30 August 2013

My Shares Investment Philosophy - Aug 2013

If you are following my blog, you can tell that I am more towards fundamentalist. However, it does not mean that fundamentalist can always win in the market. But from my experience, the few ways to earn big money is through:
  1. Long term investment in niche companies with some sort of better profit margins and good growth prospect. You have to be very patient and keep updated the business development progress of the company you are invested in, so that you do not be so eagerly to cut profit whenever the stock price drops further, instead you should stick to the principle that to buy at the lower price and not sell at the lower price. Always do a lot of homework by attending the AGM / financial report briefing / follow up with IR / market analysis by trying out the products & services. For some reasons, you may adjust your portfolio by reducing the position when the price moves up a lot and increasing the position when the price moves down further, provided the factors that affecting the stock price is NOT due to deteriorating prospect, rather it is just due to the macro environment. Some of the examples could be like Ezion Holdings, Sarin Technology, Silverlake etc. We could do some conclusion later after few years time. 
  2. Fully focused on winning bets with higher possibility. One of the examples is Margin of Safety. If the price you purchased is 70% of the intrinsic value, then the chances you are losing money is lesser compared to when the price you purchased is 130% of the intrinsic value. Note: Intrinsic value may volatile along the timeline but it is not as volatile as the stock price movement. So always deal with Mr. Market carefully.
  3. Look beyond the current investment hot topics. Normally when you realized that this is the hot topic of the investment, it means that you have lost a good chance to earn big. So it's either you move on or look beyond the current hot topics. Instead, find out the neglected counters and invest in it and sell it off when more investors are coming back. 
  4. Building up confidence level when you have more experience in winning the game. Sometimes, we cut loss or cut profit due to the inexperience in realizing the intrinsic value of the counter. When the market goes up, we feel that the stock price can be higher and forget that the price may go above intrinsic value and vice versa. 

27 August 2013

China Minzhong Halt - Aug 2013

Today I would like to record down the plunge of China Minzhong share price of nearly 48% in a single day. For some investors, they have already avoided to invest in S-Chips, or Chinese companies listed in Singapore stock market, especially after the "Chaoda" scandals happened just a few years back.

GIC divested its shares to Indonesia company few months back (with earnings I believe, as they got it at much lower price), now I am worry if this Indonesia company would like to privatize it if they believe that the counter is undervalued now. 


26 August 2013

Iskandar Intra-City Rail Line Plan Scrapped - Aug 2013


According to news, RM1.23 Billion intra-city rail line for Iskandar Malaysia in Johor, as proposed by MASTEEL will be scrapped, said people with first hand knowledge on the matter.

To me, this is a norm for Malaysia Government to stop / amend the original plan as you see from KLIA2 project, for example. Anyway, if the government really wants to focus solely on the more "realistic" project - KL-SG High Speed Rail project, I think they could not simply change plan as the foreign investors would loss confidence in their plan to develop Iskandar Malaysia project, which targeted to be another growing engine for Malaysia economy after Klang Valley.



KUALA LUMPUR: The RM1.23 billion intra-city rail line for Iskandar Malaysia in Johor, as proposed by a private party, will be scrapped, said people with first hand knowledge on the matter.

This is because the government wants to focus on the high-speed rail system linking Kuala Lumpur and Singapore, which will likely have a stop in Iskandar Malaysia, and the Rapid Transit System from Johor Baru to Woodlands, Singapore. 

“It does not make sense to have too many railway lines in Johor. 

It will be congested. We also have the Gemas-Johor Baru double-tracking project coming up,” a source told Business Times. 

Metropolitan Commuter Network (MCN), a 60:40 joint venture between Malaysia Steel Works (KL) Bhd (Masteel) and KUB Malaysia

Bhd, had proposed to build the intra-city rail project. 

The joint venture first mooted the idea in 2009. 

Under the plan, MCN was to build a 30km double-track railway line linking Kulai and Johor Baru city centre and a 50km link between Pasir Gudang and Port of Tanjung Pelepas using the existing alignment. 

The development of the railway line would be similar to the concept undertaken by Syarikat Prasarana Negara Bhd for its light rail transit project in the Klang Valley. 

The source said the MCN proposal was not approved by the Transport Ministry and Minister of Finance Inc. 

“This project is not part and parcel of the government plan to develop the railway infrastructure in Malaysia,” the source said. 

It was also to have come under the publicprivate partnership scheme, where both parties fund the venture. 

Masteel managing director and chief executive officer Datuk Seri Tai Hean Leng had said MCN would invest RM300 million to carry out the project, with the remaining RM700 million coming in the form of a government “soft loan”. 

MCN expected to pay the government the RM700 million over an agreed duration, Tai said. 

He also said then the company had not obtained full approval to undertake the project.


Source: http://www.btimes.com.my/Current_News/BTIMES/articles/20130825235758/Article/index_html

25 August 2013

Half Day Tour in Iskandar Malaysia - August 2013

Today my dad and I brought my aunt who is now Singapore citizen to Iskandar Malaysia. We first met at Taman Ungku Tun Aminah in Skudai, which is a mature town developed since year 1970s. We then went to Sutera Mall @ Taman Sutera Utama, which provide bus services from Jurong East with 30 - 60 minutes frequency. After that we went to Gelang Patah via Lima Kedai and had a lunch at seafood restaurant there.

After lunch, we continued our journey and went to few places in Nusajaya, which is Educity, Legoland, Medini, Puteri Harbour and Hello Kitty world. Nusajaya is newly developed city in Iskandar Malaysia under Zone B, so we saw little traffic there as majority of the residents are still residing in Skudai (Bukit Indah and its surrounding) or in Tebrau (Mount Austin and its surrounding). Nonetheless, I did believe that it would be a good place to stay once more people are living there.

The last destination we went to before going back to JB CIQ was Danga Bay by Country Garden. We were amazed by the landscape there and also quite curious on the carnival held there although we did not really step in to take a look.

According to my aunt, the 4 room flat in Singapore could easily cost $400K and above, and it was only S$260K few years back. As I do not really know whether this is a so called highly inflated environment, but I only know that we cannot fight against inflation, and the only we can battle with it is through promotion via hard work, doing business or investment.

So it is my day for coming to Iskandar Malaysia Zone A & Zone B. As Malaysian working in Singapore, my hope is that the relationship between Singapore and Malaysia can be strengthen and we would prosper together once the high speed rail completed by targeted 2020.


23 August 2013

Can Senai Airport Be Supplement to Changi Airport?


After Prime Minister Mr. Lee announced ambitious plan for Changi Airport expansion by mid 2020s, I believe there are certain benefited bodies from this plan, my watch list for this theme would be SATS, SIA Engineering, and ST Engineering etc.  
Now my concern to Senai Airport is that, can it be supplement to Changi Airport after the ambitious plan was announced? 
PM Lee mentioned that Changi Airport is proud of Singaporean, as it takes so many years for Singapore to develop one of the best airport in the world. With this airport, tourism industry and logistic industry continue to groom.  I noticed that until now, Senai Airport only provides little international routes to neighbor country such as Indonesia (Surabaya). However, the good news is that AirAsia provides bus services from Singapore to Senai, so the tourists may make use of this service to travel to any attraction in Malaysia via Singapore International Routes and Senai Transit services. 
Nonetheless, I am in doubt whether Senai Airport can be a truly international airport as its location is just too near to Changi Airport and Malaysia government definitely will only focus on its KLIA2 airport project. Let's see how it goes in next few years. 

SINGAPORE, Aug 23 (Reuters) - Singapore's ambitious project to double its air passenger handling capacity by the mid-2020sis set to extend its lead over neighbors like Kuala Lumpur,Bangkok and Jakarta, whose airports are struggling with congestion and construction delays.
Changi, Southeast Asia's biggest and most popular international airport, is keen to seize a greater share of aboom in regional traffic, mindful of competitors' plans to grow into international hubs.
The increased capacity also plays into the hands of budget carriers such as Malaysia's AirAsia Bhd, Singapore Airlines Ltd affiliate Tiger Airways Holdings Ltd, Qantas Airways Ltd affiliate Jetstar Asia,which is based in Singapore, and Indonesia's Lion Air.
Low-cost carriers such as these account for a third of Changi's traffic, up from virtually zero just eight years ago,and are hungry to expand routes and flight frequencies.
The expansion plans, which include a third runway and fifth terminal by the mid-2020s on top of a fourth already under construction, will double current capacity to around 130 million passengers annually and cement Singapore's leading role as a hub of Southeast Asian business.
Regional traffic predictions point to the need for bold construction plans as airports will have to double their passenger capacity every 12 years just to keep up, said Andrew Herdman, director-general of the Association of Asia Pacific Airlines.
"It's no good thinking in terms of incremental capacity enhancements of terminals or airports or runways," he said.
Driven by growing economies and rising middle-class incomes,passenger traffic in Southeast Asia is expected to rise 7.6 percent a year in the 20 years to 2031, outpacing a global average of 5 percent, according to research firm Strategic Airport Planning Ltd.
Travel between Southeast Asia and South Asia, for example,is expected to grow even faster, at 9.5 percent a year.
"Changi has big growth markets such as Vietnam and Indonesian its region that it can serve. That can drive demand," said Shukor Yusof, aviation analyst at Standard & Poor's.
NARROW BODIES, MANY FLIGHTS
The rapid rise of Asian low cost carriers caught much of theairport industry unprepared and led to Changi's decision last year to shut a budget terminal and build a larger one, the T4.
"To continue its lead position in the fast-growing Southeast Asian market, Changi needs the space to handle more flights,particularly narrow body flights as it is the short-haul market that is growing the fastest," CAPA, an aviation consultancy,said in a report.
The use of narrow bodied aircraft, such as Airbus A320s and Boeing Co 737s, means the number of individualaircraft movements grows more quickly than the actual trafficgrowth rate, sometimes leading to congestion problems for the region's airports.
That has not stopped the airlines from going ahead withtheir expansion plans. Lion Air has existing orders for morethan 500 Airbus and Boeing jets, while AirAsia has around 350A320s still left in its order book.
"As the airport grows, we will have more capacity and opportunities to grow as well so we definitely welcome the good news," said Logan Velaitham, CEO of AirAsia's Singapore unit,which has long wanted to set up a joint venture in the city.
For now, Changi does not appear to have a serious challenger to its place as Southeast Asia's leading international hub.
It has over 630,000 weekly international seats, more than Kuala Lumpur International Airport's 438,400 and Bangkok's Suvarnabhumi with 274,700 according to CAPA.
For Changi's rivals, setbacks have come in spades.
Kuala Lumpur International Airport has been working on a 45 million passengers a year terminal to replace a low-cost one but has been plagued by delays, with its opening pushed back three years in a row. It is now slated to open in April 2014.
The postponements have prompted scathing comments for operator Malaysia Airports from AirAsia CEO Tony Fernandes who has warned that Kuala Lumpur could be left behind by its neighbors.
But even after the extension, which will double its capacity, the airport will still lack an extensive airline network like Changi, with much of its business reliant on AirAsia.
In terms of overall traffic, Changi was outstripped lastyear by Jakarta's Soekarno-Hatta airport which handled 57.8million passengers in 2012, nearly six million more.
But its flights are largely domestic. Soekarno-Hatta was only built for 22 million passengers, resulting in frequent delays and much congestion. Work has started on an expansion,with an eventual goal of 62 million passenger capacity, but the time frame for that is unclear.
Political infighting since 2011 has also delayed Airports of Thailand's expansion of Bangkok's Suvarnabhumi airport.The plans call for capacity to grow by 15 million to 60 million passengers a year by 2017. It also intends to expand the secondary Don Muang airport, which is used by low-cost carriers.
In the wider Asia-Pacific region, other airports are also upping the ante.
Hong Kong International Airport, which handled 56.5 million people in 2012 and is projected to handle 102 million in 2030,is proceeding with a study for a third runway and expanded terminal. Studies are also underway for the expansion of Seoul's Incheon Airport and for a second airport in Beijing, while debate about a second Sydney airport has also been reignited.


22 August 2013

Sim Lian - Family Controlled Counter Listed in Singapore - Aug 2013

Summary of Financial Performance:

Equity Attributable to Equity Holders of The Company (in $million) rises from 80.2 in year 2005 to 704.7 in year 2012, or compound annual return rate of 31.2%.

If you do not understand what Equity Attributable to Equity Holders means for, it means Shareholders Fund. There are two methods for a company to grow the Shareholders Fund: through private placement & new shares issuance; through retaining the net profits earned.

Sometime, we can use Price / Book ratio to determine whether the share price is undervalued or overvalued. However, if we look for long term growth, PB ratio of above 1.0 is still acceptable, unless the counter requires little capital to operate while relying largely on the debts (for instance Starhub).

Reasons:

  • Transformation stage - from pure construction play to be involved in higher net profit margin property development
  • "Good luck" to enjoy the rising trend in Singapore property market as a whole, as Singapore continue to attract more talents to work in Singapore and has a flexible policy to invest/own a private property here


Chart:


The price moved from around $0.058 end of year 2005 to S$0.76 end of year 2012, which is about  37.8% average compound annual return rate.

So if you look for a very long term investment, the shares price normally will move along with the book value of the shareholders. It can be lower or higher than the pace of increasing of book value.

Nonetheless, from chart above, I realized that there was up (beginning of year 2006 & October 2010) and down (end of year 2008 - beginning of year 2009 - Financial Crisis) . If we can fully utilize it, maybe we can have a chance to earn more from that. Nonetheless, the principle of long term investment is to always look for a good counter that can increase in book value faster than the peers while maintaining cautious risk management in both business & corporate finance prospect.

Most importantly, do more homework on finding out the strategies and future plan of a company to sustain its growth while looking for better opportunities in increasing its revenue & profit margin.


P/S: Above paragraphs not stand as recommendation to buy / sell / hold counter. Please consult your financial adviser for more information before making any investing decision.

21 August 2013

Follow your investing principle(s) during uncertainty - Aug 2013

We have been gone through a price fluctuation on Asean stock market recently. If we let our mind influenced by the market, then we may end up selling at the low price or buying at the high price. So to set you from the storm, you may have your own investing principle(s) that allow you to go through the bull market as well as bear market.

As we know, the bear market begin from bull market, and of course the bull market appear after bear market ends. Instead of looking on the trend by itself, we should focus on the value we get after we paid for.

Since this is a long term journey, there is no need for you to really focus on the stock price movement. Instead, every time the huge drop in the market should be the opportunity to accumulate more good quality counters, so that you could enjoy the capital appreciation & higher dividend later.

I have seen some passive investors focused on cash flow game, where they only accumulate net free cash flow companies that will give them certain dividend amount every year. They will not liquidate off the counters they hold as they treat it as savings. It could be due to the strong confidence they have in the counters they hold for long term.

I have friends also like to accumulate real estate whenever the rental yield is right for him. As he sees regular cash flow entering his own pocket, he sees no reasons to sell off the property whenever the property price goes up or down.

If you set a good principle in your investing, I believe that you will not be really bother about the market movement. You may just focus on the counter you think it is worth to hold for long period. Try to make use of the opportunity created by the "Mr. Market". And always be greedy when the price is cheaper and be fear when the price is higher.


20 August 2013

SGX To Introduce Reduced Lot Size by 2014 - Aug 2013

From 1,000 units to 100.
Singapore Exchange (SGX) is consulting the public on its proposal to reduce the standard board lot size of securities listed on SGX from 1,000 to 100 units, with a view to reducing it to 1 unit in the longer term. The reduction of the board lot size to 100 units as a first step will allow SGX to assess the market impact before unitising the standard board lot.
My View:
I believe this is a brave move for Singapore Stock Exchange to amend the lot size to 100 units from 1,000 units. In my opinion, this will definitely increase the number of shareholders participating in bigger share price companies such as UOB, OCBC, DBS,  and Jardine C&C etc, just to name a few. 
Let's look for the example of Bursa Malaysia that already made the changes some time back, the participation of the younger generation increased, as they may not have larger capital. And it make no sense for portfolio diversification. 
I have some clients who are teenagers may also can take this opportunity to focus on blue chip counters investment instead of trading on penny stocks that may have a bigger volatility risk. The cost for a proper asset allocation may be lower down, as I see some good quality counters have not had share split even though the shares price gone up from few dollars to more than 50 dollars. 
I believe this is a trend resulted by globalization, as younger generation may have more interest on trying out the foreign market, especially US market. If you are not aware of, US market allows investors to trade as low as 1 unit. So the investors can buy the "expensive" counter at 1 unit, such as Berkshire Hathaway. 
Nonetheless, let's wait for a more concrete picture later. 

Buy & Sell Strategy - Aug 2013

When I said strategy, it means that it's just used as a guideline, as we can't perform exactly the same for all investment for different timing or whatsoever. But we can keep on learning the mistakes we made and produce our own strategy to 1. Reduce the mistakes made 2. Increase chances of winning 

Some focus on buy strategy as this is the crucial part to determine the profit / losses. For example, if you buy 80c, it's 25% profit if you sell at 1dollar. But if you buy at 90c, the profit reduced to 11% if you sell at the same price. Anyway, above is just a theory. As price fluctuates, I am not sure if you think it's good to average down when price drops to 80c, or you just hold it until $1.00, or you just cut loss at 80c. It's really depends on different scenario. 

To be more successful in investment, we have to set a target selling price first. Or we should set a target profit for each investment. For some traders, they target for 3-10% profit each trade, some only aim for 0-3%, depending on their strategy. For longer term investors, they target on 100% - 1000% return for say 3-10 years investment period. 

As time is money (learnt from Inflation Monster Story), so we should always aim at the return rate much higher than the long term inflation rate. If we just use the real estate as key inflation rate measurement, then we should always look for average target annual return rate of more than 10% to safeguard our hard earned money. 

Nonetheless, it's also waiting our time if we just keep on parking $$ in bank saving account, so it's good if we can have a strategic asset allocation that allows us to adjust the asset allocation based on market condition. We should always keep aside some cash even if we know that the bull market is still there for us to generate more profit. This is to allow us to cover some un-expected expenses & enjoy lesser fluctuation when the market is in chaos. Different investor would have their own strategic asset allocation, so that they won't be affected by daily fluctuation, instead they can focus more on long term journey. 

To me, it's always a good decision if we can sell off counters in reasonable price and buy in counters in undervalued price. It would take some time for us to understand more on what is so called "reasonable" and "undervalued", when the stock price keeps moving up and down. So once we understand that, we can apply margin of safety, so that we only buy those counters with share price < intrinsic value. The intrinsic value may change over the time, but it should not be as volatile as the stock price. To determine the intrinsic value, we can always look at two aspects - tangible & intangible. Tangible is presented in the financial report such as the net asset value & free cash flow etc; intangible can be extracted from the financial report as well, such as the quality of the management, the overall industry trend etc. 

I prefer a company with stable & increasing ROE and healthy debt level. After all, we just have to know our limitation & focus on our competence circle. We may expand our competence circle by trying to know more infor from the employees, suppliers, customers & competitors. Always bet big on sure things. 




19 August 2013

Iskandar Malaysia - Plan for Public Transport - Updated Aug 2013

According to Chinese newspapers in Malaysia, The current status update for the public transport in Iskandar Malaysia is that, the government plans to implement Bus Rapid Transit system in Iskandar Malaysia the most early by year 2016, with the routes Kulai - JB, Nusajaya - JB and Ulu Tiram - JB.

Information of the Iskandar Malaysia Public Transport:


- There are 1.38 M population in Iskandar Malaysia, with only 265K residents taking public transport
- Up until May 2013. 388K riders including of BXTRA 
- Average 7,500 daily riders of BXTRA 
- At least 50 bus routes provided by 8 public bus operators. Among all, 35% are using Ulu Tiram - JB Route.
Bus Rapid Transit Summary:
- Each route can take in 45K riders hourly
- 10 main routes:
   - Kulai - JB
   - Ulu Tiram - JB
   - Nusajaya - JB
   - Pasir Gudang - JB
   - Setia Tropika - JB
   - Senai - Larkin
   - Pulai - Kempas
   - Tanjung Pelapas - Ulu Tiram
In my humble opinion, the public transport system still focus on Johor Bahru instead of Nusajaya. It may give some signals that JB is still the main are to be focused in Iskandar Malaysia. So if you wish to invest in Iskandar Malaysia, maybe it is a better choice, until Nusajaya (Zone B), Senai-Skudai (Zone E), Pasir Gudang & Tanjung Pelepas (Zone C & Zone D) are developed soon later. 
Source: http://mykampung.sinchew.com.my/node/247784


Why there are more millionaires made their fortune through real estate investment compared to shares investment?

A studies showed that there were increasing millionaires in Asia, and most of them made their fortune through real estate investment instead of shares investment. As I am now diversify my investment into these two area, below are the reasons why I think real estate is favored by millionaires here:

  1. Stable Valuation - as in my earlier post, one of my friends enjoy the capital appreciation of her property in Serangoon. Under Rule 72, with about 7% compound annual return rate, a 100K investment could increase to 800K (about 800% return) in about 30 years. And most of the time, the real estate value normally valued at incremental stage except during crisis period such as SARS, 97 Financial Crisis etc. Therefore most of the investors prefer this asset class.   
  2. Easier to Get Margin Financing at higher LTV Ratio - In Singapore, you may get as high as 80% loan. With stable valuation, this is why I think why banks are willing to give you so high margin financing compared to Shares margin financing. 
  3. Stable Cash Flow - with stable rental income that the landlord may adjust according to inflation environment, I believe this is why most of the landlords tent to hold their real estate investment for long term period, say more than 10 years, which I think it is very hard for shares investor to do so. 
  4. Long Term Investment Period - With longer term investment period, I believe this is the main difference behavior between a real estate investor and shares investor. Normally real estate investors can sleep soundly as long as their rental income can cover their capital repayment and interest loan payment (please note in Singapore, the bank has the rights to ask you to top up if the property valuation drops below the mortgage loan), but for majority of the shares investor, they might not sleep well if the stock price in a big swing and may cause "emotional" action to cost you a lot of opportunity cost of not holding a good investment long enough to enjoy the capital appreciation. 

18 August 2013

SGX IPOs Mania - July & Aug 2013

We have seen some successful listing of REITs in SGX recently such as SOILBUILD BUSINESS SPACE REIT, OUE HOSPITALITY TRUST, and SPH REIT. It reminds me of one thing - the company will go for IPO during bull market, as they can raise higher fund during this period. Second thing is that, the investors may turn their interests in REITs market, as this is a higher yield sector compared to other industry. Nonetheless, with SOYBUILD REIT dropped about 8% from IPO price on the first day (unfortunately met the US Market Sell Down), I believe we have to be more cautious on REIT investment, to pick up some assets that bring stable gross income as well as having stronger bargaining power against its tenants on rental increment. 

As for other IPOs such as Money Max and Rex, I believe more speculators are involved as we cannot find any exciting story near term. Let's look for new investment theme for following months. I still think that STI should stand at at least 3,400 point. Being one of the relative cheap market, we should be able to find more under valued counters before the real bull market comes. 

17 August 2013

Singapore Investment - Some Thoughts - Aug 2013

From recent financial reports released on SGX website, I noticed that there is a trend for listed companies to venture into property business. It seems that Singapore Property business is a "Sure Win" business for them.

Even though at least 7 rounds of cooling measures have been applied by Singapore government, I do not see a significant impact to stop developers to reduce their property investment. Instead, you may see > S$1,000 psf in suburb area such as Jurong East by Genting Singapore. It seems that the only way we could stop the property price from climbing up is to increase the interest rate or whenever a financial crisis to come again.

With current labor tightening policy (reduce the increase of foreign workforce) and increasing rental rate in property, we do see that the impact in retail sector especially F&B suffers from the reduce EBITDA (Earning Before Interest, Tax, Depreciation and Amortization). It is quite sad when I read the reports from F&B companies. Their bargaining power towards REITs (Real Estate Investment Trusts) manager is too small that they have to pay for the rental increment as most crowd would go to convenient places near to MRT station for dining & shopping activities.

Singapore Local Banks enjoy average ROA of about 1%, which I think also is due to the low interest rate environment. They may enjoy a better ROA later if the interest rate increases later.

With current unfavorable environment for Commodities market, I do see some undervalued counters may come into picture if the commodities price drops further. As I am not sure when the downtrend of the commodities price could go back to the uptrend, but I do see that with steady population growth & increased use of bio diesel, the price wont drop so much below the operating cost.

1st Half of the year, we did see strong interest in Burma and O&G related companies, now we see a stock price normalization until we get more good news from both sectors.

With current Straight Times Index of below 3200, I believe there are more investment opportunities compared to 3 months ago. Let's try our best to find out hidden gems in Singapore stock market. Good luck in your trading / investing.


16 August 2013

A casual talk with a friend on Singapore properties

Today I spent an hour with a friend who is now retired and enjoy her retirement life with her husband and family. She mentioned to me that the property market in Singapore has been gone up crazy since few years ago. Her 5 room flat in Serangoon which she purchased at S$100K++ some 30 years ago valued at near to S$800K now, which translated to about 5% - 7% compound return rate.

If you think that it is ridiculous to own a HDB by paying S$800K, then what do you think if you could compound your S$100K at average 10% in stock market for 30 years?

The answer is S$1,744,940.23.

What if you could achieve even higher at 15% compound return in 30 years for S$100K?

The answer is S$6,621,177.20.

Time is a good friend for a good investment, but an enemy for a bad investment.

15 August 2013

Thai Beverages 1H 2013 Report - Decreased 14% Net Profit with Drop of 7% Revenue

Thai Beverages reported THB 8,324M Net Profit or 14% decrease from previous period with THB 75,988 M Revenue. This converts to about 10.95% Net Profit Margin. Let's see the detailed breakdown of the revenue as well as the profit from the screen capture:



Let's see how the management comment on the company performance for 2Q 2013.





If you look at the breakdown of the revenue, you could see that the biggest contributor to the net profit is from spirit business, with non-alcoholic beverages suffered a loss compared to last reporting period. The "est", newly introduced carbonated drinks might not as popular as Pepsi-Cola as what I heard from the online forum was that this drink taste more like a root beer. Anyway I would try it if I have a chance to drop by Thailand. Nonetheless, Oishi Green Tea series still enjoy a healthy profit margin there. With F&N business acquired by Thai Beverages & its related company, I believe there will be a synergy there to create a better profit margin in this sector in future.

The EPS for half year was THB 0.33, so annualized EPS would be THB 0.66. With current share price of about S$0.57, the PE would be about 21 X which I think still reasonable for a healthy Cash Cow company. With Book Value of THB 3.42, the PB ratio would be 4.1 X which I think is considered as in high range. The estimated ROE (Annualized EPS / Current Book Value) = 19% to me is still considered as a good ROE and we should look into more detail on Thai Beverages business model before we invest hugely in it.

As Thai Beverages still generates healthy Operating Cash Flow, I believe the high debt level may not be a concern to it, but please be mindful that it may reduce the dividend paid out to shareholders in coming years as long as the overall operating cash flow is not improving.

For more detailed information, you may refer to the link here.

14 August 2013

Sino Grandness - 1H2013 Net Profit Up 24.2% To RMB173.6M - Updated Response to SGX Inquiry @ 19 Aug 2013



Summary
  • 2Q13 net profit up 24.0% to RMB103.0M from RMB83.1M in 2Q12
  • 2Q13 beverage segment sales surged 48.3% to record high of RMB346.3M on strong orders for Garden Fresh bottled juices
  • 2Q13 domestic canned food products sales up 34.2% to RMB51.3M on higher orders for Grandness canned fruits
  • Adding new distribution channels after  gaining access into leading convenience store 
  • operators – Hongqi in Sichuan province and Meiyijia in Guangdong province
Annualized ROE stands at about 30%. With new distributors in Si Chuan and Guang Dong, I believe the net profit could stand at more than RMB340.0M, and meet the internal target set by the convertible bond holders. Current P/B Ratio is about 2.0 X which I believe is justifiable as the company enjoys higher ROE with better financial strength. However as the Operating Cash Flow is still in negative amount, I do not think that Sino Grandness could afford to distribute dividends in near future, unless it has successfully get its beverage subsidiaries listed as soon as next year. 

With estimated PE of about 6.2 X now, I do think that there is a room for company's share price to grow further. Please note that this counter has liquidity issue and higher volatility risk. 

Below is the link for company's presentation slide.

Updated Response by the Management to SGX Inquiry on Receivable, Inventories & Payable (16 August 2013):





It generally explains why the operating cash flow is negative, especially when we see the turnover days for receivable & inventories become longer. While I am just suspecting that the company may give favorable t&c to clients so that they can boost the revenue further up, I do think that the company may undertake some cautious move to avoid any further deteriorating operating cash flow.

Smaller Cap Stocks Investing

Some of the pointers I read from the book Value Growth Investing. I try to summarize it and share it here with you:

  1. Strong Economic Franchise - EPS can increase every year consistently, clients willing to pay for the increment in price, net free cash flow (in another term - the company could spend lesser in PPE while maintaining a health growth in revenue and net profit) 
  2. A growing company in a mature industry (a.k.a. find a good company in a boring industry )
  3. Avoid counters that are widely under coverage by most research analysts 
  4. Strong Balance Sheet, prefer Cash & Equivalents > Total Debts
  5. Top Management keep buying from the Open Market 
  6. PEG Ratio < 1.0 indicating that the growth of EPS outpace the growth in PE 

SWIBER - 1H 2013 Net Profit Rose 11.8% to US$ 37.4M

Summary of Swiber Financial Performance


  • Swiber’s net profit in HY2013 rose 11.8% to US$37.4 million
  • Strong order book of approximately US$1.2 billion
  • Financial flexibility with cash and cash equivalents of US$244.5 million
  • Successfully raised S$150 million 6.5% fixed rate trust certificates under newly established
  • US$500 million multicurrency Islamic Trust Certificates Issuance Programme
  • Well-positioned for large contract wins


You may go to this link for more detailed information.

KREUZ - Net Profit Increased 9.6% on the Back of US$76.4M Revenue - Aug 2013


Summary of the Half Year Performance of KREUZ
  • Net Profit increased 9.6% to US$14.6 million in 2Q2013 from US$13.3 million in 2Q2012  
  • Rise in SURF activities lifted turnover for 2Q2013 by 24.7% to US$76.4 million  
  • Strong profit margins  
  • Gross Profit, Net Profit and EBITDA margins at 29.2%, 19.1% and 29.0% respectively in  2Q2013 
  • In HY2013, Net Profit also rose by 7.8% to US$25.5 million  
  • Low gearing ratio (gross) at 14.0%  
  • As at August 13, 2013, Kreuz’s order book stands at approximately US$145.0 million
Management Opinion On The Industry's Trend 

“In line with the industry’s trend towards deepwater subsea work, the ongoing construction of our new state-of-the-art  Dynamic Positioned Multi-purpose Support Vessel is on schedule with an expected delivery in 2015. The vessel with a  capacity for operating two deepwater ROVs and heave compensated cranes for working in water depths of up to 3,000  metres, shall complement Kreuz’s ability in performing deepwater SURF with the ongoing shallow water projects.  “In the past quarter, Kreuz has successfully completed its first subsea dry hyperbaric habitat welding project, at a water  depth of 140 meters, and overcoming technical challenges associated with welding at deep depths.    Coupled with a  number of ongoing Construction, IRM and SURF projects, Kreuz is well positioned to continue its quest for future  growth.”  - Mr. Kurush Contractor

For more detailed information, please go to this link.

My View

Kreuz still depends largely on Swiber, its mother company. With SURF activities continue to shine in next few quarters, I believe KREUZ will have another record year this year. With about 9.00 US Cent annualized EPS and about 6-7 times PE, I believe Kreuz is still considered one of the cheapest counters in the O&G industry, with concentrated risk in getting most of its revenue from Swiber Group. Let's see if Kreuz can diversify its client base so that it will not be affected by fall down of single customer. 



13 August 2013

CSE Global - 4.86 cents EPS in 1H 2013 Result

Extracted from Company's announcement

Review of Performance  - 1  st  Half  In 1H13

CSE Group recorded profit after tax of S$25.1 million  compared to profit after tax of S$23.3 million in   1H12 before  discontinued operations and one-time transactions.  This was an increase of 7.6%  compared to   1H12.  Profit after tax of S$25.1 million in 1H13 compared to profit after tax of  S$33.7 million in 1H12  (including discontinued operations and one-time transactions).  

Revenue  reduced by 15.4% in 1H12 compared to 1H12 due to  lower revenue in the Americas and EMEA   regions. Basic earnings per ordinary share from continuing operations and before one-time gains of 4.86 cents was 8% higher compared with 1H12. Basic earnings per ordinary share was 4.86 cents in 1H13  compared to basic earnings per ordinary share of 6.53 cents in 1H12 (which included the one-time gain on the disposal of eBworx   Berhad).   New orders received for the first half year  of  2013 were S$222.4 million compared with S$201.1 million for the corresponding period in 2012, an increase of 10.6%. The Group generated operating cash inflow of S$47.1 million in 1H13 and improved Group net gearing to 6.2% at the end of 1H13 from 19.2% at the end of 4Q12 and 25.6% as at 1H12.

Performance of Geographical Segments

In 2Q13, the geographical regions of Asia-Pacific, The Americas and Europe/Middle East/Africa contributed   31.0%,  38.4% and  30.6% to revenue and  35.8%,  25.9% and  38.3% to profit after tax and minority interest   respectively.  The increase in profit for 2Q13 compared with 2Q12 in the Asia-Pacific region was mainly due to an exchange gain contributed in 2Q13 compared with an exchange loss in 2Q12. The Americas region  recorded lower revenue by 20.5%  with a slight decrease of  5.4% in profits for 2Q13  compared with 2Q12 mainly due to lower  level  of  less profitable  onshore activity in the USA compared to 2Q12.  The EMEA region recorded lower revenue by 31.6% and a decrease of 6.7% in profits for 2Q13 compared with 2Q12  mainly  due to lower revenues in the Middle East caused by delays in some projects.  In 1H13, the geographical regions of Asia-Pacific, The Americas and Europe/Middle East/Africa contributed 28.5%, 40.2% and  31.3% to revenue and  30.1%,  29.9% and  40.0% to profit after tax and minority interest   respectively.  Revenue and profit for 1H13 compared with 1H12 in the Asia-Pacific region was slightly decreased by 2.3%   and 3.6% respectively.  The Americas region showed a large increase in profit despite a 16.3% decrease in revenue for 1H13 compared   with 1H12. This was due to a  higher contribution from the offshore market, which more than offset the lower   level of activity in the onshore market.  The EMEA region recorded an increase in  profit despite a decrease of 23.6% in  revenue for 1H13 compared   with 1H12 due to  lower revenue and the  lower level of zero-margin revenue in the Middle East, as the loss making projects there are completed or nearing completion.

Liquidity and Capital Resources  

CSE significantly improved its operational cash inflow to S$30.2 million in 2Q13 after accounting for S$2.3  million  in  foreign currency translation differences on non-monetary assets and liabilities of its subsidiaries   whose functional currencies are in USD, EUR, GBP and AUD. At the end of  2Q13, CSE reduced its net gearing to 6.2% from 19.2% as at end of 4Q12. Gearing at the end of 2Q12 was 25.6%.

Outstanding Orders

CSE received S$127.0 million new orders in  2Q13.  Outstanding orders  increased by 1.4% to S$375.0 million   as at end of 2Q13 from S$369.9 million as at end of  2Q12.  Outstanding orders as at end of 2Q13 comprised S$316.9 million of outstanding orders for Oil & Gas, Infrastructure and Mineral & Mining and S$58.1 million of outstanding orders for Healthcare.

Outlook  

With a healthy outstanding order book of S$375.0 million at the end of 2Q13, CSE remains confident of an  improvement in  its overall profitability from operations in  2013 as compared to 2012. While some large greenfield projects are being delayed the Group will continue to focus on brown-field projects, which generally have  lower revenues but higher gross margins.  CSE is currently pursuing a full divestment of its wholly owned subsidiary CSE Global UK through a separate listing on the London Stock Exchange (“Listing”). There is no guarantee that the Listing will proceed as it will be subject to market conditions, valuation and amongst other things, the relevant regulatory and other approvals being obtained, execution of definitive agreements by the relevant parties and the approval of CSE’s shareholders.

My View

CSE Global stands as a group with stable revenue stream business model. With current low debt level and positive cash flow from operating, I think that there is a higher chance for the group to continue its dividend payout policy. Current PB Ratio stands at 1.78 X with annualized PE 8.6 X. However please note that this is a smaller capital size counter and you may experience in liquidity issue when trading in it.


JB Foods Posted Net Loss on 1Q 2014 Report


6M2013 vs 6M2012

Total revenue grew by RM35.2 million or 12.9% from RM271.6 million for the half year ended 30 June 2012 (“6M2012”) to RM306.8 million for the half year ended 30 June 2013 (“6M2013”) mainly attributable to higher sales volume mainly due to new trading activities and increase in production capacity. However, the Group registered a gross loss of RM10.7 million and net loss of RM23.1 million in 6M2013 respectively. This was due to the unusual market consolidation that significantly reduced the average selling prices of cocoa ingredients especially in 2Q2013. The Group made a provision of impairment of inventories amounting to RM13.1 million in 6M2013 to reduce the inventory cost of cocoa ingredients to the average selling prices immediately after the close of 6M2013. Other income decreased RM2.8 million whereas other expenses increased RM1.9 million mainly due to unrealized foreign exchange losses in 6M2013.


Review of Statement of Financial Position

Non-current assets increased by RM3.9 million or 3.5% from RM112.6 million as at 31 December 2012 to RM116.5 million as at 30 June 2013. The increase was mainly due to the capital expenditure incurred for the expansion project in Tanjung Pelepas.

The Group’s current assets decreased by RM3.0 million or 0.9% from RM318.3 million as at 31 December 2012 to RM315.3 million as at 30 June 2013, mainly attributable to a decrease in cash and cash equivalent of RM22.7 million partially offset against an increase in inventory of RM15.7 million, trade and other receivables of RM1.9 million and income tax recoverable of RM1.9 million. Inventories increased mainly due to increase cocoa bean and cocoa ingredients products. Trade and other receivables increased mainly due to higher sales in 6M2013. Income tax recoverable increase due to one of the subsidiary having to pay estimated corporate taxes in advance in 6M2013 based on its FY2012 profitability.

Current liabilities decreased by RM16.8 million or 7.3% from RM226.3 million as at 31 December 2012 to RM209.9 million as at 30 June 2013, mainly due to a decrease in trade and other payables of RM25.4 million, offset partially by an increase in bank borrowings amounting to RM8.6 million. Trade payables decreased mainly due to payment for raw materials. Other payables and accruals decreased due to progress billing payments relating to the expansion project in Tanjung Pelepas. In addition, the Group had paid the accrued bonuses as at 31 December 2013. Lastly there was a reversal in the provision of executive directors’ bonuses for FY2012 as the executive directors’ remuneration agreement was amended to take into consideration the losses in 6M2013. Bank borrowings increased mainly due to the increased utilization of trade bills for the settlement of cocoa beans at the end of the period.


Non-current liabilities decreased RM1.8 million or 12.5% from RM14.7 million as at 31 December 2012 to RM12.9 million as at 30 June 2013 due to the reversal of deferred tax in a subsidiary.



Cash Flow

Cash and cash equivalents decreased by RM22.7 million in 6M2013 due to net cash used in operating activities amounting RM61.1 million, net cash used in investing activities amounting to RM6.0 million and effect from exchange rate changes amounting to RM8.0 million, partially offset by the increase in net cash from financing activities amounting to RM45.2 million.

The net cash used in operating activities was mainly attributable to the increase in cash used in working capital amounting to RM57.8 million resulting from an increase in inventories of RM28.9 million and decrease in trade and other payables of RM28.4 million.

The net cash used in investing activities of RM6.0 million was mainly due to additional capital expenditure of incurred for the expansion project in Tanjung Pelepas.

Net cash from financing activities was largely due to net proceeds from placement shares proceeds of RM54.0 million and net increase in trade finance borrowings amounting to RM4.8 million which were partially offset by dividend and interest payments of RM11.8 million and RM1.8 million respectively.



A commentary at the date of the announcement of the significant trends and competitive conditions of the industry in which the group operates and any known factors or events that may affect the group in the next reporting period and the next 12 months.

Over the next 12 months, the Group expects that the business environment will continue to be challenging in view of the volatile global economic situation and possible continued consolidation in the cocoa ingredient industry.

Nevertheless, the board remains confident in the long term prospect of the business and will  continue to seek out new business opportunities.

My View

To battle in cocoa price volatility, I believe management would need to do more to diversify its business model so that it can get lesser impact in lower selling price in the cocoa ingredients. I believe that soft commodities market is now in the consolidation stage where the average selling price is normalized to a lower level. Nonetheless, I believe it is still a profitable business in long run, depends on how the management can cope with the lower average selling price environment. As what my ex-chairman Mr. Lim told us that, it is always a good time for us to consolidate our strength in the downtrend and be prepared for the good time to come.





First Resources 1H 2013 Result Summary - Aug 2013

Singapore,  13 August 2013  – First Resources Limited (“First Resources” or the “Group”),  today   reported a good set of results for the six months ended 30 June 2013 (“1H2013”) in spite of weaker   palm oil prices.   The Group posted a net profit attributable to shareholders of US$101.3 million, despite a decline in   sales of 7.3% to  US$294.3 million for 1H2013. Group EBITDA  increased marginally by 3.5% to   US$156.8 million in 1H2013.   First Resources’ financial position as at 30 June 2013 remained strong, evidenced by a low leverage   ratio (net debt over equity) of 0.2 times and healthy cash and bank balances of US$277.3 million.

Commenting on the results, Mr. Ciliandra Fangiono, CEO of First Resources said, "Notwithstanding a   more challenging operating environment with softer palm oil prices, we are pleased to be able to   maintain our overall performance, supported by realisation of some forward sales during the period.   With our healthy set of results, First Resources has declared an interim dividend of 1.25 Singapore   cents per share.”

The production of fresh fruit bunches (“FFB”) was impacted by seasonality and biological slowdown   of palm  trees in 1H2013, resulting in a marginal  decline of 0.5% in  the Group’s  FFB production   volume. FFB yield for the period declined to 7.7 tonnes per hectare from 10.0 tonnes per hectare in   1H2012, largely due to the combined dilutive effect of having a higher percentage of young trees,   which have not reached prime production ages, and lower yields from plantations that were recently   acquired.

Production is expected to improve in the second half of the year, in line with the traditional   production up cycle that usually takes place in the third and fourth quarters. The Group’s production   growth over the forthcoming years will also be enhanced by continual yields improvements in newly   acquired assets as a result of our rehabilitation programme

Looking ahead, Mr Fangiono said, “Despite current weakness in the global economy and increasing   global  edible oil supplies, the Group remains  positive on the  longer term outlook of the  palm oil   industry, which is supported by  underlying demand  growth from top consuming markets such as  India, China and Indonesia. Recent weakness in the Indonesian Rupiah relative to the US Dollar is   expected to benefit the Group as our revenue is mainly denominated in US Dollar while a substantial   portion of our cost is denominated in Indonesian Rupiah.  Furthermore, developments in the   fertiliser industry may bring about favourable purchase prices for fertiliser users in the future.”

In keeping with  its  five-year strategy of organic growth, the Group will continue  to focus on   expanding its plantation footprint and milling capacity. In 1H2013, the Group added 6,755 hectares   of new oil palms, increasing its total planted area under management to 161,792 hectares, which   includes the plantations acquired in the first quarter 2013.

In June 2013, the Group commissioned its first palm kernel crushing plant with an annual capacity of   105,000 tonnes. This  has expanded  the Group’s product offering and enabled it  to extend its   products to a more diversified group of customers. The Group is also on track with the construction   of its new refinery located at its integrated processing complex in Dumai, Riau, which is expected to   be operational by the fourth quarter of this year.

Below is the snapshot captured from the quarterly report:









Simple Financial Ratio Analysis:

Annualized EPS = 12.78 US cent
Annualized PE = 11.05 X
PB = S$1.765 / S$0.90 = 1.96 X

In my humble opinion, I think that First Resources may experience a drop in Revenue compared to last year as the CPO price dropped and I am not sure how long the management can hedge against the dropping price of CPO via forward sales. Nonetheless, I am glad that the company can still manage to maintain healthy net profit margin and debt level. Nonetheless, the Asset Turnover Ratio may remain at lower level as the PPE & biological assets acquired in the faster pace compared to the revenue growth. Given the PB ratio range 1.50 X to 2.50 X, I believe First Resources is now in the reasonable lower price range. I will consider it only if it can drop for another 10% - 20% further or we can see a reverse trend in the CPO price in near future.

You may refer to presentation document from SGX for better reading.


Country Garden - Danga Bay (Aug 2013)

Last weekend Country Garden, one of the top 10 developers in China held festival in its Danga Bay project located in Iskandar Malaysia. What surprised me was that it targeted to launch RM 18 Billion worth total gross development value (GDV) project there, with a product mix of residential, commercial and leisure activities there.

From newspapers I could see a human-created beach with a jetty over there, providing facilities for Singaporean to come here via private water transport. Country Garden advertised this project via media in Singapore as well as invited Singapore Stars to come here to promote the project. Some artistes show great interest in this project and would consider to invest here if they were offered a great discount by the developer.

So far the project starts with RM 750 psf. You may refer to the link below for detailed information:

http://www.thestar.com.my/News/Nation/2013/08/12/Sultan-backs-big-waterfront-project-Country-Garden-Danga-Bay-has-all-it-takes-to-be-a-success-says-J.aspx

12 August 2013

SUPER GROUP - 1H 2013 Report Summary - August 2013

Super Group announced 1H 2013 report recently.

EPS: S$0.105
NAV: S$0.7871
Annualized Estimated ROE: 26%

Note 1: S$ 20 M gain is from disposal of associate company S$ 17.1 M & foreign exchange gain of S$ 2.4 M. If we deduct this one off gain, the net profit will be around S$ 40 M or 4 million above last year.

Note 2:  The company still experienced negative Free Cash Flow (Cash Flow from Operating - Purchase of PPE) partly due to the reasons the company still in the expansion mode. However, it could also mean that it cannot afford to give more dividends as it has to conserve cash for long term investment.

You may see detailed explanation by management from the snapshot below:






You can see the management's comment of its business prospect below:

On 10 January 2013, we unveiled our new Super’s logo and brand identity at a private event  organized for our business partners.  To promote the new identity, we will continue to roll out advertising and promotional campaigns in some of our key markets.  We will also continue to consolidate our product lines and add new product variants to better capture the changing tastes of the consumers.  Management believes that the re-branding initiatives will help the Group to stay relevant to the   consumers and elevate Super’s position as a leading brand in the competitive Asia markets.  Raw material costs and currency fluctuations will affect the Group’s operating performance. Management  is familiar with these challenges and  will  take appropriate actions to mitigate their impact on the Group’s businesses.


NOBLE - Summary of 1H2013 Report

Noble announced net profit of US$ 106 M on the back of the total revenue of US$ 47,928 M, which is 65% dropped from previous reporting period. Agriculture division still suffered loss of US$ 120 M from the operation although the production increased 30% to 22.4 M Tonnage. The group adjusted product mix given the change in the structure of ethanol pricing in Brazil, with their ethanol production increasing more than 100% yoy basis. Grain and Oilseeds origination and trading business remains in challenging environment. The group expected Ukraine and Brazil crushing plants are ready by 3Q 2013.

Noble operating income margin on Energy improved to 2.31% from 2.02% in previous period with total operating income at US$ 719.4 M. The group sees coal as being a key component of the energy mix for foreseeable future and expect the seaborne coal markets to grow their volumes.

Noble achieved 41% yoy revenue growth in Metals, Minerals and Ores (MMO) driven by expansion into new products and geographies. Nonetheless, the operating income margin dropped to 0.76% from 1.45% a year ago due to tougher environment on their Iron Ore business. The management tried to create diversified portfolio to minimize the risk.

In overall, net working capital increased to US$ 4,654 M from US$ 4,287 M. The cash conversion cycle is deemed to be very good accompanied by the Trades Receivables DOH 14 days, Inventories DOH 12 days and Payables DOH 24 days.

For the debt concerns, Net debt increased by $272 million in line with working capital which increased primarily due to the strong harvest being seen in South America. Cash and cash equivalents stood at US$1.1 billion in line with historical levels. Leverage increased slightly to 50.3% compared to 48.8% at end December 2012 but still at a solid level, especially if adjusted for readily marketable inventory. Adjusted net debt/Capitalization stood at 30.8%. Leverage increased slightly to 50.3% compared to 48.8% at end December 2012 but still at a solid level, especially if adjusted for readily marketable inventory. Adjusted net debt/Capitalization stood at 30.8%.


Recent developments since 14 May 2013:

  • On 2 August, Noble announced the closing of a US$505 million two year committed revolving letter of credit and guarantee facility. 10 banks participated in the facility and the facility was arranged on a club basis.
  • On 20 June, Mr. Richard Margolis was appointed  as an Independent Non-Executive Director. Mr. Margolis is a former diplomat, investment banker and businessman with more than 30 years experience in Greater China.
  • On 14 May, Noble announced the closing of US$2,055 million in revolving loan facilities. The facilities comprise a US$1,017 million 364-day committed unsecured revolving loan facility, a US$488 million three-year committed unsecured revolving loan facility and the arrangement on a club basis of a US$550 million three-year committed unsecured revolving loan facility. The transaction was very well supported by a broad group of banks globally with a syndicate of 72 banks spanning five continents. All amounts borrowed under the facilities have been and will be used for refinancing and general corporate purposes.
Some simple Financial Ratio Analysis:
  • Annualized ROE of 4.04%
  • Net Profit Margin of 0.22%
  • Annualized Asset Turnover of 479%
  • Equity Multiplier 3.88 X 
  • Annualized PE of 26.5 X 
My concerns on Noble is the deteriorating net profit margin which is mainly caused by the agriculture division negative operating income. I nonetheless do think that it could make a turnaround in coming years as the crushing plants are getting ready by 3Q 2013, hopefully. The soft commodities prices may remain at lower price compared to few years back, unless we face a poor harvesting caused by an unforeseen bad weather. 



Biosensors - 1st Quarterly FY2014 Result Summary - Aug 2013

1st Quarter FY2014 Result Summary:

You may look at the image below which I took from company's report. The Total Revenue dropped about 11% to 65M USD, particularly in licensing and royalties revenue (-33%) Quarter On Quarter (qoq). Net profit dropped 63% to 12M USD from 33M USD 1 year ago. Diluted EPS was 0.69 US cent compared to 1.86 US cent a year ago. 




The NAV of the group stood at 73.81 US Cent or about S$0.92.

The Financial Review of the Group is shown as below:










The management also noted for any known factors that may affect the group performance for the next 12 months which is shown as below:


With Current Financial Ratio:

Annualized EPS = 0.69*4 = SGD0.0345
Annualized PE = 88.5C / 3.45C = 25++ X
PB = 0.96X
Annualized ROE estimate = 3.75%

Above just an estimated figure if we just based on the 1Q 2014 performance. The management expected to have improved revenue result in next coming quarters. Let's see if the EPS could be improved in next few quarters to justify its current financial ratio based on current market valuation.

06 August 2013

Normal Return & Real Return & Relationship with Inflation

Many of us know that Time is Money. But what does it really mean? For example, for investors who have a few million dollars, 3 days for them could mean for few hundred if they park their money in Fixed Deposit. So the bigger capital you have, the more you have to appreciate your time because it could mean a big amount to others. 

Now, let's talk about the normal return, real return and their relationship with inflation. I try to write it in layman term (simplified version) for your better reading here: 

Real Return = Normal Return - Inflation Rate

For example, if you have earned about 1% from fixed deposit. This is your normal return of 1%. But if you deduct it from inflation rate, your real return could be in negative term. While we are living in low interest rate and high inflation environment, there is little we can do to increase our excess cash value. 

You can argue that you can still earn 1% - 2% in your bank account in Singapore. But due to the high investment return, what you can purchase now with your excess cash could be lesser than what you can buy 1 year ago. So what is the point of parking your money in fixed deposit in long run? 

In long run, equity investment is one of the best asset classes. The share prices will go up eventually in tandem with revenue & earnings growth. As long as we can purchase good quality counters with low / reasonable price, I believe we could have higher chances in achieving financial freedom goal for better retirement life. 




05 August 2013

Capital Expenditure - Fixed Asset Purchase For Long Term Earning Growth

Capex, or Capital Expenditure is part of company's budgeting plan to grow its business. I still remembered that it is up to management's decision to categorize the expenditure under Capex or Opex (Operating Expenditure) and it is recorded under Investing Cash Flow in the Cash Flow Statement. For R&D / Software / Pattern or any other non current assets purchased, it could be categorized under Capex and amortized / depreciated over a longer period, say 5 to 30 years.

So why does the management prefer Capex over Opex? It could be due to several reasons:

  1. A better profit recognized in recent financial report. If you recognize the profit under Opex your net profit margin would be lower. 
  2. The company can capitalize the expenses under Non Current Assets and increase the Total Assets value in balance sheet, and so does the Total Equity value. 
However, for investors who prefer to use Free Cash Flow Method (Operating Cash Flow - Capex), they will take it into consideration and may ask about this question: 
  1. Is Capex growth in tandem with revenue / earning growth? If not, then it may not be a good purchase. 
  2. Is there any trend for a company to start spending money in its investment? I noticed that Japanese company started to spend excess cash pile in R&D activities. I believe this is a good sign for long term revenue growth if the company can provide more products & services to create better services. 
To me, I prefer a net Free Cash Flow (FCF) company. But it means that the company may in mature stage and may not experience exponential growth. For a start-up company, it normally has negative FCF at the beginning until later stage. You may need to consider both Pros & Cons in management's decision in CAPEX before making any investment decision.


04 August 2013

Roxy-Pacific 1H2013 Result Summary - August 2013

Below are the snapshots taken from briefing by Roxy Pacific. I will post it here for record keeping purpose. So far Roxy-Pacific has done a good job in transforming the business model towards property development from hotel management. However, please be informed that due to reporting standard changes, for all the private property development in oversea would be only recorded upon receiving TOP. Hotel revenue may recover later after the renovation job is completed. It increased gradually in Kovan square.

































Related Posts Plugin for WordPress, Blogger...

View All My Posts Here