29 November 2011

PEG Ratio - Concerns

PEG Ratio - A ratio with the formula PE Ratio divided by EPS Growth Percentage. The lower the ratio the better it is for investment. In traditional finance theory, if we look at low PEG ratio, it can be either the PE ratio is low or the EPS Growth Percentage is high. In either way, it consists of several risk that you cannot see from this formula:

1. High EPS Growth - If a company would like to sustain a ultra high earning growth, the company must also  need to sustain its revenue growth as well as Cash in Operation growth. Normally a growing co. will experience two stage of growth, an short term growth as well as long term growth. Short Term growth can be due to the co. is having a new range of products / services / market by having a lot of advertising campaign or promotion to its customers. So we can see that the A&P expenses will go up first before the revenue growth comes in eventually. While we cannot determine whether the revenue growth can be sustainable, we must also look at the company's Balance Sheet as well as Cash Flow Statement. A strong BS (e.g. Good Current Ratio, Liquidity Ratio, Debt-To-Equity Ratio, Positive FCF etc) indicating a company is growing within a healthy condition.

2. Low PE Ratio - Normally a Low PE Ratio indicates that the investors do not have a very good confidence level to the company's near future or because the company requires some discount (e.g. Liquidity Issues as the company outstanding shares is not liquid, or Market Cap Issues as the company market cap size is smaller). An Institutional Investor normally buy the blue chip  stock first before they look into a smaller market cap stock as they always want to reduce the execution cost (e.g. they can easily buy and sell at one shot without waiting for few days to complete one transaction).

With above concerns, we must have to study more after we filter out a group of stock that fulfill the PEG ratio

  • Whether the Company still can sustain the growth Rate in near future
  • Whether the Company maintain a strong Balance Sheet to sustain its revenue growth rate
  • Whether the Company able to cope with the business/finance difficulty when the downturn of the economy
  • Whether Company will get a re-catalyst in near future (e.g. Market Cap can grow to a bigger size after the revenue can grow for a long period etc)

Welcome to share with me your thought on it too. Have a nice day.

25 November 2011

Tips on Investing in Stock Market while it is very volatile

In my own opinion, there are some ways to invest in Stock Market while the market is very volatile (means that the stock price can swing very sifinicantly).

1. Try to Buy a Blue Chip Stock. The definition of Blue Chip Stock here means:
  • Has a very good track record that can go through the downturn of the economy. For example, you can find the largest market cap Stock in the stock exchange. 
  • Has proven and consistent dividend policy to the shareholders. It is unwise to sell the shares at the bottom of the market. So dividend can give you some recurring income to survive while waiting for the market to bounce back
  • Less risk on the exposure of the financial / debt. With a strong Balance Sheet (e.g. Good Interest Coverage Ratio, Good Current Ratio, Low Debt to Equity Ratio, Good Cash Flow etc)
  • "Near to Monopoly" Status due to its "Branding" Power. Normally Blue Chip Stocks enjoy a higher shares premium among its peers as they have bargaining power against their suppliers as well as Customers. 
2. Dollar Cost Averaging.
  • It is very good to apply Dollar Cost Averaging during the volatile market, as you can purchase stocks at different timing so that you can average down your buy price and enjoy higher return if you have enough holding power as well as the belief that your company can perform better than this year few years later. 
3. Diversify your asset classes
  • A good portfolio managment means that you invest into a different asset classes so that the market volatility will give you a lesser impact. For example, you can set aside certain amount of the investable fund into Fixed Deposit, Commodities, Bonds, Equity, Property and Private Equity etc. As long as you know how the optimal asset class allocation, then you will be able to meet your short term goal and long term goal. 
4. Keep on doing Homework
  • When the market is quiet, it is good to do more homework and find out a good stock that worth to be invested. Try to set your long term goal (for example, to achieve 100% within 3 years) and short term goal (for example, the dividend you need to survive in your daily activities). Once you set your goal, then you can put the stocks in your watch list and action when it dropped below your buy target or rise above your sell target. A self-discipline is important for you to stay through the market volatility. 
Let me know how can I help on your stock investment. I can be contacted via jackphang@jackphanginvestment.com. Have a nice day.

23 November 2011

Chip Eng Seng, Worth to Invest?

As everyone knows that Singapore is experiencing economy slow down, the government just issued out a projection of economy growth for the year 2012 that the economy growth can only in between 1%-3% growth. While we cannot deny that Singapore is an open economy entity that to be impacted by the global economy circle, we also should look at it in long term whether Singapore can still be in a good position to fight with it.

CES is a company leaded by Raymond Chia. As far as I know, it is undergoing a transition period where the Property Development division start providing greater net profits compared to its construction division. As of current, its order book is having around SGD300++M, which has about 2-3 years profit visibility.

Means while, its property development division is having a slowing down impact due to the recent government efforts to lower down the speed of rising of the private property. Let us read through CES property development division:

- HDB - EC / DBSS: Less Impact on the slowdown as there are still a lot of Singaporean waiting for the opportunity to upgrade their flat to a better condo.

- Private Property: Impact is high. However, we should also look at the execution power of particular property developer on how they can promote and able to sell off the property they have on hand. So far, the take up rate on Simei Property is around 35% which I think is not very encouraging. Nonetheless, it is worth for us to wait through the whole circle to be up again as in my opinion, I like to buy cheap value stock and wait another property circle to peak again. 

- Oversea Property: Australia (Australia is a growing population country). Hence in long run, it is still worth to build more properties there within strategic location such as Melbourne / Perth / Sydney / Brisbane etc. 

In conclusion, if your investment time horizon is long enough (3-5 years), my suggestion is to average down whenever the price is going down, and wait for another property circle to peak again. This advice is for long term investors. 

21 November 2011

Mah Sing 3Q 2011 Result Summary

My own opinion:

Mah Sing is most likely to achieve more than 20c EPS this year and at least 25c EPS next year. The forward PE should be at least 7.76X, which is quite low in my memory. If I would like to hold for more than 3 years, Mah Sing definitely is one of my preferred stock. :) By the way, we can see a dilution effect from its ESOS and Convertible Bond. So, if we wish to include them in the dilution effect, the PE may be at a higher range. Nonetheless, as long as shares price is at lower range, then we will see a lower possibility the bond holder convert it to equity. :) 
 

Source from: Bursa Malaysia

The Group recorded strong revenue and net profit of RM1.1billion and RM127.5million for the current yearto-date. This represents 42% improvement for revenue and 47% improvement for net profit over the corresponding period in the previous year. The current quarter revenue and net profit of RM420.7million and RM43.2 million represents 48% and 46% improvement respectively over same quarter last year. Revenue and profit for the financial period is attributable to property development activities carried out in Kuala Lumpur, Klang Valley,Penang Island and Johor Bahru.

Ongoing projects that contributed to revenue and profit include Garden Residence in Cyberjaya, Kinrara Residence in Puchong, Perdana Residence2 in Selayang, M-Suites in Jalan Ampang, One Legenda and Hijauan Residence in Cheras, Icon Residence in Mont'Kiara, Kemuning Residence in Shah Alam and Aman Perdana in Meru-ShahAlam. Also contributing are commercial projects such as Southgate Commercial Centre in Sungai Besi, StarParc Point in Setapak and industrial projects, i-Parc 1 and i-Parc 3 in BukitJelutong as well as i-Parc 2 in Shah Alam. Projects in Penang Island, Residence@Southbay and Legenda@Southbay and in Johor Bahru, Sierra Perdana, Sri Pulai Perdana 2 and Austin Perdana also contributed to revenue and profit. The Plastics division continued to contribute positively to the Group's performance. With prime sites secured, the Group continuously seek to value-add on its projects through innovative marketing strategies,award winning concepts, and timely execution.

The recently announced MOU with Central Pattana, Thailand’s largest retail developer for potential joint development and management of a shopping mall within Icon City, Petaling Jaya is one example of the Group’s ability to enhance the development appeal of its projects, for greater returns to the Group and buyers of its properties.
There were no material changes to the Group’s profit before taxation for the quarter as compared to the preceding quarter ended 30 June 2011.

Explanatory Notes Pursuant to Appendix 9B of the Listing Requirements of Bursa Malaysia Securities Berhad

The Group has laid strong foundation for longer term momentum and sustainable growth, achieved via its aggressive landbanking exercises in recent years.

The proposed acquisition of 225.7acres of M Residence@Rawang freehold land in October2011 is the latest addition that will boost the Group’slandbank by a further RM948million in estimated gross development value(GDV). With 36 projects in its portfolio, the Group's unbilled locked in sales and remaining GDV is estimated at more than RM15 billion.

The remarkable sales achieved and timely execution provided steady cashflows and liquidity. The Group’s balance sheets remain healthy with net gearing ratio at 0.38 as at 30 September 2011.

17 November 2011

Guideline on Constructing a Stock Portfolio

Today I would like to share with you on some of the guidelines to construct a stock portfolio.

First of all, you have to understand the underlying risk and potential return on stock investment. It is unlike Unit Trust, where you could diversify away the unsystematic risk that happen on single stock. Nonetheless, you may able to find a good stock and put it under your own stock portfolio for long term investment purpose.

In my own opinion, you must have at least 3 years investment time horizon (means that you MUST invest with the money that NOT to be used within 3 years). This is a crucial part especially for those investors that lack of investment experience, and protect you from doing some silly thing by selling a very cheap stock just because of the emergency use purpose.

If you do not have a lot of investment experience, you may diversify or construct a stock portfolio with below objectives:

1. Earn the Dividend during the bear market
2. Enjoy the capital growth during the bear - bull market circle
3. Sell the stock during the bull market or switch it to high dividend yield stock during bull - bear market. 

Below are the classification of the stocks
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  1. Defensive stocks - Normally we refer to consumer stocks such as F&N, APB, ShengSiong etc. The stock movement is slightly different from the overall market (means that the beta is normally lower than the overall market). We also can easily determine the future revenue movement as the growth factor normally is quite low as compared to other sector.
  2. Growing stocks - Normally this category suitable to those investors who like to enjoy capital growth instead of dividend. They would risk themselves by investing the stock in early growth stage and wait for it to grow to a certain level before they slowing down the growing speed. It require patience and insight from investors to determine which co. is really can be a 'superstar' stock in future.
  3. ETF - ETF is more on the Top Down Approach (Macroeconomic). If you are good in macro-economy, it could serve as a compliment in your stock portfolio.
On top of the above mentioned items, I would like to share with you on the asset allocation. Normally during the bear market, it is unwise if we hold too much cash on hand. Same goes to bull market, it is also unwise if we hold too much stocks on hand too. As currently the market is more towards bear market, hence in my opinion, we can start investing a little bit cash on the market. Do not risk yourself into invest whole your money into just a single stock, while you do not have a thorough homework into this company. Try to treat your stock portfolio as part of your business. The more homework you put into it, the better result you will get in your stock portfolio.

Good luck in your investment.

16 November 2011

Things to Take Note when Investing Auction Properties

I believe that many people like to buy an assset with lower price, regardless whether it is stock or property. There are higher chances to buy a property with lower price through auction. According to my dear net friend, there is something to take note when you wish to invest in auction properties:

Let say you had successfully tendered the auction unit:
  1. You need to settle the balance with bank within 3months
  2. You need to pay the fee to aunctioner
  3. You need to bear the stamp duty and so on
  4. If there is any caveat issue, you need to settle it yoursel
  5. If there's any outstanding fee payable to authority you also need to settle
  6. Even after u fully setlle the balance, if the occupant not willing to moveout you need to go through legal application.You can apply court order, but if he still unwilling to move, you can then apply police assistant (Make sure the occupant does not burn your house later, hahaha)
What I learnt from my friends through gathering is that, if you wish to buy an acution property, you can go through several ways - Property Agents, Bankers, Lawyers and other networking. Normally a good property could be sold off before an auction, so the more people you know, the higher chance you will get the property you want to invest.

Another thing to consider is the time horizon. One of my friends who bought a land near Tampoi at the price of RM180K 15 years ago now could be sold off at near to RM2.0M. He prefers to invest in long term (Capital Appreciation) instead of Rental Yield as his invested capital is huge compared to the normal retail investor. For retail investors, they would normally opt to buy property with high ROI (the ROI could be counted as (yearly dividend - yearly expenses / invested capital)). Make sure you know your risk and return profile before entering investment so that it would not cost you million of dollar just to buy a lesson from that.

15 November 2011

Do a Due Diligence on Top Management before You Decide to Invest in Long Term with Them

Frankly, I own 3 S-Chip stocks due to the the reason that I love fast growing company with potential exponential earning growth. Without a second thought, I believe that the company that fulfill my searching criteria would be under my watchlist and I would action when neccesary.

The fact is that, before you invest in a company, you should also know about the entire background of the management, the country itself as well as the culture of doing business there too. I heard from my friend that, those aggresive businessmen would risk themselves by getting so called 'Private Loan' from the underground money lender and grow their business until big enough to cover the interest paid to the money lender, and of course, the interest could be as high as 20% per annum or per month!

As China is approaching a soft landing in its economy, there is no doubt that the banks are tighening the borrowing policy and reduce the loan amount. As what I said, bank always approach you to sell you an 'umbrella' when the day is shinny and get back the 'umbrella' when the day is cloudy and start raining.

So my advice to you is that, before you invest in a company, please make sure to do a due-dilligence on the Top Management and find out their risk appettite as well as the character. If you want to find a business partner (long term partnership), make sure that this guy is trustworthy and have certain level of integrity on its suppliers, customers as well as employees.

14 November 2011

China Minzhong Quarterly Report Update

Below are the extraction from SGX website:

http://info.sgx.com/webcoranncatth.nsf/VwAttachments/Att_C1E56E69D2B6B00F482579470025F803/$file/1QFY2012ResultsPresentation.pdf?openelement

  • 1Q2012 to 1Q2011 Revenue increased 36.8% to RMB361.4M from RMB264.1M
  • 1Q2012 to 1Q2011 Gross Profit increased 68.5% to RMB147.0M from RMB87.2M
  • 1Q2012 to 1Q2011 Net Profit increased 77.9% to RMB93.1M from RMB52.4M
  • 1Q2012 to 1Q2011 Net Profit Margin increased 6.0% to 25.8% from 19.8% due to better product mix - Champignon mushrooms (14.0%), Black Fungus (14.7%), German Chives (8.4%), Capsicums (7.6%), King Oyster Mushrooms (9.2%)
  • Net Profit / Current Equity Holdings for 1Q2012 = 93.1/3,000.8 = 3.1%
  • Outlook - 
    • Despite the global economic uncertainty, the demand for vegetables products remains robust, underpinned by population growth, rising urbanization and the increased preferences for healthy dietary eating habits. Globally, food manufacturers’ needs for cost-competitive and reliable supply of raw material food ingredients are increasing on the back of increased weather adversities and supply shortages across the agricultural landscape. The Group remains well-positioned to capitalize on these opportunities with its established track record, ongoing expansion plans and highly specialized product knowledge and emphasis on product quality assurance.  
    • The Group continues to reap rewards from the expansion of its cultivation and processing capacity over the past financial year. Harvests from newly-added vegetable farmland and the additional processing capacity at the Group’s New  Industrial Park are expected to contribute positively to the Group’s business performance in the new financial year. The Group’s continued shift towards a higher value product mix will also help to drive the increase in average selling prices and margins in the long term. 

09 November 2011

Things to Take Note when Investing in REITs

Something that I learnt from investing in REITs:
  • Check the Debt Ratio. If the Debt Ratio is too high, it means a higher posiblity for company to raise fresh money from shareholders through Right Issues or Private Placement and it would dilute the EPS for short term. However, we should access the impact in long run before making final decision. 
  • Check the Management Plan of Acquisition. If the management is very aggresive to expand its portfolio size within a few more years, it is also very high chances that management will issue the placement or right issues to the sharesholders. Again, we should also access the impact of the acquisition and see if the acquisition can bring more profits / cash flow to the portfolio.
  • Check the components inside the Portfolio. Make sure you understand the country risk / sector risk as the Income of the Trust are normally formed by two:
    • Business Risk -The better occupancy rate and the bargaining power of raising rental income, the better the business is.
    • Financial Risk - Fix Rate / Variable Rate of the Borrowings. 
  •  Check the background of the Management and its relationship with the government as well as other related parties.
  • Understand your Investment Horizon and Risk Appetite. REITs always experience an economy circle as the occopuancy rate is always higher when the ecomy is good and lower when the economy is in down turn. In my opinion, we can apply dollar cost averaging to reduce the impact of the timing problem
 Feel free to give me your comments. Please let me know if you are interested in investing in Singapore REITs.

02 November 2011

Mah Sing - Silver Award (Developer of the Year Worldwide Category)


OPP Industry Awards 2011 - Winners
Raheja on top of the world at OPP Awards for Excellence 2011

Raheja Developers Ltd of India won the title of Developer of the Year Worldwide at The OPP Awards for Excellence 2011 this week, alongside 40 other OPP gold and silver medal winners. The awards were presented at a special ceremony at The Property Investor Show & OPPLive.

Raheja took gold in the worldwide developer category because, the judges said, “it is clear to see that Raheja is a construction and development company with a difference. It offers luxury living for smaller costs, excellent customer care levels, and the highest imaginable standards for the welfare of its staff, as well as for the environment. India is a country that is expanding fast and developing new homes at a breakneck speed. It needs firms like Raheja to make sure that it moves forward with a world-class vision of delivering the best possible products at the best possible prices. Planning, people, marketing, sales, administration and delivery - they do it all so well. An excellent entry.”

Silver medals in the Developer of the Year Worldwide category went to Mah Sing Group Berhad and Absolute World Group.

MahSing won, said the judges, because the “group is one of those developers that has got everything covered – from individual villas up to major pieces of commercial property. The company’s products are perfectly tailored to the local market and their relevance will definitely make them sell well. We particularly liked the fact that they are so carefully focused on quality, and that they work hard to adopt international best practice at all times. Developers around the world could learn from Mah Sing’s ability to maintain high quality standards alongside quick turnaround times.”

And Absolute World Group won through, according to the judges, because “the focus that the company is bringing to its new condo-hotel is excellent. The project is definitely going to be a winner. The 60% growth that Absolute has created over the past two years is evidence of its strong internal systems and its excellent management structure. Absolute is going to keep on growing and they deserve every success.”

The full list of all category winners is:

Category 1 – Best developer:


GOLD WORLDWIDE: Raheja Developers Ltd
 SILVER WORLDWIDE: Mah Sing Group berhad
SILVER WORLDWIDE: Absolute World Group

01 November 2011

Mah Sing Ends LOI with China Partner

Mah Sing announced on 28 Of October 2011 that it had ended the Letter Of Intent to jointly develop a property in China with its business partner there after near to 2 years of waiting. To the best of my knowledge, this is the 2nd time Mah Sing has stop such project before it kicks off due to the long time waiting.

What I am more curious is how company is going to due with its near to 30M USD deposit in China Bank? The 2nd question is, how is the company is going to expand its business to at least regional level?

However, I am still think that Mah Sing Top Management is very good in managing their cash flow, and I hope that they can keep on acquiring new piece of land when the market is in the downturn and sell more whent the market is going up. This is what I call - 'Buy Low' and 'Sell High'. In another word, we can call it 'Buy when marke price is undervalued' and 'Sell when the market price is overvalued'.

Source: http://announcements.bursamalaysia.com/EDMS/edmsweb.nsf/all/964F1D73966D04B84825793700366A26/$File/Mah%20Sing%20Changzhou.pdf
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