31 October 2013

Wing Tai - Could it be undervalued? - Last Update Dec 2013

Wing Tai is a property and retail player in Singapore, Hong Kong, Malaysia and China.

For latest quarterly report released on 25 October 2013, it reported a decrease of 66% net profit to S$24.5M from S$72M same period last year. Total Net Equity Value stood at S$2.8 Billion. So the ROE is rather very low (below 4%).

However, if we look at long term say 10 years time, the Net Equity Value rose to S$ 2.8 B FY2013 from S$ 946 M FY2004, or CAGR of 13%. Imagine, if you put in a $1.00, your invested capital there would be increased to $3.39.

As now the share price is trading at about 0.6X of Net Equity Value, it could mean that if we put $0.60 today, we may be able to able retrieve $3.39 10 years later. Sounds cool right?

However, it is not just as simple as that. We got to analyze what made the share price trading below Book value, and would it continue the trend forever? And what is our target selling price?

The business model of Wing Tai is to have a combination of property investment & development projects apart from retail business which brings in less significant income stream to the group (although we also saw a rise of Retail contribution of revenue to S$210M from S$36M).

So they can create accounting income by few ways: earn from property development projects, increased value of investment properties, or share of profits from associate & JV projects.

If you look at Shares of Result of Associated Companies & JV Companies before Tax, you will see that it has ballooned to S$294M  from S$15M in FY2004, or CAGR of 39%. The contribution from Associated Companies & JV Companies even contributed more than its core operating business in FY2012 (restated). So, it means that actually Wing Tai group actually depends quite largely on its associated & JV companies.

If you look at Hong Kong associate company (Wing Tai Properties), the net profit derived from disposal gain from non core assets & gain from investment properties revaluation. So it means for a double effect. During Property Boom, the profit would be more and during Economy Recession, the income would be affected by revenue as well as devaluation of investment properties.

So far, the group can generate operating cash flow constantly, with 2 exceptional years (2004 - SARS in Hong Kong and Singapore & 2009 - Global Recession), while the Cash Flow from Investing were always in positive mode except for year 2013 (due to borrowing to  JV companies of S$120M).

So let's look at how its listed associated & JV companies performed over five years. I copied and pasted from annual reports:

Wing Tai Malaysia (60.1% Holdings, Listed in MY)

Wing Tai Properties (33.5% Holdings, Listed in HK)

So, if you ask me when is the best to invest in property counters, I would say to wait for a recession time to come. Now the U.S. economy is recovering while Europe economy still stagnant for a long time, maybe we can diversify to Europe property / finance sectors when the time is right.



Last Updated (December 2013)

Award of Tender

The Directors of Wing Tai Holdings Limited wish to announce that Winmine Investment Pte. Ltd. (a subsidiary of the Company) has been awarded the tender for a leasehold land parcel Plot 17/2, Huai Hai Middle Road Precinct No. 45 in Shanghai Huangpu District having an approximate site area of 8,593.9 square metres at the price of RMB1,104,000,000. Following the award of the tender, Winmine will incorporate a new company in Huangpu District to develop the Land as an office cum retail development. 

I treat it as a positive move for the Co. to further diversify its property development projects from Singapore alone. Currently for property development project, Singapore contributed about >60%. So with this project, I believe the company can better weather the weakening property demand in Singapore market. As this is a retail cum commercial development, the profit margin could be higher compared to residential project. I have to do more research on Shang Hai property market before giving any comment on the impact of the project to Wing Tai.

29 October 2013

Impact of Budget 2014 on Malaysia Property Market

Yesterday we saw a significant price volatility on Singapore counters that have significant exposure in Malaysia Property development, such as Albedo & Rowsley. The reason why I think so is that the impact of Budget 2014 on Malaysia Property Market.

If you are not aware of, the property price started to surge since year 2009 after global financial crisis, as there are many countries tried to stimulate economic growth by pumping a lot of money into the market and cause a drop in interest rates. When the money are not used usefully in business development, one of the safest ways is to park under Real Estates instead of earning low interest rates in banks. So we now see Singapore and Malaysia Property market could surge more than 100% in few years time.

There are few reasons why the price surge. Firstly, Inflation causes a weaken money purchasing power, and the real wages increase is not much. Secondly, increasing interest of hot money in Asia countries, partly due to weakening economy of Europe & America, caused the supply could not catch up with sudden demand.

However, the people in both countries can feel the pain now, as majority of the citizen working in the city, especially those who are fresh graduates could not afford to buy a house near to their working places. In KL, it could cost at least RM400K++ to own an apartment near Taman Melati.

So now Malaysia government is trying to push harder to curb speculation by introducing few measurement:

  1. Increase of RPGT from maximum 15% to maximum 30%
  2. To prohibit DIBS Scheme and do not allow Financial Institution to borrow money to developers under this scheme
  3. Increase of floor price for foreigner purchase to RM1.0M from RM500K previously
I believe above measurement can at least stabilize if not to reduce the selling price of developers in prime area, especially some of them claim to use DIBS scheme to attract buyers who just need to pay for the down payment and dispose it off 4 - 5 years later. I believe the proper market will cool down soon as it may raise to the concerns to those buyers who try to speculate in the market. 

Nonetheless, the only way I think to curb the surge of property price is to increase the interest rate. It will definitely reduce the demand of the excess cash to park under real estate.

28 October 2013

Shares Investment Ideas - What Happen if ROE Fluctuate?

Since my first shares investment since Asia Financial Crisis 15 years ago, I always look for reasons how shares price can move up or down. Apart from Macro Economy perspective, the 1st reason why a company can have its share price move up in long run is due to its strong performance in its business development over a long time frame.

My thought is that, to earn money from stock market over a long run, we should first focus on the fundamental of a company, before move on to find out the entry and exit point of each investment. To do so, we can always figure out financial ratio of a company and 1 of the most important ratio is ROE (Return of Equity). It is one of the indicators to access how strong the earning power the company could have and the competitive edge against its peers. 

Most of the time, I would look for consistent and high ROE company before move on to search for volatile ROE companies. So I would like to find out the reasons why ROE fluctuate in this post. 

First of all, it would mean that the company is a cyclical company. The performance can be better during economic boom and worst during recession. So, we have to look at longer term, say 10 years performance of a company to determine what the long term sustainable growth rate the company would have.

Secondly, the company could have a different product mix during different financial years. This is quite common when the company is having wide range of products. The reasons why they try to diversify the product range instead of concentrate on single sectors could be due to the risk management or having better bargaining power against customers. 

Thirdly, the company cannot increase / control the sale price while inventory cost surges up. It may happen to commodities companies where they cannot easily pass the inflation costs to customers when the sales price is fixed.

Fourthly, Huge CAPEX (Fixed Cost) expenses per yaer - Companies must maintain certain amount of CAPEX (be it replacement cost or increase of fixed asset purchase) so that to have the economic of scales in long run. In theory, a company with high Capex is not a good choice during recession. 

Fifthly, The company had exceptional earnings / losses during financial years. It could be fair price gain/loss from investment (be it securities / properties / other investment tools) or disposal gain from PPE (e.g. real estates etc) or even a provision for future losses. We may need to do some adjustments to bring this back to normalized rate (e.g. you may need to focus on core earnings stream before looking at the other operating income / expenses. )

Sixthly, Income & Expenses not arrive at the same time. For example, a company may need to take in huge borrowing and thus incur interest expenses before the project completes and bring in better income stream later. 

25 October 2013

My Thought after Sim Lian AGM - Oct 2013

I just finished attending AGM of Sim Lian at Jurong Country Club. So far, this is my 1st AGM attended in any of Singapore Listed Companies. One of the reasons why I wished to attend the AGM was that I would like to meet those directors whose faces were not printed out in Annual Report (haha, you may treat it as a joke), and I think EDs & Group CEO are all handsome and pretty people there. The group CEO is a soft spoken people and I enjoyed chatting with him for a while after AGM was finished. 

Anyway, below is the summary that I got it from AGM just now:
  1. Sim Lian Equity grew from S$200M++ to S$800M++ in just 4 years time. I believe it is due to its good strategy to tap on uptrend of property market cycle by introducing higher profit margin projects. After UBI One is completed, the profit margin may fall to normalized rate. (FC mentioned that the industrial property project normally enjoys a higher profit margin compared to residential property project)
  2. Investment Properties started to be appeared in Balance Sheet, with the group's intention to generate more recurring income. In fact, the property bought in Sydney also would bring in about 6% rental yield. I believe the group played in a prudent way to ensure that the excess cash is taken good care of, although the ROI is definitely lesser than property development project
  3. Net Debt Ratio dropped to near to 0% level in FY2013. It may indicates that the group would think it is harder to seek a good land bank with reasonable price. In fact, they may focus on their strategy to have more recurring income projects to diversify the concentrated risk on property development project
  4. The reason of Joint Venture given by Top Management was to cater for huge CAPEX projects that may exceed group's capacity to do it alone. Anyway, my personal view is that it may increase ROE by pulling Assets & Liabilities out of the group's BS. Of course, I still think it is a good way to do so as it may capitalize loan to JV in BS, while still enjoying the shared profit of JV and an increased net profit margin. I foresee this may be a trend for group to park some huge projects in this JV categories
  5. Group CEO shared with me that the script dividend reinvestment scheme was implemented as and when the group needs the cash to support ongoing working capital. They do not have intention to privatize the group at this moment although I think they already control at least 70% stake. Personally, I think the Dividend Reinvestment Scheme was good for those who still think the group has bright future and are willing to be the long term investors. 
  6. With 4.6c dividend payout, it implies to about 5.2% dividend yield, which I think is good. Anyway, I think Sim Lian is in the midst of increasing recurring income properties, so the coming net profit may not exceed the record result in FY2012
If you ask me whether this share is cheap, I think it is not. However, I would opt in for the dividend re-investment scheme if there is any. Ya, it is definitely in my watch list and I am still waiting for a chance to increase my exposure in it later.

22 October 2013

A Letter to My Soon-to-be-Born Baby

To My Dearest Baby,

You are coming to this Wonder land soon. I hope that you can be happy and healthy always, and be a kindhearted people with the full mindset of contribution to society when you grow up. Because of you, both your mother and I have to adjust our long term plan to get ready for your arrival. Nonetheless, it was a good experience that cannot be bought by money, and we are ready to be a good parents to you too.

The very first thing I like to share with you is that, "There is No Free Lunch in This World". Do NOT take everything for granted. In fact, you should learn to get the things you want with your own hard work. I hope that you can manage your time well, and concentrate on the things you love and bring benefits to the people around the world.

As you are a Malaysian, we hope that you can get along with your Malay and Indian neighbors well when growing up. And you will be studying in Chinese Primary School, so I think we have to speak both English and Mandarin to you at home, so that you are still be able to master both Chinese and English languages.

Secondly, be always prepared for the worst while hoping for the best to come. This is to let you be more prudent in managing your own pocket money and own stuffs. We will teach you how to save and spend money wisely. It is always good to leave a portion of your money into savings so that you can use it for big purchase or investment that is good for you and everyone.

I will bring you to public library and enjoy the reading environment there. It is getting harder for a kid to spend big time in reading, as most of your friends would be playing the electronic devices such as tablets, net books etc. You will learn a lot of new knowledge from the book & magazine.

I will bring you together as a part time social worker when you grow up. I wish you to learn that there are still unfortunate guys outside, and you will learn to be appreciate of what you have now and do not waste any food or things you have.

Thirdly, I wish you be a generous person. Treat your friends & families & others well. You will know that you still require team work to get things done well. Do not be a slave of money. Instead, try to master the money game and let it works harder for you. Share the knowledge you have with other friends, and they will too share with you on how they can master the money game with their own methods. However, it is up to you to decide which method suits you most, and just stick to it after several tries on different methods.

I am looking forward to your birthday, soon.

Yours sincerely,

Jack Phang, CFA

IGB To Create Another Mid Valley in Iskandar Malaysia - Oct 2013

IGB started its journey in Iskandar Malaysia by executing a huge mixed property development project which is a Joint Venture in between IGB and Selia Pantai. It is targeting to complete a mega-mall within 15 years time frame.

The main reason to develop a megamall in Zone A, Iskandar Malaysia is in the hope to attract more Singaporean to stay and shopping here.

With lesser land to be developed in Klang Valley and Penang, there are more developers come and join the property development game in Iskandar Malaysia. Hopefully with improved infrastructure such as MRT/BRT Linked to JB (could be in Tanjung Puteri) and better security features in newly developed properties, it can attract more foreigners or locals who working in Singapore to stay and spend in Iskandar Malaysia.

I am still cautiously optimistic that Iskandar Malaysia can be developed well, provided with the collaboration between Singapore & Malaysia government.

Source: http://english.astroawani.com/news/show/mid-valley-southkey-megamall-in-iskandar-to-be-completed-in-2016-24320

17 October 2013

My Singapore Stocks Watch List Update - October 2013

I will update my watch list on adhoc basis. Please visit my blog regularly to keep yourself updated.

As I am die hard fan of retail & property sectors, so I will mainly focus on both sectors, but will gradually monitoring aviation / oil & gas / telecommunications / mining & etc sectors so that I can increase my circle of competence, and be a more successful business-like investor in future.

I am most welcomed of your feedback.

Singapore Stock Watch List
  • Retail Business
    • Food Empire PE=13.x DY=1.95% ROE=12.69% 
    • ThaiBev (ROE, DY) PE=11.X DY=3.225% ROE=35%
    • Super Group PE=28X DY=1.75% ROE=19%
    • Sino Grandness (ROE, NPM) PE=7.6X ROE=34%
    • Eratat  Director sold off all his stakes, prompting curiosity
    • Old Chang Kee (too small capital, inconsistent earning stream)
    • Osim (ROE, NPM) PE=16X DY=3.0% ROE=44%
    • Japan Food  PE=13.6X DY=2.5% ROE=25%
    • Straco PE=15.3X DY=2% ROE=15%
    • Sarin PE=24X DY=3% ROE=36%
    • Jardin C&C (ROE) PE=10X DY=4% ROE=21%
    • SPH (dropping ROE, DY) 
    • Sarin (ROE, DY, rev) 
    • Sheng SIONG (ROE, DY) 
    • Eratat (Reducing ROE) 
    • DairyFarm (reducing ROE) 
    • Oversea Edu (ROE, NPM, DY) - increasing competition from Iskandar Malaysia campus
  • Property & Construction
    • Hiap Hoe (rising ROE, NPM) 
    • Keong Hong
    • Sim Lian
    • Lian Beng
    • Good Land - Target Buy Price 26.0c, due to dilution effect
    • Capitaland
    • Kepland
    • Yanlord
    • FEOrchard
    • Wee Hur
    • KC Dev
    • Aspial
    • Ara (ROE)
    • Aspial (ROE)
    • ChipEngSeng (Reducing ROE)
    • Wing tai (ROE, NPM)
    • Roxy pacific (ROE)
  • Plantation & Related
    • First Resources (ROE)
    • Wilmar
    • Noble
    • CWT (ROE)
  • Oil & Gas
    • Kruez (ROE, rising profit)
    • Ezion
    • Semb marine (dropping ROE)
    • Yang Zi Jiang (reducing ROE, DY, NPM)
    • First REIT
  • Finance
    • Silverlake - can consider only when price below 50c (PE < 15X)(dropping ROE, NPM)
    • SGX ( ROE, NPM, DY)
    • UOB (NPM)
  • Engineering
    • CSE global (ROE)
    • UE E&C - 
    • SIA Egg (ROE, DY)
  • Telecommunication
    • Starhub (ROE, DY, NPM)
    • M1 (ROE)
  • Mining
    • Ipco (REV)
    • Civmec (ROE)
  • Electronic
    • Casa (DY)
    • UE E&C (reducing ROE, DY)
  • Logistic
    • GLP (REV)
    • Singpost (dropping ROE, DY, NPM)
    • Good pack (ROE, NPM)
  • BioMedical
    • Cord life (ROE)
7/10/2013 - 10/10/2013 to be monitored
  • Tye soon (PE)
  • BrC (rising ROE)
  • Boustead (ROE)
  • KSH (ROE)
  • Neratel (ROE, DY, NPM)
  • XMH (ROE)
  • XYEC (ROE, newly listed)
  • 800 super ( RoE, rubbish processing)
14/10/2013 Small Market Cap Counters that enjoying high ROE

  • Goodland
  • Triyards

14 October 2013

My Personal Thought on US Government Partial Shutdown

I just want to note down what my thought now so that I can check again whether my thought was really accurate after time passed.

  1. There will be a serious consequence if the US debt default eventually if both Democrat & Republican parties cannot come to the conclusion on solving the rising debt level issues FAST enough, say before 17 October 2013. If they try to delay the due date to November 2013, it only gives more time for investors to liquidate their shareholdings due to several reasons: 
    1. Year End Holidays are coming. Some of the investors do not really like to carry the fear and enjoy their long term holidays. 
    2. No more positive catalysts after US Market came to near record high of 15800 points. If the market cannot break the record high, the only trend is to go down. 
    3. Fear of QE tapering to kick off soon. The investors are now fear of the rising interest rate environment to come soon. 
  2. Even so, I am cautiously optimistic of longer term investing environment (say until 2017) as the global economy is picking up in long run, although we still see some uncertainties in Europe market & over leveraging in Emerging market. 
  3. I think the only way to make big money is to wait for a market crash (fear factor). So let's just wait and see if there is more unfavorable news to come before we can really bet big on the equity market. 

13 October 2013

Property Bubble in Iskandar Malaysia?

Year 2013 is the tipping point of Iskandar Malaysia development, as we have seen some of the major projects completed here: Legoland, Educity, Hello Kitty World etc and we also know that more well known developers venture here, such as Country Garden, Walker Corporation, Shangri La etc. 

I heard that the property price here have been surged rocket high, as RM300K property in Horizon Hill now can reach about RM1.0M and above. Of course, there are few reasons why we have seen a surge in property price here: 
  1. Support from Central Government - to create economic corridor along side Klang Valley, and Southern Johor has great advantage by just sitting aside Singapore, a logistic and financial hub. 
  2. Improvement of infrastructure spurred demand for foreign talents working in Singapore to travel in between Iskandar Malaysia and Singapore. They can even send their children to study in International School here with cheaper fees. 
  3. Increase in security level compared to few years ago. More gated & guarded communities are built up for those who demand for security enhancement. We now can see police control stations along major streets. 
  4. Increasing demand for Malaysian workers who cannot afford Singapore private property after Singapore government tightened the rules for foreigners & PRs to own a property here, especially introducing ABSD (additional buyer stamp duty. Some of them buying for future retirement or just simply for relatives or parents to stay while they can come and pay visit to those who are working in Singapore. 
  5. We also saw a great improvement in Bus services in Iskandar Malaysia, especially Causeway Link, a company which provides bus services in between Iskandar Malaysia and Singapore. Some may think that by year 2018 or later, we can see MRT linked to JB from Woodlands. It definitely can shorten the traveling time for a person to reach Singapore downtown from JB to within 1.5 hours, compared to 2.5 - 3.0 hours now. 
Nonetheless, if you look at the reasons above, then you may notice that none of the reasons are actually related to the economy boom in Iskandar Malaysia. In fact, Iskandar Malaysia currently rely heavily on Recreation & Education sectors to push up the property price. We still need a huge middle class to support retail business here. So far, I still cannot see Uniqlo / H&M setup a branch here. My wife complaints that there is nothing excited to shop here compared to Singapore. It is not really a good sign if we just rely on tourists / foreigners to boost up the economy here. In fact, I really hope more MNCs to setup a branch office here and it could be a backyard for Singapore. To me, I would call it The Greater Singapore (the area within 50 KM radar of Singapore downtown). Nonetheless, this is just my fat hope, as I know that the Singapore-Iskandar relationship may not be the same as Shenzhen - Hong Kong relationship as Singapore & Malaysia is just a country-country relationship and it relies more on long term political relationship between these two countries. 

As a citizen who grew up in JB and working now in Singapore, I sincerely hope that both area can prosper together. In long run.

08 October 2013

First Six Downtown Line MRT Stations to Open December 2013

When I first read the news on the first six downtown line MRT stations to be opened on 22 December 2013, my first thought was the recent poor performance of SMRT. SMRT to me is a GLC which controlled/supported by the Singapore government to introduce or encourage public ride life in Singapore. According to a research which I could remember where the source is, Singapore government is targeting a 75% population to take a ride on public transport in this small island and may consider to impose more ERPs in major road like Alaxandre Road & Holland Road.

Whether you like it or not, now BMW (Bus, MRT, Walk) is the main vehicle of most Singaporean.  And to battle with the inflation, I do not think that the bus & MRT fares would be increased significantly over the years, so what SMRT management could do is to be very careful in performing maintenance jobs (to avoid any additional penalty costs), and at the same time to promote shopping / advertisement experience in some of the popular MRT stations.

Demographic of Singapore has changed. Most of the young couples could just go dining and shopping near to the MRT stations before heading home. With more MRT stations to open, I believe that certain industries can enjoy the benefit from here. Let's work harder to find out investment opportunities here.

Sim Lian could enjoy the benefit for having a good land bank in Bukit Panjang, where Bukit Panjang is one of the terminals of Downtown line. Anyway with so little volume transacted per day, it is not a favorable counter for institutional investors.

My concerns now is whether the Thompson line could be completed by year 2020, as now I am relying heavily on MRT for my daily transport tool. And it would reduce the traveling time to maybe 30 minutes from Woodlands to downtown, a same traveling hour from Punggol to downtown. Let's keep an eye on the progress of MRT, and enjoy the ride (although the user experience may not be as good as 5 years ago).

Below is the source of the news I read. You may take a look here.

Source: http://sg.news.yahoo.com/first-six-downtown-line-mrt-stations-to-open-22-december-042755520.html

07 October 2013

Hu Li Yang's Talk in Singapore stock Conference 5 October 2013

I am one of the fans of Hu Li Yang, not only he is one of the investment guru in Asia region, but also of his great personality on stock investment.

I would like to share with you some of his opinion in year 2014 trend of investment:

  • QE Tapering is the beginning of the clock to swing the asset price back to reasonable price or undervalued price. If you think the shares price is high now, it's better not to touch it until you think that it is cheap to buy. 
  • He is still looking good on Malaysia and Singapore stock market, mentioning that Asean is one of the fastest growing market in the world. However, he cautious that there will be volatility in the market still, and be careful when buying any counters / assets. 
  • It may take 1 year time for market to back to its reasonable level. There are still many people complaints of the high property price, driven by the hot money that flows to different market to look for investment / speculation opportunities. 
  • Gold is not a good long term investment tool now, at least for next 10-20 years. He mentioned that Gold normally has 10 years bull market and 20 years bear market. 
  • Be patient for the market correction and keep the money under the pillow. He jokes that bankers will call you to invest excess money in bank and you may be in trouble if buy at the higher price. 
  • If a share price breaks below 10 day average price level, the higher chance is that the price would be in the down trend. So be careful when the share price is in the down trend as the trend could last for few months - years. 
  • The best performing months are from November to January, the worst performing months are July, August and October. 
To me, Hu is more like a teacher to those who are still new in investing / trading. He doesn't really care about financial ratio like P/E or P/B ratio, but more interested in catching opportunities by looking at the chart or doing some quantitative methods. After all, it is up to you to decide how to apply your own investing / trading strategy based on your real characteristics, because no one can better understand you than you do. 

04 October 2013

Conscience Food - delisting & my thought

Conscience food recently announced a delisting & exit offer to its minor shareholders and it's currently under SGX review and pending for approval. If this is approved, it means for a loss for those who bought shares above the exit offer of 18.4c. 

The argument given by the major shareholder was that the counter was traded illiquididly and it may not appropriate for the major shareholder to keeping listed status as what I thought was they can hardly raise fund at better price. 

This is not a first case for a small counter being forced by the shareholder to be delisted. So to some investors, this is called "liquidity" risk as it actually meant for getting hard to buy or sell through secondary market. As for me, I think that it's necessary for us to play safe not to invest a lot in small and illiquid counter as the shareholder may initiate exit offer to the minor shareholder. Anyway, in this case, conscience food management offered at much higher price than last closing date befofe announcement, so I think it's good for some investors to take the offer and look for better opportunity elsewhere. 

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