tag:blogger.com,1999:blog-30086426007080289862024-02-23T15:44:20.689+08:00Market Uncle's BlogMy Investment Diarymarket unclehttp://www.blogger.com/profile/16460144334144587714noreply@blogger.comBlogger119125tag:blogger.com,1999:blog-3008642600708028986.post-77010559496820744552017-08-26T10:29:00.000+08:002017-08-26T13:59:19.048+08:00Towards cashless society, how about a unified digital walletOn the latest coverage on going cashless:<br />
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<ol>
<li><a href="http://www.straitstimes.com/opinion/can-singapore-catch-up-in-race-to-go-cashless">Can Singapore catch up in race to go cashless?</a></li>
<li><a href="http://www.channelnewsasia.com/news/singapore/govt-agencies-explore-e-payment-solutions-for-hawker-centres-9157344">Govt agencies explore e-payment solutions for hawker centres, coffee shops</a></li>
</ol>
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The success or failure of the drive hinges not on what Singapore want to achieve but how consumers (end users) wants. Just like for start-ups to succeed, it is not about how wonderful a product or service the company can offer, but how well it addresses the unresolved need of the consumer.<br />
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For cashless to take off, one crucial aspect is user experience which boils down to convenience. A typical user now must grapple with cash to make small value purchase in hawker centres, wet market or small groceries stores. He also uses cash to top up store value cards such as Kopitiam card for food court usage. With proper planning, he might juggle a portfolio of credit cards that no only suit his spending habits but also maximises his rebates (cashback, air miles or vouchers). Through his active life, he might also accumulate many membership cards, discount cards and so forth. He might do well to drive a car and so pick up a driver licence along the way. With kids, he might have more loyalty cards for family oriented programmes.<br />
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Taken together, going cashless and making cash payment easier only solves part of the problem and not enough to convince end users to switch. To make matters worse, as highlighted in the various articles, the need to maintain so many payment system for businesses add to the inertia for any transition.<br />
Looking at the issue holistically, we need not only a common, low cost payment system that benefit businesses but also a common digital wallet for end users. Such unified digital wallet allows payment, whether from credit or cash accounts, and digitalised other cards such as identification, driver licence and discount cards. The back-end of this digital wallet can either be a government or third party maintained central data depository. The front-end will be an app that a user can download to their mobile phones. Payments and authentication (identity, membership, or discounts) will be done via QR code scanning (camera enabled phones are ubiquitous but not NFC ones). This way, the wallet that one carries can literally be replaced by a mobile phone completely.<br />
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Unfortunately, the downside to all these digitalisation is the challenge to help those less able to handle the cashless platforms such as the non-English literate elderly, the blind or vision impaired. For them, traditional payments and identification must still be available and not totally done away with.<br />
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market unclehttp://www.blogger.com/profile/16460144334144587714noreply@blogger.com0tag:blogger.com,1999:blog-3008642600708028986.post-19861442928387398552017-08-12T14:25:00.000+08:002017-08-12T14:27:44.567+08:00Local developer's hope or dream<div class="separator" style="clear: both; text-align: center;">
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All signs point to a <a href="http://www.straitstimes.com/opinion/signs-of-new-vigour-in-the-property-market">potential recovery in the property market</a> even when the slew of cooling measures have not been lifted. However, one rule, <a href="http://www.straitstimes.com/opinion/qualifying-certificate-scheme-time-for-review">Qualifying Certificate</a> in particular that was in place to "<span style="background-color: white;"><i style="font-family: selaneten, georgia, "times new roman", times, serif; font-size: 19px;"><span style="color: blue;">By limiting foreign companies' holding period, the QC scheme was meant to prevent them from hoarding land or buying land for speculation in Singapore</span></i><span style="color: #333333; font-family: "selaneten" , "georgia" , "times new roman" , "times" , serif;"><span style="font-size: 19px;">". Basically the developers had 5 years to build and 2 years to sell all to avoid any penalties.</span></span></span><br />
<span style="background-color: white; color: #333333; font-family: "selaneten" , "georgia" , "times new roman" , "times" , serif; font-size: 19px;"><br /></span>
<span style="background-color: white; color: #333333; font-family: "selaneten" , "georgia" , "times new roman" , "times" , serif; font-size: 19px;">However, this does not seem to deter them from <a href="http://www.channelnewsasia.com/news/singapore/have-chinese-developers-created-new-dynamics-in-the-singapore-9110620">aggressively biding for land recently</a>. They do not mind bidding ahead of fundamentals, i.e. "</span><span style="color: #333333; font-family: "selaneten" , "georgia" , "times new roman" , "times" , serif;"><span style="font-size: 19px;"><i>They may bid at zero margins but by the time they launch it, they make a handsome profit out of it.</i>" In order words, they must be pretty confident they can sell them all and well.</span></span><br />
<span style="color: #333333; font-family: "selaneten" , "georgia" , "times new roman" , "times" , serif;"><span style="font-size: 19px;"><br /></span></span>
<span style="color: #333333; font-family: "selaneten" , "georgia" , "times new roman" , "times" , serif;"><span style="font-size: 19px;"><span style="color: #333333;">Thus it is kind of strange when </span><a href="http://www.straitstimes.com/business/property-market-picking-up-cdls-kwek" style="color: #333333;">Mr Kwek raised the concern about the QC scheme</a><span style="color: #333333;">. "</span><i><span style="color: #333333;">..."</span><span style="color: blue;">Such penalties are heavy and erode all profit. I hope the Government reviews them again to steady the rate of growth in terms of price increase.</span></i><span style="color: #333333;">" What he did raise rightly was the aggressive nature of foreign developers risk pricing the locals out of the market. "</span><i><span style="color: blue;">If not, you can see every bid (for land) now is higher and higher than ever. Land is akin to raw material for a factory, and if we don't have that, the factory will be doing nothing. Therefore, there's no choice but to bid for the land. If you put in a cheaper bid because you think it's the right price, you'll get nothing</span></i><i style="color: #333333;">.</i><span style="color: #333333;">" So its really up to the local developers to face up to the competition, wherever its coming from.</span></span></span><br />
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<br />market unclehttp://www.blogger.com/profile/16460144334144587714noreply@blogger.com0tag:blogger.com,1999:blog-3008642600708028986.post-65820517612940052252017-08-09T16:02:00.000+08:002017-08-09T16:03:29.935+08:00Happy Birthday Singapore!!! <div style="margin-bottom: .0001pt; margin: 0cm;">
<span style="font-size: 13.5pt;"><b>Happy Birthday Singapore!!! </b></span><br />
<span style="font-size: 13.5pt;"><br /></span>
<span style="font-size: 13.5pt;">Woohoo, I am back. After orbiting around my two adorable kids for
the past few years, I can finally resume some blogging on my investment pursuit
after a hiatus of more than four years since the last fruitful journal entry.
This time though, I'll focus more on personal finance, still my favourite
topic.<o:p></o:p></span></div>
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<span style="font-size: 13.5pt;">Looking back at what I had posted
and the comments I had received, my immaturity and inexperience were obvious. I
had written more to (re)assure myself I made the right equity decisions and
sparring with fellow investors who bothered to comment merely exposed my
decision flaws. I sincerely thanked them for coming out to comment and
sharing their thoughts.<o:p></o:p></span></div>
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<div style="margin: 0cm 0cm 0.0001pt;">
<span style="font-size: 13.5pt;">From a bachelor to a husband to
a father of two school-going children, really made me mature a lot and probably
age faster than I admit. My values do not change but my priorities do.
Stability and certainty matters more to me now than before. Not that I avoid
risks but I am now much more cautious (less aggressive). I am more willing to
trade-off potential capital gains from undervalue gems for more cash-flow stability
via sustainable dividend stocks. Overall portfolio growth can still be attained
from compounding reinvested dividends. Nonetheless, I still do my due diligence
and research to avoid overpaying for any business, a red line that I will never
cross. <o:p></o:p></span></div>
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<br /></div>
<div style="margin-bottom: .0001pt; margin: 0cm;">
<span style="font-size: 13.5pt;">I had also created a Facebook page,</span> <span style="font-size: 13.5pt;"><a href="http://facebook.com/MrMarketUncle/">facebook.com/MrMarketUncle/</a>, to share interesting articles
and put up short posts. Stay tuned for more. <o:p></o:p></span></div>
<br />market unclehttp://www.blogger.com/profile/16460144334144587714noreply@blogger.com0tag:blogger.com,1999:blog-3008642600708028986.post-23212825005797677982012-01-01T00:10:00.003+08:002012-01-01T00:14:43.983+08:00Happy New Year!!!Though I can't really find the time to blog anymore (at least in the near future), I can still squeeze a few minutes to wish all a very happy new year. May 2012 be a better year for all! Huat ah!<br /><br />2 predictions I'll like to voice out (just for fun, for serious readers, please stop reading):<br /><br />#1. The worst should be over for Euro-zone, its just too big to fail, sounds familiar?<br /><br />#2. Singapore property market will crash? Doubt so, looks like a few more cooling measures are necessary.Unknownnoreply@blogger.com4tag:blogger.com,1999:blog-3008642600708028986.post-78901391214511048262011-05-08T10:55:00.003+08:002011-05-14T15:57:05.333+08:00Awaiting my 2nd bundle of joyAlmost exactly two years after my 1st bundle of joy turn into a cheeky toddler, 'terrible two' that many called one, I'm expecting another one to join us to make this a noiser and messier home. I find balancing my limited time amongst family, work, investing, blogging and photography a very difficult task, especially when I need to dedicate much more time amongst the first 3. I am aware of my priorities, as much as I need to make tangible investments from the resouces generated from my work, I also need to make intangible investment of my time in my family. Thus blogging and photography (the only 'brainless' hobby that I can indulge in to let my brain rest) will have to take a back seat. If opportunities arose, I will still write an article or two. Otherwise, it will be a long while before I can return to serious blogging. I thank all faithful readers and fellow value investment bloggers who have contributed invaluable comments and ideas, and made my investment journey so far a very rewarding one!Unknownnoreply@blogger.com10tag:blogger.com,1999:blog-3008642600708028986.post-70193663581143680062011-03-05T13:41:00.005+08:002011-03-05T23:12:25.965+08:00Watch out for the Intangibles!<span style="font-weight: bold; color: rgb(0, 0, 102);">Motivation</span><br /><br />A friend recently approached me to help him take a look at Healthway Medical. Once of the most glaring thing that struck me when I thumbed through its latest financial statement was the huge intangibles on its balance sheet. After I explained to him my concerns, I thought I might as well highlight it on my blog too.<br /><span style="font-weight: bold; color: rgb(0, 0, 102);"><br />Risk of high intangibles</span><br /><br />Intangibles on the balance sheet arose primarily from when a firm acquires another business and pay a price higher than its the net tangible assets. This translates into goodwill that the acquiring company reports. Another common intangibles can be copyrights or patents that royalties can be collected. Whichever it is, intangibles have to be revalued periodically and amortized (write down) accordingly if necessary. Basically, intangibles are valued by how much revenue it can generate, forecast into the future, and discounted to present value. Thus should any estimated variables (forecast revenue) change, the value of the intangibles need to be readjusted. Thus, it is always easier to value licence, copyright etc, than pure good will.<br /><br />What happens when an intangible asset is marked down? The same amount has to be reported on the income statement as a deduction against the revenue. If the amount is huge, a 'loss' is reported even though the company is actually profitable. On the surface, this might not seems to be a serious concern since the impairment does not even impact the cash flow. But the fact that a huge amount of intangibles got wrote off either meant the business acquired earlier on was worth much less (goodwill) or the copyright or licence couldn't bring in as much revenue as forecasted. Either way, the drop in net asset value following the amortization meant the price-to-book ratio will jump, a simple litmus test to indicate overvaluation.<br /><br /><span style="font-weight: bold; color: rgb(0, 0, 102);">Case study 1 - Healthway Medical</span><br /><br />A look at Healthway Medical's latest financial statement shows that it carry $177.6m of intangibles out of total assets of $242.2m as of 31st December 2010, i.e. about 9.5cts out of 10.48 cts of NAV is intangibles! A check on Healthway Medical's Annual Report reveals that the intangibles are mostly made up of goodwill which comprises of discounted future cash flows from various clinics under its management. The anticipated growth rate of the revenue was 2-4% for 2010 to 2013 and 4% infinitely. Discount rate was 7%. Thus if these clinics failed to performed as targetted, significant amortization, and hence net loss, could occur. Against the NAV of 10.48 cts, the company's share price was trading at around 13.5 cts.<br /><br /><span style="font-weight: bold; color: rgb(0, 0, 102);"><br />Case study 2 - IPCO</span><br /><br />IPCO has $66.4m of intangibles out of total assets of $195.3m as of 31 Oct 2010, i.e. about 3.7cts out of 7 cts of NAV is intangibles. The intangibles also arose from goodwill contributed by the valuation of future earnings of its subsidiary, Excellent Empire, which holds a 90% equity interest in three companies supplying natural gas under 30-year exclusive contracts in the cities of Anlu, Dawu, and Xiaochang in Hubei Province, China. However, due to past aggressive (possibly unsustainable) growth rate in revenue, chances of future earnings unable to hit projections become very likely. Anyway, against the NAV of 7 cts, the current share price of 2 cts continue to seem attractive to me.<br /><br /><span style="font-weight: bold; color: rgb(0, 0, 102);"><br />Case study 3 - Armarda</span><br /><br />Let's now look at what happens when the intangibles got amortized. Armarda had a string of acquisitions since IPO and as of 31 Dec 2009, had amassed HK $98.8m of intangibles against 229.2m of total assets. The intangibles also arose from goodwill contributed by various businesses. Unfortunately, most of their revenue failed to meet targets used to value them. Thus Armarda amortized these intangibles every quarter (resulting in net loss of each quarter). As of 31st Dec 2010, only about HK $11m of intangibles remain on its balance sheet. Its NAV is now 2.3 cts and the company is trading at 7.5 cts. I discarded the remainder my Armarda.<br /><br /><span style="font-weight: bold; color: rgb(0, 0, 102);">Conclusion</span><br /><br />Not all cash generating assets are tangibles and ignoring these is a gross error in valuating a company. However, one must be cautious and mindful of their presense in the balance sheet, especially if the intangibles form a very significant portion.Unknownnoreply@blogger.com13tag:blogger.com,1999:blog-3008642600708028986.post-21072284481660289022011-01-15T15:59:00.009+08:002011-01-15T16:14:29.090+08:00STI vs SGS bond yield<div><strong><span style="color:#000066;">Just being curious</span></strong><br /><br /><div>One of the common finance wisdom states when the economy is booming, funds shift from bonds to stock market for better returns (surging stock market and rising yields in bond market). During a recession, the opposite occurs where money exits stock market to seek refuge in the bond market, further depressing the meager yields.<br /><div><br />Thus I was curious to find out whether this relationship actually holds true over a long run. If so, will there be a relatively reliable yield to serve as an indicator to enter or exit the market? i.e. going into the stock market when bond yields drop below a certain threshold and exiting when yield surge beyond another value? Even before I look further, I already knew things shouldn't be so simple, so its more for fun rather than a serious exercise to change my current investment strategy which already worked well for me.<br /></div><br /><div><strong><span style="color:#000066;"></span></strong></div><strong><span style="color:#000066;">Chart</span></strong><br /><br /><div> </div>Anyway, let's see how the graph will look like:<br /><div><br /></div><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhed8_HKDYzZGHdJk1_TkCj9VleC6j8yC9yD_UsWYMj1_VZzggAQLyDTBQrN4bGQ3ydwxVAP67wX5JV2pNb6jY4k_ElzvJGILRpqt8MW6a9K05bgLA-iZKB5scfMXkQXhfgWbkjvi1Ng8I/s1600/t-bills+vs+sti.PNG"><img id="BLOGGER_PHOTO_ID_5562320988917017842" style="display: block; margin: 0px auto 10px; width: 400px; height: 323px; text-align: center;" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhed8_HKDYzZGHdJk1_TkCj9VleC6j8yC9yD_UsWYMj1_VZzggAQLyDTBQrN4bGQ3ydwxVAP67wX5JV2pNb6jY4k_ElzvJGILRpqt8MW6a9K05bgLA-iZKB5scfMXkQXhfgWbkjvi1Ng8I/s400/t-bills+vs+sti.PNG" border="0" /></a><graph>The above graph is made by plotting monthly STI closing value versus monthly average of SGS (Singapore Government Securities) 3 month T-Bills' yield. The STI closing values can be downloaded from yahoo finance while the T-Bills yield can be obtained from SGS website.<br /><br /><strong><span style="color:#000066;">Pattern?</span><br /></strong><br />If the theory above holds true, the bond yield curve should track the STI index. i.e. when times are good, funds exit bond market to chase higher return in stock market, pushing up stock index and causing bond prices to drop and yields to rise, and vice versa. Looking at the chart, it seems to me this is only somewhat true during 1999 to 2009 and about 1% yield might be the indicator to enter the stock market while 2.5 to 3% yield could signal the exit. However, for both instances, one will either enter or exit the market too early, by as much as 2 years.<br /><br />While no clear pattern between bonds and stocks seems to occur prior to 1999, what is surprising to me, is the divergent trend after 2009. Though the stock market continue to surge, the bond yield continue to stay severally depressed. This 'abnormally' can be dismissed as the consistent trend mirroring the current global low interest environment brought about by the quantitative easing in USA to stimulate growth and recovery from recent economic recession. It can also imply that with all the hot funds flooding the region from overseas, substantial amount flows to both stocks and bonds. So does that means the there is still much more funds being amassed in the bond market that can be liberated to push the stock market much further into a bubble bigger than the last? Only time can tell. Meanwhile, I doubt I'll be pumping in any more money as most of my businesses are quite favorably acquired at reasonable price. So its more of sit back, relax and accumulate profits and parked them away for the next burst. </graph></div></div>Unknownnoreply@blogger.com5tag:blogger.com,1999:blog-3008642600708028986.post-86105460573713846072010-12-18T13:51:00.003+08:002010-12-18T23:37:11.654+08:00Portfolio update for Q4 2010<p>The past 3 to 4 months is a rather rewarding period for me. I had been busy restructuring portfolio and at times, havesting the sweet returns from the seedlings planted during the recent global financial crisis. </p><p><strong><span style="color: rgb(0, 0, 102);">Switched from Food Junction to Food Empire on 16 August 2010</span></strong> </p><p></p>While Food Junction continue to struggle in its food court and F&B segments (~2% drop in revenue and 20+% drop in profit), Food Empire's business surprisingly rebounded with a spectular recovery of 60% increase in revenue and nearly 70 fold increase in profits. Fortunately, food junction is very thinly traded all these while that I've invested so that I didn't really suffer material loss on the sale. Even more furtunate that no one seemingly cared how well Food Empire recovered so that I can buy more of its shares cheaply. If I can trust their opinions about their business outlook, I'd rather bet on Food Empire for a continued sustainable recovery, well ahead of Food Junction.<br /><p></p><p><strong><span style="color: rgb(0, 0, 102);">Selling coffee for cash, took profit on Super Group and bought Matex on 14 September 2010</span></strong><br /></p><p>This is the 2nd time I made hefty gain on Super Group (formerly known as Supercoffeemix Manufacturing). I was lucky to buy this again during the financial crisis and just slightly over a year, the stock price doubled. While I still think its business fundamentals are still strong and there is still potential for further growth, I doubt the share price had equal amount of potential. So as my usual habit, I sold halve to recoup my principal.</p><p><br />With new funds, I turned my attention on one business waiting on my watchlist, Matex. Normally I shunned manufacturing companies due to their poor margin, i.e. high expenses and pricing pressure. But Matex is different. It got cash. It is another typical cash rich cigar butt that I just can't ignore. When I bought it, it was trading at slightly below its cash and equivalent less term loan per share. Business wise, though the company is still making loss, it has narrowed significantly. Together with the disclosure that the company is looking at other emerging markets (South America, Middle East and India) besides overinvested China, I am quite optimistic of a recovery in the near future.<br /><strong><span style="color: rgb(0, 0, 102);"></span></strong></p><p><strong><span style="color: rgb(0, 0, 102);">Selling healthcare for water, took profit on Thomson Medical Centre and bought Darco on 4 October 2010</span></strong></p><p>Similar to Super Group, I was fortunate to be able to buy TMC in the midst of the global financial crisis and since then, price also doubled. And like Super Group's case, I also sold halve of my stake. This turns out to be a good move as in just a few weeks later, Peter Lim, the legendary remisier king, offered to acquire TMC at $1.75 a share. I straight away sold my remaining stake without much hesitation. No matter how much business potential there is over the long term, I doubt the share price has significant upside after it hit $1.75. That's pricing it at 3.6 times book!</p><p><br />Looking at my watch list, I selected Darco. I am well aware of the fraud case that hit its Taiwanese subsidiary. But judging from the impact ($8m SGD) versus its cash and eqvialent of $20m SGD. I judge that its significant but not dangerous to threaten the company to function normally. With a huge discount to its net tangible assets and the slew of contracts the company manage to capture recently, I am optimistic the company can turn around in the very near future. Thus I used part of the TMC profit to acquire some Darco shares.<br /></p><p><strong><span style="color: rgb(0, 0, 102);">Increased stake in Manufacturing Integration Technology (MIT) on 11 October 2010</span></strong></p><p>In the midst of the global recession brought about buy the financial crisis, orders for semiconductor equipment almost grind to a halt. This is when MIT show their resilience by translating that semiconductor know-how to produce laser scribers to make solar panels. Since then, semiconductor equipment orders started to improve and their expansion to renewable energy seemingly began to bear fruit with their first major order announced on 30 September. The future for MIT is never brighter.<br /></p><p><strong><span style="color: rgb(0, 0, 102);">Acquired Metro Holdings on 1 November 2010</span></strong></p><p>This is one of the most controversial business I acquired. Metro is known for its retail business but its stellar business performance is actually attributed to its property business in China. Metro enjoyed strong cashflow from the rentals it derived from the properties currently under its management and from another perspective, it is basically a REIT but a very different beast, net cash and trading at nearly 50% book value.<br /></p><p><strong><span style="color: rgb(0, 0, 102);">Acquired Hour Glass on 24 November 2010</span></strong></p><p>One thing that caught my eye about Hour Glass is its strong balance sheet (nil debt and trading at discount to book value) and good business recovery (~57% increase in yoy 2Q profit, ~38% in yoy 1H profit). With the increased well heeled gamblers the two integrated resorts bring to Singapore, I see that the luxury segments (including watches) should stand to benefit. Wish them good luck!<br /></p><div align="left"></div>Unknownnoreply@blogger.com2tag:blogger.com,1999:blog-3008642600708028986.post-77350357823332653582010-11-26T22:59:00.002+08:002010-11-26T23:31:04.801+08:00Subprime Crisis, Singapore's version?<strong><span style="color: rgb(0, 0, 102);">The Year 2006</span></strong><br /><br />A few years ago, my wife and I are the 'fortunate' few to buy left over HDB flats under the walk-in scheme. As the flat came in standard condition, i.e. totally bare, we visited a few condominium showflat for renovation ideas. My wife was tasked to absorb as many ideas as possible while I entertain the agents as a prospective buyer. That was when I started to pay attention to the loan, interest rate etc.<br /><br />Most mass market private property then was going around $600,000 for a 3 bedder of equivalent size to a 5 room HDB. Based on our combined income, the maximum loan the bank would grant us is sufficient to service the maximum 90% valuation of the property, as allowed then.<br /><br /><strong><span style="color: rgb(0, 0, 102);">The Year 2010</span></strong><br /><br />With the economy out of recession with an expected double digit GDP growth for the full year, demand for private property surged strongly and continued to do so even with recent cooling measures. I am thus curious to find out more, especially from the perspective of not so deep pocket buyers on the street. We went to the Spottiswoode Residences near Tanjong Pagar to take a look. After the usual tour led by the agent, we found ourselves talking to a banker (I never met one in 2006) to assess our financial capability. My eye almost pop out when he worked out the maximum loan the bank will grant us. No, our combine income never shoot the roof. Though our income did increase, but definitely far far below the 300% jump in maximum loan allowed, in just 4 years. It never take too long to realise the key difference, 1.5% effective interest rate (not the initial year promotion interest rate). That's 40% lower than HDB's concession interest rate of 2.6%!! I can't remember what's the effective interest rate in 2006, but definitely higher than 2.6%. Using 50% of disposable income as a guide for maximum installment potential a month, no wonder we can take on such a huge loan!<br /><br /><strong><span style="color: rgb(0, 0, 102);">Made in USA<br /></span></strong><br />First they lower their key interest rate to nearly zero, then they print money, then they printed some more. The net effect is the ultra low interest rate environment property buyers are 'enjoying' at the moment. Let's assume a typical couple with pockets of reasonable depth decided to buy a private property. Even if they are not crazy enough to take on the maximum loan that will shave off half their monthly income, they would still be forking out much higher monthly installments as they would like when the interest rate eventually recover to a more reasonable figure of 3-4%.<br /><br /><strong><span style="color: rgb(0, 0, 102);">Potential Problem(s)</span></strong><br /><br />For the best case scenario, the interest rate raises to the 3-4% eventually and these genuine non-deep pocket buyer-stayers are able to folk out the higher monthly installments. A worse scenario would be the eventual burst of the property bubble and valuation drops below the outstanding loan. Bank theoretically can only loan up to 70% of valuation, so if valuation drops, they can lend less, and the buyer has to pay up the difference. But according to the Banker, so long as the buyer promptly pay up the installments, banks don't normally execute such 'margin calls'. The worst case scenario would be the burst of the property bubble coinciding with the next recession. i.e. drop in property value and loss of income.<br /><br /><strong><span style="color: rgb(0, 0, 102);">Risk<br /></span></strong><br />From the buyer's perspective, the risk is personal. But from the banks' perspective, it seems to me that even the maximum 70% valuation limit on the loan is not quite sufficient to limit the number and amount of potential bad loan if the unreasonably low interest rate is used to justify the maximum loan allowed in a growing property bubble.Unknownnoreply@blogger.com6tag:blogger.com,1999:blog-3008642600708028986.post-7048817576599905322010-10-31T11:11:00.004+08:002010-11-05T22:05:25.730+08:00The yearn for financial independence<p><strong><span style="color: rgb(0, 0, 102);">Have you heard from Robert Kiyosaki, the author of Rich Dad Poor Dad?</span></strong><br /></p><p>"Have you heard from Robert Kiyosaki, the author of Rich Dad Poor Dad?.." I heard this many times and this has ALWAYS been the starting line to introduce some MLM (Multi-level marketing), land banking or other 'alternative' paths to financial independence quickly. I get to hear this again just a few days ago. My wife's friend offer to share with us, over breakfast, a business scheme that will bring us to financial Independence in 2-5 years. Her only prerequisite for participants who want to benefit from this business is to sacrifice several hours a week. My alarm bell went off immediately when she mention 2-5 years and rang even louder at the weekly effort required to succeed in the business. Anyway, it didn't take long before she got to the point, being a sales agent for Amway... and of course, nothing fruitful emerge at the end. Anyway, it seems to me that my wife had an affinity with acquaintances, friends or colleagues dealing with MLM business. Recently, while accompanying my wife to meet up with her piano blog reader on a premise for some discussion (she thought it has to do with piano or music in general) that turn out to be a presentation on e-spring water filter system, which also happen to be another product from, yes Amway again.</p><p><br />As far as MLM's business structure is concerned (quoted from wiki):</p><p><br /><span style="color: rgb(255, 0, 0);">"Multi-level marketing (MLM) is a marketing strategy in which the sales force is compensated not only for sales they personally generate, but also for the sales of others they recruit, creating a downline of distributors and a hierarchy of multiple levels of compensation. "</span></p><p><br />Coupled with their products (few are wildly popular items), it seems to me that out of many who tried, probably a much smaller percentage will ever make it big. But the success of the latter is sufficient to entice people to try. Thus I am absolutely puzzled how one can generate sufficient sales (personal effort or combined downstream effort) to get enough commission to attain financial independence in 2-5 years.<br /></p><p><strong><span style="color: rgb(0, 0, 102);">Why not insurance or property?</span></strong><br /></p><p>If one has the sheer mental grit to persevere in such a low hit rate sales environment such as MLM, won't it be more rewarding to try being an insurance or property agent? It is almost no brainer Singaporeans are generally under insured (just taking an inaccurate empirical consensus amongst my friends), they want the payout when things happen but dreaded the costly premiums (especially the riders) that are 'wasted' if they don't claim. As for property, whether downgrading or upgrading, agents get to earn commission from each transaction.<br /></p><p><strong><span style="color: rgb(0, 0, 102);">Looking for a short cut</span></strong></p><p>There is a common trait I observed amongst all of them who tried MLM, not only do they want success (financial independence), they want it safe and they want it fast. Working and saving is too slow. Venturing out to do business is too risky. Although it is simple logic that risks are inversely proportional to returns, many continue to believe logic-defying novelties. Take land banking for example, one of my wife's colleague got into this (yes, I also wonder why my wife got so many such lobangs). He's a sales agent from Walton International, a company involved in land-banking. The objective of land-banking is to purchase raw land and hold them until its profitable to sell. It is again sold as a low risk high return venture as raw land is cheap and once selected for development, the returns is huge. However, the problem here is how much do the investor know about the land they are buying? How do they assess their potential? How sure are they sure that they are getting a good deal? Even in land scarce Singapore and Hong Kong, there are reserve land to last many years.<br /></p><p><strong><span style="color: rgb(0, 0, 102);">The slow way to success</span></strong></p><p>As the saying goes, anything that sounds too good to be true probably is. Unless we are extreme lucky to strike lottery, most of us either have to trade skill or time for money and ultimately hard work pays off. The more enterprising ones can take on more risk to venture into business and reap enviable rewards if they succeed. Lazy or risk-adverse people like me will prefer to reap what others sow by buying bits and pieces of listed businesses and make our money work harder. But whichever way we choose, it really takes much longer than 2-5 years to achieve financial independence, and I'm perfectly fine with delayed gratification. </p>Unknownnoreply@blogger.com8tag:blogger.com,1999:blog-3008642600708028986.post-61420656459120186432010-09-25T09:50:00.002+08:002010-09-25T09:54:39.534+08:00Financial magazine review(s)<span style="color:#000066;"><strong>Motivation</strong><br /></span><br />I have been faithfully subscribing and reading the Economist and the Edge for the past few years (ever since I started investing) until I decide to stop the latter. Instead of just saying why am I dissatisfied with The Edge, I might as well write a simple review of the three finance or business magazine I deemed useful for my interest.<br /><br /><strong><span style="color:#000066;">The Economist, my main workhorse of info after the newspapers</span></strong><br /><br />Besides the news on papers or over the Internet, I get the most useful geopolitical, macroeconomic information from The Economist. Though I might not agree with all the articles, some are actually biased collection of facts to shape reader views, most articles are nicely written and well argued, especially the articles in the 'Business' and 'Finance and economics' sections. I like it most whenever there are 'special' coverage of a particular topic, e.g. the economy of a particular country, her strengths and weakness, her challenges and opportunities. Price-wise, it really depends on how good a deal one can squeeze from the distributing agent. I always bargain for a 2-year subscription (at quite a steep discount to newsstand price) at the World Book Fair and get the agent to throw in 1-year subscription of any magazine for free (that's how I got The Edge). Anyone with an even cheaper but timely alternative (other then reading from the library free) please let me know. Thanks!<br /><br /><strong><span style="color:#000066;">The Edge, thanks but no thanks</span></strong><br /><br />I have to say I like to read The Edge... whenever there are nice articles, especially when they ran exclusive coverage of certain companies or particular fields of business. But unfortunately, these articles made up just a tiny portion of each issue, with advertisements, charts, stocks and property listings almost practically filling the rest of the pages. I find myself reading less than 10% of each issue. Info per dollar wise, each 'useful' content in The Edge is really expensive. Thus after renewing for a year when my free subscription of The Edge ends (that comes with The Economist), I terminated it.<br /><br /><strong><span style="color:#000066;">Pulses, a better replacement to The Edge</span></strong><br /><br />I need to find a finance or business related magazine that give a more Singaporean perspective, the local businesses, the market environment that's closer to me etc. I discover this magazine while loitering around a newsstand when I was too bored, can't remember whether I was too early for an appointment, or the person I'm meeting was late. Anyway, at least 50% of the magazine is 'useful' material. The magazine can be subscribed from <a href="http://circulation.sph.com.sg/worldatyourdoorstep/product_detail.asp?pd=94&pt=M">SPH</a>:<br /><br /><a href="http://circulation.sph.com.sg/worldatyourdoorstep/product_detail.asp?pd=94&pt=M">http://circulation.sph.com.sg/worldatyourdoorstep/product_detail.asp?pd=94&pt=M</a><br /><br /><strong><span style="color:#000066;">Conclusion</span></strong><br /><br />We live in an information age and sieving through the tonnes of garbage for useful stuff is getting harder each day. Life can be more pleasant if there are better one-stop, customised source of useful information one can easily digest to become knowledge and attain the wisdom to translate these into concrete results.Unknownnoreply@blogger.com9tag:blogger.com,1999:blog-3008642600708028986.post-67710889725283162862010-09-17T22:48:00.002+08:002010-09-17T22:53:27.355+08:00Investing is similar to gambling?<span style="font-weight: bold; color: rgb(0, 0, 102);">Motivation</span><br /><br />I read with interest an article published on Asiaone "<a href="http://news.asiaone.com/News/Latest%2BNews/Asia/Story/A1Story20100916-237501.html">Casino not so different to stock investment</a>":<br /><br />In the article, Kwon Oh-nam, CEO of Grand Korea Leisure, South Korea's leading foreigner-only casino was quoted as saying:<br /><br />"... Some people get so obsessed with stock investment that they sit in front of the computer monitor to check Dow Jones all night long. Even if they do, some lose big money, but such cases are not criticized as much as gambling...".<br /><br />src: http://news.asiaone.com/News/Latest%2BNews/Asia/Story/A1Story20100916-237501.html<br /><br />This is something I totally disagree. Hey, that's not investing, that's stock speculation! And yes, to all things in life, there are plenty of opportunities to speculate, not just in stocks and casino, but in properties, commodities, currencies etc.<br /><br /><br /><span style="font-weight: bold; color: rgb(0, 0, 102);">Stock investing vs Gambling</span><br /><br />I've been to a casino once only, the one in Genting Highlands with my wife. We changed RM$50, yes one single $50 note, to chips and played at the "big-small" game table. Our chips are too few to warrant a seat, so we just stand around. We played till we are left with with $10 chips and en-cashed them back to cash, to 'complete' the 'process' of 'gaming' experience at Genting. I'd say the experience is thrilling and fun... at one point we almost doubled that $50 we started with and that occurred in less than 30 minutes of play. Such quick and solid returns can only occur in a gambling environment.<br /><br />It is the same thing when one speculates. The 'bet' is quick and the 'returns or loss' are fast. Stock punters normally don't care whatever a company does for business (or still in business?) so long as its stock volume is huge and the price swings are there, buying and selling for potential quick profit is what they are after.<br /><br />For investing, one have to study the company, read up on its past, its present and using available data, project its future...then buy, hold and wait... and the wait can last several years... no thrill, no fun to speak of. In short, its plain boring.<br /><br /><br /><span style="font-weight: bold; color: rgb(0, 0, 102);">Its all about odds</span><br /><br />If I define gamble as just a bet on an outcome one desires. Then all kinds of bets are merely subsets of gambling and the single factor that differentiates the groups is the odds. For investing, the odds are to the investor's advantage over the long run. For speculation, the odds are cleared staked against the punter.<br /><br />For gambling at the casino, the odds are staked against the player and for stock speculation, the odds are staked against those with no insider info or those dependent on 'inaccurate tips'; but for investing, the odds of winning are higher the greater the margin of safety and a longer time horizon they are willing to wait, i.e. delayed gratification pays off.<br /><br /><span style="font-weight: bold; color: rgb(0, 0, 102);">Conclusion</span><br /><br />Come to think of it, it is not only about the odds or what's right or what's wrong... but also knowing what one is doing. Its one thing when one knowingly gamble, but quite another when one confuse speculation with investing.Unknownnoreply@blogger.com3tag:blogger.com,1999:blog-3008642600708028986.post-59258235877738863002010-08-28T09:33:00.004+08:002010-08-28T09:40:56.300+08:00Stubborn HDB Property Bubble?Some of my friends painfully resisted buying a flat for the past few years, hoping that the property bubble will pop when the global recession erupted. But to their disbelief, the prices and cash over value (COV) continue to defy gravity and broke new highs. This prompted me to take a closer look at this bubble, why is it so stubborn!?<br /><br /><span style="font-weight: bold; color: rgb(0, 0, 102);">Demand</span><br /><br />Looking at the past prices (available data from 04 to present):<br /><a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjO-BxSJDwZxmCaPoRaF9-7HE7GSc_tWU7w-uCFUl31-EwPOdKgqLDevcD1FkpCzYh4JfS2hvUw_lMtLv7515rPyKBV2fJg7YbgVYtDHHa5RnJHecL87_tl4Wd_CDEhvAohaFKrEpN8aAs/s1600/resale-price.PNG"><img style="display: block; margin: 0px auto 10px; text-align: center; cursor: pointer; width: 400px; height: 248px;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjO-BxSJDwZxmCaPoRaF9-7HE7GSc_tWU7w-uCFUl31-EwPOdKgqLDevcD1FkpCzYh4JfS2hvUw_lMtLv7515rPyKBV2fJg7YbgVYtDHHa5RnJHecL87_tl4Wd_CDEhvAohaFKrEpN8aAs/s400/resale-price.PNG" alt="" id="BLOGGER_PHOTO_ID_5510268291443386034" border="0" /></a>src: <a href="http://www.hdb.gov.sg/fi10/fi10321p.nsf/w/BuyResaleFlatResaleIndex?OpenDocument" target="_blank">http://www.hdb.gov.sg/fi10/fi10321p.nsf/w/BuyResaleFlatResaleIndex?OpenDocument</a><br /><br />it can be seen HDB resale prices hit the bottom and remained there after '97 Asia Financial Crisis to late 2006. Though this period included the dot com bust (2000 to 2002) and SARS crisis (2003), there is still generally good economic and population growth (local + foreign). Thus it is quite unthinkable that demand for flats will remain stagnant for nearly 10 years!<br /><br /><br /><span style="font-weight: bold; color: rgb(0, 0, 102);">Supply</span><br /><br />From HDB FAQ, it can be seen that they massively overbuilt in 1997 and and apparently took them nearly 10 years to clear their stock:<br /><br /><quote><span style="font-style: italic; color: rgb(255, 0, 0);">...</span><br /><br /><span style="font-style: italic; color: rgb(255, 0, 0);">With the BTO System, flats are built based on real demand. Before any BTO project proceeds, we need to have a clear indication of demand - where to build, what type of flats to build, how much to build.</span><br /><br /><span style="font-style: italic; color: rgb(255, 0, 0);">In this way, there is better management of supply and demand. Before the BTO System, when we tried to build ahead of demand, we ended up with a huge oversupply situation when the financial crisis hit in 1997. Prices were depressed which did not benefit anyone.</span><br /></quote><span style="font-style: italic; color: rgb(255, 0, 0);">...</span><br /><br />src: <a href="http://askhdb.hdb.gov.sg/Home/hybrid/Themes/HDB/Answers_internal_check.asp?MesId=4604291&isCFP=&FolderID=0&ProjectId=7875909&reAskpage=answer.asp&SelectedCategory=&RecordQuestion=" target="_blank">http://askhdb.hdb.gov.sg/Home/hybrid/Themes/HDB/Answers_internal_check.asp?MesId=4604291&isCFP=&FolderID=0&ProjectId=7875909&reAskpage=answer.asp&SelectedCategory=&RecordQuestion=</a><br /><br />So if HDB is not going to build ahead of demand anymore and thus assuming there will not be an over supply of flats in the future, then prices will have already found a floor and the ceiling will be determined by demand. HDB will continue to launch BTO until all the demands (genuine ones) are answered, judging from the number of projects launched in first half 2010 (already more than last year), more coming up in second half 2010 and even more in 2011 if necessary.<br /><br />(src: <a href="http://www.hdb.gov.sg/fi10/fi10296p.nsf/PressReleases/B6B5E10434F42EB64825776900154FF8?OpenDocument" target="_blank">http://www.hdb.gov.sg/fi10/fi10296p.nsf/PressReleases/B6B5E10434F42EB64825776900154FF8?OpenDocument</a>)<br /><br />(src: <a href="http://www.channelnewsasia.com/stories/singaporelocalnews/view/1073777/1/.html" target="_blank">http://www.channelnewsasia.com/stories/singaporelocalnews/view/1073777/1/.html</a>)<br /><br />With the recent drive to sustain economic growth based on productivity growth and not via cheaper foreign labour, the demand for flats should be moderated further. Thus I see that price increase will slow down and subsequently stay flat, but not come all the way down since there will not be a repeat of large number of excess HDB flats.<br /><br /><span style="font-weight: bold; color: rgb(0, 0, 102);">Conclusion</span><br /><br />The era of cheap HDB flats (when HDB overbuilt or even cheaper during my parents time when flats sell at cost) is over. Whether or not the current prices or cash over valuation is justified is not really easy to answer. But should young couples continue to wait for a major price correction? They will need to weigh the opportunity cost of waiting for the price to come down versus the risk of paying much more should their combine income exceed $8,000. It will not be an easy decision.Unknownnoreply@blogger.com8tag:blogger.com,1999:blog-3008642600708028986.post-16134799095608984752010-08-14T09:39:00.002+08:002010-08-14T09:40:48.696+08:00Portfolio restructuring over the last 4 months<span style="font-weight: bold; color: rgb(0, 0, 102);">Partially divested First Ship Lease Trust(FSLT) into Pacific Shipping Trust(PST) on 29 June 2010</span><br /><br />I can count myself 'unlucky' that FSLT had 2 of its ships returned prematurely and took a big hit to its total outstanding contractual revenue and just blame this on the 'business' risk. But looking further into the business to understand that the risk is actually much higher than I thought actually attributes more blame to myself. The high yield comes at a price that I sadly have to pay. Most of the contracts are made when shipping rates are over inflated and ships overvalued. When all things come crashing down, the odds are basically heavily stacked against FSLT. It is already fortunate that only 2 ships are returned. The only good news in this midst of this gloom is that the worse for shipping seems over. Though the global economy is still not on firm footing for full sustained recovery, at least the chance of another big recession is quite slim.<br /><br />I have a habit of raising funds from one sector and putting them back there. Though this make no investment sense, but nonetheless, its just my preference. I decided to divest part of my FSLT into PST. PST also have simiar structure like FSLT but with a more sustainable distribution payout policy and loan repayment scheme. Its recent distribution accretive acquisition is the main factor that entice me to cross over. Though I'm aware that they do not yet have the funds to acquire them and most probably will require equity raising in late 2010 or early 2011, I believe the yield will still be higher post capital raising.<br /><br />To put things in perspective. There are two deep cyclical sectors I'm vested, Shipping and Oil & Gas (O&G) Support. Both are still going through pretty bad storms (poor demand and oversupply of vessels) and no one can tell when the storm will blow over. But I'm pretty sure when the sunlight burst through the clouds, the returns will be good. No better time to invest other than bad times.<br /><br /><span style="font-weight: bold; color: rgb(0, 0, 102);">Partially divested Singapore Airlines(SIA) into Singapore Airport Terminal Services(SATS) on 6 July 2010</span><br /><br />If I'm optimistic about the future of SIA (versus the aviation gloom that just ended), I'm even more optimistic of SATS. As more people fly, both companies will benefit. In addition, for SATS, its newly acquired food business (Singapore Food Industries) is fast becoming a fat cash cow. From its annual report, it can be seen that its benefiting from the opening of the two Integrated Resorts. It is also venturing into Pig farming in Jilin province in China. My view is that SATS will become a strong food supplier as it diversify its income stream away from airport support services, an area that will only become more competitive as more players are brought into Changi Airport.<br /><br /><span style="font-weight: bold; color: rgb(0, 0, 102);">Took more profit from Cambridge Industrial Trust(CIT) into Starhill Global REIT on 29 July 2010</span><br /><br />Though CIT was giving a yield of more than 10% versus that of Starhill Globals's 6%, but in terms of discount to net book value, at 50 cts, CIT is trading at 15% discount while at 58 cts, Starhill Global is trading at more than 35%. Looking through the assets of Starhill Global (Ngee Ann City, Wisma Atria, freehold David Jones Building in Perth, Australia, freehold Roppongi Terzo and PRIMO in Tokyo, Japan) I personally think they don't really deserve to trade at such a 'steep' discount when Capitalmall Trust trades above its net book value! Thus for Starhill Global, I'm looking for at potential for capital appreciation rather than cash flow from dividends like CIT.<br /><br /><span style="font-weight: bold; color: rgb(0, 0, 102);">Conclusion</span><br /><br />While the worst of the global recession seems over, the economic recovery does not seems to be on firm footing yet. Some of the stimulus spending initiated by governments across the globe are not terminated yet. In fact, US actually pledges to further increase their stimulus spending. Thus I presume most of the financial performances reported so far do not reflect their true potential when the global economy fully recovers. Hence I see more investment opportunities ahead, as market overreact to negative news that comes out once in a while.Unknownnoreply@blogger.com7tag:blogger.com,1999:blog-3008642600708028986.post-78419697492191683372010-08-06T22:52:00.001+08:002010-08-06T22:54:36.879+08:00Shopping vs Investing, behaviour peculiarity<span style="font-weight: bold; color: rgb(0, 0, 102);">Sale!!!</span><span class="yiv603706086Apple-style-span" style="border-collapse: collapse; line-height: 27px;font-family:arial,helvetica,clean,sans-serif;font-size:medium;" ><div style="margin: 0px; padding: 0px; line-height: 1.2em; outline-style: none;"><br /></div><div style="margin: 0px; padding: 0px; line-height: 1.2em; outline-style: none;">Whenever there is some genuine sale giving 'huge' discounts, e.g. 50%, 70% off original price. There'll always be enthusiastic crowds grabbing the items as if things are going for free. I recently encountered one for branded handbags near my working area. Most shoppers are predominantly ladies who seems to have a mental database of each item and their prices. They knew their 'true' worth and face no problem telling which are the real bargains. Thus seldom do I see them regret their purchases.</div><div style="margin: 0px; padding: 0px; line-height: 1.2em; outline-style: none; font-weight: bold;"><br /></div><div style="margin: 0px; padding: 0px; line-height: 1.2em; outline-style: none;"><span style="font-weight: bold; color: rgb(0, 0, 102);">Stock market sale</span><br /><br /></div><div style="margin: 0px; padding: 0px; line-height: 1.2em; outline-style: none;">While Great Singapore, Christmas sale happens regularly once a year and some sales never seem to end (e.g. Courts), sales in the stock market occur much more unpredictable and sporadic. In contrast to sales in Orchard Road that drew crowds, sales in the stock market scare away people. The greater the discount, the thinner the trading volume. </div><div style="margin: 0px; padding: 0px; line-height: 1.2em; outline-style: none;"><br /></div><div style="margin: 0px; padding: 0px; line-height: 1.2em; outline-style: none; font-weight: bold; color: rgb(0, 0, 102);">Inflation</div><div style="margin: 0px; padding: 0px; line-height: 1.2em; outline-style: none;"><br /></div><div style="margin: 0px; padding: 0px; line-height: 1.2em; outline-style: none;">When energy prices goes up, people complain of higher transport cost, higher utility bills, higher food prices. No one is happy. But when the stock prices shoot up, the trading volume increases. The crowd are happy. The higher they go, the happier they are to snap one the shares like hot cakes. </div><div style="margin: 0px; padding: 0px; line-height: 1.2em; outline-style: none;"><br /></div><div style="margin: 0px; padding: 0px; line-height: 1.2em; outline-style: none; font-weight: bold; color: rgb(0, 0, 102);">Conclusion</div><div style="margin: 0px; padding: 0px; line-height: 1.2em; outline-style: none;"><br /></div><div style="margin: 0px; padding: 0px; line-height: 1.2em; outline-style: none;">On the surface, it seems like people have 2 brains, one for daily use, the other for stock market. The latter is obviously faulty. However, drilling a little deeper, I can think of 2 reasons for the apparent difference. First, perhaps, have got to do with valuation. While it is quite easy to know the 'true worth' of an IPHONE 4 or a LV bag, it is not so easy to put a value on a particular stock. And when the price of that stock one had been painstakingly research drops like a rock, the further it goes down, the more the person doubt his analysis. Second, greed. It might seems easy money to buy and sell something that continue to worth more with each passing second. Doesn't matter if one is buying high to sell higher, so long as there's a ready idiot to buy from them. While the problem of valuation could be mitigated by diversification and margin of safety, the problem of greed can only be solved when one become the last idiot to buy at the highest price.</div></span>Unknownnoreply@blogger.com4tag:blogger.com,1999:blog-3008642600708028986.post-67741445569968539142010-04-25T14:21:00.019+08:002010-04-25T16:33:30.567+08:00I bought Mermaid Maritime, United Envirotech and AspialNo longer had the luxury of time to blog on each and every transaction within days, I might as well consolidate them into a single article and post them when I had the time. Anyway, it will still serve my intended purpose to track what I do over the years and still garner some feedback, though not as timely as I hope to. But life is all about compromise, isn't it?<br /><br /><span style="font-weight: bold; color: rgb(0, 0, 102);">New addition to my portfolio since the MacArthurCook Industrial REIT error</span><br /><br /><ol><li>Mermaid Maritime on 19 January 2010</li><li>United Envirotech Ltd on 22 March 2010</li><li>Aspial 22 April 20<br /></li></ol><span style="color: rgb(0, 0, 102); font-weight: bold;">Qualitative Reasons behind Actions</span><br /><br /><span style="color: rgb(0, 0, 102);">1. Mermaid Maritime</span><br /><br />Despite seemingly increased effort to cut dependence on oil by going into other forms of energy or greater 'green' efforts on energy conservation, I doubt the demand for oil will be drop in the next 10 years, enough for me to double my returns on all my oil related businesses. After SPC, CH Offshore and KS Energy, Mermaid Maritime is my latest acquisition in this business. Other than SPC, all of them are involved in support related services in the Oil & Gas industry. For Mermaid Maritime, they are primarily involved in tender rig drilling and sub-sea engineering. What attracted me was their seeminly good financial health (cash and equivalent slightly exceeds outstanding debt) and actually traded below net tangible assets.<br /><br /><span style="color: rgb(0, 0, 102);">2. United EnviroTech</span><br /><br />If I'm crazy about oil & gas, I think I as crazy over water too, the other critical resource. I actually got into Dayen Environmental Ltd and got out immediately after I discovered a can of worms. The problem with me was that until I'm am vested into something, I could not find the energy to drill deep enough beyond the business nature, prospects and reported financial. When I knew Dayen actually had disclosure issues (one of them relates to reporting profits and projects clinched but not losses incurred), I got out as soon as I can and fortunately market irrationality allow me <span style="font-style: italic;">even</span> to exit with some profit!<br /><br />Anyway, back to United Envirotech Ltd (UEL), though registered in Singapore, they derived their revenue predominantly from their business in China. The Chairman and CEO, Dr Lin Yucheng was recruited by the Singapore Economic Development Board in 1990 to conduct research and development work in SISIR (Singapore Institute of Standards and Industrial Research), Singapore. He subsequently set up a subsidiary under the Singapore Productivity and Standards Board (PSB)- formed from the merger of National Productivity Board (NPB) and SISIR. The company was involved in environmental, health and safety standards consultancy and environmental engineering. This will later become a subsidiary of UEL.<br /><br />Now, UEL is involved primarily in turnkey projects or building and running of waste water treatment plants in China. The latter provides increasing amount of recurring income and stablises their profitability. One interesting thing about UEL is that it is in almost net cash, not really because they are that great in utilising internal resources for building projects but always raising equity when they need the cash, as the recent two placements show. If I am a major shareholder, I won't be happy with the dilution. But as a small shareholder, I am pretty fine so long as I still get my returns.<br /><br /><span style="color: rgb(0, 0, 102);">3. Aspial</span><br /><br />Aspial had 3 business, jewellery via Lee Hwa, Gold Heart and Citigems; Pawn brokerage services via Maxi-Cash and property developement. It is the 3rd business that attracted me to this company. By now, the property bubble in Singapore is already too obvious to ignore. If so, why do I still choose to buy Aspial? The reason being that Aspial seems to buy only freehold land for development and was 'fortunate' enough to buy most land at relatively low price before the surge in 2H FY09, though it could be much cheaper even earlier after the global financial crisis erupted in FY08. Anyway, the way I read it was that if the bubble continues, they can develope properties to sell at a handsome profit, else, they'll just have to sit on their land, anyway, freehold land don't depreciates.<br /><br /><span style="font-weight: bold; color: rgb(0, 0, 102);">Conclusion</span><br /><br />Wow, that's 4 transactions squeezed into one article. Hopefully as my baby girl grows up, I can still find the time to blog, though my primary 'duty' is still to spend as much time as I can with my beloved baby girl. Once I can get her a little sister or brother, hopefully I can outsourced the attention to themselves, mutual perpetual attention supply via playing, quarreling or fighting ;)Unknownnoreply@blogger.com6tag:blogger.com,1999:blog-3008642600708028986.post-2027106498653676972010-03-20T10:38:00.007+08:002010-03-20T11:54:39.346+08:00Valuer for HDB units, an easy job?After years of painful search and watching the property prices continue to defy recession forces, a friend of mine finally settle for flat in a mature estate with about $50k above (already high) valuation. Querying the valuation of the flat, I discovered it is valued at the higher tail end amongst recent HDB resale transaction. And yet my friend is paying $50k above this.<br /><br /><span style="font-weight: bold; color: rgb(0, 0, 102);">HDB valuation methodology</span><br /><br />I came across a recent article to the Straits Times forum from the Singapore Institute of Surveyors and Valuers commenting on HDB valuation:<br /><br />...<br /><span style="font-style: italic; color: rgb(255, 0, 0);">For homogeneous properties such as HDB flats, the common valuation method adopted is the direct comparison approach. This approach is similar to that used by a potential buyer when considering the purchase of a flat. He would look at the<span style="font-weight: bold;"> location, consider the age, size, design, height</span> and other important characteristics of the flat and <span style="font-weight: bold;">compare the prices paid for comparable flats in the locality</span>.</span><br />...<br /><br /><span style="font-size:85%;"><a href="http://agneschaw.wordpress.com/2008/08/21/straits-times-forum-hdb-flats-no-new-valuation-method/">src: Straits Times Forum: HDB flats: No new valuation method</a></span><br /><br />However, it seems to me the valuer simply value the flat based on recent transaction, pegging to the sales in the higher percentile.<br /><br /><span style="font-weight: bold; color: rgb(0, 0, 102);">Valuer and Stock Analyst</span><br /><br />I commented on market-biased analyst before in my earlier article,<a href="http://market-uncle.blogspot.com/2008/09/analysts-analysis-to-be-taken-with.html"> <span style="font-style: italic;">Analyst's analysis --- to be taken with a tonne of salt?</span></a> that many simply value stocks based on market sentiment, i.e. using high P/E ratio to derive stock valuations during market exuberance and conversely using low P/E ratio when sentiments were poor. Valuing HDB properties by tagging on to the high end of recent transacted prices is no different.<br /><br /><span style="font-weight: bold; color: rgb(0, 0, 102);">Boom Bust Cycle - here we go again</span><br /><br />Sentiments in the property market is definitely pointing north. By valuing flats based on the higher percentile of recent transactions and willing buyers paying hefty cash over value over the inflated valuations to form the next higher transaction price, only lead to self-sustaining perpetual runaway valuations. The stock market parallel being investors bidding up stock prices fueling analysts to issue buy calls with even higher valuations by finding means to justify higher P/E ratios.<br /><br /><span style="color: rgb(0, 0, 102); font-weight: bold;">The Tipping Point</span><br /><br />Any sane investor who lived long enough will know that surging prices will not reach the moon one day. Many events, usually unexpected, could put an end to all such craze and caught many by surprise even if there will be more 'experts' coming out to warn people as prices continue to defy gravity. The direct opposite will occur when prices tumble as all tried to exit the market at the same time. Stock analysts will slap stocks with ever lower P/E ratios as market sentiments continue to worsen. When sellers of HDB flats begin to sell below valuations that they finally agree to be over inflated, this leads to lower transaction prices and hence even lower valuations for other sellers.<br /><br /><span style="color: rgb(0, 0, 102); font-weight: bold;">Conclusion</span><br /><br />While price surging and plunging in accordance to economic cycles is a natural phenomenon, the amplitude can be better managed if all valuers (analyst and property valuers) can be more impartial in their analysis, anchoring their judgment on solid fundamentals instead of ambient sentiments. Buyers (flats or stocks) need to do their part too, in not outbidding each another to ridiculous prices.Unknownnoreply@blogger.com11tag:blogger.com,1999:blog-3008642600708028986.post-57999167475540489832010-03-06T11:39:00.005+08:002010-03-06T12:08:56.512+08:00Do we need to monitor the stock market so closely?<span style="font-weight: bold; color: rgb(0, 0, 102);">Hectic but fruitful life after a new entrant</span><br /><br />Ever since my girl was born and my confinement lady left, life have been very hectic, tiring and sometimes frustrating. Eventually, when she learnt to smile at us, its had been one of the happiest moment of my life and instantly felt all this was worth it :). Looking back, my last post was more than 3 months ago and I haven't really got the time to meddle with my portfolio or look up company reports ever since.<br /><br /><span style="font-weight: bold; color: rgb(0, 0, 102);">Missed opportunities?</span><br /><br />As my girl grow up, nearing her fourth month on earth (not counting the time she spent evolving in my wife's womb), she finally seems to be able to adjust to our earthly culture and give me some peace to do my stuff without constantly crying and requiring us to decipher what she want. So finally I an able to find time to stock take on my portfolio, read up a little on my companies and what had gone on in the last 3 months. Surprisingly (at least to me), I neither didn't miss much of the action nor any really great opportunities. As far as fundamentals go, the reporting seasons only occur once every 3 months and the last one was just concluded. Looking at the results and outlook stated in the financial reports of my companies and those I'm interested in, none really warrant much action and there isn't really much changes in their stock price for me to bang wall on missed opportunities.<br /><br /><span style="font-weight: bold; color: rgb(0, 0, 102);">Investment style for the busy</span><br /><br />I recall speaking to friends or colleagues on investing. Many who believe in the need to invest would rather outsource the task via funds, citing the reason of being too busy to monitor the stock market. Looking at my current situation and looking back, I can confidently reiterate that self driven investment doesn't really need to take up alot of one's time.<br /><br /><span style="color: rgb(0, 0, 102);">Exploiting economic cycles</span><br /><br />For the ultra-busy who have nothing much to spare other than to breathe, they can easily exploit economic recessions the likes of 1983, 1997, 2001/02 and 2008/09 to pick up decent blue chips are cut throat discounts. All they need to do is understand the business of these blue chips and are confident they will survive the economic crisis. Once the storm blow over, they will be siting on huge paper profit.<br /><br /><span style="color: rgb(0, 0, 102);">Exploiting business changes</span><br /><br />For those who can afford a little more time, they only need to check SGX every 3 months during reporting seasons for updates. There will still be some meat left to exploit business turnarounds (which will take a few quarters for the company to return to solid performance) or new lucrative business ventures (which will also take several quarters before these new directions pay off handsomely in terms of better profits).<br /><br /><span style="font-weight: bold; color: rgb(0, 0, 102);">Conclusion</span><br /><br />Looking forward, I will not have the time to invest or blog as much as I like to, but I can be sure I will still be able to realise my goals for my investment.Unknownnoreply@blogger.com5tag:blogger.com,1999:blog-3008642600708028986.post-30053643158758638842009-12-26T14:04:00.019+08:002009-12-26T15:20:31.669+08:00Investing in REITs - Really for the yield?<span style="font-weight: bold; color: rgb(0, 0, 102);">Business model of typical REIT</span><br /><br />People invest in Real Estate Investment Trust (REIT) primarily for the stable dividend yield. REITs are supposed to provide good source of passive income for those with neither the cash nor the leverage capacity to invest in typical properties for passive rental income. Is this really so?<br /><br />Before answering that question, let's look at the business model of a typical REIT. In layman terms, REIT acquire properties and lease them out for rental income. The funds for acquisition comes either from shareholders (share issue), banks (loans) or both. REIT is supposed to pay out ALL profit from rental income less all other business expenses (including bank loan interest) required to keep the REIT alive.<br /><br /><span style="font-weight: bold; color: rgb(0, 0, 102);">During Good Times</span><br /><br />When the economy is booming, demand for factory, office and retail space pushed up rents and hence the record rental income for REITs, pushing up the dividend per unit (DPU) of these REITs. However, the prices of these REIT surge even higher, and hence the yield is actually very low. For blue chip REIT like the Capitalmall Trust, yield got as low as mere 3 to 4% in 2007. At such yield, I am quite puzzled whether the investor are indeed after the dividend yield.<br /><br />During such time when demand for practically everything is high, profit is easy to come by and credit is even easier. DPU accretive property acquisitions continue to be made even when property bubbles seem to form. Perhaps the REIT management think no matter how much they pay for the properties, with easy credit, they can always milk much more from the tenants. Perhaps investor think the same way too, and look pass the current depressed yields for brighter future returns.<br /><br /><br /><span style="font-weight: bold; color: rgb(0, 0, 102);">During Bad Times</span><br /><br />Unfortunately, all good things must come to an end one day, especially those built on excesses. The subprime crisis put an end to the easy credit and the ensuing recession saw demand for factory, office and retail space plunge, driving down rents and rental income for REITs. Since REITs pay out all their profit, little is left to repay debts and when the loan are due, some faced problem refinancing their debt. Investor confidence in such REITs sunk like a rock in water. For example, Cambridge Industrial Trust, without a strong sponsor and concern was material that it might not survive, its annualised yield at one point went above 25%!<br /><br />Inherent to the REIT's business model of growth by debt and paying out every cent less all expenses, continual injection of funds is their sole source of life sustaining blood. Thus capital call in form of debt refinancing (at prevailing interest rate) or equity raising exercise via rights or placement is inevitable.<br /><br />For debt refinancing, the consequent is dip in DPU if interest rate is much higher than before.<br /><br />But for equity raising exercise, dilution becomes a significant concern for those who do not have the funds to subscribe to rights entitled to them or left out cold in an event of private placement to new shareholders. The latter is especially unfair to current shareholders and normally met with angry shareholders like the recent case of MacAuthurCook Industrial REIT's dilutive recapitalisation plan.<br /><br />Whichever route the REIT take, by virtue of their business model, high DPUs or high dividend yields are never sustainable.<br /><br /><span style="font-weight: bold; color: rgb(0, 0, 102);">Conclusion</span><br /><br />If high yields or high DPU is not sustainable, is REIT never a worthwhile investment? I don't think so. Like all businesses, each have their intrinsic business cycles and one can benefit by exploiting the ups and down. For REIT, during recession, rents are low, property valuation are low, credit are difficult to come by and share prices depressed. At this juncture, the moment they can sort out their outstanding debt issues (i.e. refinancing, rights, placements), there is no better time to buy them and await the eventual economic recovery.<br /><br />Thus in my opinion, REIT is better as a one-off capital appreciation investment than long term passive income generator.Unknownnoreply@blogger.com14tag:blogger.com,1999:blog-3008642600708028986.post-47295373750063985472009-12-11T12:43:00.015+08:002009-12-11T14:49:08.263+08:006/6 Hindsight vs 0/6 Foresight<span style="font-weight: bold; color: rgb(0, 0, 102);">6/6 Hindsight</span><br /><br />Comment and analysis articles started popping up everywhere <span style="font-style: italic;">after</span> Dubai World requested creditors to delay debt repayments for 6 months. Articles explaining how the collapsed of these property castles built on shaky grounds of leverage was just a matter of time and listed so many warning signs that any idiot could predict this crisis with ease. This kind of postdated prediction also occured after the subprime crisis erupted in the United States.<br /><br />While it is true that genuine warning signs were indeed present and if people took heed, many of such crises could have been avoided. But in this era of information barrage, where one has to sieve real information from fake, good from bad and useful from useless, spotting a few true red flags from countless fake cry wolves are always a challenge.<br /><br /><span style="font-weight: bold; color: rgb(0, 0, 102);">0/6 Foresight</span><br /><br />Future cannot be predicted but with adequate preparations and precautions, adverse consequences could be mitigated or potential opportunities exploited. That's precisely the reason why I neither believe nor made sense of technical analysis. Looking back, any bottom or peak looked so obvious, but looking forward, how many times had a double-top resulted in even higher 'top' when the forward 'obvious' would have been a sell down or profit taking? But understanding and appreciating economic cycles would give one a much better 'foresight' as all good things must come to an end one day or fine weather will one day re-emerge after a terrible storm.<br /><br /><span style="font-weight: bold; color: rgb(0, 0, 102);">Mistakes in investment</span><br /><br /><a href="http://www6.lexisnexis.com/publisher/EndUser?Action=UserDisplayFullDocument&orgId=574&topicId=100016870&docId=l:1089399593&isRss=true">Commenting on the China-based firms listed on SGX and their corporate governance concerns following a year of scandals afflicting a few such firms, SIAS chief, Mr David Gerrad</a>, mentioned business failure and human failure. I could not agree more that investors are already prepared for the first failure but not the second. That is what investment is about. Looking at my past mistakes (right up to the most recent one involving Macauthurcook Industrial REIT, MI-REIT), I need to add that human failure has another dimension- human failure by the investor.<br /><br />Human failure on the corporate end cannot be tolerated but sad to say, can't really be avoided (if the management is out to be shady). But human failure on the investor side can be avoided if he exercise more care in his research on the company. Blame my luck if the CEO or chairman runaway with the company's cash but blame myself if I count my beans wrongly. Thus MI-REIT is my most painful mistake despite being one of the least costly simply because it is a systematic error on my part.<br /><br />To me, business failures are random errors that can be mitigated by diversification & margin of safety. 0/6 foresight dictates that luck plays a part in the eventual outcome. However, human failure by the investor is a systematic failure that will skew the final result for the worse.<br /><br /><span style="font-weight: bold; color: rgb(0, 0, 102);">Conclusion</span><br /><br />I neither bother to improve my 0/6 foreight nor believe it is ever possible unless I have privilege information, so all I can do is to be more careful and meticulous (being careless or lazy is a fatal flaw for any investor profile) in my future investment adventures.Unknownnoreply@blogger.com4tag:blogger.com,1999:blog-3008642600708028986.post-21772556326334138242009-11-21T14:20:00.009+08:002009-11-21T16:48:13.601+08:00I bought MacArthurCook Industrial REIT on 18 Nov --- a bet gone wrong?<span style="font-weight: bold; color: rgb(0, 0, 102);">Some history</span><br /><br /><ol><li><span style="font-weight: bold;">6 November 2009</span>: MacArthurCook Industrial REIT (MI-REIT) announced a severely value destructive recapitalisation plan on the 6 November 2009. </li><li><span style="font-weight: bold;">11 November 2009</span>: Cambridge Industrial Trust (CIT) annouced the usage of $10.5m out of $28m from recent private placement to acquire 9.76% interest in MI-REIT.</li><li><span style="font-weight: bold;">16 November 2009</span>: CIT alerted MI-REIT unitholders to the value destructive nature of the recapitalisation plan and urge them to vote against the resolution at the EGM on 23 November. They intend to vote out the managers of MI-REIT and install themselves as the manager of the REIT.</li><li><span style="font-weight: bold;">17 - 20 November</span>: Separate rallying announcements, newspaper ads by CIT and MI-REIT to seek support against and for the recapitalisation plan respectively</li><li><span style="font-weight: bold;">20 November</span>: MAS announced that it will not approve managers of CIT to manage MI-REIT due to potential conflict of interest.<br /></li></ol><br /><span style="font-weight: bold; color: rgb(0, 0, 102);">The recapitalisation plan</span><br /><ol><li>Issuing 78.5m new units to AMP Capital Investors (AMPCIL) at 28 cents</li><li>Issuing 142.9m new units to Cornerstone Investors at 28 cents</li><li>Issuing 975.6m rights at 15.9 cents (2 rights for 1 MI-REIT unit) to all unitholders, including AMPCIL and Cornerstone Investors.<br /></li></ol>With 266.4m outstanding units as at 30 September 2009, new units constituted a hefty 83% of existing units! No wonder the dilution and value destruction are so severe!<br /><br /><span style="font-weight: bold; color: rgb(0, 0, 102);">Value destruction</span><br /><br />From the proposed recapitalisation plan announced on 6 November, the financial effects pre and post recapitalisation are stated as follows:<br /><br /><span style="color: rgb(0, 0, 102);">Before </span><br /><br />NAV per unit: 92 cents<br />DPU (half year): 3.45 cents<br />Yield (annualised): 16.8% (based on MI-REIT unit traded at 41 cents)<br /><br /><span style="color: rgb(0, 0, 102);">After</span><br /><br />NAV per unit: 31 cents<br />DPU (half year): 1.04 cents<br />Yield (annualised): 9.3% (based on MI-REIT unit traded at 41 cents)<br /><br />Issuing new units to AMPCIL and Cornerstone Investors at 28 cents a share at a discount of 30% to traded price of 41 cents before the recapitalisation plan was announced and 70% discount to NAV was upmost unfair to existing shareholders!<br /><br /><span style="font-weight: bold; color: rgb(0, 0, 102);">Better to let it fail?</span><br /><br />Before the announcement of the recapitalisation plan, MI-REIT was trading at about 40 cents, or 56.5% discount to NAV. After the recapitalisation, if the market continue to value it at the same discount to NAV, it would mean a share price of about 13.5 cents!<br /><br />Allowing MI-REIT to fail would mean a fire sale of its properties. Though the process will take some time and most, if not all, would go at a huge discount to last the valuation on Sep 2009, existing unitholders can use the NAV per unit to guage how much they will get back. Assuming a 50% discount to NAV, each unit can still fetch 46 cents! This is already much higher than the 31 cents NAV per share after recapitalisation and even higher than the 41 cents before its announcement!<br /><span style="font-weight: bold; color: rgb(0, 0, 102);"><br />A bet gone wrong?</span><br /><br />It was only after CIT highlighted the severe value destructive nature of the recapitalisation plan that I find out more about it. Satisfied that the ridiculous plan is indeed a totally unfair deal for existing shareholders, I am willing to bet that they will not support such a deal. Since it was a bet, I decided to risk less and bought less than what I normally would for other investment. Thus I bought some on 18 November.<br /><br />I was hoping that the plan will be rejected, CIT take over MI-REIT, and come up with a fairer recapitalisation plan, e.g. rights, new loan facility etc; restructure it, sell off unperforming assets and ulimately merge the two REITs.<br /><br />However, that hope was dashed when MAS announce it would not approve CIT's managers to manage MI-REIT on concerns for conflict of interest. Thus my only hope left was to see the recapitalisation plan get voted down and have MI-REIT liquated to unlock its value for existing shareholders.<br /><br /><span style="font-weight: bold; color: rgb(0, 0, 102);">Conclusion</span><br /><br />Investment is all about risk and I am willing to take calculated risk. I did my sums and theoretically, the ridiculous recapitalisation plan should be voted down. However, as there are sometimes no logic in market behaviour, I can't be too sure until the votes are counted.Unknownnoreply@blogger.com27tag:blogger.com,1999:blog-3008642600708028986.post-69013691245934613952009-10-31T10:03:00.015+08:002009-11-14T16:22:58.417+08:00Cut loss on United Food and Ocean Sky, invested into Suntec REIT on 28 Oct 2009<span style="font-weight: bold; color: rgb(0, 0, 102);"></span><span style="color: rgb(0, 0, 102);">United Food Holdings</span><br /><br />Mistakes are mistakes, no matter how they are packaged. United Food Holdings is one of the most spectacular value destructing business on my portfolio. Starting with a huge cash horde which translates into a large cash per share, it can easily qualify as one of my best cigar butt. But as time go on, the management demostrated outstanding capability to drain it with seemingly failed but huge investments (land, soya beans).<br /><br /><span style="color: rgb(0, 0, 102);">Ocean Sky International</span><br /><br />Unlike United Food Holdings, I did not classify Ocean Sky as a cigar butt in the beginning. However, just like any typical manufacturers hit hard by the falling orders due to the ongoing economic recession, they are driven into quarterly losses.<br /><br /><span style="color: rgb(0, 0, 102);">Suntec REIT</span><br /><br />Looking at the falling office rents, sliding occupancy rates, Suntec REIT might not seem to be a good investment option. However, even at current dismal rents and occupancy, Suntec REIT already offer nearly 10% yield based 3Q DPU and the price I bought.<br /><br />Going forward, I have reasons to be optimistic about rising rents, occupancy rates and hence DPU. Looking at the Prime Grade A Office Rental Trend posted in the 3Q presentation slides, rising and falling rents just mirror cycling economic trends. As such, once the economy regains firmer footing, the demand for office space and retail space will resume, and especially after the completion of Marina Bay financial centre and Sands IR that further bring more vibrancy into the area. But in the short term, rents and hence DPU for Suntec REIT could worsen before it get better.<br /><br /><span style="font-weight: bold; color: rgb(0, 0, 102);">Action</span><br /><br />I can choose to sit on United Food and Ocean Sky, especially the latter, and wait for them to recover with the broader economic situation. But going through my options, I see more potential in Suntec REIT than Ocean Sky, in terms of recovery.Unknownnoreply@blogger.com5tag:blogger.com,1999:blog-3008642600708028986.post-62205583557549774282009-10-18T16:02:00.004+08:002009-10-18T16:19:29.981+08:00Took profit on Cambridge Industrial Trust and Courage Marine on 2nd October 2009<span style="font-weight: bold; color: rgb(0, 0, 102);">Rationale</span><br /><br />Both had almost doubled in share price since I acquired them. For past investments, I would have sold 1/2 of my holdings to recover my capital and let the 'profit' grow. But for Cambridge Industrial Trust (CIT) and Courage Marine, I decided to trim my holdings by about 1/3 each instead.<br /><br />I decided to keep more of their shares because I am still confident of their potential to grow much further once the regional and global economy recover strongly.<br /><br />On the other hand, I still took some profit because no matter how big that potential is, I prefer to diversify and raise cash for future investments.Unknownnoreply@blogger.com1tag:blogger.com,1999:blog-3008642600708028986.post-66214325387448108592009-10-10T12:12:00.010+08:002009-10-18T16:20:03.434+08:00Reinvested remaining proceeds from SPC into KS Energy on 29 September 2009<span style="font-weight: bold; color: rgb(0, 0, 102);">Motivation</span><br /><br />Despite the recent oil price correction from above USD $147 last year to current level fluctuating around USD $70, I believe the demand for crude oil for energy needs, and accompanying support services will surge again as the world economy gets back on its footing.<br /><br /><span style="font-weight: bold; color: rgb(0, 0, 102);">KS Energy</span><br /><br /><a href="http://www.ksenergy.com.sg/about.html">KS Energy</a> operates in the oil & gas industry. It has 2 main core business segments, trading of capital equipment and provider of capital equipment chartering, drilling and rig management services. It is the latter that I see potential.<br /><br /><span style="color: rgb(0, 0, 102); font-weight: bold;">Business Performance</span><br /><br /><a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjNXtX_JCQjW_jpP8SJOQzEhr5Km7aL7w0vnlW-yKgLnmntPI9dkAxPWczBSUQQKmmmOwJ_w-wKWu0oSEA3aMeHUidXtkg5OKAqxyNxsc9W4vftKSwJHPH9II4uq268qm2kwLPDcv0MD88/s1600-h/ks.PNG"><img style="margin: 0px auto 10px; display: block; text-align: center; cursor: pointer; width: 400px; height: 249px;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjNXtX_JCQjW_jpP8SJOQzEhr5Km7aL7w0vnlW-yKgLnmntPI9dkAxPWczBSUQQKmmmOwJ_w-wKWu0oSEA3aMeHUidXtkg5OKAqxyNxsc9W4vftKSwJHPH9II4uq268qm2kwLPDcv0MD88/s400/ks.PNG" alt="" id="BLOGGER_PHOTO_ID_5390825976965354450" border="0" /></a><br />Ignoring other operating income that normally arose from divestment of investment or interest income, profitablitiy seems to turn the corner since 3Q 2008. With a lower base in 3Q 2008, 3Q 2009 should see a better improvement in earnings.<br /><br /><span style="font-weight: bold; color: rgb(0, 0, 102);">Reason to be optimistic - leveraging on more economic locomotives</span><br /><br />The surge in world demand for resouces in 2007 to 2008 might be only a prelude to a much bigger one in the next decade, 2010-2019. The global economy used to be pulled by one major (US) and several smaller (Eurozone, Japan) locomotives. The next decade will see, for the first time in recent history, several huge locomotives in operation together. These include US (awaiting recovery), China, India and Brazil. Together with the support locomotives from Eurozone and Japan, the pulling force in the next decade could be very powerful.<br /><br />The consequence is a surge in demand for resources and services the world can ever produce. Unfortunately, the demand cuts both ways. On one hand, asset and security prices will be boosted and the next bubble that dwarf the one that burst in 2008 may well occur. On the other hand, inflation will break through the roof and governments around the world will have a hard time containing it.<br /><br />Unless there is a concrete switch into alternative sources of energy, demand of oil and gas and its supporting services surge again, on a much larger scale. This is where I believe KS Energy, CH Offshore (that I invested earlier) and many other (currently more expensive) providers will stand to benefit.<br /><br /><span style="font-weight: bold; color: rgb(0, 0, 102);">Risk</span><br /><br />One of my main point of concern for KS Energy is its debt, though it manage to reduce it somewhat via recent fund raising activities. KS Energy's growth and expansion strategy is much more aggressive than CH Offshore and I hope it does not more grow broke. Even though the recent credit crunch is easing, there is still a high chance it can occur again in the near future.<br /><br /><span style="font-weight: bold; color: rgb(0, 0, 102);">Conclusion</span><br /><br />With the investment in KS Energy, my investment in oil & gas industry is more or less completed. I'll turn my attention to food commodities now, for the same reason I go into oil & gas segment.Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-3008642600708028986.post-29968792386837031792009-09-19T10:49:00.009+08:002009-09-19T19:19:20.468+08:00Investing in gold, a worthwhile option?As gold price rose past USD 1,000, there seems to be a renewed interest in investing in gold. I am pretty curious to find out whether this is a worthwhile adventure.<br /><br /><span style="font-weight: bold; color: rgb(0, 0, 102);">USD quoted commodities</span><br /><br />As with many commodities such as crude oil, gold is quoted in USD. When USD depreciates against major world currencies, gold prices tend to rise in assumption that value of gold remains unchanged (neglecting inflation to keep the discussion simple). If this assumption is true, then investing in gold for anybody leaving outside United States becomes more of a forex investment than a commodity investment.<br /><br /><span style="font-weight: bold; color: rgb(0, 0, 102);">Is gold expensive now?</span><br /><br />The following charts shows the gold prices in USD and USD/SGD exchange rate over the same period.<br /><a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi8SOvgA0IG6hxqt-G8cQv7iNmPu3V4cPrZq2zqZpDoAKwOW0M2tyNFI1hzRCyIgc7hBnnrx-ax5LK6u4TkV79dmKEm5xmJgu0YhOTsoYqftNjfNujsSKJ_h3yX-3uYDPVImNGUIXjNg1E/s1600-h/5yr-gold-usdsgd.png"><img style="margin: 0px auto 10px; display: block; text-align: center; cursor: pointer; width: 370px; height: 400px;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi8SOvgA0IG6hxqt-G8cQv7iNmPu3V4cPrZq2zqZpDoAKwOW0M2tyNFI1hzRCyIgc7hBnnrx-ax5LK6u4TkV79dmKEm5xmJgu0YhOTsoYqftNjfNujsSKJ_h3yX-3uYDPVImNGUIXjNg1E/s400/5yr-gold-usdsgd.png" alt="" id="BLOGGER_PHOTO_ID_5383014044093489842" border="0" /></a><span style="font-size:85%;">source:<br /></span><ol><li><span style="font-size:85%;">gold prices: http://www.goldprice.org/gold-price-history.html#36_year_gold_price</span></li><li><span style="font-size:85%;">currency: http://sg.finance.yahoo.com/currency</span></li></ol>Indeed, for Singaporeans, the gold price looks like a mirror image of USD/SGD exchange rate chart. Thus, is gold expensive or cheap now?<br /><br />In January 2005, gold cost about USD $430 an ounce and 1.63 SGD fetch 1 USD then, thus it was about SGD $700 an ounce. Today, 18 September, gold cost about USD 1,014 an ounce and now 1.4149 SGD fetch 1 USD, thus gold cost $1,434.70 now (about twice as expensive). That is a growth of slightly over 100% versus <a href="http://www.singstat.gov.sg/stats/themes/economy/hist/cpi.html">inflation of about 10% in the corresponding period</a>. Thus I do think gold IS expensive now.<br /><br />A different conclusion might be derived using data stretching beyond 2005 but I could not find these historical figures. Nontheless, looking at historical gold prices:<br /><br /><a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjKdvjPrqfvCepUtARl3_6_aOfvK15dZ3hcMcTeQK9bDy8YcKA70s_tkVklomwRVD9v9jHMqFwDGOj6vtGGTPc32d9sPUoSGbNiBhdlVtkhJvW0-Bo7xahBUazIhHZvwEUcxKxYU7Hn058/s1600-h/gold_all_data_o_usd.png"><img style="margin: 0px auto 10px; display: block; text-align: center; cursor: pointer; width: 400px; height: 276px;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjKdvjPrqfvCepUtARl3_6_aOfvK15dZ3hcMcTeQK9bDy8YcKA70s_tkVklomwRVD9v9jHMqFwDGOj6vtGGTPc32d9sPUoSGbNiBhdlVtkhJvW0-Bo7xahBUazIhHZvwEUcxKxYU7Hn058/s400/gold_all_data_o_usd.png" alt="" id="BLOGGER_PHOTO_ID_5383014330090236130" border="0" /></a><br />gold was never more expensive.<br /><br /><span style="font-weight: bold; color: rgb(0, 0, 102);">Investment opportunity?</span><br /><br />As with ANY rationale investment, I aim to buy low and sell high and profit from the difference. While buying high and selling higher can be potentially profitable, the risk could be disportionately higher and not a route I am keen to take.<br /><br />However, assuming quoting gold in USD is a thing to stay (similar problem afflicts crude prices), as USD budget deflicit widened and current account deficit worsen as US try to spend their way out of recession (essentially printing USD), USD against major currencies (incl. SGD) could continue to slide, thus providing a strong lift for gold prices.<br /><br />How far US deficit will grow, how far USD will continue to slide and how much lift could be provided for gold is anybody's guess and I'm NOT comfortable with betting on it.<br /><br /><span style="font-weight: bold; color: rgb(0, 0, 102);">Alternative investment?</span><br /><br />On the assumption that US cannot allow fiscal deficit to grow indefintely and hence USD will not depreciate beyond gross cost of paper it's printed on, USD (against SGD) could be a better bet. i.e. an even riskier bet of buying 'cheaper' USD now, wait for the US recession and budget deficit storm to blow over (how long?) and buy gold when USD regains its strength. By then, gold price will have come down and USD will have traded much higher against SGD. Gold becomes cheap once more.<br /><br /><span style="font-weight: bold; color: rgb(0, 0, 102);">Physical Gold, anybody?</span><br /><br />It is quite apparent I'm not keen on gold as an investment. But I did toy with the idea of buying some physical gold for fun, i.e. just to feel shiok. No, I'm not talking about gold jewellery, but real, solid gold.<br /><br />Phyiscal gold can be purchased from <a href="http://www.uob.com.sg/personal/investments/treasury/precious_metals.html">UOB</a> at a premium above traded price and prevailing GST. While a kilo-bar is too expensive to buy and crazy to leave it at home, a bullion coin is nice to keep as a souvenir. Maybe I'll get one when the gold becomes cheap, again.Unknownnoreply@blogger.com8