Author: Level13

Price movement of DBS shares over the past month

The price of DBS has fluctuated greatly in the past 1 month or so. This increase in volatility has benefited short term traders. Fundamentally, there is no change in the business condition and environment that DBS is operating in. All said, these movements are not unexpected and can be anticipated if one is able to understand the effects of corporate actions and read the market well. I am not suggesting that the share price is being manipulated. The point I want to make is that there are certain ‘invisible hands’ in the market (how else do you explain the...

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Hear no evil, read no evil

“Many stock commentators are saying that stocks are cheap, dividend yield is high, time to buy.” “A value investor should not be obsessed about short term fluctuation. Long term value is more important. Now is the time to ferret out the wheat from the chaff.” “If it is because of a short term bull market that commentators recommend/ investors buy stocks, it is speculation. Those commentators need to be fired and those investors need to be educated.” The above are some comments on my earlier posting titled “Short term bull, long term bear”. All the things mentioned by stock...

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Short term bull, long term bear

Last Friday, the STI closed at 1829.71 points. Within 1 week, it went up 5.15% from around 1740 points. The picture on the right shows that the STI has breached the 50 day moving average ever since it went below that line in June 2008. This indicates a short term bullishness in the market right now. I expect the STI to go higher in the next few weeks and the reasons are as follows: 1) The Obama factor – This will be a change welcomed by all. Obama will take office in January 2009 and he has already assembled...

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Desperate, Bold Step by DBS

DBS announced today that it will be issuing rights to raise net proceeds of approximately SGD4 billion. Pursuant to the Rights Issue, 760,480,229 Rights Shares will be offered at SGD5.42 per Rights Share on the basis of one Rights Share for every two Shares held. At this moment, there are 2 burning questions on the investors’ minds. Why the need to raise capital? Why now? After reading all the chest-beating statements in the announcement, i remain unconvinced. The signal i am getting from DBS is this: I NEED CASH BADLY. So they don’t need the cash for M&A. But...

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Updates on Bright World takeover

Recently, the share price of Bright World(BW) came under further pressure as a result of a letter sent to its directors from the Monetary Authority of Singapore (MAS), referring to a possible breach of section 203 of the Securities and Futures Act. What is section 203 of the Securities and Futures Act? Section 203 (Continuous disclosure) shall apply to — (1)(a) an entity the securities of which are listed for quotation on a securities exchange; (b) a trustee of a business trust, where the securities of the business trust are listed for quotation on a securities exchange; or (c)...

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Eight years recap

For those who need a recap on what has happened in the investment world for the past 108 years, The Global Investment Returns Yearbook (GIRY), compiled by London Business School experts is definitely an eye opener. The core of the Yearbook is provided by a long-run study since 1900 in all the main asset categories in Australia, Belgium, Canada, Denmark, France, Germany, Ireland, Italy, Japan, the Netherlands, Norway, South Africa, Spain, Sweden, Switzerland, the United Kingdom, and the United States. These markets today make up some 85% of world equity market capitalisation. The first chapter of the book gave...

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Crude oil price is all rubbish!

By: Level13 Around 4 months ago, crude oil price was at about USD140 per barrel. Fast forward to the last weekend, after a slew of bad news and poor earnings outlook hit the market, crude oil is only trading at about USD62 per barrel. After witnessing a drop of 55% in crude oil price, I have a few questions in my mind. Did the oil consumption in the world reduce by half over the previous 4 months? Did the world’s population replace half its energy needs by using alternative sources over the last 4 months? Did the oil producing...

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Sweeteners for Bright World takeover

By: Level13 A few days ago, CHAC and BW jointly announced the terms of the amended agreement in the takeover offer. Things that have been changed: 1) Valuation and purchase price of BW. The revised transaction results in a minimum valuation of Bright World at approximately USD255 million (assuming CHAC acquires all issued Bright World shares, the initial shares of CHAC issued to World Share are valued at USD9.29 per share, which is the estimated redemption value of the CHAC shares). 2) Triggers for the issuance of the additional shares World Share’s eligibility to receive additional CHAC shares has...

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Saving mini investors

By: Level13 Currently the Hong Kong government is trying very hard to intervene and arrange for a compensation package to all minibond investors. There has been immense pressure by the Singapore minibond investors on the local authorities to step in and arrange a similar bailout. With all due respect, I personally do not think that it is a good idea for the authorities to step in. MAS, which is the government authority in this case, has to make decisions and take actions that are consistent. If MAS has decided to intervene for the minibond investors, then why stop there?...

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My view on Bright World takeover (Part 1)

By: Level13 This write-up on Bright World (BW) is divided into 2 parts. It contains my deductions based on publicly available info on the takeover of BW. Before I begin, please take note that i am vested in BW and my views may be biased. What is mentioned in this posting cannot and should not be taken as professional investment advice. Lets recap what has happened so far: On 21 July, China Holdings Acquisition Corp (CHAC) announced today that it will make an offer to acquire all the shares of Bright World Precision Machinery Limited. CHAC has entered into...

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Value in textile industry? No way!

By: Level13 Below is a recent recommendation by one of the brokerage companies on the SGX comapnies involved in the textile industry: Risk-reward ratio getting attractive. In fact, these textile companies are generally financially sound. They are in net cash position and are still garnering lucrative net margin of 26%-30%, rewarding investors with adecent ROE of >20%. As high-end textile manufacturers are relatively asset-heavy given their high capex investment, current low historic P/NTA of 1x also indicates opportunities to pick up shares in these companies at bargain prices. But from the info i gathered, it seems like the picture...

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Price Movement

By: Level13 This posting is not to encourage readers to trade. For most people, it has been proven that constant trading is detrimental to their investment return. However, as a retail investor, we should have a general knowledge of the signals that the price movement is indicating to us. The price movement of a stock is dependent on the demand and supply of the stock, which in turn is influenced by the buyers’ buying interest and the sellers’ selling interest. Every buyer or seller has different purposes when entering into a trade. The followings are general “rules”, which provide...

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Temasek reduces Merrill Lynch stake – True or False

Though it has been confirmed to be incorrect now, Level13 shares his view on how one should always double check on the reports and not follow blindly. By: Level13 Before you come to the conclusion that Temasek has made a lousy investment decision which has resulted in losses, it seems like nobody can verify on the accuracy of this news. According to the Mutual Fund Facts website, they have sold off 50% of their stake. That means at the start, Temasek should own about 174 million shares. However, I am inclined to think that this piece of news is...

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RTO = Ready to offload

By: Level13 In the Business Times on Thursday: Backdoor listing is the flavour of the season as companies are taking the reverse takeover (RTO) route to the stock exchange instead of initial public offerings (IPOs). In the first half of this year, the value of announced reverse takeovers (RTOs) on the Singapore Exchange surged to US$969 million – an all-time high that even exceeded the amount raised through IPOs, year-to-date. Some US$797 million worth of RTOs were announced for the whole of last year – a record by itself – data from Dealogic shows. The first six months of...

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Who’s the real culprit?

By: Level13 Below are some of the versions we read about recently on the reasons behind the relentless price increase of commodities. VERSION 1: Speculators In the current global economic slowdown, it would be fundamentally reasonable to assume that consumption has gone down and prices have weakened. This indeed is the case for lead, zinc and nickel. Copper on the other hand has remained stubbornly resilient and is in striking distance of its previous all-time high despite the increasingly bearish fundamentals. The International Copper Study Group (ICSG) reported a production shortfall for 2007 of about 55,000 tonnes, which is...

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