27 June 2013

72 Rule in Investing


Today I wish to share with you on the 72 Rule in Investing. It is a simplified version of compounding formula, and I think it is quite interesting for you if you are interested in mathematics.

Compounding is a very important factor to decide how much you could earn at the end of the investment journey. In long run, The multiple effect is much higher than the addition effect. For example, let me show you a table as below:

1,000 +1000 *1% *5% *10% *15%
2,000 1,010 1,050 1,100 1,150
3,000 1,020 1,103 1,210 1,323
4,000 1,030 1,158 1,331 1,521
5,000 1,041 1,216 1,464 1,749
6,000 1,051 1,276 1,611 2,011
7,000 1,062 1,340 1,772 2,313
8,000 1,072 1,407 1,949 2,660
9,000 1,083 1,477 2,144 3,059
10 years later 10,000 1,094 1,551 2,358 3,518
11,000 1,105 1,629 2,594 4,046
12,000 1,116 1,710 2,853 4,652
13,000 1,127 1,796 3,138 5,350
14,000 1,138 1,886 3,452 6,153
15,000 1,149 1,980 3,797 7,076
16,000 1,161 2,079 4,177 8,137
17,000 1,173 2,183 4,595 9,358
18,000 1,184 2,292 5,054 10,761
19,000 1,196 2,407 5,560 12,375
20 years later 20,000 1,208 2,527 6,116 14,232
21,000 1,220 2,653 6,727 16,367
22,000 1,232 2,786 7,400 18,822
23,000 1,245 2,925 8,140 21,645
24,000 1,257 3,072 8,954 24,891
25,000 1,270 3,225 9,850 28,625
26,000 1,282 3,386 10,835 32,919
27,000 1,295 3,556 11,918 37,857
28,000 1,308 3,733 13,110 43,535
29,000 1,321 3,920 14,421 50,066
30 years later 30,000 1,335 4,116 15,863 57,575
As you can see from the table above, the longer the period we invest in and the higher the compounding rate that we can achieve, the better the return we could get. In long term investment, the most important thing that we have to achieve is the Self Discipline as well as the Risk Management. The more experience we are in the investing, the better result we could achieve in long run.

Ok, so what's 72 Rule here?

It means that the number of years that we double up our investment are roughly derived from 72 divided by the compounding rate. For example, if your annual return rate is 1%, it would take about 72 years to double up the principal amount. However, if your annual return rate is 10%, it would only take about 7 years to double up the principal amount. If we choose to select an investment vehicle,  Equity is always a good tool in achieving higher return rate compared to Fixed Deposits / Fixed Income instruments.

Please note that, however above is just the theory of 72 Rule. It always depends on ourselves in achieving the target annual return rate. Let us work hard together to have a good investing execution plan.

Thank you and good luck in your investment journey.

25 June 2013

Free SMRT Rides to CBD starting from 24 June 2013

The free rides to Singapore CBD area campaign initiated by SMRT started from 24 June 2013 to 24 June 2014 was launched officially yesterday. To the best of my knowledge, there was about 9% lesser crowd during 8 PM to 9 PM yesterday. It has given me the impression that this project has taken impact more than what I had expected.

Frankly speaking, if the public transport system in Singapore can be improved further, there will be more people who are working in CBD area willing to stay at the sub urban area such as Jurong, Woodlands or even Pasir Ris or Punggol. The traveling hour from Woodlands to CBD area could be cut short to as little as 30 to 40 minutes after the Upper Thompson MRT line is completed targeted on Year 2020.

However, we must bear in mind that the employers also play a vital role in reducing the amount of commuters during peak hours by providing flexible working hours and "Work From Home" scheme. As a mobile remisier, I can now stay mobile and not in a fixed place which I think is quite convenient.

I also notice that there is a review on the monthly travel card which is priced at $190 currently. It definitely can help the heavy travelers to reduce their financial burden in traveling. The COE can be decreased further and we can see a moderate CPI later.

Nonetheless, the current concern on public transport still remains on its operating efficiency. The Singaporean are getting lesser tolerance on the train break down / delay any more. However, I believe that Singapore government is working hard to ensure that most Singaporean are happy with the world class public transport service which I think is still one of the best in the world.

Will it help to improve the SMRT shares performance? Let's wait and see for a concrete result later. In initial stage, I would think that it may reduce the train service related revenue by about 2% (e.g. I just guess that there is about 20% of commuters working in CBD area and only 10% of them are willing to take part on this campaign) but will definitely reduce the possibility of train breakdown later on.


China Stock Market Collapse?

Yesterday we had experienced another terrible experience in China Stock Market with Shang Hai Composite Index dropped more than 6% in single day. According to the experts out there, this was due to the rising concerns on China's liquidity crunch as the Inter-Bank Loan Rate spike to more than 10%, which could lead to another financial crisis in China.

Although China’s central bank could step in to add cash to the system, it has largely been holding off. "Currently, the overall liquidity in our banking system is at a reasonable level," the People’s Bank of China said in a statement Monday.

As I am new to this market, so I could not have any good recommendation here. What I wish to note it down here is to express my feeling in this year.

Starting from beginning of the year, I thought that the stock market was already in a high level, until I realized that I was wrong in May. At that point of time, I already reduced my position to about 50% from about 90% beginning of the year. As I am not rely on the income from stock market, so there is little room for my to make mistake. So if we look at the current situation, the China stock market actually still above the year beginning level. So it is still early to say that China has entered bear market.

If and only if we believe in long term investment, then it might create a chance for us to enter the stock market. To me, I am still cautiously optimistic in long term growth in China economy as well as the emerging market. With hot money now flows back to US, I believe that there will be a volatile market for us.

Anyway, I am a bottom-up approach investor, so I will just keep continue to uphold my investment philosophy - that there is no point for us to keep cash in long run. We should always find opportunities in the stock market. You can be patience, you can just do nothing, but please do not forget to monitor closely the news that may bring fortune to us.


23 June 2013

Shares Buy Back vs Dividend Payout

Yesterday I met with friends and they asked me about the impact of shares buy back. My answer to them was that I prefer shares buy back against divided payout.

Let's look at the example of shares buy back. If the company A total outstanding shares is 10,000,000 shares and the company decided to buy back 10% or 1,000,000 shares, the outstanding shares will be reduced by 10% to 9,000,000 and the EPS in short will be increased by 11%. If the overall situation do not change, you would need the shares price to go up by 11% to back the previous PE level. 

Of course you would say this is just a theory, and the current market situation might not react like what theory would predict. Some investors would think that the company have wasted the money in doing something not creating the "real" fortune to the shareholders. They would prefer the company to spend the money on something that is good for future investment. For example, YTL Power has loaded money, but if they keep on buy back the shares and do not have any good investment in future, then this will not attract investors who are looking for future growth. 

However, if you distribute the excess cash back to shareholders, it only give benefits to those who like steady cash flow income and do not really fancy of capital appreciation game. Anyway as we do not pay for capital gain in Singapore and Malaysia, it is wise for us to re-invest the dividend back to the counters and enjoy the future ride of the share price later. 

Above are just my thought on shares buy back and dividend payout. I welcome your feedback in this topic.

19 June 2013

ESBI - Rethink of ESBI

When I was in my early 20s, I was always focused on shares investment. I learnt a lot of financial term in forum which I actively participated was "ROE", "CAGR", "DY", "PE" and so on. I still remembered that my ex-gf gave me a book titled "Intelligent Investor" as my birthday gift. I learnt more from there, such as "Margin of Safety", "Mr. Market" etc. And I have to admit that Mr. Benjamin Graham and Mr. Warren Buffett as well as Mr. Phillip Fisher influenced me a lot in searching a stock that can be multi-bagger. I was quite fortunate to reach six digit in my early 20s and I have great confidence that I can be millionaire in my 30s and multi-millionaire in my 60s.

I believe the hunger of chasing after money had lead me to be very focused in it and that is why I took the self study on CFA and become CFA charter holder eventually. To be frank, in "I" quadrant, you need to spend a lot of time to learn about the jargons used by the investment professionals and to master it, you have to be in real war, after learn from those experts. It's all about how you let your money earn hard for you, after you have earned hard for your money.

I just went to Serangoon Library and have some glance on Robert's book again. I believe that to be really rich in investment or in business, what you have to do is only one thing:

"Buy Good Counters in Low Price"

This is the first step in determine whether you have a good investment return. There is little wrong if you manage to buy a dollar asset with 60c. Of course you can argue that there is no free lunch in the world. So you must be doing more homework to figure out what makes the price low and what are the catalysts to allow the company back to its intrinsic value. You can estimate the terminal value and your holding period and discount it back to present value with your desired return rate. An important ratio - PEG (PE To Growth) Ratio can be used for checking whether the stock price is undervalued or not. After all, you also have to have a checklist to check through whether the company is worth to hold for a long period.

When I am managing my own fund, I always look at the longer term, that I can ignore the short term stock price volatility and fully focused on the long term prospects of the business in the company that I hold. I gotta make sure I can fully understand what drives the revenue and the cost as well as how the company can manage the debt level effectively so that they can balance the risk & growth in long run.

To stay profitability in long run, I believe the self discipline and hard work in finding good counters in low price is important for us. There is no hurry for us to chasing after "Hot" stocks. And we should bet big for a "sure" thing.

13 June 2013

Mah Sing - Latest Project in Iskandar Malaysia (May 2013)

Mah Sing recently announced its acquisition of land adjacent to Senibong Cove, which is about 10 minutes drive from JB CIQ. According to its initial plan, it is a RM4.35 Billion gross development value (GDV) project which consists of service apartments, street mall and hotels / serviced suites. With recent acquisition, Mah Sing GDV now stands at RM26.4 Billion.

For more detail information, you may go to the below link:

Source: http://www.starproperty.my/index.php/property-news/mah-sing-to-develop-new-projects-in-jb-and-taman-wahyu-off-jln-ipoh/

Malaysia Shares - Genting Plans to Re-Invest in Genting Highland

After 41 years of opening in Genting Highland, the management revealed that they would finalize plan to redevelop / reinvest in the Highland. To me, this is a brave move as the management has full confidence and commitment on its homeland as Malaysia is a Muslim dominated country. A RM 3.0 Billion should be a good budget to further improve the revenue and net profits there.

I have a friend who was retired as a sub-con of Genting Highland few years back when Genting started to venture in Resort World Sentosa, an iconic resort in Singapore Sentosa island. My wife and I paid a visit last year and founded that the weather there has been hotter, and it was just like  an old town to us as there was no further development.

To be successful in tourism business, you have to keep on improving your brand awareness by providing good quality service to clients, else they will soon move to other attractions that may provide better ideas on vacation. If you really like to be in this industry, it is better that you can have a long term plan so that your cash flow can be increasing steadily over the years.

A Singapore listed counter that I can think of is related in tourism industry is Straco, which is focus in China domestic market. Actually I prefer to invest in this industry as this is "Green" Industry and it may not incur a lot of ongoing CAPEX over years to boost the revenue. In fact, you need to train your staffs so that they can entertain the tourists and leave them a good impression so that they may come back again.

Above is just my humble opinion.

12 June 2013

Can we still invest in downtrend market?

While I am not a technical analysis (TA) expert, I still understand that investing in downtrend market is similar to catching a falling knife - sounds dangerous. And many TA experts would suggest us to set a cut loss point when it's in downtrend and enter back the market when the uptrend is formed.

Well, I only believe in the term "Price is what you paid and Value is what you get". If you buy a counter that you think is undervalued at that point of time, there is impossible for you not to think of buying more when the stock dropped by 20% or more than your last entry price. 

It's not easy for us to calculate the intrinsic value of each stock, as most analysts in the market are using "Relative" method by comparing the stock price among peers. They may make a "buy" call when the counter's PE/PB ration is lower than peers. When the whole market is dropping, the analysts would suggest higher return due to so called high beta / volatility, but when the market is in uptrend, the analysts could even reduce the "rate of required return" due to low volatility?!? 

Some analysts may use the comparison with its own previous performance on PB/PE ratio. This is an easier way to figure out the counters in mature stage but not for cyclical / growing stocks as PB/PE ratio may not be a good value indicator for those stocks. 

Anyway, I think there is always no fixed magic formula to retrieve the real value of the counter. You will always experience the up and down of the share price. What we can do is just do nothing when market is hot and start collecting good quality stocks when nobody wants to enter the market due to the fear of unrealized gain in paper, like they forget the famous quote "Price is what you paid, Value is what you get". The value is always there, no matter how much stock quote is. 

For long term investment using excess cash, I believe we can start finding hidden gem(s) as current Singapore stock market drops by more 10% to below the year beginning value. It's time for us to do more homework to collect valuable assets. We can enjoy the fruits in later years. I still believe that we can enjoy a good return investing in equity market, as it is my most favorite asset class.

10 June 2013

Factors that Determine Your Investment Return(s)

I have to acknowledge that I am influenced by the intelligent investor, Benjamin Graham. A famous quote by the Great Investor - Warran Buffett is "Rule #1, Do Not Lose the Money, Rule #2, Remember Rule #1".  So to increase the chances of winning in the investment game, you have to be very conservative in managing your money to invest in something you are very sure of the real value is. 

I have met with a lot of investors who are quite savvy in their investment products. Some become millionaires through real estate investment / management, some become millionaires through Equity Investment, and some through leveraged products etc. To become a successful investor, you have to be very sure (at least in your mind) that you can be rich through investment. 

Having gone through some 15 years of experience in investing in Shares, I believe that there are some Magic formula that you can be rich in shares investment. Some of the factors that I would like to share with you are listed as below:

  1. Understand your risk & return profile. When I was in early 20s, I can simply put 100% of my cash in equity market. This is not because I am very brave, but because I know that I can put 100% of my cash there as I have little commitment on my family, until I have to set aside my assets in Aussie Dollar FD in my late 20s to support my younger brother to further his studies in Australia. Always use the excess cash in investing in higher volatile market to ensure you are not affected by the short term risk but can enjoy longer term return via capital appreciation and dividend returns. 
  2. It is all about asset allocation. You can put 100% of your money in single asset class like equity, or you can diversify to different asset classes. To me, I am now diversify my portfolios to Real Estates and Equities, which I think the correlation is a lesser than 1.0. Correlation is a term to compare the trend of different asset classes. The lower the better. In traditional portfolio management, Fixed Income and Equities are two most important components, while alternative investment like Commodities & Real Estates is getting popular in recent market. 
  3. Do a lot of homework in the investment that you are holding in / thinking to invest in. It is just like your babies. You have to fall in love with it and putting a lot of attention to ensure it bear the fruits in later stages. You have a lot of ways to do your homework. In equity market, the homework you can do is to read the annual / financial reports as well as the news related to the counters that under your watch list. Try to experience yourself in investing so that the more experience you have, the better result you will get later. 
  4. If you are too lazy to do your homework, at least you can hire someone who are having such characteristics - integrity, hardworking, expertise in the business / wealth management. In long run, you can still beat the others who just park their monies in Fixed Deposits or in Banks. 

08 June 2013

Next Insight - A Good Portal on Shares Investment in Singapore

There are few websites which I think is good for newbie investors to participate / learn from. One of the websites I think is good is "Next Insight". When I first started to invest in Singapore Market, I went through this website to getting comments / news update from various sources. If I am not wrong, this website also has a team of editors that provides summary / their own view on SGX listed counters.

Last time I was misunderstood as one of the editors from Next Insight when I was in CEO Talk. So I do believe that this team do provide a good quality write up on Singapore Counters and I wish to share with you on them.

About Them:

a) Cover selected briefings organized by listed companies for analysts and fund managers;

b) Cover selected overseas trips organized for analysts and fund managers;
c) Do exclusive interviews with CEOs of selected companies;
d) Write the key content of clients' annual reports, including the financial & operations review, as well as produce content for publications such as CFA Singapore's newsletter.
e) Provide and moderate a forum for readers to discuss stocks.


You can go to their website to have a look there. Welcome to share with us the website(s) which you think it is good for the investors here.

P/S: It is wise to do your more own homework before making any investment decision. Discuss with your Financial Advisor / Banker / Broker to find out more on the counters you are interested in.

MIdas - Will It Shine in Next Few Years? - Updated 13 June 2013

Background:

Incorporated on 17 November 2000 as an investment holding company, listed on 23 February 2004  on Singapore Exchange Securities Trading Limited (“SGX-ST”) and on 6 October 2010 on The Stock Exchange of Hong Kong Limited (“SEHK”), Midas Holdings Limited (the “Company” or "Midas”, together with its subsidiaries, referred to the “Group”) has grown over the years to gain  recognition as a leading manufacturer of aluminium alloy extrusion products for the rail transportation sector in the People’s Republic of China (“PRC”).

Under the Group are three business divisions, namely:
(a) the Aluminium Alloy Extruded Products Division,
(b) the PE Pipes Division, and
(c) the Aluminium Alloy Plates and Sheets Division.

These three divisions are strategically located in the PRC to take on the opportunities as well as to capitalise on the potential benefits of the vast developments that are taking place in the infrastructure and rail transport sectors. Besides our core business, we have a 32.5% stake in a licensed metro train manufacturing company in the PRC, Nanjing SR Puzhen Rail Transport Co., Ltd. (“NPRT”).

Source: Midas FY2012 Annual Report 

In recent months, Midas announced a few projects grabbed from various countries. YTD project value is about RMB 2.5 Billion or about S$ 500 Million which could last until FY2014. As it largely depends on the development in China, so as urbanization in progress in China, we foresee more cities require a better and faster train service there.

- Updated 13 June 2013: Midas announced another project obtained by the respective party, on building metro trains in China, and YTD project value is about RMB 3.6 Billion or about S$ 700 Million which could last until FY2016. 

I learnt from news that China was in the midst of changing new government last year, and so the rules and regulation was in review. Started from this year onward, we see a new regulation body to control the new projects of rail tracks. I believe it can improve the efficiency in planning and running the execution of the development of rail tracks in mainland, especially for those 2-3 tier cities.

However, as the income stream is quite volatile, you have to be prepared to experience the share price volatility in coming years, until the development in China is in mature stage. Also you have to be more closely monitoring the fiscal policy in China. I believe China is now trying to push for the growth in domestic demand industry, hence the improvement in infrastructure in Mainland definitely will help cater to this requirement.

Below is the snapshot of Financial Highlight captured from Midas IR website:





07 June 2013

Iskandar Malaysia - Will Johor Government Impose More Restriction on Property Investment?

Iskandar Malaysia is a flagship project initiated by Malaysia Government since Year 2006. We see a tipping point when the main road infrastructure and some of the leisure projects was implemented last year, such as Johor Premium Outlet, Coastal Highway, EDL and Legoland etc. With more theme parks coming in to this region, I believe it would be a very important station for tourists to come and travel in South East Asia. Although Senai Airport is still under utilized, but I believe it could further improve the passenger volume in Changi Airport, as I observe that there are increasing amount of tourists crossing the causeway to / from Singapore, especially during school holidays or summer/winter holidays.

With 130,000 foreigner buyers in Iskandar Malaysia, 90% of them are Singaporean. Recently the new CM of Johore announced that the government may impose higher tax to foreigners due to increasing demand that drive up the property price which locals could not afford to buy. It is a trend for Malaysian who work in Singapore to buy a house in JB after so many attempts done by Singapore government to curb the speculation in Singapore property market.

Malaysian Friends around me also feedback that they can understand why Singapore government try to protect its citizen by implementing Additional Buy Stamp Duty (ABSD) for Singapore PRs first time buying property in Singapore. However, they also hope that the infrastructure in Iskandar Malaysia could improve further so that the traveling time could be reduce significantly.

The traveling hour now from JB Custom to Kranji / Woodlands MRT station is around 1-1.5 hour during peak hour. And it may take about 1 hour from Kranji/Woodlands to CBD area in Singapore. With MRT further improved in Singapore and JB by year 2020, I believe the traveling hours can be further improved by 50%. It may bring new interests for those who wish to stay in JB while working in Singapore. I believe minority of Singaporean may move to JB while renting out their properties in Singapore to create another income stream for them.

Anyway, let's see what would happen. Maybe this time Iskandar Malaysia can be "Shen Zhen" to Singapore, where labor-incentive industry could move to this area and Singapore can further strengthen its leadership as global logistic hub & financial hub. And definitely Johor Government must do something to reduce the tension among locals who complaint about the rising property price (and hence the inflation rate) there.

My View on Sarin Technology (Singapore Listed Counter)

I first noticed Sarin Technology about a year ago. However I did not do much homework on it until recently I read a book related to diamond industry, then only I realize how diamond industry works. Most of the diamond cutter / retailers are controlled by Jews families. So it is a Niche industry, and require some sort of entry barrier to get into this industry.

Sarin Technology mainly is the supplier of machine to diamond retailers. It mainly involves in Research and Development. The Galaxy series is its flagship product, which could bring recurring revenue to Sarin.

The Gross Profit Margin is quite high, stands at above 20% except for year 2008 & 2009 (Global Financial Crisis). With recurring income model in place, I believe the revenue could be quite stable if not increasing in coming years. Nonetheless, I believe it is also affected by the global economy, so I would think of accumulating it when another global financial crisis comes.

With current PE of around 18X, I would put it in my watch list first.

06 June 2013

Sino Grandness - Summary - FY2012 Annual Report

Corporate Profile:


Headquartered in Shenzhen China, Sino Grandness is an integrated manufacturer and distributor of canned fruits and vegetables as well as bottled juices. Since its establishment in 1997, the Group has rapidly grown to become one of the leading exporters of canned asparagus, long beans and mushrooms from the PRC. The Group serves globally renowned customers across Europe, North America and Asia, such as Lidl, Rewe, Carrefour, Walmart, Huepeden, Coles and Metro.

With stringent quality control and procedures implemented in its manufacturing processes, Sino Grandness' manufacture and sale of canned products are compliant with international standards, including Hazard Analysis and Critical Control Point ("HACCP") food safety system, British Retail Consortium ("BRC"), International Food Standard ("IFS") and International Organization for Standardization ("ISO") certifications. As such, Sino Grandness is able to export its canned products to customers globally including the European Union, which has enforced import restrictions (commonly known as "Green Barriers") since 2000 on the grounds of environmental and food safety issues.

Sino Grandness' six production plants are strategically located in five provinces in the PRC, namely Shandong, Shanxi, Yunnan, Hubei and Sichuan all of which are key agricultural belts in the PRC. The production bases straddle different climatic regions so that production activities can be carried throughout the year.

In March 2010, the Group successfully launched its own-branded bottled juices, 鲜绿园, comprising mixed-fruit juice and vegetable-fruit juice to target the huge domestic consumer base in the PRC. As a percentage to Group revenue, sales from the PRC market have surged from 41.9% in FY2011 to 60.0% in FY2012 due to strong sales growth of the own-branded beverage segment.

OUTLOOK


Looking ahead, despite the unfavourable economic climate faced by Western countries, the PRC economy seems likely to remain on a growth path in the new year, fuelled by the government’s domestic demand stimulus.

Social trends also augur well for the Group. As urbanisation increases, city dwellers tend to become
more affluent and make more health-conscious lifestyle changes. The rise in disposal income per capita, as well as increasing awareness of nutritional products in the PRC creates opportunities for growth in the food and beverage industry.

Leveraging on this trend, Sino Grandness is confident that its products, such as its Garden Fresh house brand juices and house brand canned products, are well positioned to meet the demands of the market. In this respect, the Group has been focusing on advertising and promotional activities to further develop the brand identity of Garden Fresh juices, as well as sales and marketing initiatives to extend its distribution network in the PRC market.

Over the year in review, concentrated brand-building efforts through advertising and promotion events as well as media sponsorships (for example, the 2012 Youth Idol Chinese Presenter Competition) have increased the brand presence of our Garden Fresh juices. In fact, our Garden Fresh juice has achieved a breakthrough in sales performance in FY2012.

Not resting on our laurels, we have plans to expand the Group's production capacity so as to enable us to meet and secure larger orders. We also plan to engage in research and development efforts to expand our range of juices in order to widen its appeal among consumers.

Source: Sino Grandness FY2012 Annual Report

My View: During the trip to China last week, I still cannot find any of its products (Garden Fresh) in 2-3 tier cities like Jie Yang, Feng Shun and Chao Zhou etc. So I can safely to say that we can foresee another wave of growth in smaller cities in China. Nonetheless, I am not quite comfortable with the increase of receivables, and do not rule out any impairment of bad debts in coming futures when it expands the distribution networks to smaller cities. With latest private placement in place (about 10% of new outstanding shares), we will see a dilution of EPS in coming financial reports. Another growth engine would be the domestic canned fruits products as the management may take steps to further improve its market shares in China.

My forecast of FY2013 EPS would be around 26-28C if the revenue and profit can increase further for another 40%. There would be a PE re-catalyst if its subsidiary Garden Fresh can be listed successfully next year. Nonetheless, I prefer a stable dividend policy after Garden Fresh get listed in Hong Kong / Taiwan.

However, I believe it would be a tough competition with other big boys like Wahaha or WangLaoJi if Sino Grandness wish to diversify its product base and compete against them. So let's see how CEO Mr. Huang Yu Peng can lead the group to another level.



Straco - Summary - June 2013

Straco is a China based company listed in SGX since few years ago. It is a tourism player in China, mainly in Shang Hai, Xi An and Xia Men. Just a glance on its FY2012 annual report, I found that its revenue basically depends on the growth of domestic tourists arrival as well as any major events held on its assets in China.

In my humble opinion, Straco is a cash cow company as it is generating Free Cash Flow consistently.  Nonetheless, due to the volatility of the revenue generated over the years, I would be more conservative on forecasting the future earnings in next couple of years.

Factors to improve the net profits of the companiy:

1. Increase of wages among locals.
2. Increase of major events held on the assets.
3. Acquisition of more assets that can bring net operating cash flow.

Things to note:

1. The income stream is volatile, although there is an improvement in FY2012.
2. However, I am quite confident in longer term revenue growth, as I believe the management can use the cash balance wisely to contribute it back to the shareholders or for future investment purpose.


05 June 2013

A trip to China - Shan Tou, Jie Yang, Chao Zhou, Feng Shun

Recently I just went to China with my relatives to pay a visit to the relatives in China. In Singapore and Malaysia, most of the Chinese whose ancestors are from Guang Dong, Fu Jian or Hai Nan Province. We went back to Guang Dong Province to visit the grave of ancestors and the attractions there.

During the trip, the tour guide had shared with us the history and latest progress on the cities near Shan Tou. The population there is about 5M in each city. Jie Yang, Chao Zhou and Shan Tou is now consolidated as one metropolis called "Chao Shan" as the locals there share the same dialect and culture. The newly built up Jie Yang Airport can welly feed the visitors there. Anyway, our main focus was to stay at Feng Shun town, which is where my grandparents came from.

According to my parents who went back 6 years ago,  Feng Shun town is now developing very fast, and there are still a lot of property development in 2 tier / 3 tier cities in China. As the population in China is very big (about 1.3 Billion), there are hundred of cities just like Feng Shun town. I believe that the living standard there has improved a lot, and we can see a lot of private transports along the road there.

The property price there has surged a lot too as well. According to my relatives, the per square meter price is about 6-7K RMB in Feng Shun Town, while it could go as high as 70K RMB in Shen Zhen, a 1-tier city near to Hong Kong.

My tour guide had mentioned that the medical system in China still remains weaker, as not many villagers afford to go to the hospital if they do not subscribe for any medical insurance. This is because they have to put the deposit before admitted to hospital. So I am grateful that Malaysia government still provides a cheap medical services to Malaysian, unlike other countries in South East Asia.

I think I will be going back again to witness again the development of China, a fast growing emerging market. As China is going to transform its economic model from Export Oriented to Domestic Oriented, there will be an increase of middle class there, and we do see a lot of investment opportunities there.

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