Borizon Issue 4

The information contained in this magazine is for discussion and reference only and should not be treated as investment advice. We make no representations or warranties of any kind, express or implied, about the completeness, accuracy, reliability, suitability or availability with respect to the

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whatsoever arising from, or in connection with, the use of this magazine.

Source of photos: Unless otherwise specified, all photos are from Google Images.

CONTENTS

Market Update

Companies & Industries Shale — The Rock That Will Rock The World

Editor’s Note

Career Coach Career Planning: Market Exploration

—Accounting

Biweekly Review: Market Atmosphere Changes SH Composite Index Tests 2000

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6

Columns

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Travel

Flying Ryanair

People

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Go for it – You never know unless you try!

2 Walter Y.H. NG Professional Consultant, Café 12

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Issue 4 |Nov 2012

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“My study experience abroad helped my growth in the very

internationalized food industry”

- Walter NG on studying abroad

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Editor’s Note

Go for it – You never know unless you try! By Gloria Emily Chan

Issue 4 |Nov 2012

A s a year three student, I realize the best thing about

being one is the freedom one enjoys. Without the

never-ending society duties and the crazy 21-credit

timetables (I almost killed myself by having both in year

one), one has more time to do things one really wants to

do; for me, one of them is to edit a magazine.

I n mid September, I signed up to be editor for my

church’s magazine, and, to my surprise and delight, in

the same week, I was invited by my friend TK to be an

editor in Borizon, a start-up business magazine founded

by him and a few of his friends. I admit I hesitated about

joining Borizon for a while – what if I don’t have enough

time for my studies? What if I lack business sense that I

become a burden to the production? What if I cannot

cooperate well with the guys? (Yes, I am the only girl on

the team so far, and, coming from an all-girls secondary

school and an almost-all-girls department.) Yet, I threw

my silly worries away and told myself: Go for it, you

never know unless you try.

S o here I am, writing as one of the editors of Borizon.

I must say I have learned a lot from this experience.

Every experience is an opportunity to learn and grow as

long as you meet it with an open heart and mind. All in

all, it is just the beginning of an exciting and meaningful

journey, and I am sure, with the sky as our limits, there is

so much more to learn from and together with the guys.

Hope you will enjoy reading this issue and those coming!

If you wish to ask questions or give us comments, please

contact us through [email protected].

◆ Market atmosphere changes

◆ Shanghai Composite Index tests 2000 level

Abstract of last issue The quality of the current uptrend is deteriorating. To balance between risk and award, investors should stop accumulating positions and clear weak performers. Uni-president is one of the common defensive stocks. Its steady trend and low volatility are suitable for risk-adverse investors.

Then….. Hong Kong stock market slides on the worry of US fiscal cliff and the weak performance of Mainland market. The two major indexes lose 1% - 2%. Uni-president (00220), the famous defensive stock, is immune from the general market consolidation and continues its steady uptrend.

MARKET RECAP

T he Shanghai Composite Index finds no support

after the 18th National Congress of the Communist Party of China. The atmosphere of the market immediately turns.

The up/down ratio is not optimistic. The average percentage of down stocks is 60%, showing that most of the individual stocks are consolidating in phase with the market.

HSCEI slides in phase with Mainland market

Hang Seng Index starts consolidation

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Market Update

This article is intended for students interested in the stock market. With 10 years of trading experience, our writer is an investor. He is currently managing 600k of equity.

▲ China’s smooth transition of leadership did

not provide support to the market.

Market Update

THE WINNING INDUSTRY

Benefiting from sharp decline in cost of raw material, the textile industry has been performing well for over 2 months. Texhong textile (02678), one of the fast growing textile firm in China, announced that the year earnings will significantly improve. The changes in fundamentals boost up the stock price in the past two months.

Technically, Texhong (02678) formed a 4-months cup with handle pattern and it breakout 3 weeks ago. It shows that the upward momentum is strong. Investors who missed Texhong could consider another leading textile firm, Shenzhou International (02313), which is forming a 6-month cup with handle pattern and is undergoing a ‘shakeout’ process. Investors could build a position on it if it breakout $16 level with a huge volume support.

Borizon Ranking

Texhong (02678):

Shengzhou (00322):

Texhong (02678) breakout from ‘cup with handle’

Shenzhou Intl. (02313) is forming a profitable base

“Our market timing model for HSCEI shows a ‘Downtrend’ signal. The uptrend will be interrupted by an unknown timeframe of consolidation. To reduce risk exposure to market, investors should clear

weak performers to avoid possible loss. ”

Joseph Lau

What now?

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Issue 4 |Nov 2012

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Companies & Industries◆ Shale — the rock that rocks the world

◆ An alternative energy source in the 21st century

E nergy has always been our concern. With rapidly expanding global population and limited resources,

energy plays an increasingly important role in the balance of power between nations. Gone were the days when military power rules the world. Nowadays, energy rules. The commonest form of energy resource is oil, which is so invaluable that people term it black gold. Of course, the importance of oil also lies in its strategic significance.

While oil’s prime position as the main source of energy seems unshakable, there exists a rising energy source that perhaps could be a game-changer – shale or more precisely, shale gas.

What is Shale gas?

Shale gas is an unconventional natural gas that is trapped in shale, a kind of sedimentary rock, during its formation. Shale gas did not come under spotlight until recent decades, despite the fact that it was first extracted in U.S. in 19th centuries. Trapped in rock, shale gas was difficult to extract and therefore, development of shale gas was marginally economical. Shale gas extraction was only commercially feasible

until George P. Mitchell pioneered hydraulic fracturing by which rock layers are broken and the natural gas resource trapped is released.

Shale gas success in U.S.

Since the breakthrough in its extraction, shale gas production has drastically increased. In 2007, the production of shale gas in U.S. was only roughly 1,300 billion cubic feet (bcf). But in 2010, its production increased fourfold to around 5,300 bcf, representing over 20% of total natural gas production in U.S. And it is projected that by 2035, shale gas production will account for 46% of U.S. natural gas production.

Unconventional Natural Gas Resources

Conventional natural gas resource is the natural gas deposits that are the most practical and easy to extract. However, the volume of conventional natural gas is small, accounting for only around 20% of total natural gas deposits. On the contrary, unconventional natural gas deposits, including tight gas, coalbed methane and shale gas, are abundant but difficult to extract.

By Louis Pang

The largest shale gas reserves — China

On the other side of Pacific Ocean, China has the world’s largest shale gas reserve — almost 50% more than the second one, U.S. Historically, China has been a coal-powered country. With its limited oil reserve, unsophisticated nuclear and other renewable energies technology, China has been relying on coal as its main energy source, which generates about 80% of electricity in the country. However, increasing awareness on environmental impacts of coal mining and burning drive the government to seek other options, and shale gas is a feasible alternative to coal, which generates electricity with half of the carbon emission of coal.

Gearing up for shale

In March this year, the Chinese government released its five-year shale gas development plan, with a targeted production of shale gas in 2015 fixed at 6.5 billion cubic meters (bcm) and more than 60 bcm in 2020. In November 2009, China President Hu Jintao signed an agreement with U.S. President Obama to strength China-US cooperation on clean energy development, including shale gas. Though shale gas industry in China is still in its early development, it can be seen that the industry has received much attention from the public and the central government. Development of shale gas can help reduce China’s dependency on natural gas and oil, which China is importing from the rest of the world to satisfy its unmet domestic demand, and thus, improving the national energy security.

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Issue 4 |Nov 2012

China Energy Production & Consumption in 2011

Petroleum * Natural Gas ** Coal *** Consumption 8,924 4,624 4,053,829 Production 4,299 3,629 3,829,471 Net Import 4,625 995 224,358 Import / Consumption(%) 52% 22% 6% * In Thousands Barrels per Day ** In Billion Cubic Feet *** In Million Short Tons

▲ According to initial assessment, China has the world’s

largest shale gas reserve, followed by U.S.

Source: U.S. Energy Information Administration

▲ China’s oil and natural gas production cannot meet its consumption. Over half of its oil consumption and

one-fifth of its natural gas consumption is satisfied by import from other counties. Shale gas may help reduce its energy dependency.

▲ China’s domestic energy production cannot

meet its strong demand.

Borizon

Companies & Industries

Difficulties ahead

Despite the potential of shale gas industry in China, its development is not without obstacle.

First of all, China’s complex geology presents a great challenge to the gas explorer. For example, Sichuan Basin and Tarim Basin, where most shale gas resources reside, have complicated geological characteristics, making the fracturing process which works well in U.S. not applicable in China. Shale gas companies in China cannot expect to succeed by copying the technology from U.S.

Second, a large amount of water, in terms of million gallons, is required during the hydraulic fracturing by which natural gas is extracted from the broken shale rocks. Such a water-intensive process is a concern for shale gas development in a country where water resources are limited, especially in the inland.

Also worth noting is the water pollution risk posed by the hydraulic fracturing process during which chemicals are used to crack the rock. Chemicals may pollute the underground water if precautionary measures are not taken.

Lastly, given the large area of China, how to efficiently transport the extracted gas from the west, where the gas is produced, to the east, where the gas is consumed, is also a problem. And the country’s current pipeline infrastructure is insufficient to meet the demand.

▲ Schlumberger Ltd., the world's largest oilfield-services

provider, bought 20% shares of Anton Oilfield in July and

announced the establishment of joint venture in September.

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▲ Shale, which traps natural gas during its formation could be a

game-changer in the energy industry

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Issue 4 |Nov 2012

Shale gas stock beats the market

Yes, the journey of developing shale gas industry in China is not an easy one. Yet, there are also a number of factors that make the future of shale gas industry promising. For example, central government has provided great support to the industry such as subsidies. Also, Beijing has limited the entry of foreign companies into the industry. The shale gas exploration license is only open to foreign companies which form a joint venture with domestic explorers.

The benefits that shale gas brings, including energy security and reduced carbon emissions, make it a project that attracts much attention. With the strong support from the central government, the shale gas industry in China is booming.

The bright outlook of the shale gas industry is reflected in shale gas-related stock price over the past few months. Several shale-gas related stock, including Anton Oilfield (HKG: 3337) and SPT Energy (HKG: 1251), have generated more than 100% return this year. With the government’s commitment in developing shale gas, it is expected that the strong trend will continue.

Industry Focus — Shale gas

Career Coach

Market Exploration

Accounting Industry by Marek Chiu

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◆ Understand the industry— Accounting Industry

◆ Industry overview

Hello again, internship deadline is approaching. We would like to introduce to you some industries before you make your application choice. In this issue, we are going to introduce the accounting industry to you. Let’s get started!

Accounting Industry Overview

T o begin with, we would like to give you an overview of the industry—what do accountants do?

As for the legal framework in Hong Kong, every registered company has to obey some accounting requirement.

According to Section 51C of the Inland Revenue Ordinance, it requires every person who carry on trade, profession, or business in Hong Kong to keep sufficient records in English or Chinese of the income and expenditure to enable the assessable profits to be readily ascertained and shall retain such record for not less than 7 years.

One of the responsibilities of accountants is to facilitate in-house book keeping. Most big firms will have their own accounting division or finance department. Or else, companies will need to seek for accounting firms to handle the book keeping for them.

Audit

According to companies ordinance, the annual financial statements of a limited company incorporate in Hong Kong is required to be audited by a qualified

accountant with a practicing certificate issued by Hong Kong Institute of Certified Public Accountants (HKICPA).

The companies’ internal book keeping is verified by the accounting firms under certain accounting standards such as International Financial Reporting Standards (IFRS) or Generally accepted accounting principles (GAAP).

Audit team is usually divided into different teams by the industries. For example, financial service, manufacturing, trading, retailing, etc.

Each of the industry have some required specific reporting and will need specialized accountants in that area of business to handle it.

“Deloitte Global Financial Service Industry practice provides tailor-made solution to serve leading financial services companies covering the 4 major sectors: Banking, Securities, Insurance, Funds and Investment Management. Our major clients are mainly banks and investment banks for example, Agricultural Bank of China, CITIC, Morgan Stanley, RBC, Mitsubishi UFJ Financial.”

— Assurance Associate, Deloitte

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Tax Planning

Another service provided by accounting firms is tax planning service for a company. Tax planning can be is very complicated process. Not only do accountants have to do Corporate tax reporting, but personal taxation of the client company as well. Tax planning will need to summarize all the taxation items plus all the taxable deductibles such as property deductible, bonus security and derivatives, charitable deductible, etc.

Hong Kong’s taxation system is comparatively simple. Our tax is a 200-pages one, compared to U.S. tax code of 17,000 pages. As taxation systems vary across jurisdictions and can be very complicated, companies have to seek professional advice from third parties to ensure that they fulfill local tax compliance.

▲ Hong Kong Inland Revenue Department in Wan Chai

Issue 4 |Nov 2012

Advisory and Consulting

Advisory service is a relatively new business area of accounting firms in recent years.

Advisory service covers a wide business area including, management consulting, operational consulting, strategy consulting, business performance consulting, IT consulting,etc.

Consulting service from Big 4 is targeted to small to mid cap companies to provide solutions to some difficult business problems. I will give you some examples like how to improve current profit? How to reduce operation time by 50%? How to expand our market into China within 5 years? Should our company expand our business area to smartphone market and where?

“My team focuses on Merger & Acquisition of companies. Different from investment bank which usually handle cases of very large companies. In Big4, we focus on middle market companies — those with revenues between US $100 millions and $1 billion per year. My responsibilities range from valuing a company to preparing pitch book, and from handling clients’ queries to presenting to clients.”

—Wilson Chan, Corporate Finance Analyst, KPMG

“The main responsibility in tax division is to liaise with the inland revenue department and other government bodies. We will need to obtain and verify with clients’ data in order to calculate the tax they need to pay for this fiscal year Even though the concept

is simple，however, we have to be very

carefully with each item as there maybe a lot of tax deductible items and bonus stock option.” — Sally, Tax Intern KPMG

Big 4 — the accounting giants

“Big 4” refer to the four largest professional services providers in the world, which includes PricewaterhouseCoopers, Deloitte Touche Tohmatsu, Ernst & Young and KPMG. The services provided include assurance, tax, corporate finance and etc. Big 4 accounting firms are the dream employers of many fresh graduates. Why?

Big 4 is famous for its comprehensive training programs for the new recruits. The training program includes Income Statement Analysis, Accounting Standard Training, etc. Big 4 firms provide students an excellent career ladder and progression from entry level to senior management in Big 4 is comparatively faster than other industries. Experienced professionals from Big 4 are highly sought after by other companies and industries.

Despite the fact that every year Big 4 recruit a lot of accounting-major students, the accounting giants also take on many students coming from non-accounting majors. Big 4 provide comprehensive conversion program for recruits without accounting background to let them understand the daily business and operation.

As Big 4 devote much resources to the training of new hires, some firms introduce a penalty scheme to hold the new recruit responsible for the fee of the training program if they resign within a certain period of time like 2 years. After all, accounting industry have a high turnover rate!

Industry Overview

In recent years, the accounting industry in Hong Kong is getting more and more competitive. After the announcement of HKEX, listed companies are permitted to seek for accounting firms in mainland china to do the audit work.

Career Coach

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▲ Auditors provide assurance service to ensure the public has accurate,

comprehensive and timely information of a company

Borizon

Student Program of Firms

There are a lot of different induction programs in different firms. Such Programs provide information , mentoring internship and industry insight for undergraduate student to know more about the accounting industry. These are some excellent opportunities for you to explore your career interest while in school.

Our team gathered some information on these program as some of you maybe interested.

Ernst and Young | EY Academy

“Accelerate your understanding of professional services and develop your leadership skills with a one- to three-day course designed to introduce you to our culture, people and practices that drive our success.

Through group activities, discussions and training, you'll build your leadership, teamwork and communication skills. If you show the qualities and strengths we're looking for, we'll invite you to interview for an internship or full-time opportunity with us. To discover more about this program, contact your university careers center or speak to your Ernst & Young campus recruiter.”

Deloitte | Deloitte Club Hong Kong

“The Deloitte Club is a structured program designed to develop university students. Through mentoring, classroom training, ambassador programs and internship opportunities, you can get a taste of the Deloitte life. Many students have benefitted greatly by joining the Club. We would like to welcome you to experience the Deloitte way of life through the Deloitte Club, and even to become one of us. Let's build our future together.”

KPMG| KPMG Elite Program

“KPMG's Elite Program allows you to combine your university studies with valuable work experience at a well-known and reputable firm, network with other Elites like yourself, and puts you at an advantageous career position. After completing the Program, your hard work will also be recognized and rewarded, as top performing Elites will receive a joining bonus when you become full-time KPMG staff members.”

PWC| Student Club LEAP

LEAP is a student club in Beijing, Guangzhou, Hong Kong and Shanghai, sponsored by PWC China and Hong Kong, and operated by local university students.

Well, I guess you should have understood more about the accounting industry at this moment. Hope you guys do have some benefits from the career section of this issue. In the following issues, we will probably start to give out some hints on job hunting and tip on job application. Stay tuned and see you next issue!

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Issue 4 |Nov 2012

Career Coach — Accounting Industry

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People

Learn from your boss, from your frontline staff. Respect and adapt to company culture.

By T.K. Lo

Walter Y.H. NG Professional Consultant, Café 12

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“Learn from your frontline staff. The cleaning ladies know the most effective detergents, they can save you thousands of dollars!”

S tarting as a frontline employee, Walter Ng worked his way up the corporate

ladder to become the executive of Hong Kong’s largest food service provider. During the first half of his career, Walter has already been involved in numerous exciting projects, including the construction of Hong Kong International Airport. In recent years, he took up an Executive MBA program at CUHK and anchored the launch of our school’s student-ran café, café 12. Walter chatted with editors of Borizon to share with you his career insights. “I started from the frontline. I was the purchasing accountant. I checked prices of every type of cheese out there. Thanks to my education background, I was able to move up the ranks. I studied in

Switzerland, and, as not many people studied in continental Europe back in those days, I was able to perform well with an international team and gain their trust. I became a food and beverage assistant and then later a cost controller. I was around 23 years old.”

“I believe it is very important for

one to grow with the company,

learn about the culture and adapt to

it. Senior management in that

company was from Europe, I

studied there and I knew their way

of working. That helped me become

part of the organization.”

“My study experience abroad helped my growth in the very

internationalized food industry”

- Walter NG on studying abroad

Issue 4 |Nov 2012

▲ Walter giving a talk at the Hong Kong Association for Customer Service Exceleence

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People

“ Then I became involved in the catering service in Kai Tak Airport in Kowloon City. And eventually I

worked on the new Hong Kong International Airport at Chek Lap Kok in the early 1990s. My team was responsible for providing meals for all the workers on the island. We are talking about the three daily meals of 10,000 people from around the world! There were cultural differences because the managers who had experience in large scale catering were westerners while the workers who eat the meals were Chinese. What managers wanted to put on the menu was not what the workers wanted to eat! My early experience studying abroad really helped me solve these situations.” “The construction of the Hong Kong International Airport was definitely a once in a lifetime experience. I am very proud to have accomplished such a large project.

After that, I did contract catering in theme parks and institutions.”

“I decided to come back to the campus and

took up a MBA program. I loved this place

and stayed to launch Café 12. With this

amount of customers,” Walter points to the

crowd at café 12, “I believe it has been

quite a success!”

Walter was responsible for the daily meals of over 10,000 workers in Chek Lap Kok. Many of them are from different countries with different taste buds!

Exchange programs are definitely valuable experiences. Through exchange opportunities, you will get to understand how people from different places behave and work. It might become useful one day, just like Walter’s experience!

Borizon

Column: FLYING RYANAIR T h e J o y a n d t h e P a i n

By T.K. Lo

We know a lot of our readers are going to go on

exchange programs and study abroad. And for those who are heading to Europe, cheap budget flights are the best alternatives to expansive train rides. Budget airlines are cheap and they get you everywhere. Among them, Ryanair is the most famous (or infamous) budget airline. Here I am to share with you the pros and cons of Ryanair.

JOY CHEAP – Ryanair is cheap, ridiculously cheap. For 100 Euros you can get a round

trip ticket for 2 hours flights. For

example, Copenhagen (Denmark)

to London (UK).

DISCOUNT SALES – Ryanair cuts

ticket price crazily. I once flew

from Brussels (Belgium) to Sicily

(Italy) for HKD 130, it was a 3

hours flight!

PAIN FAR – To cut cost, Ryanair uses remote airports. Their hub Brussels Charleroi Airport is NOT in Brussels! Don’t be fooled! However, you might find one near your school! LOUSY SERVICE – Don’t expect food. Expect a noisy cabin and not-so-comfortable chairs. PRICE CHANGES ALL THE TIME – Ryanair changes the price every other day. Act quickly when you see a cheap ticket! Blink and you miss it! NOTHING IS FREE – Even your checked baggage.

In short…. Ryanair is an extensive flying coach system in Europe. It

is cheap. It gets you everywhere. But you pay for what

you get!

CRAZY STORY! Ryanair tried to reduce cost by removing all windows

If you would like to get your story published, email to [email protected]!

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