26 June 2012

Sakari - Summary of Q1 End Mar 2012 Report

Sakari is seen to be in weaker momentum since it announced the latest quaterly report in May 2012. Weaker coal demand and lower coal future price further drove the price down since then. It reported a 16% drop in revenue to US$188,821,000 and significant slip of 65% in net earnings. In term of EPS wise, the EPS dropped from 1 U.S. cent from 4 U.S. cents. on qoq basis. Nevertheless, average price was at US$93.98 per tonn thanks to the higher contribution from Sebuku mines.

Sebuku on-going development of pit infrastructure and surface prepration kept production at steady state and in line with targets. Its production will increase consistently as more operating room is created. The sale volume in the quarter was 392Kt.

At Jembayan, a softening market and heavy rain-fall in December 2011 were the main reasons of the drop in coal mining volume, and increased production cost to US$60.95/tnn. It has now turning its focus to 2 new pits development, instead of coal extracting.

Coal market outlook remains weaker in year 2012, as market fundamentals have moved from a stable stupply-demand balance into an oversupply situation, due to the reason general slowdown in most of the world's major economies and the re-direction of coal from the weaker markets of Europe and Americas into Asia. This development tend to suggest that the market is close to reaching a floor and will be primed for an upturn once improved the conditions gather momentum across the globe.

The company expected a better cost control as the year progresses with the further improvement in stripping ratios. It expected the actions taken in Q1 will set the platform for the company to respond to prevailing market conditions and cost pressures and achieve all its targets for the year. The main focus is on Sebuku's high margin coals and margin improvement for long term rather than short term production growth in weak market conditions.

25 June 2012

Real Estate Direct Investment - Hold / Flip / Rental?

My 1st property purchase in Iskandar Malaysia made in year 2009 was completed when I got the keys just a couple of week ago. While there are a lot of thoughts on my mind, I would like to list down all the posibilities and pros & cons of each options to my first real estate purchase in Iskandar Malaysia.

While everybody is talking about "Location, Location, Location" in real estate investment, I can see more property developers are going to suburbans to develop the properties there, especially when the infrastructures are in place. The current "hottest" spot in IM are located at Bukit Indah, Kempas, and Nusajaya.

When the time I made my real estate investment in IM, my 1st thought was to purchase a house near to my family, and I was single at that point of time. 3 years after, a lot of things had changed, and I have one lovely girlfriend who prefers to stay at Singapore due to more convenient and efficient time planning to work at Singapore.

With this in mind, I realize that the demographic of people staying in Iskandar Malaysia is mainly divided into three parts, one who prefers better "lifestyle" to avoid crowdiness in Singapore and they have their own private transport which allow them to be flexible in working in Singapore while staying in Malaysia. The second majority would be those who cannot afford to pay an expensive rental in Singapore. I roughtly know that the current rental for a common room can be easily stand at 600SGD to 800SGD, not to mention the master bedroom, which can be as expensive as 1,200SGD. The last part would be those who work in Iskandar Malaysia for shorter period/not afford to buy a house here.

Of course, if I would like rental income, I should go for servived apartment. The reason is due to the higher rental income / mortgage loan payment ratio. While we can still see a success story in investing in real estate for long term, there is no deny that JB second hand property market has been stagnant for long time, partly because of the reasons that the residents here prefer 1st hand purchase and there are still plenty of medium cost houses here.

If I would flip the house, I would sell it immediately after I get the keys. I saw from some websites that the neighbour of mine would like to sell it at price of RM550K to RM610K, which I think is quite amazing/unbelivable. Anyway, I try to let my emotion off from me, as I do not really know the best/maximum profit I can achieve from this option.

I appreciate your kind opinions if there is any. Thank you.

23 June 2012

Highest 5 Years Earning CAGR Stocks in Singapore Stock Market as of 23/6/2012

CAGR - Compound Annual Growth Rate, refer to the geometric rate of growth, in this case we are focusing on the annual earnings of a company for 5 years time horizon. Below is the list of the counters I extracted from shareinvestor.com.

EU accord on 130b euro growth plan

GERMANY, Italy, France and Spain agreed to cooperate on a growth plan of as much as 130 billion euros (S$208 billion) for the 17-nation bloc.

The leaders of the eurozone's four top economies (Germany, France, Italy and Spain)  had agreed to mobilise "one per cent of European GDP, that is 120 to 130 billion euros, to support growth", a move German Chancellor Angela Merkel hailed as "an important signal".

My comments to this news is that, if all the 17-nation could come to the agreement to boost the economy together as well as to work closer on fiscal policies by reducing the sovererign debt level, the chances of any of the nation to exit from Eurozone would be getting lesser. The near term market outlook would become better, but requires closer monitoring.

Euro could be streghten in short term, after the recent falling in value compared to US dollar. I would also foresee a better stock market outlook in Eurozone as well as in Asia market, as this could be seen as a sign of Eurozone countries to work together to avoid the Eurozone economy to be hurt further. 

To date, Spain and Italy are the two countries which are in the spot light for their high debt-to-GDP ratio after the Greece election. There are mix sentiment on these two countries on how successful they deal with the sovereign debt repaying given recent higher yield in the debt auction market. 

Source: businesstimes.com.sg

20 June 2012

Capital Appreciation vs Dividend Income

While I was still reading on the book "The Battle for Investment Survival", something crossed my mind and pompted me to re-think about the objective of investment.

In the market, if you more conservative and not willing to take additional risk, you may often look for the more certain investment options, such as investing in bonds, high yield stock with lower growth / business risk and so on. While we cannot avoid the market risk (the risk when we are investing in the market and we cannot predict the market movement whether it is going down or up), we can select on certain lowe Beta stocks with the intention to earn the dividend income in the market.

No doubt we can easily find a 8% dividend yield or above counter in the market, but the common problems for those counters with high yield are either fall into one of the groups below:
  1. Lower potential growth due to high dividend paid out ratio. The higher earnings distributed to the shareholders indicates that the management does not have aggresive plan to expand further. Rather, a consistent dividend paid out plan would only attract investors that only want a certain dividend to meet their low investment return objective.  If the company would like to maintain high dividend ratio while expanding aggresively, the only thing it can do is to raise the financial cash flow, which will eventually result in higher debt ratio / diluted earnings.
  2. High dividend yield could be due to super low price or unsustainable dividend. In this case, we should avoid to invest in these counters. A high trailing dividend yield does not always means a high expected dividend yield. This happens in cyclical industry, such as commodities / off-shore marine / logistic / property development / construction etc.
From my previous experience, my successful shares investment counters are those in the growing industry, with the remaining earnings are reinvested in new projects. No doubt, this could increase the volatility of the capital invesmtent, but it actually will bring more opportunities of getting capital appreciation in long term.

Should we sell off all the shares before market collapse and re-enter the market after the market collapse? So far, I always remain consistant stock-to-portfolio percentage, but I would apply tactical asset allocation by making use of the market condition to re-adjust the stock-to-portfolio percentage, to stand a better chance in long term investment.

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