Author Archive

Posted on February 17, 2010 - by DanielXX

Resorts World Casino – An Analysis

This is meant to be an analysis of the casino demand dynamics — not the IR. As far as I’m concerned, the centerpiece of both the developments is the casino, and everything else, including the convention centres or Universal Studios, are but secondary. The casinos are meant to subsidise all the other developments, so if they fail, the peripheral IR developments will be in trouble.

So there’re “crowds and crowds of people queueing to enter the RWS casino”, according to our mass media. Let’s sieve out the opinions and go for the facts.

The consistent number that was reported is that there were 6,000 visitors to the casino as of 6 in the evening yesterday. The casino openeded at 12 noon. At first glance, it’s hard to get your mind around this number to gauge whether that’s sizeable. I read earlier that RWS was planning to open about 500 tables at opening. Assuming that all 6,000 visitors stayed inside the casino over that period of time, that would mean a maximum number of 12 at every table. But hold on — from my experience at other casinos eg. Genting Highlands, at least half, maybe three-quarter, are likely gambling at the jackpot machines or the computerised gambling machines (you can play roulette, tai-sai, bacarrat etc at these gaming terminals with a central dealer manning the counter) — this means maybe a likely average of 5 per table instead. Now everyone who’s been to a casino will know that 5 at a table is pathetic or at best average.

And that’s on the casino opening day with so much inbuilt hype.

For some more perspective. Read more…

Posted on May 21, 2009 - by DanielXX

How To Make Money in Stocks Part 7: Pick Low-Hanging Fruit

Allied to this theme is: don’t try to understand the whole world! (actually that was the original title, but I thought the low-hanging fruit thing sounds more professional)

Actually in my view, investing is a very simple process compared to most other forms of work in the world. Not making money from investing, mind you, but the process in itself. All the talk and academic theories about structuring portfolios, optimising risk-return etc, does it really do anything but add two or three percentage points of return over the market (if one is lucky)? But people actually make a good living out of this, not just fund managers, but also service providers like financial consultants, market forecasters, systems providers, and a myriad of financial-related cottage industries. I look at engineers and the gargantuan structures they come up with: aeroplanes, software, building systems …. and I wonder …. it’s incredible that the financial industry is paid so much for coming up with so little! (albeit they have the uncanny ability to blow these little achievements up into monumental state-of-the-art triumphs).
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Posted on April 24, 2009 - by DanielXX

City Developments @ 6.01 (Property/ Singapore)

Main issues

1. Weak sector outlook
2. SOTP valuation is below current price

I have been very bearish on property for quite a while, and this latest hotstocksnot coverage shows that I have not lost this pessimism over this sector yet.

My recent views over Singapore property are well-documented in my Trendspotting blog article in February titled “Continued weakness in Singapore residential housing”. In it I outlined the liquidity situation, supply-demand dynamics and valuation comparison to historical prices and concluded that private residential demand plus prices will remain weak through the next 1-2 years. My views sector-wise have not changed. Though global liquidity conditions might have improved, my understanding is that local banks are only lending out based on 60% of home value, while unfavourable supply-demand conditions will not resolve themselves so fast. There is talk now that HDB prices will be next to fall; that removes a price support mechanism for mass market private residential housing, erstwhile the strongest of all private housing (together with old-money landed housing).
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Posted on April 4, 2009 - by DanielXX

The G20 conference

And so, after half a year of waiting, finally the G20 meeting convenes this coming week. Will it be another NATO (No Action Talk Only) meeting ie. an anticlimax yet again?

I tend to think that this will come to be seen as a key event in the annuals of financial history, because of a few factors: (1) it has been six months in the making, which gives various participants the time to think things over and lobby for support; (2) the economic collapses following the Lehman bankruptcy have confounded even the most pessimistic estimates, hence conferring the political impetus for drastic action; (3)long-standing economic imbalances have long been recognised and this is the best opportunity, amidst a crisis emanating from such imbalances, to “upside the downside” (to quote a famous saying from our of our most articulate local ministers).

I believe there will be a few key issues on the agenda as described below, together with the market implications:

(1) Coordination on fiscal spending by all countries. Related to this is the issue of protectionism. For example, countries like Singapore are dead scared of too much fiscal spending because of the fear that much of this money will leak overseas due to our high exposure to global trade. (more…)

Posted on March 3, 2009 - by DanielXX

Continued weakness in Singapore residential housing

I was thinking which of my blogs I should put this article in and decided that the Trendspotting one is the most appropriate although the article is not highlighting a trend to buy into; rather it is advising against buying into something. Besides, I haven’t written in Trendspotting for some time already.

There has been pessimism over the property market since mid-2008, and justifiably in my view, given the potential looming supply of private homes coming onstream over 2009-10. However, recently there appears to be a wellspring of renewed optimism in the market, magnified through the press, over the successful launches of several mass-market developments, notably Caspian in Jurong East and Alexis in Alexandra. I also notice threads appearing online trumpeting the recovery of the housing market. And of course, you hear again the boss of one of our local big developers declaring his (perrenially) optimistic views about the property market during the company’s results release.

In my opinion this is false optimism tinged with acute conflict of interest from the various parties involved. Let’s get the overall feel of things:
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Posted on February 18, 2009 - by DanielXX

Technical Analysis- A somewhat scientific look

I like reading the Review segment of the Straits Times because there are occasionally interesting analysis, and Andy Ho sometimes has interesting articles. This guy writes extensively on a variety of topics ranging from health to science to philosophy to political systems to economics … all of which interest me (save maybe for health). Saturday’s article in ST is the inspiration for this latest blog entry.

I had read a book on chaos theory some years back, which is the subject of Andy Ho’s article, but had not really made the connection to stock market dynamics then, probably because my market experience then was not too extensive for me to make that connection. But some years later, on reading this article, it struck me how economic and stock market behaviour can be described by chaos theory’s derivative, complexity theory (if it can even be called a theory, since there’re no real quantitative equations).

The story goes that classical mechanics can describe the interaction between two bodies, such that if given a set of initial conditions (eg. position, speed) for both bodies, the equations can predict their future trajectories for all eternity. This is known as a deterministic system (ie. its future is predictable). However, things get much more complicated for a system of three bodies. Where initial conditions vary by a little bit, the subsequent behaviour of the system can vary by a lot. This finding forms the basis for complexity theory, which attempts to describe complex systems.
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Posted on February 9, 2009 - by DanielXX

On Temasek Holdings

I do not often like to comment on political issues too vehemently but sometimes I feel so strongly about certain subjects in which I feel I have a reasonable overall grasp, that I have to blurt it out. Temasek is still a political organisation as of now, no matter their claims about how commercial they are (tell me how commercial you are when the former CDF can go straight from the SAF to Head of Portfolio Strategy of the organisation), and I think it will be difficult to shake off the political links. I mean, how can it possibly do so, unless it wants to deny that the money it is handling does not belong to the citizens and the state of Singapore???

So, Madam Ho Ching’s resignation has signalled a recognition of the need for a change in the power structure in the organisation, and hopefully this will lead to a change for the better in all senses. My views about Temasek’s execution through the financial crisis starting from 2007 are as follows:
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Posted on January 7, 2009 - by DanielXX

Developing An Investment Philosophy Part 5

A friend joined a fund management firm recently and was amazed at how the analysts were expected to cover multiple geographical markets simultaneously, since the firm managed several Asia-Pacific funds. How was he supposed to do it, he wondered, since he previously was only familiar with the Singapore market. Indeed, was it even humanly possible for a person to cover many markets at the same time?

To me, there are three distinct aspects to developing one’s expertise and effectiveness in the stock market: depth, breadth and philosophy. Be deficient in one aspect and he will be a much less effective investor by an order of magnitude because of it.

In fact there are many analogies that I can draw between this and kungfu (which I like watching, and in the mood to indulge in today because of the movie Ip-man) so I’ll use the analogies liberally here. (more…)

Posted on December 26, 2008 - by DanielXX

CapitaCommercial Trust @ 96 cts (REIT / Singapore)

Main issues

1. Rents set to fall
2. Interest expense set to rise
3. Relative yield valuation is not attractive

And finally I resume my Hotstocksnot coverage. It has been a turbulent year and I have been so absorbed, enthralled and traumatised by the stock market that I preferred to spend time on my own stockpicking rather than highlighting hotstocksnots. Besides, valuations had plunged and it was getting difficult to find overvalued stocks.

CapitaCommercial Trust (CCT) had dived together with the general market, especially with the REIT segment, since the middle of 2008, hitting as low as 60 cents in early December. It didn’t help that it was axed from the MSCI Singapore index in November, which further added to the selling pressure. However, in recent days, it has rallied strongly by over 50% to 96 cents on improved sentiment over property given lower interest rates. It is my view that this is not sustainable and the stock has become a hotstocknot, although it is substantially off its 2007 highs of >$3.

I will address my viewpoint along three main issues: revenue, costs (the difference will of course be earnings), and valuation.
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Posted on December 1, 2008 - by DanielXX

Reflexivity revisited

Let’s review the various perspectives about the relationship between stock prices and “business fundamentals” as most people understand it. First, there is the advice given by the Sage of Omaha about Mr Market being manic-depressive and that the prices he/she/it quotes can have a disconnect with underlying fundamentals. Then there is the typical technician’s/efficient market theorist’s view that price reflects underlying fundamentals, even though it might not seem so at the time to the outsider. And then there is George Soros, who advocates that market prices can actually actively influence fundamentals. The last view is known as reflexivity, a term coined by Soros.

Despite Soros’ celebrity fund manager status, reflexivity has never really caught on in popular investment literature, partly because it does not really have mathematical grounding. It is more of a philosophy than anything else, in its recognition of the two-way feedback between price and fundamentals, instead of the traditional view that fundamentals drive prices. But in the aftermath (I hope) of this credit crisis, it deserves serious all-round consideration and recognition now. (more…)