31 July 2013

Tuan Sing Quarterly Report Summary - July 2013


REVIEW OF SEGMENT PERFORMANCE 

Property

For the first half year, Property revenue rose to $92.1 million, a 23% increase over that of 1H2012  
attributable mainly from Sennett Residence which was launched in March this year.  As at 30 June 2013, 262 units or 95% of Seletar Park Residence had been sold or booked at an aggregate sale value of $287.8 million.  As at 30 June 2013, 291 units or 88% of Sennett Residence had been sold or booked at an aggregate sale value of $364.5 million.  Revenue and earnings from these sales will be progressively recognized. In Shanghai, additional units sold at Lakeside Ville Phase III brought the total number of units sold to 163 or 95% of the project.  

Revenue from investment properties decreased 5% to $5.1 million due to lower contribution from
Robinson Towers and International Factors Building offset partly by higher contribution from other
properties.  Majority of tenants at Robinson Towers and International Factors Building moved out of the buildings by end May 2013 prior to the demolition of the buildings which took place in June 2013.

On the whole, Property contributed a profit after tax of $12.6 million and accounted for 58% of the
Group’s total profit for the first half year 2013.


Hotels Investment

For the first half year, GHG posted revenue of A$64.5 million comparable to the same period last year.  Net property income decreased 5% to A$20.1 million due to lower contribution from hotel operations offset partly by higher contribution from non-hotel rental.  The combined Revenue Per Available Room (“RevPar”) reported by Grand Hyatt Melbourne and Hyatt Regency Perth edged down 1% year-on-year as a result of a marginal decrease in occupancy and room rates.  The decrease was mitigated partly by higher food and beverage revenue as compared with that for last year.  

Despite lower net property income, GHG’s profit after tax of A$4.4 million was 3% higher than the
same period last year attributable to lower depreciation charges as well as lower interest expense.  Certain fixed assets had been fully depreciated; and there was a partial loan repayment last year. This translated into the Group’s share of GHG’s profit of $2.8 million for the first half year 2013. After deducting finance costs and deferred tax provision at the investment holding level, Hotels Investment contributed a profit after tax of $1.2 million, as compared to $1.3 million a year ago.



Industrial Services

For the first half year, Industrial Services reported revenue of $91.3 million and profit after tax of $1.4 million, as compared to revenue of $101.9 million and profit after tax of $1.4 million in the previous corresponding period. Revenue from SP Corp declined 10% to $86.6 million as a result of lower sales in both commodities and tyre trading.  However, profit after tax improved 7% to $1.4 million due to significantly lower loss from geotechnical and soil investigation businesses in the current period following the scaling down of the Singapore operations since last year.  



Other Investments

Other Investments contributed a profit after tax of $7.2 million as compared to a profit after tax of $7.7 million in the same period a year ago. GulTech reported a 7% dip in revenue to US$127.8 million and a 2% dip in profit after tax to US$23.7 million.  Sales decreased as market was subdue, the impact of which was cushioned by foreign currency exchange gain, higher scrap sales income and lower income tax expenses.  Net profit attributable to shareholders decreased 2% to US$13.4 million.  Consequently, this translated into a lower share of profit for the Group.



Source: Tuan Sing quarterly report July 2013

OSIM - Latest Quarterly Report - July 2013

Highlights of OSIM latest quarterly report:



Osim expects to continue to create higher consumer demand for OSIM products like
uDivine App, uAngel, uPhoria, uHug, uPixie, uCozy, uRelax, uPebble, uBio, uSlender and
nutritional supplements like Taut, Stem C, Zhi and Liver Protector. They have 579 OSIM outlets. In China, they are in 45 cities with 266 OSIM outlets.

For this year, Osim are targeting to open 20 to 30 OSIM outlets. Their 217 GNC outlets are doing well. GNC Taiwan is progressing well. For RichLife, they will focus on seven key cities for better focus, control and efficiency. There is a total of 252 GNC/RichLife outlets in ONI Global.

On 22 July 2013, they increased their shareholding in associated company TWG Tea from 35%
to 45% for two dollars only. This is expected to be earnings accretive for OSIM this year. Osim expect the businesses to remain strong in 2013. The directors are pleased to recommend an interim dividend of 2 cents per share or about 1% dividend yield.

In my view, I think that Osim is doing a good job as it continues to strength its position as Asia leader through branding and R&D activities. With annualized EPS 13.66C or annualized PE of about 15X, I believe it is a reasonable price now for OSIM.


SMRT - Disappointing Result - July 2013


SMRT Net profit dropped to $ 16.3 M (-55% y/y, net loss q/q) despite revenue inching up to $ 284.8 M. The mildly higher top-line was due mainly to higher train (+25%), rental (+9%) and taxi revenue (+6%), however operating profits tumbled 49% with operating margins slumping 8.8% to 7.8%, as continued increase in operating expenses for the fare business was not being offset by fare increases, resulting in  lower train profits and higher bus and LRT losses.

Operating expenses rose to $272.1 M mainly due to higher staff costs (+ 23%) and depreciation (+12%). Repairs and maintenance costs rose 4% with more scheduled repairs and maintenance. I believe this is a good sign for SMRT to continue to strive to maintain its service as one of the best train service providers in the world.

In my humble opinion, I think that SMRT could take a longer time to restore confidence from investors as well as its clients on the train services provided. With the "Free Ride" campaign kicked in this year, I believe the hidden cost such as reputation risk could be minimized offset by a little drop in revenue.


29 July 2013

Lian Beng - FY 2013 Net Profit Dropped 22.3%

Lian Beng reported latest full year report last week. To recap, FY2013 net profit decreased 22.3% to S$40.2 million as there was a gain in sale of investment property of S$7.9 million in FY2012.
  • Group proposes dividends of 1.25 Singapore cents per share
  • Group’s cash and cash equivalents remained strong at S$170.9 million as at 31 May 2013
  • Construction order book  of  S$1.3 billion as at 31 May 2013 to provide constant flow of activities through FY2016

The operating cash flow dropped due to increase in net working capital. Increase in Loan to Associates and Investment Properties resulted in huge negative investing cash flow. And because of that, you can see an increase in financing cash flow and debts to ensure the cash & equivalents stand at S$100M and above.

In normal circumstance, a rise in net working capital and investment means that the company is experiencing expansion period. So we can be cautiously optimistic that Lian Beng may have better result in later years, if everything including debts is under control. With fully sold out industrial building to get TOP by FY2014 (coming financial year), so we expect a better result coming years.

With declared 1.25c dividend, it turns to about 2.1% dividend yield (still better than bank interest rate). It is up to investors to decide the invest in longer term, hoping for a better FY result, or just look for another better investment opportunity.




Ratio Analysis (FY2012, FY2013, FY2014Q1)





28 July 2013

How to Construct A Suitable Wealth Porfolio

In modern portfolio theory, it is good to have a diversified portfolio with lower correlation risk. For example, if you have 3 asset classes, you can combine them with your targeted return rate and lower volatility risk. 

As to me, as long as I do not need the money for urgent needs (e.g. living expenses or vacation needs etc) then I can put the excess cash aside to asset classes other than cash & equivalents. So now the next step is how to construct a suitable wealth portfolio for long term investment needs. 

If you are near to your retirement stage, and the purpose of constructing the portfolio is for retirement needs, then you should allocate more cash in high dividend yield counters / bond. I understand that the stable cash flow comes from bond investment. You can put your invested capital there and enjoy regular coupon payment before receive your invested capital at the end of the bond investment. The benefits from bond investment is that you can enjoy higher than Fixed Deposit interest and it is a good investment tool if you wish to park there for more than 1 year. To me, Fixed Deposit is more on for urgent usage purpose. So you can park your excess cash in bond before got good opportunities in equity market. 

The next stable cash flows come from Preference Shares. Priority of Preference Shareholders to receive the cash flow is higher than normal share holders. So it may suitable for investors who like to have higher dividend yield but enjoy lower volatility risk. 

Another good investment tool for receive rather stable cash flow is REITs. REITs cash flow come from Gross Rental Income deducted by administration fees & interest payment. As long as the occupancy rate stays high and the interest rate stay low, the possibility of getting increased cash flow is much certain. 

Last but not least, the investors can receive the cash flow from dividend payment by being normal share holders. Some companies do have dividend payout policy by distributing certain percentage of net income to shareholders. However, it is management's decision to determine the dividend to share holders based on current economy condition. Some companies may conserve more cash during expansion period and distribute it back to shareholders when it reaches mature stage. 

For capital appreciation purpose, the sequence is shown as below:

1. Normal Shares >> 2. REITs >> 3. Preference Shares >> 4. Bond 

To construct a good portfolio, you may first identify your own risk & return profile and the investment time horizon. The longer investment time horizon, the more capability for you to put more in normal shares. And if you have greater amount for investment, you can put more percentage in normal shares. 

Anyway, I strongly encourage you to do more homework before creating your own portfolio. So you can understand the underlying risk while waiting for your targeted return. 


26 July 2013

How to Trade with Confidence?

I have a friend whom he said he was a lucky guy. He loves trading and this is how he can trade with confidence:

1. Act Fast - he can be a day trader. In another word, he trades frequently in a day. He sometimes get latest info from his remisier/dealer, and after some calculation on the price trend, he entered and exited the market very fast. I believe he has been trained to be handle the trading activities as per normal. Sometimes, if you are taking it too hard, you will always suffer from the "heart pain" of losing and lose more subsequently when you act with fear / greed. So first thing you have to do is to know how far you can lose before determining your cut profit line. 

2. From his behavior, I noticed that he loves volatility or high performing stocks. Because he acts fast, so he normally entered at early stage and exited before the price collapse. Sounds perfect, but I know that out of 10, only 1-2 will be very successful in trading due to limitation on knowing himself well. 

3. He normally will look for bigger picture while also checking on particular price. He also likes to use fundamental ratio to filter out the so called speculated counters as if the counter has strong fundamental, he doesn't mind to hold for say 6-12 mths period.

4. For every trade, he will start with small amount and may accumulate when things go right or go wrong depends on situation. After all, I believe having strong belief in the counter and the holding power are the ultimate reasons how you can be more confidence in your trading. 

5. And last but not least, just set aside small amount for the trading while putting large amount in long term investment / savings. Do not fall in love with any speculative counters. 


25 July 2013

A Good Small / Mid Cap Stock Would Emerge As Large Cap Stock Eventually

We always heard from others that it is a good and safer bet to invest in Blue Chip counters which have a large market value as they contributed large revenue and profits, which give investors a sense that it would standstill during the bear market.

There are a lot of examples of large capital stocks emerged from good mid cap counters, such as Wilmar, First Resources and Noble etc. As you can see, a large market value companies normally have faster growth in its revenue and net profits in earlier stage before staying in a more stable range of growth, say 5% - 10% per year. As the revenue grow to certain level, it is harder for the giant counter to grow compared to its smaller peers, unless they can create a new market for more consumers or acquire smaller firms to have better strength in Economy of Scales. 

In fact, I prefer small/medium capital companies to large capital companies when I try to construct my own portfolio. The reasons are listed as below:

  1. Enjoy lower PE compared to higher PE. PE in another way means the number of years for investors to receive their invested capital given current EPS. For example, if the PE is 5, it means that it takes 5 years for the investors to "receive" the invested capital. However please be reminded that above formula is just for guessing purpose as we still have to take into consideration of other factors such as the business risk & credit risk of the companies. It may not true if the current EPS is not sustainable, and investors may end up getting nothing if the companies does not distribute excess earnings as dividend to investors. 
  2. Enjoy Potential Faster Growth. It could be true if the small/mid market cap counters are in its niche industry, with lesser competitors and higher growth potential. Example 1: Ezion establishes its leadership in jack up rig servicing (lifeboat) in South East Asia / Asia region and still expanding. Example 2:  First Resources is in expansion of its land banks with about 10% compound annual growth rate in total cultivated area.
With 2 reasons above, I believe it is always a good move for us to invest in good small / mid cap stocks to enjoy better potential return, which could mean higher volatility price risk. 

Nonetheless, we should study more in the company policy, such as the corporate governance, business model, financial risk as well as business risk before we become minor shareholders.


REITs - Things To Note when Investing

I received some inquiries from my clients on REITs investing and wish to share it here to you as well. REITs stands for Real Estate Investment Trust, a financial product that managed by real estate professionals with sponsors of buildings.

So how does the REITs make money for the investors? It mainly comes from disposal gain and rental income received from tenants. If you believe in long term inflation environment unlike what was happened in Japan, then you can take opportunity to invest in REITs. 

However please do take note that normally REITs acquire new assets by issuing new shares or from bank loans. So it could increase borrowing cost or equity cost when interest rate started to increase. I ever heard that Singapore government is in discussion to prevent the property bubble to burst when the bank interest rate is rising to possible up to 3% in later years.

Currently REITs are providing yield of in between 5% to 10%, compared to more than 10% in financial crisis. So it means that if the REITs price are affected by both drop in interest rate as well as rise in interest rate. But if we take long term perspective, the interest rate would eventually go up when the economy activities are picking up. So, it always not late to invest in REITs, but have to take note of the points I mention above.

Enjoy investing in REITs, for long run.


23 July 2013

Merger and Acquisition

Merger and acquisition happens in every market, especially during the bad time. You can see the acquirers are willing to pay minor shareholders a higher price compared to current market value. So what does it mean? Why do the acquirers willing to pay for higher premium? What should minor shareholders do?

Let me give you an example on recent acquisition case in Singapore market - F&N. Firstly Thai Beverages tried to enter the Beer beverages sector, as F&N was holding Tiger Bear business, which enjoyed higher net profit margin compared to Thai Beverage losing money Chang Beer. As Thai Beverages tried to venture oversea, they need a strong brand to synchronize with its own Chang Beer. Chang Beer is losing its stake against its competitor Singha Beers in local market, so it was trying to enhance its position in Beer markets by acquiring stake in F&N in the hope to control the Tiger Beer business and its distribution network. However it was Heineken to acquire the remaining stake by paying higher premium on that.

So why did Heineken agree to seal the deal with higher premium? It could be due to controlling premium it was looking for to control the whole supply chain management as well as the business network distribution which is an intangible asset to Heineken. As Tiger beer is a cash cow business, it can bring in more cash flow over the years, which allows Heineken to continue to build up the strength in South East Asia market.

If the offering share price is good, I believe there are more minor shareholders willing to take up the offer and enjoy the capital gain, else I do not think of any reasons why the minor shareholders are willing to do so. In Singapore market, you will need at least 90% shareholdings to submit the compulsory offer to allow the minor shareholders to sell their remaining shares to you in stipulated time frame.

After all, we as a minor shareholders can only enjoy the dividend income as well as the potential capital gain along the investment journey. M&A maybe a good chance for us to take the capital gain, if the offer is good. When you are looking for shares investment, please also do remember the liquidity risk that you may suffer if nobody is willing to buy the shares from you due to concentrated shareholdings under single major shareholders, unless you have done your due diligence that the major shareholder is trustworthy.


22 July 2013

Dividend Reinvestment Scheme

I remembered that HSBC is giving its shareholders an option to reinvest their dividends in shares at cheaper price. Not only itself, Maybank, Noble and some other listed companies also do the same things. So what's the purpose for management to offer the scheme to its shareholders and what should shareholders response to this?

Management perspective:

1. Reduce the cash out flow due to cash dividends paid to shareholders. Not only that, some companies are required to pay for taxes on dividends before distributing to clients. So it also may increase total cash flow over all. 

2. Increase the loyalty among shareholders. It can be a sweetener for long term investors who prefer to keep the dividends in shares so that they can enjoy long term capital appreciation from the share price. 

3. The management can keep more cash for further investment by investing in capital expenditure. So the potential investing cash flow can be higher. 

4. A better corporate finance structure by improving liquidity ratio. This can be done by keeping more cash & equivalent assets. In may also stands as a covenant to keep a better credit ratings. 

Shareholder perspective:

1. A chance to have more shares without incurring transaction costs, as they can avoid additional commission charges when purchasing additional shares trough open market. This is a good option for  investors who intend to accumulate the same counter in a long time horizon. 

2. Hassle free for investors who wish to reinvest the shares with the dividend. The shareholders can just select the reinvestment option and just wait for the shares to be credited back to their account. 

Cons:

1. Odd lots could be given to shareholders if their shareholdings are not big enough. They may go to the odd lot market to sell their shares later. Normally odd lot market offers bigger bid ask spread due to lower liquidity. 

Anyway, for those shareholders who require real cash flow, they can still reject the reinvestment scheme by opt-in normal cash dividend scheme. So I think this is a win-win solution for both shareholders and management in determining free cash flow usage. 

Welcome to leave me your comments here. 



21 July 2013

Mah Sing launched final tower of Meridin Suites Residences - July 2013

Mah Sing, one of my favorite counters in Malaysia Stock Exchange, launched its latest tower of Meridin Suites Residences in Medini, Iskandar Malaysia this month, which is just a few kilometer away from TUAS highway. 

Medini, a next hot spot in Nusajaya, Zone B of Iskandar Malaysia, is growing fast by attracting a lot of well known developers such as UEM Land, IJM Land, Sunway, and Mah Sing etc as the focus switched to this area after several rounds of property curbs in Singapore property market. 

I paid a visit to Medini last Friday while waiting my brother to come back from TUAS. I realized that there was a little changes in this area. Traders Hotel and Hello Kitty World were launched not too long ago at Puteri Harbour. However, I see little activities here as there is still a room for people to stay and work here besides having a leisure time. I did notice that there were cars from Singapore and Kuala Lumpur parked at Traders Hotel, indicating that this area could attract people from around the region to have a great fun here. 

Back to the topic, this last tower comprises of units of 2- and 3-bed-room suites with built-ups from 968 square feet, priced from RM757,000 on wards (or RM782 psf ). I would say this price is considered reasonable - mid expensive if you compare it to buildings nearer to Puteri Harbour which could easily stands at RM1,000 psf. 

Mah Sing also launched a representative office in Singapore officially to boost up its popularity to  Singapore investors who are interested in Malaysia properties. As a long term investor, I hope Mah Sing can focus more on higher margin projects in right location. As there is a political risk, I do not think that Mah Sing can venture in oversea without cor-operating with local companies. Anyway, let's see if Mah Sing can still have a healthy growth since its debut in property division year 1994. 
 

19 July 2013

Privatization - motive behind

I have seen some delisting of good counters due to privatization. It happened more during bear market. So what are the reasons behind for the major shareholders to privatize it? Below are the points I can think of:

1. The controlling shareholders think that the current market value is cheaper than what they worth. Low PE could be a justification for under estimated counter. 

2. There could be any major projects coming up that might give negative short term impact to the counter, but the controlling shareholders can benefit from there in Long run. 

3. Possible take over action by the competitors, and hence a step taken by the controlling shareholders. 

4. There is no point listed in the market as the market valuation is so low that it could be expensive when raising equity fund through private placement or new shares listing. The management see no points keeping the listed status. 

So when you ever encounter any shares has little float in the market, and it is having a good fundamental, please do not be surprised when the controlling shareholders decide to privatize it. You may or may not be benefited from there. It depends on your purchasing price and the price the main shareholders willing to buy from you. 

A good news is that, as long as it is not reaching 90% controlling stake, you may still have a chance to reject the offer. Anyway the chances of winning over the bid from controlling shareholders are slim if they can keep on raising the price of privatization and winning supports from other investors. 

What happens if you do not sell your shares after the privatization? You might be able to retrieve information from the management or try to persuade them to buy over from you even though you are not able to do it over the open market. But I think it's really up to the major shareholder to decide as it has become a private limited. 

Hope this article can help you understand more on privatization. 

18 July 2013

My Opinion On Commodities - July 2013

We see a softening market in commodities trading. As you noticed, almost all the agricultural companies had experienced a weaker share price this year due to the fact that the selling price of raw material has dropped from the peak just before 2008 Financial Crisis.

The interesting story here is the sudden drop of Gold price to about US$1200 from around US$1800. Gold is identified as one of the best hedging tools against inflation. So what does it mean if gold price is dropping?

We need some catalysts to boost up the commodities price. For example, recovering of US economy may increase the needs of crude oils and its alternatives in long run. Bio-diesel, one of the hot topics in last decade, shows that it could only survive if the crude oil is always maintaining in a higher price, for example US$100 or higher. I still remember that the price of palm oil, one of the choices for bio-diesel ingredients reached about RM 4,000 peak and subsequently dropped to about half of it as of current. The main reasons could be a few:

  1. Depreciation of USD against RM. Investors try to find other asset class to hedge against the depreciation of USD due to the weaker economy and Quantitative Easing. However, as US economy is picking up, it may force or encourage the commodities traders back to US equity market or money market as they may expect a rise in US interest rate in coming years. 
  2. Slower growth in China and India, the top 2 nation who contributed as major importers of crude palm oil. 
  3. Fast expansion in the planted lands by commodities players. 

As the commodities prices are reflected quickly on the supply & demand trend, so any of the changes in these two aspects could give an impact to the commodities market. Jim Roger, guru of commodities market remains optimistic on commodities market in long run, as his argument is due to limited supply of farm lands and increase in usage on bio-diesels / cooking oils / other commodities products as global population growth and demography changes (more younger farmers would move to the town to look for a better job).

Nonetheless, I do expect a fluctuation in commodities price, as what it always happens here since last couple of years. We may experience a slow and steady growth in commodities price once the long term equilibrium is found.

P/S: Above is just my own opinion on commodities. Please do your homework before making any investment decision.

17 July 2013

I Love Singapore

I am living in JB since I was young. And a lot of my ex secondary School mates are working in Singapore. Me too. 

Lets talk about what makes Singapore a developed nation in such as a short period. Some argued that Singapore is just a small island so it can be easily managed and achieved faster growth compared to other larger South East Asia countries. Some also argued that due to strong and anti-corruption government, they can achieve Real growth in long run. In some others opinion, it is due to the relatively strong currencies and a foreign talents welcomed policy that attract both foreign direct investment as well as foreign workers to boost up per capita GDP growth. 

In fact, after so many years of growth, some if not most of the citizens started to feel the pain of growth. Many young couples who just graduated from university or poly technics just cannot afford to buy their home in secondary market, and anyway it does help them to get married fast just to have a BTO (Build To Order) flats. This resulted in conflicts between citizens and governments 

In fact, we did see a U-turn in Singapore labor policy and a surge in labor costs after the 2012 election. A lot of research reports mentioned about the worry of over supply in property market in year 2015. And you can notice that government is in the preparation for rising interest rate once US has recovered from the recession, which they measured by lower than 7% jobless rate in local market. 

While I do not deny the efforts by Singapore government to do more in favor of the citizen, we also cannot leave other working forces behind. Some of my friends who are PRs and having schooling kids there may be "encouraged" to convert to citizens, but most younger PRS may just go back to the home grown nation as they just could not afford to buy a flat there. 

Anyway, a lot of my friends are not looking good in the prospect of Iskandar Malaysia. In fact, this region can only be good in compliment to Singapore, proving the resources of Industrial land, which is limited supply in Island. We can see a continuous transformation of Singapore to be a light labor intensive industry nation, meanwhile Iskandar can be a playground / leisure place to its neighbor. At This Moment. 

16 July 2013

Abenomic - Japan Economy leaded by Abe

Abe’s forecast victory in an upper-house election on July 21 may strengthen his hand to push through deregulation to sustain a recovery that has so far been driven by monetary and fiscal stimulus, we call it "Abenomic" as it is driving the economy growth by printing more money like what FED did for the Quantitative Easing, in a hope to generate positive inflation rate that could force the corporate & retails to spend more on CAPEX / goods purchasing. 

We can see that it is started to generating impacts to the economy growth as the corporate started to spend more on CAPEX and shares buy back. 

To me, this is a good beginning to Japan economy as the TOPIX is actually still below 50% of its peak 39000 points since some 20 years back. In a deflation environment, people tend to keep the cash so that they could enjoy cheaper goods & services in later years. This is actually a norm in Japanese society as its getting lesser young generation due to low birth date and higher jobless rate among the younger generation has lead to more society problems. 

Japanese government is targeting a healthy 2% inflation environment in long run, so I do think that for people / corporate that are having large cash pile may started to change their mindset to combat with inflation. 


15 July 2013

What are Your Problems in Investing?

We have recently tried to identify the problems in investing shares or other financial products. You may share with us your opinions on your problems investment journey. 
  1. Investment ideas - To some inexperienced investor, they might not really know the investment ideas. In my opinion, you could get it from the latest news, either from online or offline media. You might get the ideas from your broker or anybody around you. However, the consequences could be too overwhelmed by the news. You have to learn how to filter out the useful information that you could utilize on. For example, I am quite keen on property stocks investing, so I always like to follow the news released by the authorities or from the publishers, so that I could know what the current market condition is and check whether there is a need to reallocate my portfolio. I also do read financial reports released on SGX / Bursa Malaysia website to help me to further understand the business of my favorite listed companies. 
  2. Lack of financial education - This is the critical part, as it determines the potential return that you could get from your investment. To most of the people who have no knowledge on the investment, they may park their excess cash in Fixed Deposits that generate about 1% annual interest, so certain that the purchasing power would be eaten up by the "Inflation" monster over long run. The more financial term you learn, the more opportunities you have in investing in different asset classes to diversify your risk while achieving better returns. 
  3. Not enough time to manage investment - The lesser time you have to manage your investment, the more passive investment tools you can choose, which also in another word that, you may generate a lower return compared to active investors. Sometime, it is also very hard to get a good money manager to assist you in managing your money. 
So, what are the problems that you encounter during your investment journey? Welcome to share with us here. 

14 July 2013

Hatten Imperio Mall Updates - April 2014

April 2014 Update
-------------------
I have been notified by Hatten group on the second 10% progress billing that has been completed and RHB is the panel bank for the mortgage loan application. As this is about 5 months delay as projected based on July 2013 update, I believe the group will speed up the construction and hopefully it can be completed by End of 2017.






July 2013 Update
------------------

Not too long ago, I asked Hatten group on updates of Imperio Mall. The staffs there sent me an excel file which consists of the expected time table of completion. Below is the indicative schedule of Imperio Mall:

November 2013 - Stage 2i (20% Completion)
March 2014 - Stage 2ii (30% Completion)
October 2014 - Stage 2iii (40% Completion)
November 2016 - Stage 3i (97.5% Completion)
November 2017 - Stage 3ii (100% Completion)




Principle in Selecting Stocks - 14 July 2013

After I become a full time investor in Shares Investment, it gives me a lot of time in re-adjusting my principle in selecting stocks. Let me share with you here on some of the principle in selecting stocks. 

If you focus on tips, your confidence in holding a stock to rise to its top is very little, as you might not really know how accurate the news is from your research analyst / your grand-mum / your online friends, but it does give you a chance of practicing yourself to be more interactive with people around you so that you may try your luck next time. 

If you focus on the business that you are investing in, you may not really care about the changes in external environment such as the Fiscal Policy or Monetary Policy. I still remembered what KLSE.8K Uncle shared with me 10 years ago that, he had a friend who was a hawker selling Char Kuey Tiaw and this friend didn't really care what the politician or economists said to the public as his business were not really affected by that and he would just focus on his Char Kuey Tiaw business. 

If you focus on the news movement, your investing behavior would largely affected by the news update such as comments from Bernanke. If you really wish to focus on that, reading news could occupy most of your free time. You may be more sensitive and be more frequently trading based on the news released recently. 

In this stage, I just want to focus on finding out more "business prospects" of the stocks. It could be like for example, any acquisition plan / research & development plan / changes in Top Management etc that may affect the long term intrinsic value of a company. It may take longer time to reflect in the stock price. But it does give me some certain assurance that, as long as the business can grow in healthy and faster pace that its peers, it really worth for us to keep this counter. To do so, we should look on the business strategy of the company, how the company participate in changes of economy, as well as how strong the financial position it has to cushion during the bad time. 

The interesting part in investing in shares is that, the market remains calm most of the time, but only will get mad due to the fear / greedy. It is really up to us to choose what principle of selecting stocks. 

11 July 2013

How to Define a Good Debt Ratio?

I hate debt, until recently I tried to use margin on my property investment. It means that instead of using 100% cash invest in 1 property, I can now actually utilize 10% cash to invest in maximum 10 properties, provided the bank allows me to borrow up to 90% loan for each property I have. However, it means that I have to pay more for the interest expenses incurred during the borrowing period.

Same goes to a business. Sometime when the business is in the expansion mode, it is more expensive to get shareholder to fund in more cash to leverage on the growing stage (due to dilution of EPS), and hence the management can decide whether to borrow more money from banks to support the operation activities. Of course, there are some procedures in bank to ensure that the business has the credibility to make the payment based on the cash flow it will generate in future. So in short, if you really want pick up a stock that is highly leveraged, make sure you could understand how its business model works and how consistent the operating cash flow is to ensure that there is no problem for the company to pay the debt.

Excluding financial industry which typically involved in high gearing ratio to generate cash flows / net profits, I would think a Total Debt to Equity Ratio of less than 0.5X a safe ratio me. Anyway this is just a rough idea for me, as I have to do more homework to determine whether the debt that the company is having now is a good debt or bad debt. A good debt to my own definition is to bring in more business to the company without issuing more new shares that could dilude the EPS in future and it gives company flexibility to bring down the debt level whenever the economy circle turns to downtrend.


10 July 2013

Silverlake - Can it continue to rise faster?

Background of Silverlake:


The Group is a leading provider of digital economy solutions and services for major organisations in  Banking and Financial Services, Payments, Retail and Logistics businesses, mainly in Asia. The Group’s Silverlake Axis Software and Services Solutions are delivering operational excellence and enabling business  transformations at over 100 organisations across Asia, including 40% of the top 20 largest banks in South East Asia. The Group’s sources of revenue, in the order of their percentage contribution to total revenue in FY2012, are Maintenance and Enhancement Services, Software Project Services, Software Licensing, Sale of Software and Hardware Products and Credit Card Processing.


Financial Highlights (Extracted From Annual Report FY2012): 



My points: As you can see, the revenue rose to RM400M from less than RM200M 2 years ago. It implies that the group is aggressively participating in the upgrades on digital system especially in Finance Sector in Malaysia & Singapore. Nonetheless, profit margin dropped due to product mix changes. As this is a cash cow company (positive free cash flow), the company has the power to acquire subsidiaries for further growth preparation or distribute excess cash as dividend back to the shareholders.

I will keep it in my watch list and monitor how it evolve to be a better player in this industry. Nonetheless, as I observed, there is an item in Non Fixed Asset - Intangible Assets which I think is quite common in Software Company to capitalize its software products and amortize it over the years. Nonetheless, I still need something to convince me that this is a good counter to hold for longer term, say 5 - 10 years before I make any buy decision.

Mr. Goh has about 75% stake in this company. I view it as a safe bet if you wish to invest long term as Mr. Goh has huge commitment in this company. Nonetheless, without more liquidity, I do not see many institutional investor would have interest on it.

Another Q: why does the company still propose for new placement to acquire subsidiaries while it actually could fund it internally?

Price Chart:



Recent News Update:

9 July 2013 - Cyber Village Sdn. Bhd., a wholly owned-subsidiary of SAL, has secured a contract from Bank Rakyat, the biggest Islamic cooperative bank in Malaysia, to implement a new internet banking system.

3 July 2013 - Proposed Acquisition of Cyber Village Sdn. Bhd. has been completed. Following the completion of the Proposed Acquisition, CVSB has become a wholly-owned subsidiary of SAL. Placement of 100,000,000  new ordinary shares in the capital of the Company (the “Placement Shares”) at a price of S$0.75 for each Placement Share (the Placement”), the Company wishes to announce that  out of the net proceeds of the Placement,  RM39,296,000  has been disbursed and utilized to pay for the first tranche of the Proposed Acquisition.


April 2013 -  the Group completed the acquisition of Merimen Ventures Sdn Bhd (“Merimen”). Merimen is a value added enterprise solution provider that serves the regional insurance industry by offering a cloud computing Software as a Service (“SaaS”) platform on a subscription basis to insurance companies and  their partner communities. It is the market leader in motor claims processing in Malaysia and Singapore, and has a growing presence in Indonesia and the Philippines.




08 July 2013

Net Tangible Asset (NTA) VS Net Asset Value (NAV)

Net Tangible Asset is the Net Asset Value deducted by Intangible Asset. 

Intangible asset can be goodwill that occurred after the group acquired subsidiaries above its book value / reasonable price. Or it could be a discounted future value from projects on hand, depending on how management judge for it. The company has right to revalue the intangible asset and discount it by amortization on annual basis. 

In general, I prefer NTA over NAV, as it could prevent me from over state the book value of the company. I had encountered one company with negative NAV but positive NAV and the company went bankruptcy eventually. So we should always take into account both NTA and NAV before we make any investment decision. 

ROE could be also affected as the formula stated as (Net Earning / Average Equity), where by Equity actually could be treated as NAV (Asset - Liabilities). If we replace the Equity figure by NTA, the RONTA (Return On Net Tangible Asset) could be higher than ROE if the difference of NAV and NTA is significant. 

Nonetheless, this is just my thought now. Welcome to let me know your thought here. 

07 July 2013

Intrinsic Value - How to Calculate It

In securities investment, especially Shares Investment, there are several methods in defining the actual value of counter. Let me summarize the methods as below:

  1. P = D(1 + g) / ( r - g), P = present value, D = dividend, g = dividend growth rate, r = equity requirement rate 
  2. P = FCFF (1  + g) / ( coc - g), FCFF = firm free cash flow,  coc = cost of capital, g = free cash flow growth rate 
  3. P = FCFE (1 + g) / ( r - g), FCFE = Equity Free Cash Flow, r = , g = free cash flow growth rate
In short, all the calculation are based on the discounted cash flow from various methods. The value of the shares are relying on the future cash flows. If we are pretty sure of the cash flow, then we can determine lower requirement rate for the counter. The more homework we do on the counter, the better result we could achieve. 

04 July 2013

Lian Beng Current Construction Project Value at S$1.4B (June 2013)

Lian Beng announced on June 2013 that it has clinched another project worth S$115M and added up to its order book value of S$1.4 billion. If we simply calculate the project average life span at about 3 to 4 years, the average revenue the company could achieve from construction division can be easily at around S$350 Million per year.

I understood that there are some financial problems on several contractors and Lian Beng may benefit from taking over the existing projects from those contractors. Nonetheless, I also heard from my friend that tightening labor policy imposed in Singapore is giving impacts as the wages are rising and it is getting more difficult to recruit expert workers in this industry. All I know is that contractors which had been awarded projects by HDB would benefit from more BTOs in coming years.

As Lian Beng is using the latest financial reporting standard FRS 115, so the revenue from private development projects would be in the report once the TOP is obtained. I am hoping for a better result in next financial year. Cheers.


Below is the news I captured from company website.


SINGAPORE, 24 June 2013 – Lian Beng Group (“Lian Beng” or “the Group”) (联明集团), a Singapore BCA   Grade A1 construction group,  has set its record yet again for its construction order book.  

The Group   secured two projects worth approximately S$200 million, boosting its order book to approximately S$1.4   billion.  The Group’s wholly-owned subsidiary,  Lian Beng Construction (1988) Pte Ltd, was awarded the building   contract of a condominium along Flora Drive in Pasir Ris estate worth S$115 million.  The contract involves   the building of  nine eight-storey residential blocks,  one block of clubhouse,  a  basement car park,  a   swimming pool, tennis courts and other amenities within the condominium compound.  

The contract period  will last 28 months start from July this year to October 2015.  This condominium is developed by Tripartite   Developers Pte Ltd (“Tripartite”), a joint venture of  Hong Leong Holdings Limited (“HLH”), City   Developments Limited (“CDL”) and  TID Pte Ltd  (“TID”).  The Group’s another  wholly-owned subsidiary,   Deenn Engineering Pte Ltd, has secured recently a contract worth approximately S$85-million on 17 June   2013 for a project in Singapore.

03 July 2013

Intelligent Investor - Margin of Safety + Investment Strategy

Some key points after reading Intelligent Investor:

1. Margin of Safety - Before you invest, always lower down your target buying price compared to the intrinsic value, just in case your forecast maybe wrong.

2. Investment Strategy -

2.1 Buy Low Sell High - May be the best strategy, but you may focus on 2 parts: buy in those high growth stocks that could enjoy faster growth rate; buy in those counters that neglected by investors for temporary due to some reasons.

2.2 Believe in yourself and do not follow the crowd, to avoid that you could be selling at lower price or be buying at higher price.

Most importantly, you can just do nothing but waiting for the opportunities to come. Anyway, be focus on the business you are invest in rather than the stock price fluctuation.

01 July 2013

First REIT - Some Thought on It (28 June 2013)

Some factors that I think it's important to calculate the value of a REIT:

1. Stability of the income stream (mainly in rental income) 
2. Acquisition / Disposal of the real estates that may create value to the portfolio
3. Credit Market - Stability of the borrowing cost or the future trend of it
4. Debt Ratio - How far can a REIT to acquire new assets without risk on deteriorating its credit ratings / further dilute the DPU. 

Introduction of First REIT:

First REIT is Singapore’s first healthcare real estate investment trust that aims to invest in a diversified portfolio of income-producing real estate and / or real estate-related assets in Asia that are primarily used for healthcare and / or healthcare-related purposes.

Managed by Bowsprit Capital Corporation Limited, First REIT’s portfolio consists of twelve properties located in Indonesia, Singapore and South Korea, namely 1) Siloam Hospitals Lippo Village, 2) Siloam Hospitals Kebon Jeruk, 3) Siloam Hospitals Surabaya, 4) Imperial Aryaduta Hotel & Country Club, 5) Mochtar Riady Comprehensive Cancer Centre, 6) Siloam Hospitals Lippo Cikarang, 7) Siloam Hospitals Manado and Hotel Aryaduta Manado, 8) Siloam Hospitals Makassar, 9) Pacific Healthcare Nursing Home @ Bukit Merah, 10) Pacific Healthcare Nursing Home II @ Bukit Panjang, 11) The Lentor Residence and 12) Sarang Hospital.

Its hospital assets in Indonesia are operated by Siloam Hospitals Group, a division of PT Lippo Karawaci Tbk, a strong brand name in the Indonesian healthcare industry supported by a team of international healthcare professionals whereas The Imperial Aryaduta Hotel and Country Club and Hotel Aryaduta Manado are operated by The Aryaduta Hotel and Resort Group. In Singapore, the nursing homes at Bukit Merah and Bukit Panjang are operated by Pacific Healthcare Nursing Home Pte. Ltd. and Pacific Eldercare and Nursing Pte. Ltd., respectively. The Lentor Residence is operated by First Lentor Residence Pte. Ltd. In South Korea, the Sarang Hospital is operated by a private doctor.

With Share Price of $1.19

Trailing DPU Yield => 7.26 c / 119c = 6.1%

Forecast DPU Yield => 7.06 c (annualized DPU based on 1Q2013 result) / 119 c = 5.9%

As First REIT Rental Agreement normally is a long term contract (Health Care Center / Hospitals are normally have a longer term agreement with REIT managers), the income stream is considered stable, except for the interest expenses that might increase as FED hinted that the long term interest rate in US may increase eventually on year 2015 and Singapore Interest Rate always follows after it. So this may be a double effects ( the spread between risk free rate and the DPU yield will be reduced as well as the DPU may also be reduced in later years due to increase in interest expenses). 

First REIT is having Total Debt To Equity Ratio of about 0.5x and I see no default risk in paying the rental income as those are healthcare / hospitals that having strong cash flow. It is up to you to decide the spread you wish to earn in future. Below is the history of acquisition / disposal of First REIT:

Acquisition:

November 2012 – Siloam Hospitals Manado & Hotel Aryaduta Manado and Siloam Hospitals Makassar.

March 2013 - proposed acquisitions of two additional hospitals from the Siloam Group - Siloam Hospitals Bali in Bali and Siloam Hospitals TB Simatupang in South Jakarta.

Disposal:

Adam Road property

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