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Your Investment Adviser Can Make You Rich?! Think Again

Tiang Chuan — Sat, 16 Apr 2011 12:36:52 +0000

Contrary to the popular image investment intermediaries try to project, they can only keep you rich, not make you rich! Read the article – Your Investment Adviser Can Make You Rich?! Thank Again to learn more!

Sabana Shari’ah Compliant REIT

La Papillion — Fri, 12 Nov 2010 01:00:06 +0000

Photo by aussiegall

There’s more IPO coming up and more REIT type of IPO, right after the launch of the mega one by MIT. Unfortunately, though I bidded for that in the offer period, I didn’t get a single lot at all. Let’s hope this one – Sabana Shari’ah Compliant REIT works out well for me.

This is actually an industrial reit managed in a manner compliant with Shari’ah investment principles and they can only invest in Shari’ah compliant real estate and real estate related assets. It holds 15 industrial properties across Singapore and is the only Shari’ah compliant reit listed in Singapore – possibly the largest in the world by total assets. What’s interesting about Shari’ah compliant reit is that muslims can apply into this. Strictly according to their religion, there are certain investments (even insurance) that does not sit too well with their religious teachings and principles, hence they are not allowed to invest in them. By setting up this reit, it opens up a new instrument for them to put their money in. Sort of to tap the Middle eastern market, so to speak.

Shari’ah guidelines state that non-permissible activities cannot exceed 5% pa of the gross revenue of the reit. Non-permissible activities include activities like conventional financial and insurances services, gaming, non halal production, tobacco related products, non-permitted entertainment activities and stock broking in non-complaint securities. Takaful insurance coverage have to be sought where available and financing, investment and deposit facilities have to be shari’ah compliant, if not, after seeking approval, the conventional kinds will do. Go on and google about Takaful and Shari’ah. It’s a very elegant way to do ethical investing.

They should be doing road shows to entice institutional investors to get into their placement tranche before deciding on the IPO price. The minimum and maximum offer price is $1.00 and $1.10 respectively. Based on the minimum offer price, the forecasted yield for the reit in 2011 and 2012 is 8.45% and 8.48% respectively. NAV value is 0.94, so obviously the IPO price is above the NAV by around 6.4% to 17%, depending on the offer price. Gearing, defined as total liabilities to total assets stands at 33%, which is pretty okay. AIMS and CIT, both industrial reits, have gearing at 34% and 39% respectively, so this sabana one is quite normal I suppose. Read more…

The “WANTS” of Investing

Adrian Khiat — Thu, 11 Nov 2010 01:00:09 +0000

Photo by darkpatator

Prior constructing an investment portfolio for my clients, I will normally access the “WANTS” for them. This “WANTS”, not only implies what they wants in their life, it is actually my Acronym for their
“Willingnesss”,
“Ability”,
“Needs”,
“Time Horizon” and
“Suitability”

Only after determining the WANTS, will I be able to ensure what I recommend will be suitable for them in their long term financial interest.

Willingness…
I often hear how my clients lament on how they lost in their previous investments and swear to themselves that they will never invest again. It is also not uncommon to see people putting all their money in banks and cite the need for emergency use. Everyone have different experiences and upbringing with regards to investments and hence we cannot put all in one single category in term of Willingness to take risk.
“Willingness” is more of a psychological part of investing. Some people need to be counselled on why they have to be more willing to take sime risk. They either have to see the needs or they have to understand why investing is not that risky all the time. Contrary, some people are too willing to take risk when they don’t have the ability or the need. Read more…

First REIT Announces Acquisition and Rights Issue

Drizzt — Wed, 10 Nov 2010 07:56:52 +0000

Photo by pshutterbug

First REIT announces the acquisition of 2 properties:

Mochtar Riady Comprehensive Cancer Centre (MRCCC) – SGD 170 mil
Siloam Hospitals Lippo Cikarang (SHLC) – SGD 35 mil

This will be funded by issuing 345 mil shares for a gross proceed of SGD 172 mil and long term debt financing for SGD 50 mil

Rights Issue price will be SGD 0.50

Rights Ratio will be 5 for 4

Implied TERP – SGD 0.70 per unit

discount to TERP – 28.57%

discount to closing price – 47.37%

My Assessment

Based on a last closing price of SGD 0.98, the final number of shares will be roughly 619 mil compare to previous 274 mil. That’s a 125% increase in units.

The final price it should fall to will be SGD 0.70

The distributable income increases from 20 mil to 38.5 mil. That’s 92% increase.

Based on final price of SGD 0.70, your yield will be 8.83%. That’s quite a good yield.

Based on this financing, the debt to asset will increase from 14.5% to 17.7%. Still less than 20%

With an injection of (172+50 = 222mil) of assets yielding 18.5 mil more, these new assets yield for 8.1%. This yield is close to the current yield of 7.8% based on a share price of SGD 0.98.

The portfolio risk gets diversified across properties as well. But geographical risk still remains. for details on geographical risk do take a look at this article I written previously. Read more…

Personal Growth and Financial Freedom

Panzer — Tue, 09 Nov 2010 01:00:18 +0000

Photo by Bombardier

Have you ever felt that you were going through the same routine over and over and over again in life?

Has it ever occurred to you that your life could be on auto-pilot as you engage in the get-up-go-to-work-go-home schedule?

Have you ever paused to think about what is this whole purpose of getting ahead, to be financially free or to be free to do whatever in life?

Mid-life Crisis and Financial Freedom

I am approaching the big 40 and for a number of people, it is the start of what we call a “mid-life crisis”. But even before I came to this age, I was already feeling some of the effects of mid-life crisis especially when I moved from my second to third job in my career.

After spending 4 years plus in the IT security consulting and auditing arena and discovering that my career was literally plateauing in terms of income and progression, I took the plunge and tendered my resignation after securing a job as a head of internal audit in an organisation.

This turned out to be a challenge initially as the new employer was demanding and the environment was very stressful. I found myself putting weight due to poor diet (eating out at food courts and fast foods) and lack of exercise. That was a period that turned out to be a blessing in disguise. After 4 plus years doing similar work day-in-day-out, the career change again helped me sharpen my career saw to pick up or refresh skills in office politics, report writing, leadership and management.

My crisis on the personal front was not so much driven by work but by the question arising from the lifestyle, “Is there all to life except to work, earn and spend money?” Read more…

Jaya Holdings Ltd reports Q1-2011 net profit of S$31.28mn on revenue of S$78.2mn….no major surprises……remains one of preferred marine plays

Kevin Scully — Mon, 08 Nov 2010 12:28:18 +0000

Photo by Real Buried Treasure

Jaya Holdings, one of my Stock Picks reported its Q1-2011 results. Revenue rose 94% to S$78.2mn while net profit was down slightly by 4% to S$31.3mn. EPS was 4.1 cents compare to 4.2 cents in Q1-2010. NAV per share isS$0.66 compared to S$0.62.

Key highlights in the results:

Shipping

Revenue from the offshore shipping division was S$18.2mn compared to S$21.8mn (down 17%) from weaker because of lower utilisation of vessels at 66% compared to 81% in the corresponding quarter. This was however partially offset by higher average charter rates of S$14,559 compared to S$12915 (a rise of 12.7%). Jaya attributes the rise in charter rates to better fleet composition with a current fleet size of 21 compared to 22 in Q1-2010. The shipping division made net profit of S$16.8mn in Q1-2011 compared to S$34.1mn in Q1-2010 (a decline of 51%)

Ship Building

Ship building revenue rose 224% to S$59.97mn from S$18.5mn. The sharp rise is due to the recognition of the 100% sale of three vessels compared to 22% revenue recognition of two vessels in Q1-2010. Ship building made a strong contribution of S$21.3mn in Q1-2011 compared to S$0.4mn in Q1-2010. Read more…

Maturing as an Investor

Musicwhiz — Sat, 06 Nov 2010 00:58:24 +0000

Photo by Wonderlane

As the months go by, our experience as a human being continues to build up; whether it be with work, relationships or, investing! Every now and then, I will take a step back and reflect on what I had learnt in the past few months as a result of either reading, observation, thinking or analysis. On this occasion, I realized with a start that I had matured a lot as an investor compared to the “Dark Ages” back in 2005 to 2006 when I was still fumbling around for directions. It turned out that value investing became the framework with which I would build my investing foundation, and over the years I have moulded this discipline to fit my own personal character and competence.

So to summarize the lessons learnt, here is a simple laundry list (not in order of significance):-

1) Understanding Valuations and Emotions – After reading many books on behavioural finance, I finally learnt the effects of over-confidence and loss aversion and how it could devastate one’s portfolio. Throw in patience and discipline and you would have a very robust philosophy on how one should approach investing, and I am currently putting that into practice. Value investing also would not be complete without an understanding of human psychology in the stock market and the factors which drive sentiment. At the same time, I was also refining my valuation techniques (still currently a work in progress) and striving to improve to become a better investor.

2) Avoidance of Scams – Not to sound too caustic or cynical here, but the recent proliferation of scams in the news has caused me to be extra wary of the numerous “get-rich quick” schemes out there. Read more…

China Mobile a potential international dividend aristocrat? $CHL $VOD

Drizzt — Thu, 04 Nov 2010 03:05:38 +0000

Photo by Duchamp

I got to know about China Mobile as a dividend stock while research some of the top international telecom dividend companies in the world. China Mobile was an asia representative and what caught my attention is that it mirrors that of Vodafone.

Singapore investors would be glad to know that you can easily trade or get invested into China ADRs such as China Mobile on the SGX via your brokerages such as POEMS, Kay Hian and Lim and Tan. You can get dividends from this ADRs as well, but from what I Know with-holding taxes on dividends still applies.

Dividend Aristocrats index measures the performance of large cap, blue chip companies within the S&P 500 that have followed a policy of increasing dividends every year for at least 25 consecutive years.

So to say that China Mobile has the potential to be a dividend aristocrat would be saying that

it has the capability of increasing free cashflow consistently
manage debt to asset ratio for the longterm
sustainable business model and business economics

Lets take a look if fundamentally China Mobile is able to satisfy that.

China Mobile is one of the largest mobile telecommunications company in the world by virtue of having the world’s largest subscriber base with the potential to grow further.

For a telco, it is important to have size because

purchaser power – you demand a large amount of equipment such that you have bargaining power
supplier power – you are large enough to determine the future direction of the industry
price competitive – you are able to undercut your competitors and still be able to be profitable

How waiting for a good price resulted in me missing out on great company in Thomson Medical

Drizzt — Mon, 01 Nov 2010 01:00:33 +0000

Photo by peasap

Yesterday I came back home to received a news that Peter Lim, after failing to secure Liverpool decided to buy a hospital – Thomson Medical

He made the general offer worth $513 million after his private firm Sasteria bought a 39.34 per cent stake in the company from its founder and largest shareholder, Dr Cheng Wei Chen and his family. Dr Cheng and his family sold their shares at $1.75 apiece for about $202 million.

This represents a 62% premium above the last traded price. I think those people that have been queuing 1 cent below to get the right price should be kicking themselves now.

I have reasons to be sad as well. I blogged about Thomson Medical having a good businss and a likely appreciating dividend. The problem is that I waited too long to buy into the stock and the price jumped to $1.

By then I was waiting for the stock to fall back from its highs to get in again, but it just never came. If not I will be sitting on a nice profit now.

A lot of friends told me don’t cry over this and really I think I got past that stage already. Its important to see if there is some lesson learnt: Read more…

Ezra – Review and Analysis of FY 2010 Financials and Comments on Proposed Acquisitions

Musicwhiz — Fri, 29 Oct 2010 02:00:41 +0000

Photo by moriza

Ezra released their FY 2010 financials on October 22, 2010; and at the same time, there was also an announcement on the acquisition of two companies for a combined US$325 million (US$250 million + US$75 million). The details can be read up on SGXNet, so I will NOT be posting the salient aspects of the proposed acquisition. Although I had divested of Ezra one year ago in October 2009, I am still monitoring its business, financials and fundamentals by way of interest to assess if the divestment at the time was a correct choice, based on objective evidence and my thoughts at the time. That post one year ago can be found here.

While reviewing and analyzing the numbers from the financial statements, I had a distinctive feeling that the Balance Sheet quality had deteriorated significantly from a year ago, and the Income Statement also showed a similar but gradual deterioration. What I found out from my analysis is strictly based on an objective look at the hard numbers for Ezra as at August 31, 2010; and all conclusions are my own personal one. At no time at all should any reader construe this information as a recommendation to either buy or sell securities of Ezra Holdings Limited, and I shall NOT be responsible for any losses derived thereafter. Notwithstanding the upbeat press release by Ezra (drafted by Oaktree Advisers), I would like to give my objective view on some of the key numbers and financials from an analytical standpoint. Comments are encouraged and welcome in order for me to learn and grow as an investor.

At the same time, I also provide my comments on the proposed corporate financing deal which Ezra had proposed for Aker Marine Contractors (“Aker”) and AMC. I explain why the deal may not be as lucrative as reported in the glossy press releases and presentation slides, and present my view on the potential long-term effects of such an acquisition on the financial health of the Company. The usual disclaimers apply with regards to my comments here, as well. Read more…

SGX’s takeover offer of ASX……watchout for mispricing opportunities as sentiment and rhetoric affect the share prices

Kevin Scully — Thu, 28 Oct 2010 01:00:39 +0000

Photo by Jule_Berlin

I have not Blogged on this transaction although you may have read or seen quotations from me from the media.

Details of the SGX takeover of ASX can be found here…..a summary of the key terms are as follows:

a) SGX is offering to acquire all the shares of ASX for A$22.00 in cash and 3.473 new SGX shares

b) the transation is subject to a whole series of regulatory and shareholder approvals with completion targetted for sometime in Q2-2011

c) based on last Friday’s closing prices for both shares, the SGX offer was at a huge premium of between 37% to 47% depending on which period the reference price was based on.

d) the consideration was S$10.7bn or about 104% of the market capitalisation of the SGX; 608.25mn new SGX shares would be issued; and the net gearing of SGX would rise to 44.9% on completion

The price of the SGX shares which stood a S$10.12 on 15 October 2010 fell by 13.8% to a post announcement low of S$8.72 on October 26, 2010. ASX shares initially rebounded to reflect the offer but has since seen its shares decline inline with the weakness in the SGX share price.

My personal view on the proposed transaction is as follows:

a) strategically it makes sense for the SGX and ASX to come together. The combined entity and market would then be a credible alternative to North Asia and if successful – it could eventually attract other smaller capital markets in South East Asia to join as well.

b) I was surprised by the structure ie cash and shares which would give the SGX’s original shareholders control of the enlarged entity. An all share deal or a merger of equals would have been my preferred route – it would be politically more acceptable to both sides and would not leave the combined entity with so much debt.

c) i also recall difficulties that Singapore and Chinese companies have had in the past in trying to acquire strategic Australian assets. Read more…

From Free Cash Flow to Willingness to Pay Shareholders

8percentpa — Wed, 27 Oct 2010 01:00:29 +0000

Photo by Pink Sherbet Photography

A while back, I wrote this post about stocks that have good record of free cash flow and naturally they also gave a lot of dividends. I thought I would just delve a bit deeper into how free cash flow affects dividend while also looking at 1 or 2 other factors.

Basically, to determine whether a company can consistently pay dividends and grow them, we need to know:

1. The firm’s balance sheet, esp the size of its debt
2. The firm’s ability to generate good cashflow or even grow it
3. The top management’s willingness in actually paying dividends
4. If it actually gets paid out, what is the yield?

The first thing I usually look at would be the firm’s long term track record in generating free cash flow, which is operating cashflow minus capex, ie the cashflow that is left after deducting money invested in new equipment, new plants etc. The thinking is that the remaining cashflow can be used to pay down debt or pay out dividend. If the firm has no debt (that’s why Criteria 1 is there), then the money should logically flow into dividends.

On the same post, I only managed to screen out 30-40 companies that have consistently generated positive free cashflow. This is out of 700 listed companies in Singapore. This shows how difficult it is to actually produce enough cash to give out dividends. Read more…

3 minutes investment update – 10/2010

Adrian Khiat — Tue, 26 Oct 2010 09:59:10 +0000

First Minute – Lets look at the indices
1. Emerging Markets and Asia-ex-Japan index rose about 11% for the month alone. The Kopsi did well with 11.3% rise.
2. Year to date, Asia-ex-Japan and Emerging markets did well with an increase of 11.3% and 9.8% respectively.
3.Gold is the best performer of the year so far having appreciate 19.2% to a high of 1,309 at end of September. It reached US$1,364/oz on 8th Oct, which translate to an increase of nearly 25% Year to Date. It is also the more consistent and less volatile than equities in performing such a feat.
4. China, surprising did relatively badly for 2010, having rose a mere 1% for the HS Mainland 100 Index compared to its fellow emerging markets.
5. Developed economies like USA and Europe rose 1.4% and 2.8% YTD so far and Japan dropped a whopping 11.2%.
6. Oil prices remain stable, Baltic Dry fluctuates within a fair range, VIX indexs looks stable, US Consumers are not getting much confidence with their starting their purchasing plans as yet… Read more…

September 2010 Portfolio Summary and Review

Musicwhiz — Mon, 04 Oct 2010 01:00:41 +0000

Photo by Hythe Eye

As expected, September 2010 was a very quiet month with hardly any corporate announcements from the companies in my portfolio. This was to be expected as September has traditionally been a very quiet month, and I have confidence that the businesses I own are slowly but surely building up their competencies and capabilities to tackle the new challenges ahead.

This month was one of quiet reflection over the business aspects of the companies I own, as well as a little more delving into SIA Engineering Company, which was an investment I had acquired in early August 2010. As can be seen, most of my posts have been on property, investing and SIA Engineering. Moving forward, my thoughts are focusing more on personal finance areas and also on the latest news on Singapore Airlines (SIA) issuing corporate bonds for retail investors. This is a very interesting development as corporate bonds had never been available to retail investors before; previously they were issued to either institutions or sophisticated investors (accredited high net-worth investors). SIA will be issuing S$300 million worth of bonds at a yield of 2.15% per annum, coupon to be paid annually (the announcement did not say otherwise). Suffice to say that the yield is really pretty dismal, considering one can get yields of at least 3-5% in equity markets right now. However, in the current low interest rate environment, getting a coupon rate of 2.15% is still significantly better than the abysmal 0.125% which is being paid by most savings accounts. Of course, one has to also consider the fact that SIA is one of the well-run and well-established airline companies in the world; hence the risk of default will be low, which is why the bonds are paying such a low interest rate. Another advantage of bonds is that they rank above equities in terms of payment should anything untoward happen to the Company, although they rank behind secured debt. It will be interesting to see the general public’s response to this bond offering, and also observe how the media covers this and “plays it up”.

On the economic news front, USA is obviously undecided whether it will have a double dip, with most economists and “experts” trying (in vain) to second-guess one another. Obviously, the one who happened to get it right will be lauded as the new “soothsayer of the year” and enjoy a reputation akin to what Nouriel Roubini is currently enjoying. Such is the strangeness of this world, where people constantly try to predict that which cannot be predicted, only to have to “revise their forecasts” constantly. I still think economists have the best job in the world because they can always afford to be wrong yet still retain their jobs. Imagine if that were to happen in the engineering field – a suspension bridge is calibrated wrongly and collapses. Someone would lose their life, and not just their job. Read more…

Sun Tzu – War On Business Part 13 (Palate Palette)

Musicwhiz — Sat, 02 Oct 2010 01:00:21 +0000

Photo by Duchamp

We have come to Episode 13, which is the final episode of the Sun Tzu series, and it’s one which brings us to Kuala Lumpur, Malaysia; a country which has not been covered so far in this series. Here, James Sun meets up with a lady called Sun-Ann Wong (“Su-Ann”) who runs a café cum pub called Palate Palette. There is a reason for the phonetic play on the two words, which we shall see later! This café was set up three years ago and offers more than just food and drink; it also serves as a place for regulars to rest and relax. However, it remains small as there have been no attempts or plans made for expansion.

Su-Ann is a London-trained graphics designer and she had entered the restaurant industry 3 years ago to start up a café which boasted creative artwork and murals on its walls, in order to provide a refreshing concept as compared to other more “mundane” cafés. However, James quips that “standing on the defensive indicates insufficient strength”, implying that her business model is not strong enough for her to expand and grow the business. In the Food and Beverage (F&B) industry, competition is always very keen and margins are therefore razor-thin. Palate Palette was making a marginal profit but at the expense of Su-Ann putting in a lot of work and effort; and the fact was also that it was stagnant and not growing. Her partner, who had opened the café along with her at the time, had left and thus she has to handle everything (one-woman show!).

The interior of the café is filled with very creative artwork and graphics and this makes up the feel of the restaurant and helps to attract customers and patrons. On the second floor, a space has been set aside for private parties and events. There is also a marketing website with information on events held and Su-Ann relies on word of mouth to spread the news about her café. Read more…

Your Own Business Intelligence Dashboard for Personal Finance

Panzer — Wed, 29 Sep 2010 01:00:13 +0000

I attended a seminar organised by a vendor of business intelligence application software recently and that presentation jogged me to write about developing our own dashboards for personal finance.

Some of you might be wondering, “Business Intelligence? Dashboards? What do these things have to do with me?”

The terms may seem fancy, and they often do since application software companies tend to do that to justify the price of the efforts in developing a solution for your problems, but ultimately the whole concept of business intelligence when applied to your own personal finances is: know what you have and know how much money flows in and out of your life. It’s as simple as that. A dashboard in the physical world can be the dashboard of the car which shows how fast you are driving (speedometer), distance and fuel gauge. These show you the key indicators of your vehicle that tells you if you’re going too fast (or slow) and if you need to top up your vehicle’s petrol.

Developing Your Own Dashboard

Building a dashboard is simply having a visual way to communicate information about your personal finance status to yourself (hopefully to influence your behaviour to save more or spend less or both!) I personally track two key things in my own finances. The first is my personal net worth. This is an Excel worksheet that has my total assets and liabilities and shows my net worth at any one point in time.

The second key thing I track is my cash flows from income, interest, dividends, capital gains (or losses) against my total expenditure. The resulting savings (or deficit) shows how successful I am (or not) in a particular month to hit my savings target. Typically, I aim to save about 20%-25% of my takehome pay (excluding compulsory CPF contributions) for each month. Some months I miss that target, other months I more than exceed (e.g. year end bonuses)

Here are some examples of the gauges or visual indicators about my personal finances. Read more…

Personal Finance Part 26 – Wealth Cannot Last More Than 3 Generations

Are you a Macro or Micro investor?Are you a Macro or Micro investor?

Alvin — Tue, 28 Sep 2010 01:00:41 +0000

Photo by Anonymous9000

When people speak about macro and micro, does economics come to mind? I do.

Macroeconomics, as Investopedia explains, “focuses on the national economy as a whole and provides a basic knowledge of how things work in the business world.” While “microeconomics looks at the smaller picture and focuses more on basic theories of supply and demand and how individual businesses decide how much of something to produce and how much to charge for it.”

If you are a macro investor, you would look at GDP, CPI, interest rate, etc to determine the state of the economy. You would probably invest in Forex, Government bonds, Index Futures, Commodities, etc.

If you are a micro investor, you look at a particular firm or industry, and assess its potential to make money through the product or service it produces. You would probably invest in individual stocks.

Despite the differences, they are related to a certain extent. The health of the economy can affect the business operations in that country and in turn, influences the profits. Hence, there are some micro investors that also look at the macro level while making investment decisions. But it is rare for the macro investor looking into individual companies’ balance sheets.

A pure technical trader would not care whether it is macro or micro, as long as there is a price, he can trade. But as a fundamental investor, what is your edge then? Are you better as a macro or a micro guy? Read more…

What constitute an investment?

8percentpa — Mon, 27 Sep 2010 00:38:12 +0000

Photo by moriza

The way I see it, an investment has to be something that can generate cashflow. Stocks give dividends, bonds give interest and real estate gives rental income. These are real investments.

However in the strange World of Wall Street Craft, anything and everything becomes a feasible investment, an asset class of its own. The recent boom earlier this decade being commodities.

But if you think about it, commodities shouldn’t be considered an investment bcos you don’t get a cashflow. Holding a ton of copper, or a ton of wheat doesn’t give you cashflow. The whole premise is based on prices going up. And when it’s based on just prices going up, then it’s dangerously close to the idea of the Greater Fool Game. Where you can only make money by selling something that is worth very little, at a higher price, to a greater fool who is willing to buy.

That is why value investors are not interested in price, we are interested in value. Price merely tells us if we can get the asset below its value. If there was no transparent price on the asset, we are happy as long as we have cashflow. But if there is no cashflow, you cannot calculate an intrinsic value of the investment. And in that sense, commodities cannot be classified as an investable asset class. Needless to say, a lot of the newly created asset classes like art, wine, vintage watches and other funny stuff cannot be called investment. Read more…