Archive for the ‘Featured’ Category

Posted on September 3, 2010 - by musicwhiz

August 2010 Portfolio Summary and Review

August 2010 was indeed an interesting month for me in terms of portfolio changes; as I made the somewhat painful decision to divest of my entire stake in FSL Trust (as I had previously blogged about in this post). The decision was a mixture of relief and regret, as the funds from this investment can finally be freed up to be redeployed into a more promising investment. What I dislike most is “deadweight” in my portfolio, and I will not hesitate to cut loss on a position in order to re-allocate the funds to another position should I objectively conclude that it would be in the best interests of my portfolio.

I had mentioned that I expected August to be a relaxed month; but it was not to be so as I spent quite a bit of time researching and poring over Annual Reports for my latest purchase – SIA Engineering Company Limited (“SIAEC”). In order to do a more comprehensive analysis as compared to my previous one on Kingsmen Creatives, I spent a lot more time dwelling on the Annual Reports, doing deeper analysis on each division, poring through SIAEC’s many associated companies and joint ventures; as well as doing a detailed competitive analysis for three of SIAEC’s competitors. The result is a rather lengthy report to justify my purchase of SIAEC which I will split into five separate sections (in order to keep each section readable). The full report is about 32 pages (along with 14 tables of figures) and it is my intention to post up as much of the analysis as I can in its entirety; as this is the first blue chip company (SIAEC is, incidentally, part of the Straits Times Index’s 30 component stocks) I have seriously researched on and I will need to get some feedback so that I can improve for future research and analysis work. (more…)

Posted on September 1, 2010 - by kevinscully

Double dip or mild recovery in the US…..the uncertainty is causing a boom in the bond market and low volumes in equities……

I had an informal lunch with some academics and fund manager veterans last week to test the waters.

It is timely in that we have Fed Chairman Bernanke Bernanke, in his Aug. 27 speech to central bankers and economists in Jackson Hole, Wyoming, indicating that the US economy is not growing as fast as expected and added that the Fed was ready to step in to avert a recession.  This apparently caused a rally in the US markets last Friday.  The slowdown in US GDP growth happens to coincide with the ending of fiscal stimulus packages.  This means that domestic consumption is not stong enough to offset the absence of fiscal spending but domestic consumption is still growing albeit modestly.

The chart above doesnt seem to be that worrying but for the fact that expectations for Q2-2010 GDP were for more than 2% GDP growth…..this is now down to 1.9%.  Unemployment is also likely to remain high.   Chad Evans, Fed Chief for Chicago feels that the risk of a double dip have risen but this is not yet the likely scenario. Read more…

Posted on August 31, 2010 - by Jay

Valuation Expansion

On Wall Street, a lot of educated monkeys like to talk about valuation expansion. Basically valuation expansion simply means that some stock trading at 15x PE should be trading at 25x PE bcos its industry is sexy, or the company has undergone transformation of its business to become the new growth story or some other cock-and-bull story.

So say the stock price today is $15, and the stock earns an EPS of $1 ie PE is 15x. Valuation expansion simply means that the stock should be $25 bcos PE should be 25x. The basis of this argument is that since the stock is in a growth industry, or has transformed its business, or watever crap reason, the future EPS is not just $1 but much higher. Since we are not sure what that would be, just give it a higher PE to justify this growth.

The ingenuity of this crap theory is that nothing changed, but the “value” of this stock just expanded 60%. This then can be used to justify buying the stock at any price bcos we can always assuming super normal growth and increase the valuation. We can even increase the target multiple further from 25x to 50x. This would expand the original “value” by 333%.

Let’s just do a simple experiment the debunk this valuation expansion theory.
(more…)

Posted on August 30, 2010 - by musicwhiz

GRP – FY 2010 Analysis and Review

GRP released their FY 2010 results on August 20, 2010 (the company has a June 30 year-end). Suffice to say that there were no major surprises; either negative or positive, but the prevailing sentiment from me is that the Company can do more to either increase their dividend or to reinvest the cash which is just piling up. There was not much articulated about how the cash will be utilized or how the business would be grown beyond what it is now; so it was quite a disappointment for me. I will go through the usual review and analysis which will be kept brief as this is a simple company to analyze; but I will focus at the end on what I’d expect from the Company in FY 2011 and how I hope it can communicate better to shareholders.

Financial Analysis

Profit & Loss Statement

Revenue was essentially flat, rising just 1.4% from S$25.3 million to S$25.6 million; and was mainly due to the weakness in Hoses and Marine as well as the PVC pipes division (in China). Cost of goods sold, however, increased by 6.2%, which resulted in gross profit falling by 6% from S$10 million to S$9.4 million. (more…)

Posted on August 26, 2010 - by musicwhiz

Personal Finance Part 18 – To Crave and Covet (C&C)

It’s been a while since I’ve talked about aspects of personal finance, as I was kept busy the whole of May to July 2010 with analyzing the financial results of the companies in which I hold shares, as well as writing about Sun Tzu’s War On Business episodes. I’d realized the last entry on personal finance was back in April 2010 and was on cycling! I had been thinking in the last couple of weeks about the problems associated with our society in relation to over-spending and lack of prudence or knowledge about financial matters; and it boils down to one major problem which I term “C&C – Crave and Covet”. This will link up to many other concepts which I will point out later (and which have been popularized by the mass media as well).

The simple definitions of the words crave and covet are as follow (from Dictionary.com):-

Crave – To long for; want greatly, desire greatly
Covet – To desire wrongfully, inordinately, or without due regard for the rights of others

It is in our basic human nature to crave and desire for more, of course after ensuring our basic necessities are provided for. But society today is a lot more materialistic and capitalistic than it was say, two generations ago. This is sadly due to the modernization of Singapore, which in some ways has outpaced the maturity of the young minds, who are still struggling to adapt to the “First-World” mentality inculcated within them by our education system. A mature mind is one which is able to handle pervasive emotional influences which may have a detrimental effect on one’s wealth and spending habits. (more…)

Posted on August 25, 2010 - by kevinscully

InvestFair 2010……some questions posed to the panel on Themes for 2010….from Genting to where the STI Index will be by the end of 2010

InvestFair 2010 was held at Marina Bay Sands……the YOG made getting their last Saturday a bit difficult for me because the roads were closed and only opend at 1pm.  Finding parking at the Convention Centre wasnt difficult especially when your daily rate could be as high as S$30.00.  The building is still under construction so signs and directions were a problem.

Our session was well attended….the hall was full with standing room only.  I thought I would share some interesting questions here:

Genting Singapore

Gabriel originated this question by saying that investors shouldnt trust analyst recommendations given that many analysts who had calld sels on Genting were now calling BUYs….with some citing the “luck” factor as a basis of the recommendation.   At current levels, he said that Genting was the most expensive listed casino in Asia…..I take that to mean that its a bit to pricey now….for investors who dont own the stock.

I dont follow the stock directly but have followed Genting Bhd and Resorts World before.  I think the main issue with Genting is whether the revenue it reported is sustainable…..when a casino opens and is new, especially in Singapore, our first, there is what I call the novelty effect.  We saw this in Sands Macao which recouped its investment costs in nine months.  What is more important to me is sustainable revenue and profit and we are likely to only see this in year 2 or 3 when the novelty wears off and also in the face of competition from the region.

Intutively, I agree with Gabriel, that if its the most expensive listed casino in Asia…..the risk reward doesnt favour medium investors entering at these levels. Read more…

Posted on August 24, 2010 - by Createwealth8888

High Dividend Yield Stocks? – Part 8

Read older post on? High Dividend Yield Stocks? – Part 7

I believe all investors will love high dividend yield unless you are a day trader who don’t really need to care on dividend.

Imagine a high dividend yield bandwagon is rolling past you. A few people on the back of the wagon are partying and playing music of their lives and singing the song of high yield. You may be unable to resist the sweet sounds being played and run to join the party.

But, before you jump on the bandwagon, you may want to wonder a bit as there can be more than one way of looking at high yield; its associated risk of future dividend cut and impact to its stock price.

A. High Yield High Growth

I don’t think you can find it now in the current market. If you can find it, don’t tell anyone. Sell your car and mortgage your home and load it up! Just kidding. LOL (more…)

Posted on August 23, 2010 - by musicwhiz

Tat Hong – FY 2010 Analysis and Review Part 3

Part 3 of this analysis delves into Tat Hong’s inventory levels for crawler cranes as well as tower cranes. It also attempts to discuss Tat Hong’s prospects for the next financial year and beyond by incorporating recent news as well as from attendance at Tat Hong’s FY 2010 AGM which was held on July 27, 2010.

Crane Inventory Levels (All Cranes)

Looking at Tat Hong’s total fleet profile, it can be seen that their inventory levels have hit a new high of 481 units even as they are trimming their inventory and boosting their fixed assets (transfer from trading stock to fixed assets for rental). The one glaring figure which explains the depressed performance is the overall utilization rate of just 56.6%, which is a far cry from their “peak” performance of 83.5% utilization as at June 30, 2007 (nearly 3 years ago). This would explain why revenues for crawler crane rental are so depressed – companies have not really kick-started their spending on buildings, oil and gas projects and infrastructure as these will lag the economic recovery; hence Tat Hong’s performance in this division will generally lag the economy by about 6 to 9 months. (more…)

Posted on August 21, 2010 - by musicwhiz

Sun Tzu – War On Business Part 11 (Ultizen Games)

Photo by Kyle May

Episode 11 of this highly successful series brings James Sun back to China, Shanghai. In this episode, he meets up with entrepreneur Lan Hai Wen, who heads a video-gaming company called Ultizen Games. Ultizen is in charge of producing and marketing games for adults and children, but the Company recently was awarded a contract (thanks to the CEO’s networks and contacts) to produce and develop a children’s game, for the Chinese mass market. As can be imagined, the potential is huge as China has a very large child population, and if the game takes off it could elevate Ultizen to a whole new level.

However, as with all businesses, it is prudent to check out the competition first. The video gaming industry is large and fragmented and there are many companies which are muscling in to grab a piece of the lucrative pie. Ultizen is purportedly one of the larger gaming companies in Shanghai, but it is difficult to grab the leadership position as people’s tastes keep changing and the industry has to continually churn out new games and software to keep consumers interested. There is also not much product and brand differentiation as people usually just buy the game without bothering much about the company behind it (as well as the legions of developers who helped produce it). I can safely say this because I used to be a gamer too, and seriously I cared more about the content and graphics than the actual gaming company (OK, maybe except Blizzard which produced Diablo II)! (more…)

Posted on August 19, 2010 - by La Papillion

Old people don’t need life insurance?

I was browsing through some of the blogs when I saw Mr Tan’s post on insurance. It’s his usual style to advice people to buy term and invest the rest. But that doesn’t attract me – it’s this line:

“There is no need for people to have life insurance when they are old.”

By ‘life insurance’, I take it that he means the whole life variety – those plans that gives a lump sum pay out in the event of death and total permanent disability of the insured person from the inception of the policy till age 100.  This is very different from the very much cheaper term plan where a similar lump sum pay out will be paid out but it is usually up to age 65. However, life insurance these days come along with a critical illness (CI) rider that allows a lump sum payment when it strikes. Since this rider ‘rides’ onto the main plan of the whole life, which is up to age 100, the CI cover will also be up to age 100. I am under the impression that CI stand alone cover up to age 100 is either exorbitant in price or does not exist.

What do we need when we’re old? (more…)