30 April 2013

Ezion Holdings - Can It still Continue Its Uptrend?

Ezion has retreated from its record high of S$2.20 and is now at around S$2.00. Nonetheless, it has started the uptrend since October 2011 and the shares price was up 400% since then. It clinched a lot of projects since year 2011 to support its momentum. To recap, Ezion Holdings is a company specializes in Multi-Purpose Self Propelled Jack-up Rigs (“Liftboats”). 

Source: Maybank Kim Eng Chart
Let us look at the list of the projects the company got recently:

  • 18 Apr 2013 - 50% JV - USD 148.6 million to provide a Service Rig over a 7 year period to support the oil & gas activities of a national oil major in Central America. Expected to start in 3Q2013 
  • 20 Mar 2013 - USD 48.2 million  over a 3 year period to provide a Service Rig to be used by an international oil company to support its oil & gas activities in the Arabian Gulf. Expected to start before End of 2013
  • 28 Feb 2013 - Received Letter Of Intent (LOI) - USD 45.3 million over a 2 year period to provide a Liftboat to be used by a South East Asian based national oil company to support its oil & gas activities. Expected to start by 3Q2013
  • 18 Feb 2013 - USD 79.9 million over a 3 year period with additional 2 year extendable option to provide a Jack-up Rig to support   a South Asian based national oil company. Expected to start by the 4Q2013
  • 15 Jan 2013 - Received Letter Of Intent (LOI) - Charter of one unit of Liftboat over a 4 year period with an approximate contract value of up to US$ 116.8 million. The Charter is expected to commence in 1Q2015 

While the company requires larger capital to deploy the upcoming projects, fund raising activities has taken in place since last 2 years, and we can see a gradual EPS increase compared to Total Revenue and Earnings Increase for the past few years. Fully Diluted EPS 9.12 cts for FY2012 was about 25% higher than 7.32 cts for FY2011.

Fully Diluted EPS 9.12 cts for FY2012 Compared to 7.32 cts for FY2011

Few things to note:

  1. Any future fund raising could only dilute the Earning Per Share (EPS) further. Given current low interest rate environment, I believe the company can utilize debts to fund its ongoing projects. Nonetheless I believe current management can manage the corporate finance well barring any unforeseen circumstance. 
  2. In my opinion, I think that the company could get more projects from different region, as long as Crude Oil price remains at US$90 and above. 


Summary of Ezion Holdings that I copied from Company announcement:

Ezion Holdings Limited (“Ezion” and together with its subsidiaries the “Group”) has 2 main   business divisions that specialises in the development, ownership and chartering of strategic   offshore assets and the provision of offshore marine logistics and support services to the offshore   oil and gas industries.          

The Group is the owner of one of the largest and most sophisticated class of Multi-Purpose Self Propelled Jack-up Rigs (“Liftboats”) in the world and one of the first to promote the usage of  Liftboats in Asia & Middle East. Ezion’s Liftboats  are used mainly for well-servicing,   commissioning, maintenance and decommissioning of offshore platforms.        

The Group is also the owner of a fleet of vessels, consisting of tugs, ballastable barges, offshore support vessel and self-propelled barge that are used in the provision of offshore marine logistics   and support services to the offshore oil and gas industries. The Group’s fleet of ballastable   barges, one of the largest in the region, has been specially reinforced and modified to carry the   prefabricated modules in the construction of LNG extraction facilities and jackets for the   offshore oil and gas industries.        

The Group’s operating companies also offers a range of services to include marine consulting   related to the development & construction and marine logistic solutions for marine offshore   facilities. Branch offices in Korea, The United States of America and Australia provide logistics,   supercargo, engineering and freight forwarding to complement existing operations.

29 April 2013

Iskandar Malaysia (Johor Bahru) - Singapore Relationship

I have been living in Johor Bahru, Malaysia for more than 20 years before I moved to Singapore. If you asked me the feeling I have towards those cities, I would tell you that I love to stay in Johor Bahru for its relax life style and work in Singapore for its fast moving tempo on business development environment.

I have been at Batam for several vacation with my family, and some merchandisers allows us to use Singapore dollars to buy the food/services there. It gives me to an idea of how we can create a bigger pie in these region - Malaysia, Singapore and Indonesia in Asean region.

If you look at the map, Singapore stays at a very strategic location in between Asean countries. It is now one of the world's top financial hubs, oil refinery hubs, offshore and marine centers, as well as logistic centers. It takes many years to build up its repo as the world class transportation hub too.

With limited Singapore land supply and high density of population now in Singapore, Singapore has no choice but to transform itself to a lower labor-incentive nation, mainly focus on finance & service industry such as tourism, retailers, and so on. With this policy in place, I believe there will be more SMEs in Singapore move to Iskandar area to produce the goods & services there and sell it / export it through Singapore ports as Singapore ports will still remains at one of the world's busiest logistic centers.

Nonetheless, the property price in Iskandar will only be increasing in longer term after more highly paid workers staying in this region, which I hope the improvement of infrastructure & security will help this trend to continue in long run.


News on Iskandar:


ANOTHER RM5.06 billion worth of investments has been committed to Iskandar Malaysia in the first quarter of this year, bringing the total since 2006 to RM111.37 billion as at March 31.

Iskandar Regional Development Authority (IRDA) chief executive Datuk Ismail Ibrahim said in a statement yesterday of the total cumulative committed investments, RM44.82 billion or 40.2% represents investments that have been realised.

“Iskandar Malaysia continues to receive strong support and patronage from both local and foreign investors in spurring its growth. This indicates the high level of confidence that stakeholders have in the various initiatives being
implemented.”

Among the promoted sectors, manufacturing recorded the highest cumulative committed investment at RM35.33 billion, he added.

Property development — residential, retail and industrial segments collectively — contribute cumulative investments of RM40.42 billion as at March 31, followed by utilities (RM9.53 billion), government investment — mainly in infrastructure and public works (RM8.31 billion) -- and emerging technologies (RM1.03 billion).

Local investors contributed RM72.6 billion (64%) of the cumulative committed investments while the balance RM38.8 billion (36%) came from foreign investors.

Asia remains the key source of foreign investments, with Singapore and Japan being the top two Asian investors.

Source: http://www.mmail.com.my/story/iskandar-gets-another-rm5b-investments-54449

26 April 2013

Palm Oil Stocks - Is It Worth to Buy Now?

Crude Palm Oil Price is trading around US$700 to US$800 range recently, with concern on weaker demand in China and India, as well as over supply and excess reserve of palm oil in Malaysia and Indonesia. As you can see the down trend from the image below, I believe it will continue the current trend, until the demand in China and India is picking up there.

Source: CME Group

If the production output remains unchanged, the revenue of the palm oil counters will retreat by at least 10%-20% due to the fall of palm oil price in the market. Now the question is, will this trend continue to reach another record low level, say US$600 or below? I doubt so, as the global economy is picking up now, and with relatively cheaper price compared to crude oil, I believe it is getting more reasonable to generate bio-fuel with crude palm oil now. Nonetheless, let's see how Malaysia and Indonesia, the two main contributors of Crude Palm Oil that account for around 80% of the global production to jointly deal with the recent palm oil price weakening.

To me, I prefer to have a relatively companies that are in the early stage of growth and manage to control the cost well. My first choice would be First Resources, although the 3rd month production this year is lesser than 3rd month last year, which I knew that was caused by "rest" of the palm trees. Addition to it, I also found that First Resources were buying additional Fresh Fruit Brunches (FFB) which I believe is for the refinery business. With that in mind, I believe First Resources could mitigate the price downward pressure risk by doing hedging as well as managing its operating cost in time to come.

I am still cautiously optimistic on long term prospect of palm oil industry. Let's look at it again 1 year later.

25 April 2013

Why Do We Need to Buy "Growth" Stocks?

Today I reread on <Paths to Wealth through Common Stocks> written by Phillip Fisher, one of the Investment Guru in U.S. 1 question has crossed my mind, that is why do we want to invest in equity.

If your mindset is just to have an asset class that can beat inflation rate, equity is one of the best tools that I can think of. To investors especially with lower risk appetite, Equity seems riskier than Fixed Income, or alternative investment such as real estate. We have heard most of the time that trading in shares could let your become broke or become poorer than before. After all, it is about your mindset, on how you think  what Equity Investment is.

To me, I prefer to buy in those companies with sustainable growth. It is exactly like putting your money in private company, that you wish to see the company is growing and be assured that the manager uphold his duty to further expand the business and manage the cash flow in healthy manner. If you are a believer in long term investment, then you should invest in those companies that has the power to grow faster than peers in long run.

To be a business-like investor, you have to fully understand the business model the company is employing now, and how the company management is doing their job to keep the company competitive enough to survive and prosper in future. The shares investment is not about the Capital Gain that you could take home each day, but to the extend how much confidence you have with this company, and how much you are willing to pay for it to be part of the company's shareholders.

Imagine, if you invest in Apple ten-twenty years back, you could easily enjoy the multiple fold capital gain in just about 10 years time. So the more homework we do to investigate in the stocks that in our watchlist could help us to be more confidence to hold it long enough to allow the company to grow in revenue and earnings in few years time.

Selecting the good stocks to me, is more important than selecting the right timing to go in to the market. As long as your mindset is correct, invest in equity market is as simple as to be part of the company that is growing in sustainable way.

23 April 2013

China Earth Quake

China Earth Quake caused some price volatility in S-Chip in Singapore Market, one of them is Sino Grandness, that dropped about 3.3% a day. Thai Flood that happened two years ago also caused a share plunge on Thailand related shares. If the event is one-off event, we should try to make use of it, by leveraging on the shares plunge and hold until the shares price goes back to normal level. 

However, how many person can do that? The market is full of fear and greed. We should always stay calm and not be too excited when shares price is rising and not too sad when shares price is going down. Price is what you paid, and Value is what you get. 

Will Election Result Affect Iskandar Malaysia Project?

From news that I read everyday, I notice that some investors would apply Wait-And-See attitude when investing in Malaysia Properties. As now Johor is expected to have a great war in between Barisan National against Pakatan Rayat, I believe the result would give a minor impact to Johor property market. If we look at Selangor and Penang property market after the opposition party took over since Year 2008, the property price there rose at least 50%, which I believe this is due to several reasons:
  1. Quantitative Easing started by US encouraged hot money flow into Asia / Emerging market, and created bubble in asset class, such as Gold / Commodities / Real Estate market. 
  2. Job creation attracts more people from Kampung area to work in City like Penang and Klang Valley, and drives up the property prices. Not only that, with more colleges / private universities setup in City, it also creates demand for students to stay in City and have a good education services there. 
  3. Inflation plays a vital role in driving up the real estate price. The cost of material and labor cost were increasing in faster pace during recent years, and it is very hard for us to see a property market cool down if we cannot find a better alternative investment tools. 
Johor Bahru Market some how rely on Singapore Market. Most talents prefer to stay in Singapore to earn a better income compared to work in JB. If we cannot attract high income jobs in Iskandar Malaysia, then we can only boost up Iskandar GDP by focusing on two main areas:
  1. Tourism - With more Theme Parks are being built up here, we foresee a grow in service industry. 
  2. Education - Some of my friends are considering to let their kids to study in Educity, which I think is quite useful here. 
  3. Logistics/Light Industrial - We can still manage to attract high labor-incentive industry to move to Iskandar from Singapore. Part of the reasons is due to Singapore labor tightening policy as well as Singapore government's effort to transform Singapore Economy to Less Labor Incentive Economy. 
There are more well known developers coming to Iskandar Malaysia to try to help to build a better Iskandar Malaysia. I would foresee the high end real estate market can only be supported by citizens here after more higher income jobs are created. As this point of time, Iskandar Malaysia can only stands as compliment to Singapore, as the Senai Airport actually attracts little passengers compared to Changi Airport. The closer relationship in between Singapore and Malaysia, the better Iskandar Malaysia will be.

Singapore Shares Market Daily Update - 23 April 2013


Stocks in Focus: MCT, Tiong Seng, BBR, Dukang, First Ship Lease, Rickmers Maritime, Tiger Airways




MCT: 4QFY13 distributable income up 19.8% y/y to $34.7M, DPU rose 11.8% to 1.737¢, which translates to annualized yield of 4.9%. Gross revenue +21.6%, net property income +23.4% due to contributions from Mapletree Anson as well as higher rents achieved upon renewal of existing leases across all properties in its portfolio. 

Tiong Seng: Signed MoU with Myanmar construction firm Shwe Taung to explore setting up 30/70 JV precast plant in Myanmar.

BBR: Won 2 Malaysian contracts worth RM286m to build 2 bridges in Trengganu (expected completion end 2015) and Sarawak (expected completion 2Q156).

Dukang: Among baijiu brands endorsed by China's Ministry of Foreign Affairs. Hopes that with the official stamp of approval, the brand will gain greater prominence in China and beyond.

First Ship Lease: Incurred 1Q13 loss of US$7.1M due to US$5.3M impairment of investment in tanker co TORM and 11.6% drop in revenue from its 25 vessels, in part due to payment defaults by Berlian Laju Tanker. Net gearing stood at 122%. No DPU declared as part of agreement with lenders to relax loan covenant.

Rickmers Maritime: 1Q13 distributable income up 1% y/y to US$23.7M, revenue up 1% to US$35.5m. net profit up 30% to US$10.7M, helped by lower finance expenses.

Tiger Airways: Obtained approval from Australian regulators for sale of 60% of loss-making Tiger Australia to Virgin Australia. Tiger will book a one-time gain of $120M from the disposal.

17 April 2013

Singapore Shares Market Daily Update - 17 April 2013


Stocks in Focus: M1, SGX, Keppel Land

M1: 1Q13 net profit $41M, up 1.8% y/y and 8.4% q/q as service revenue rose 4.2% to $200m, led by growth in post-paid mobile and fixed customers. EBITDA Margin slid to 39.5% from 41.6% in 4Q12 Mobile customer base stood at 2.045m, of which 223K were 4G customers, while fibre customer base increased to 60K.

SGX: 3QFY13 results topped estimates with net profit of $97.7M on 16.5% increase in revenue to $190.6M. Securities daily average traded value was $1.7B, +17% y/y and +41% q/q, while derivatives volume hit a record 479K contracts, +52% y/y and +34% q/q. Total equity funds raised was $2.4B vs $484M a year ago. Interim DPS of 4¢ maintained.

Keppel Land: Partners China Vanke to jointly develop properties in S’pore and China.

16 April 2013

Singapore Shares Market Daily Update - 16 April 2013


Stocks in Focus: Keppel REIT, K-Green, Keppel Corp, Falcon Energy, Ascendas REIT, Far East H-Trust, SIA, Geo Energy, Breadtalk, Contel, HLN Technologies, Innopac 

Keppel REIT: Booked 20.7% y/y increase in 1Q13 net property income, mainly driven by higher occupancy  improved performance from Ocean Financial Centre and 77 King Street, lifting distributable income by 7.6% and DPU by 3.7% to 1.97¢ for 5.9% annualized distribution yield.

K-Green: 1Q13 financial result net profit declined 9.8% to $3.2M in line with 10.5% drop in revenue. NAV falls to $1.01 from $1.05 after distribution paid in prior quarter.

Keppel Corp/Falcon Energy: Secured US$226M jack-up rig order from Falcon Energy, bumping up new orders to-date to US$1.8B.

Ascendas REIT: 4QFY13 NPI slid 4.3% q/q due to flat revenue and higher M&C charges and property taxes. This, coupled with a doubling in performance fees dragged DPU down by 15.5% to 3.06¢ from 3.62¢ paid in the 3Q.

Far East H-Trust: Acquires Rendezvous Grand Hotel (298 rooms) and Rendezvous Gallery retail wing (NLA 24,700 sf) for $264.3M from Straits Trading.

SIA: Overall load factor rose 1.9 percent to 71.5% in Mar 13.

Geo Energy: Acquiring its 5th coal mine concession in East Kalimantan with area of 4,600 ha that estimated to contain a higher calorific value coal of 7,200 kcal/kg and semi-coking coal.

Breadtalk: Entered into JV with a consortium of investors comprising Perennial Real Estate Holdings, Bright Assets Enterprise, HK-listed Shun Tak, Ron Sim and Ronald Ooi, to develop Phase 2 of 3 plots of land in Tongzhou district of Beijing, China. Breadtalk will have an effective 2.93% stake in the Beijing Tongzhou integrated project, which comes with retail, office and residence components.

Contel: Inks $582.3M RTO with vendors of e-commerce social network YuuZoo Corp via issue of up to 1.16B new 5 to 1 consolidated shares @ $0.50.

HLN Technologies: Sacked its COO Wa Kok Liang for grave misconduct and breach of duties in relation to the proposed disposal of HLN Rubber Products

Innopac: Australian foreign investment review board has approved its takeover of Merlin Diamonds

15 April 2013

Singapore Stock Market Daily Update - 15 April 2013


Stocks in Focus: DBS, SPH, Hi-P, Technics O&G

DBS: DJ reported Bank Indonesia has given the green light for DBS acquisition of Bank Danamon, Indonesia’s 6th largest bank by assets but no details on the approved limit.

SPH: Turned in weaker-than-expected 2QFY13 net profit of S$71.5M (-15% y/y) as revenue fell 5.5% due to declining adex and circulation sales and higher rentals and marketing expenses. Interim DPS of 7¢ maintained.

Hi-P: Guides for a marginally lower revenue but higher profit in 1Q13, reversing an earlier profit warning.

Technics O&G: Formed JV with Eversendai to provide engineering and construction services for O&G industry.  The JV will acquire a plot of land in UAE to construct and operate a fabrication plant and facilities for offshore and onshore works.

14 April 2013

Learning Is a Continuous Process In Investment

Investment to me is a hobby. I spend average 10 hours a day  in reading news/books/financial reports related to investment as well as writing summary. I am very grateful that I am able to make money with my hobby. Besides being a Mobile Remisier, I also engage in several talks in teaching people in shares investing. This website also stands as a portal for information sharing purpose. 

Investment is a continuous process, that requires you to focus fully on, and keep on improving yourself to equip with adequate knowledge. You can join online forum to get yourself familiar with the investment term, such as ROE, ROI, Net Profit Margin, Asset Turnover, Debt-To-Equity Ratio etc so that you can have better ideas on the public listed company that you are investing in.   

Besides that, you can also attend some seminars organized by financial institution. Maybank Kim Eng Securities, one of the Singapore Stock Broking firm, introduces some courses that suitable to newbie and/or amateur investors. You may go to their website to find out the courses exclusively for their clients. 

To me, I went through a 3 level exams in Chartered Financial Analyst (CFA) program. This program provides information on analyzing investment, such as from Economy, Quantitative Method, or Fundamental point of view. It helped me to better understand how we can justify a good investment, as well as to manage our wealth portfolio. 

Not only that, reading investment books can help us to grow faster, compared to we figure it ourselves from the investment journey. It is actually a very small investment that can bring a big return to you. We can copy those successful investors' ideas in investing. However, being investing for 15 years in Equity market let me know that your own characteristic is the main reason that make yourself different from others in the investment results. Do not be afraid of the risk, and try to manage the calculated risk in investment. For example, please do more homework before putting all your money in just 1 basket. I am not saying that diversification is good, in fact, I try to put all my money in a few counters / real estates that I think the best can give me the best return after calculating all the risk involved. 

I always believe in hard work. Try to read more news from newspapers, and figure out what the next investment theme that yield the best result. To me, I prefer to invest in Property related, such as REITs, property development & construction stocks and real estate, and that is why I create this website to share more on property and shares investment in Singapore and Malaysia market. 

Thank you for those who are my long term readers. And I hope we can learn from each others to achieve a better and consistent result in the investment journey. 
 

13 April 2013

Singapore Stock Screening - Good Growth Counter with Decent Dividend Payout

Today I just did a homework to extract data from www.shareinvestor.com on good growth counter with decent dividend payout. My steps are stated as below:

1. Get Top 200 5 years revenue growth (Revenue CAGR) counters
2. Further filter counters with positive EPS Growth and DPS Growth

Below are some counters that after the stock screening as of 13 April 2013 for me to focus on the counters. Please note that this is only a simple stock screening. You have to do your own homework to get the desire result yourself.

  1. CWT
  2. Lian Beng
  3. Straco
  4. Super Group
  5. Jardine C&C
  6. OCBC Bank
  7. FEOrchard

11 April 2013

Should We Avoid Investing in Small Cap Counter?

We have seen a Penny Stock Rally in recent months, indicating that the market is shifting the focus to penny stocks. In case you do not know the meaning of "Penny Stock", it means that the counter is having price lesser than S$1.00, with lesser shareholding value and of course lack of liquidity. It could take longer time to buy and sell the counter compared to large cap counter. So the market could imply some liquidity risk premium to those penny stocks.

To me, I prefer to invest in medium cap counters, which size is in between small cap and large cap. I would consider the small cap is lesser than S$100M, and large cap is more than S$1.0B, where medium cap stands in between S$100M and S$1.0B. Anyway, this is my own definition of small, medium and large cap counters. 

Back to the question, should we avoid investing in small cap counter? You should access your own risk/return profile as well. The smaller capital size company could have issue in competing with its larger peer, especially for those in industry that requires a large capital expenditure to acquire more revenue from the market. Secondly, small company may need to issue higher debt yield bond to attract institutional investor   to invest in it. Thirdly, with little capital compared to the peers, it may have higher business risk when the bad time has come. That is why, we hardly see institutional investors spending time in investing in those small cap counters. 

Nonetheless, if we could have out hidden value in the small cap counter, it can produce a very high return to investors. Let's take Sino Grandness as an example. 

Sino Grandness Chart. Source: Shareinvestor.com

Sino Grandness reached all time low at May 10, at below 25 cent. It is however gaining momentum in last couple of months and reached more than $1.10 in April 13. I would say the result is quite fantastic. Why do I say so? Sino Grandness is a S-Chip counter. Normally investors will avoid in investing long term with S-Chip counter due to  financial scandal happened on some S-Chip counters. The market cap was lesser than S$100M 3 years back and now stands at more than S$300M. What are the reasons behind to push the market cap from as low as below S$100M to now more than S$300M? I think it could be due to the following reasons:

  1. Growth Factor: The company transformed to Beverage producer from pure Canned Food exporter to Europe and America after listed in Singapore Stock Exchange. As it entered higher profit margin sector, the ROE also considered to be in higher range. Secondly, it enters in China domestic market, which is an emerging market that enjoys higher growth in coming years. With the changing of demography has taken in place, more residents are staying in cities, and they prefer faster and healthier F&B. 
  2. Public Awareness: More research houses cover this counter in recent months after the company reach another new high in its revenue and earning. The most important catalyst could be the listing of its subsidiary - Fresh Garden in Taiwan / Hong Kong market. As I noticed, the CEO of the company keep on pushing the Fresh Garden distribution network into deeper and smaller tier cities and had campaign in advertising the brand "Fresh Garden" to country level. Having more distributor networks allow the public to take notice of its loquat juice series in domestic market. 
  3. Institutional Investor Buying: After release of 2012 FY result, we received news on private placement by institutional investor at 82C. I think this is an encouragement to the company to further expand its business in domestic country. 
Nonetheless, we should be aware of the possible failure of its subsidiary getting listed in Hong Kong / Taiwan market. It can bring a huge penalty in failing to do so. Let's try to find out more small cap counter and hope it can grow to a bigger cap counter in coming years. 


Singapore Stock Market Daily Update - 11 April 2013


Stocks In the Focus: Tiger Airways, Tritech, Wilmar, OKP, SGX, United Fiber

Tiger Airways:  Singapore’s March load factor dropped 1 ppt Y/y to 86%; Tiger Australia’s load factor up 6 ppt to 85%

Tritech: Expects to report a net loss for FY ended March

Wilmar: Will set up 3 subsidiaries which has registered share capital of 120m yuan

OKP: won a S$10.2m drainage contract

SGX: Signed MOU with China Financial Futures Exchange to collaborate on derivatives mkt development

United Fiber System: Hold meetings with unsecured creditors that have provided credit to its unit Poh Lian Construction, to talk about proposed debt restructuring

10 April 2013

Example of ROE - Lian Beng

In last article, I emphasized on the importance of ROE for us to judge on how good the company management in improving shareholder value. Let me use Lian Beng as an example to demonstrate.

ROE (Return on Equity) is divided mainly into three parts:
  1. Net Profit Margin - How much profit the company can earn from the revenue, in another words, what is the bargaining power against its suppliers and customers as well as whether it is in fierce competition among the peers. 
  2. Asset Turnover - How much revenue the company generate from existing assets, in another words, how efficient the company is to generate more revenue from limited assets 
  3. Equity Multiplier - How good the company in managing its corporate finance
Below is the breakdown of Lian Beng's ROE for financial year 2006 to financial year 2012 :


From the above image, you can notice that Lian Beng is leveraging on debt to generate the revenue. In normal circumstance, it is cheaper to employ debt instead of equity to expand the business. However, as Lian Beng is in Construction industry, it can be categorized as cyclical stock, or in layman term, the company revenue varies all the time. It can be very good in certain years and not performing well after the peak period. Nonetheless, you can see that Lian Beng's Equity Mutiplier remains at 2.5x to 3.0x.

The main generator to push ROE higher is the Net Profit Margin component. Lian Beng's property division and Concrete division were growing, especially Concrete division which grew significantly and seek for listing in Taiwan stock market.

Ok, let us look at the growth of the Shareholder Value, or in short the Equity position in Balance Sheet.


As you can see from the table above, ROE was getting higher after Lian Beng raised the right issue in financial year 2008. This is due to the fact that it was getting more contracts from government and private developers after Singapore government announced the plan to build 2 resorts in Marina Bay and Sentosa respectively. As of current date, the construction project GDV is around S$1.1B, which can last until financial year 2017.

Shareholder Value rose from $58M as at FY2007 to $242M as at FY2012. Even if we exclude the right issue on FY2008, the Equity Growth was near to the G rate. G = ROE * (1 - Dividend Payout Ratio). If the shareholder value can grow at 10% every year, I would consider the company is in very healthy position in doing its business. Nonetheless, I prefer the company can venture more into property development sector, as the profit margin is higher there. To Lian Beng, it has grown to second stage as it can now take in more projects as the equity base is larger compared to 5 years ago. More importantly, we can see a grow in investment holdings in Non-Current Assets, which derived from joint-venture with other property developers.

Summary: It does not really mean that high ROE is good, or it not good to have high Equity Multiplier. We should look at how efficient the management in managing its cash flow so that it will not face the cash flow shortage issue. 

Singapore Stock Market Daily Update - 10 April 2013


Stocks in Focus: Midas, ComfortDelgro, WBL/UE, Chasen, United Fiber

Midas: Awarded $17.3M SMRT car body contracts for new trains on the NEL and CCL.

ComfortDelgro: Acquires London bus operations from First Group for £56M. It has emerged to be #2 player in London. 

WBL/UE: Independent financial adviser recommends shareholders reject UE's $4.15 offer for WBL.

Chasen: Secured a RMB48M equipment moving project for TFT/LCD manufacturer in China.

United Fiber: Received several expressions of interest for troubled construction arm Poh Lian, which is under judicial management

09 April 2013

Singapore Stock Market Daily Update - 9 April 2013


Stocks in Focus: Keppel Corp, DBS, GLP, World Precision, CNA, Swiber, Good Pack, JEP, Xinren, Shanghai Asia

Keppel Corp: secures repeat jackup order from Ensco worth about US$225M

DBS: extended a deadline to complete the acquisition of PT Bank Danamon Indonesia from Temasek

GLP: pre-leases 463k sf of space in Suzhou and Wuhan to third-party logistics provider Best Logistics

World Precision: won 3 orders with aggregate value of RMB 11.34M

CNA Group: awarded a $10m contract from MediaCorp to design, supply and install an Internet protocol mgt system and extra low voltage system for its Media Complex at Mediapolis @ one-north Buona Vista

Swiber: successfully marketed SGD bonds at 7.125%

Goodpack: sells $50m 10-yr unsecured notes

JEP: says unit JEP Precision Engineering gets more aircraft-related orders

Xinren: auditor Ernst & Young issues Auditors’ opinion with emphasis of matter on FY12 financial statements.

Shanghai Asia: auditors KMPG issue emphasis of matter on the FY12 financials.

08 April 2013

Singapore Stock Market Daily Update 8 April 2013


Stocks in Focus: Ascendas Hospitality Trust, Olam, SGX, Interra, ISDN, Alebdo


Ascendas Hospitality Trust: Acquired Park 300-room Hotel Clarke Quay from Park Hotel Group for $300m or $893,000/room, with a 10-year leaseback agreement with option for another 5-year term.

Olam: Withdraws its libel suit against Muddy Waters and Carson Block

SGX: SGX AsiaClear to introduce iron ore futures this week

Interra: Completed 2nd producing well in Myanmar oil field and will begin to drill a 3rd well, which will take about 6 weeks.

ISDN: Signed MoU with China Huadian Engineering Co, a Chinese state-owned power and industrial play, for collaboration on energy-related projects in south-east Asia.

Albedo: Auditors are unable to express an opinion on the company's financial statements due to uncertainty over its ability to recover $12m owed by 70% owned Thai Tech Steel Co, which is under official receivership and facing lawsuits from its minority shareholders

ROE - How Fast The Company Can Grow

ROE in full name, Return On Equity, is one of the most financial indicators that I judge on how good the quality of the company management is.

If a company can maintain a very consistent pace of ROE, it means that the company can grow consistently. In CFA course, ROE can be measured in growth component by following formula:

g (sustainable growth rate) = ROE * (1 - Dividend Payout Ratio [DPR]), DPR = DPS / EPS

The higher g, the better growth prospect it is.

Nonetheless, this is the result that we can detect. We have to do more homework on ROE is generated, and what is the business model and tactical strategy applied by the management for sustainable growth. For example, Apple company has been transformed from computer maker to personal entertainment gadget maker such as iPod, iPhone, iPad, and coming i-Watch. Once it has expanded or venture into better growth prospect market, it may enjoy a better PE Ratio, however to success or not, it has to make sure it can become one of the market leaders so that it has a better bargaining power against suppliers and customers.

As far as I am concerned, the ROE can be maintained as consistent high range, this company does have some competitive edge against other company. I prefer to find a growing company in mature industry, it means that it does have something different from other players.

Let me know your questions here so that I could explain it in more detail to you.

06 April 2013

E&O The Mews - A Good Buy?

Yesterday I was invited by E&O to attend its project preview - "The Mews" at E&O Gallery, next to Raffles Hotel in Singapore. There were about 10 attendants to come and listen to the talk conducted by them.

For those who are not familiar with E&O, it is one of the well known property developers in Malaysia, especially in Penang and Klang Valley. Its business model consists of property management, hotel management, as well as property development. You may go to its website to find out more.

In Klang Valley, or more specifically The Greater Kuala Lumpur, E&O has some projects ongoing in Kuala Lumpur Golden Triangle. The newly completed project is St. Mary Residences. It is just a merely 10 minutes walk distance to KLCC, a famous tourist attraction and landmark in KL. According to the salesperson in E&O, it is nearly 100% purchased by the investors & owners and now managed by E&O.

Ok, back to the topic - The Mews. This project is located at Jalan Yap Kwan Seng, Kuala Lumpur, a mere few minutes walk distance from KLCC. The indicative selling price is around RM1,500-RM1,600 psf and investor could get an early bird discount if book it in advance. There is a DIBS Scheme, which means that the investors can pay nothing but the 10% down payment until the project is completed. For Singaporean buyers, you can also enjoy loan benefit of up to 80% or 90% Loan-To-Value Ratio depending on your qualification as the panel mortgage banks include OCBC and UOB, which are Singapore local banks.

For those who are interested to learn more about this project, can contact E&O Singapore Office. I believe you can make a better decision after doing some homework to find out the background of this project. As this is a luxurious High-End Condominium project, you can target it to Expats or locals who are living and working near to KLCC. Please be aware that there will be more upcoming projects by other developers, as well as the quality of the management team of each project, as this is one of the key factors to invest successfully in high-rise project.

Last but not least, for foreigners to purchase Malaysia properties, you must fulfill the following criteria:

1. Value of more than RM500K, or around S$200K
2. Not Malays Reserve Land
3. Not Agricultural Land

There is a property gain tax applied to the profit for Malaysia properties sold within 5 years from the date you signed off S&P Agreement. You must pay 15% if you sell within 2 years, or 10% if you dispose off within 2-5 years. Anyway, this is not a concern for high rise project as it will take roughly 4 years to complete and you may just take another 1 more year to rent out to the tenants before decide to sell it to another buyers.
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