Wealth Buch -- Journey towards Financial Freedom

Reminder: Saizen REIT Warrants expiring soon

2012-05-25T01:51:00.001+08:00

Just a friendly reminder.

The warrants for Saizen REIT expires on 1st June 2012.

You may want to see how to exercise your warrants from this link:

How to Exercise Your Warrant Options (SGX)

At the moment, my average cost of 0.161 is in the red. Dividends of 0.0189 has been received so far. :(

What do I expect after 1st June 2012?

I'm pretty sure that Saizen will follow in the footsteps of AIMSAMPIREIT. There should be a share consolidation soon.

I'm prepared for a 5 for 1 or 10 for 1 share consolidation. I'm expecting a 5 for 1.

Peace out.

In case anyone is interested, here's a video on Saizen from investor central
http://video.xin.msn.com/watch/video/saizen-reit-what-skeletons-are-in-the-closet/pforc6gc?src=v5%3ashare%3apermalink%3a

Path to Financial Freedom -- Create your exit plans

2012-02-01T02:34:00.004+08:00

I'm referring to the following blog post link
http://www.cpf.gov.sg/imsavvy/blog_post.asp?postid=943438268-310-6846058964
and perhaps others with a similar mindset.

In the post, the author lists 5 steps to financial freedom:
Step 1 – Boost your Active Income
Step 2 – Get Rid of Unnecessary Debt
Step 3 – Save More
Step 4 – Reduce Spending and Live Within Your Means
Step 5 – Invest For Passive Income

I do not know anything about the background of the author, but interestingly, to get out of the rat race, his mentality and suggestion, like many, is actually to get into the rat race and be the best rat among all.

Fair enough, especially if we start with a near zero networth. I started the same way.

But... is the road to financial freedom so direct? I used to think it was, but gradually, as you might have seen from some of my older posts, I start to have the following thoughts:
1) What's the point of attaining financial freedom at a ripe old age? Use it for medical? (Read: 1 million dollars... so what?)
2) Is there any point being a millionaire scrooge? (Read: Millionaire Scrooge?)
3) We all have different definitions of money... and hence financial freedom (Read: Financial Relativity)

In my opinion, the 5 steps by the author is a very sound retirement plan. One can retire comfortably provided one follows the plan with good discipline.

The harsh truth: This is, to me, a newer and more modern rat race, thinly veiled and disguised as a path to financial freedom.

See the similarity.

This was proclaimed as the rat race:
Study hard, get good grades, get good career, work hard at career, get promoted, retire comfortably with pension and savings.

This is now proclaimed as the way to exit the rat race, attaining financial freedom:
Study hard, get good grades, get good career, Work hard at career, disciplined savings plan, money to put into investments that will generate you passive income so that you can retire.

There isn't much difference to me. I see the difference as between being fed by pension vs being fed by your investments. Money, instead of going into your pension fund, goes into your investments.

What then, is truly the path to financial freedom? Is it merely working hard, saving well, cutting debts, spending less and increasing your passive income? I used to think so, and as I mentioned, this is actually the newer and more modern rat race.

Now, my understanding has been updated.

The path towards financial freedom, is about having a sound exit plan for everything you do.
(Read: http://ktservices.blogspot.com/2011/02/importance-of-exit-plan.html)

For example:
Having a massive amount of passive income is about having an exit plan for active income.
Having a massive amount of savings (or inheritance) is an exit plan for active working.
Having the ability to do freelancing/tuition/coaching is an exit plan for career, for school.

Exit plans are also for equities buying, business set ups, and etc etc.

In the book The Richest Man In Babylon, there was one story in which copper was imported for the King. The importer had an exit plan ready; should the king decide not to buy the copper for his plans (the main business bet), they could still sell the copper to the metal workers (the exit plan).

The lesson in this story is about finding exit plans for your investments or business ventures.

Building a path towards financial freedom is about building/creating and strengthening your exit plans.

Let me summarize what I have done over the past few months to build my exit plans (as can be seen in my goals).

1) Career
I have started building an exit plan ever since graduation. I gave tuition as a freelancer, and recently invested in a tuition centre.

This is exit plan 1.

To further strengthen, I plan to synergise my exit plan 1 with more plans, in terms of authoring my book, creating my apps. While nothing is concrete yet, these form my building blocks.

For my planned publishing, my exit plan would be to use the book for my current and future students.

For my iPhone apps creation, I needed a laptop anyway. That itself is an exit plan for me. The laptop satisfies a want (for a more than sufficient powerful computing), a need (for portable computing), and functions as an investment for future apps creation. Apps creation is itself a potential money making machine in the future to synergise with my educational skills, as well as being a hobby of mine (the exit plan).

In addition, another exit plan I have is a PhD study planned. I teach physics olympiad to secondary schools as well, and another exit plan would be to coach students in a polytechnic as an adjunct lecturer.

Thus, I consider myself as being free from my career. I can choose to stay or not to stay as I'm not limited or held by the need for the job's salary payout at all. I work more for socialising than for money. This itself is a form of financial freedom.

2) Equities
This is perhaps a more commonly practiced principle, an exit plan for your equities. As everyone knows, Berlian Laju has been suspended. This comes from me not having an exit plan, be it sound or not, in the past.

Traders will tell you to always plan for your exits, i.e. which point to take profit and which point to cut loss.

Right now, my exit plan for equities (almost none) is mainly "exit" via receiving dividends. E.g. for Starhub, I will get back my principle sum within 10 years.

So what is your exit plan?

Berlian Laju suspended!

2012-01-27T17:53:00.003+08:00

I had previously posted about Berlian Laju here:
http://wealthbuch.blogspot.com/2010/10/berlian-laju.html

This was a purchase from a long time ago. I had the opportunity twice to cut loss with $800 loss, but I didn't. It ballooned to $10k.

Too bad my bet didn't work out... Probably have to write off 10k from my portfolio.

Lessons learned:
1) If you don't cut loss early enough when things looks wrong, the loss will cut you deeper.
2) A TA purchase should be given TA treatment. Do not switch to FA or hope treatment. Vice versa.

Returning almost all of 2011 dividends to the market through this single counter. Thanks Mr. Market for the lessons :)

On the bright side, my rubbish counters have reduced by 1.

Goals for 2012, The Year of the Dragon

2012-01-18T00:21:00.000+08:00

This post was sort of inspired by jwt from LP's cbox. Basically, he asked me if I have any updates on my personal goals, and he would be interested to read. I was quite surprised and honoured actually. I was too busy to really spend time to update this blog, but I was thinking, hey, I might as well consolidate my thoughts in this post to guide myself too. After all, typing everything out helps me (1) consolidate thoughts in a more structured and logical manner, and (2) take more responsibility and action for my goal because I have announced to the world.

Dragon Year 2012 is another year for me to achieve multiple goals. Why set these goals, one may ask. Well, I have set myself goals for year 2010 and year 2011. While I do not necessary achieve all my targets, at least my actions are in the correct direction. I will have an aim in life, something to look forward to, and when achieved, a feeling of exhilaration.

In an earlier post, I have briefly mentioned my goals for 2012:
http://wealthbuch.blogspot.com/2011/11/as-year-2011-comes-to-end.html#more

Here, I will try to put more clarity into my thought processes. I have divided into three groups.

Group 1: Equities and Bonds

1) Goal of achieving $2k average dividends per month, i.e. $24k dividends a year
I have shared my updated portfolio strategy into equities.

Basically, I have not put any extra funds into the market because I was saving up to take a stake in a tuition centre.

The most recent purchase will be the 10 lots of CMA Retail bond that I have acquired. At 3.8% coupon, this will add another $380 to my annual dividend amount.

Aztech as a company has fallen way below my expectations, to the effect of stopping dividends payout. I will be looking to divest this.

Berlian Laju, Hor Kew and Cosco are my worst non-performing counters, and I will be looking to divest too.

CitySpring, while non-performing, is still giving dividends. I can take my time on this counter.

The other equities, some being in green and some in red, are still performing well, and giving dividends. Apart from property companies like GLP and CMA, which did not perform well nor give much dividends, the rest are pretty stable since most are blue chips.

My dividends for 2011 exceeded $10k, and I hope to grow this further in 2012.

Group 2: Business Startups
1) Setting up of a tuition centre
I've agreed to take a 50% stake in a centre, and the deal will be settled within a month.

I have already moved my current students for 2012 to the centre. Most likely I will be earning MUCH lesser from this action from active tuition as overall hours spent on teaching might be reduced, but I hope it will work out in the long run.

I can't really know how it would turn out, but I have some plans in my head which I hope to execute successfully. Giving myself a year or two to try this out.

2) Setting up of publishing
It is still my dream to have my own book, autograph it, and share my knowledge through this book to students. It is my dream to have students over Singapore reading my books, and scoring well for their exams because of it.

But I want to keep the copyright. And I have further plans for this. Will have to see how it pans out.

3) SmartPhone Apps for Education
It is not just iPhone apps now. Basically, I will try to see if I can make use of my expertise in programming and tuition to create really useful apps.

Not sharing too much of my ideas here yet as nothing is concrete.

But hey, one thing that is concrete is that I have bought my 15" MacBook Pro with an upgraded hard disk of 750GB 7200 rpm. It set me back by about S$3K. Ouch!

I can't judge how it would affect me, but hey, at least I could treat it as my personal reward for 2011!

I have also bought a Wacom Pen Tablet to assist in creating youtube videos with cool animation.
I have done an experiment. Just search for H2 Physics Overview in youtube, and the first result is my creation.

Group 3: Personal Development
Just last week, it suddenly struck my head that I might want to go for a PhD on a full time basis.

Why? I do not know. I have done some research on the available schemes. Basically, I'm interested in a scholarship scheme that pays $4k monthly, while sponsoring the PhD.

What about my current job? Well, it pays not too well, but I'm still ok with it because the job comes with lots of flexibility. I'm a very technical person, and I think I have learned quite a bit of technical stuff at the current department. In my earlier post, I mentioned I'm unsure and I feel stagnant. I did feedback my boss on this. I'm pretty confident of my strong technical skills in the company, but perhaps it might be time to move on.

Perhaps that was the motivation that pushed the idea of a PhD research into my head, and with a bond-free scholarship to go along with so that I have enough to survive and eat.

The deadline for this application is May 2012 for the Jan 2013 intake. Hopefully they will take me in...?

Just don't steal the chance from me if you read this :(

Am I doing it right?

2012-01-08T12:02:00.001+08:00

Much as I try to motivate myself with the statement:

There's no absolute right or wrong; just do what you think is right.

I can't help thinking sometimes if I'm indeed pushing myself on the right track. I don't want to go through the trouble to type a long history, so I shall just summarize in point form.

I have these goals lying in my head for quite a while:
Time-consuming goals
Childhood goal: Start a tuition centre (taking 50% stake in a current centre)
Recent goal: Start a publishing house and publish truly useful educational materials for A levels (I must share my knowledge before I forget or before anything unfortunate happens to me)
New goal: iPhone and Android apps for education purposes (for free downloads to help students)

While I'm working my ass off on these goals, I need money to eat, I need money to invest in the materials to work towards the goal, etc. Yet, my current job is so damn low-paying.

So the question lies here.... should I search for a higher paying job while I work on my goals? Yet, will the new job be so busy that it does not allow me time nor energy to work on my goals?

Don't get me wrong, I like my job, I like what I do as sidelines. But I need to grow as well :x

It's truly a testing moment as I see my job salary remaining moderately stagnant (due to the company itself, a US MNC which isn't doing too well), while I see my friends and siblings getting higher and higher salary increments in government sectors. Yes, I might have achieved more than most my age at the moment due to extra income from tuition, but deep down, I know that isn't anything sustainable. My available time will slowly reduce, my energy will slowly wane...

It makes me wonder if working on my goals while staying stagnant in the job market is the correct move in comparison to climbing the career ladder. The cliche answer is: "only time will tell".... Yet it doesn't help in coming out with any solution.

Finished with lamenting, signing off back to working on my goals.

As Year 2011 comes to an end

2011-11-21T11:49:00.001+08:00

In case you are wondering, I do know that year 2011 still has one more month to go. But I do think it is time to start reviewing and plan ahead for the next year.

This is the link to Goal 2013 which I had set myself in November last year.

Year 2011 was super busy because of the following goal:

4) Setting up a publishing company and publish my notes
I'm currently about 35% done with my first A level guidebook. With most of my students having finished A levels from my side, I will have lots more free time come end Nov and Dec. This is the time to power up and increase my authoring.

Target timeline: Book completion (Mar 2011), Publish (Apr 2011), Sales (May~Jun 2011)

Sad to say, this was not achieved at all. I'm only currently 75% done with the book due to my heavy involvement in tuition. Nevertheless, I do think I have spent an enormous amount of time on this book.

I have to say I respect people who managed to author good books. It was a rather daunting task. There were much more challenges than I had thought. Writing good notes isn't simply (like some guidebooks out in the market) just putting information and leave it as it is. This leaves students in the lurch, only able to memorize from the notes without deeper understanding. No, I want students who use my notes to truly benefit, to truly appreciate Physics. In fact, I have been giving snippets away for free here and there to students who truly need it, and who truly wanted to learn.

While I didn't achieve this goal at all, there was progress. Which means the goal setting was still useful. Moral of the story: Aim far, and even if you do not achieve your goal eventually, you are still one step nearer to it!

In Year 2011, I have neglected two goals, namely

2) Goal of setting up ExamWorld to a super big site to help more students
3) Goal of building WealthBuch's traffic further

Interestingly, traffic continues to come in rather frequently without me adding any additional information.

As for goal 1,

1) Goal of achieving $2k average dividends per month, i.e. $24k dividends a year

There was a slight increase, having put extra cash into SMRT, SGX and Singtel this year. I also added equities of GLP, CMA and Capitaland along the year. As you can see, I'm inching towards a more blue-chips portfolio consisting mainly of monopolies and oligopolies.

While I'm still far from $2k per month, there was definitely some progress.
Additionally, my uni school fees bond are almost paid out. The interest of 2.6% was low compared to the % dividends I have received from SPH, which was why I left it as it is.

Finally, for goal 5

5) Goal of reaching a million in investable assets between me and my girl

I'm still inching towards this "daunting" goal. Personally, my investable assets managed to cross a quarter million mark, although it is still less than $300k.

For 2012,

I'm moving ahead with an updated strategy.

Portfolio Strategy
My portfolio in equities are starting to shift towards blue chip companies. I'm happy with a 4% dividend yield for blue chips, to a 7~8% yield for stable REITs.

I hope to be able to exit the following eventually:
1) Aztech
2) Berlian Laju
3) Cosco
4) Hor Kew

Granted, these companies do not look like they will collapse anytime, and I'm still receiving dividends from Hor Kew, hence I'm ok to wait a while longer for I do not need the cash yet.

I will still be looking to add to my portfolio of stable blue chips, i.e. Singtel, Starhub, ST Engg, SPH, SMRT, etc. I will also hope to be able to add SIA Engg, SembCorp Industries and M1 eventually to my portfolio.

2012 Strategy
2011 was rather uneventful for me. 2012 will hopefully be a more exciting year. My plans are roughly up, and my strategy to ensure a sustainable income source for years to come.

1) Setting up of a tuition centre
I've discussed with a tuition centre, and agreed to take a 50% stake in the centre, and eventually a 100% stake. The centre is surviving well, but I hope to be able to bring it to higher heights through a massive introduction of IT in certain portions.

As such, I have moved my current students for 2012 to the centre. Most likely I will be earning MUCH lesser from this action from active tuition as overall hours spent on teaching might be reduced, but I hope it will work out in the long run.

2) Setting up of publishing
While it might be better to find an established publisher to publish and market my book, I want to try my hand in setting up one as I want to keep the copyright of my hard work.

Fortunately, I'm aiming at a market where there is not much books yet for it is rather niche. That is, A level physics. Not aiming to earn much, but aiming to have a head start and a foot hold.

3) iPhone Apps for Education
I was looking at Sitex 2011, and had almost decided on a MacBook Air, before deciding a MacBook Pro is more suited for me.

Since Apple traditionally comes out a new model for MacBook Pro around the start of the year, I will be waiting for IT Show 2012 to get my MacBook.

Why do I link to MacBook? This is because iPhone Apps can only be developed of Mac machines at the moment.

I have an interest in programming, and I'm going to treat this as a hobby for a start (like my tuition services), to develop apps which can complement tuition. I believe no one has done this before (the idea in my head at least) and I aim to be the first to do it. But first, I need the MacBook and to learn the programming required... i.e. Objective C.

All of (1), (2) and (3) while seemingly unrelated, will eventually be able to exhibit synergy in some manners, or so I thought.

Meanwhile, I will still keep my full-time job as I embarked on these new ventures.

An errant forumer using momoeagle

2011-10-31T07:38:00.001+08:00

Notice

======================================================================
Latest Update: I have emailed the admin at ShareJunction.com, and he has banned momoeagle from posting in the forums there.
I thank the admin for such a speedy response in upholding the integrity of online sharing.
======================================================================

It has come to my attention that an errant forumer has been using my nickname, momoeagle, in ShareJunction. Please take note that momoeagle in ShareJunction is not me, nor do I share or believe in his analysis.

Apparently, this user has been masquerading with my username in InvestIdeas, and the admin at InvestIdeas has kindly deleted his account and I have registered under myself.

The reason for this post is that this particular user is bent on misleading others using my nickname.

Please take note that I do not support the counters that this clone recommends using that name, nor the "analysis" he wrote. There have been a number of people who asked me privately why I posted "this and that" on InvestIdeas. A real life friend, MusicWhiz, even sent a private message to the "momoeagle" at InvestIdeas.

There is no need for this clone to have any integrity in posting when it is under another person's established nickname, and I believe this defeats the purpose of true sharing among forum members in the investing community.

momoeagle is now my username in a number of stock forums, and no other:
1) ChannelNewsAsia
2) Valuebuddies
3) InvestIdeas
4) NextInsight
5) RMAO forum
6) HardWareZone
7) LowYat Stocks forum

This clone goes by a few nicknames and apparently has no support for his analysis and counters. Hence his current actions.

Meanwhile, I will be back to being busy in real life, i.e. setting up two businesses on top of my full-time job. No time or $$ for stocks, really.

Signing off.

Quick Thoughts on STI

2011-09-28T14:51:00.003+08:00

Some quick thoughts:

1) History likes to repeat.

http://sg.finance.yahoo.com/q/ta?s=^STI&t=my

The 97 market crash resulted in a V-shaped rally which followed in a quick crash to bottom in 2003.
The 07 crash resulted in a V-shaped rally as well. The bottom may well be at 2013, probably near the STI 2000~2500 level if the percentage drop is similar.

2) Pivot point analysis
STI has pivots at certain numbers, and it has been pivoting around these numbers for the last few years.
The next three pivots to watch out is 2450, 2200 and 1950. Expecting around 2200 to 2450 when combined with part 1.

3) 61.8% fibonacci retracement level
61.8% is the golden ratio.
Based on market top at 3313 and bottom at 1455 (1678 difference), the 61.8% (1037 points) is around STI 2275.

4) The Feb of 1996
STI topped at 2504. Probably some support at this level.

Based on the 4 points, the probability of STI moving towards 2500 level is very high. That is at least another 200 points more to go down.

My 2 cents. I have not liquidated much of my positions yet.

Excerpts from The Intelligent Investor

2011-08-19T10:42:00.001+08:00

The recent market volatility prompted me to post two excerpts from the Intelligent Investor by Benjamin Graham. His wisdom may show some light:

Excerpt 1

A serious investor is not likely to believe that the day-to-day or even month-to-month fluctuations of the stock market make him richer or poorer. But what about the longer-term and wider changes? Here practical questions present themselves, and the psychological problems are likely to grow complicated. A substantial rise in the market is at once a legitimate reason for satisfaction and a cause for prudent concern, but it may also bring a strong temptation toward imprudent action. Your shares have advanced, good! You are richer than you were, good! But has the price risen too high, and should you think of selling? Or should you kick yourself for not having bought more shares when the level was lower? Or—worst thought of all—should you now give way to the bull-market atmosphere, become infected with the enthusiasm, the overconfidence and the greed of the great public (of which, after all, you are a part), and make larger and dangerous commitments? Presented thus in print, the answer to the last question is a self-evident no, but even the intelligent investor is likely to need considerable will power to keep from following the crowd.

It is for these reasons of human nature, even more than by calculation of financial gain or loss, that we favor some kind of mechanical method for varying the proportion of bonds to stocks in the investor’s portfolio. The chief advantage, perhaps, is that such a formula will give him something to do. As the market advances he will from time to time make sales out of his stockholdings, putting the proceeds into bonds; as it declines he will reverse the procedure. These activities will provide some outlet for his otherwise too-pent-up energies. If he is the right kind of investor he will take added satisfaction from the thought that his operations are exactly opposite from those of the crowd.

Excerpt 2

Imagine that in some private business you own a small share that cost you $1,000. One of your partners, named Mr. Market, is very obliging indeed. Every day he tells you what he thinks your interest is worth and furthermore offers either to buy you out or to sell you an additional interest on that basis. Sometimes his idea of value appears plausible and justified by business developments and prospects as you know them. Often, on the other hand, Mr. Market lets his enthusiasm or his fears run away with him, and the value he proposes seems to you a little short of silly.

If you are a prudent investor or a sensible businessman, will you let Mr. Market’s daily communication determine your view of the value of a $1,000 interest in the enterprise? Only in case you agree with him, or in case you want to trade with him. You may be happy to sell out to him when he quotes you a ridiculously high price, and equally happy to buy from him when his price is low. But the rest of the time you will be wiser to form your own ideas of the value of your holdings, based on full reports from the company about its operations and financial position.

The true investor is in that very position when he owns a listed common stock. He can take advantage of the daily market price or leave it alone, as dictated by his own judgment and inclination. He must take cognizance of important price movements, for otherwise his judgment will have nothing to work on. Conceivably they may give him a warning signal which he will do well to heed—this in plain English means that he is to sell his shares because the price has gone down, foreboding worse things to come. In our view such signals are misleading at least as often as they are helpful. Basically, price fluctuations have only one significant meaning for the true investor. They provide him with an opportunity to buy wisely when prices fall sharply and to sell wisely when they advance a great deal. At other times he will do better if he forgets about the stock market and pays attention to his dividend returns and to the operating results of his companies.

Recent Updates

2011-08-12T15:45:00.002+08:00

On Portfolio: Overall -5%. Fortunately less than total dividends received over last two years

Did a series of buy transactions recently.
SGX at $7.13 (average $7.36)
CMA at $1.44 (average $1.65)
AIMS at $0.205 (average $0.201)
SMRT at $1.88
Capland at $3 (average $2.32)

Sold all GRP at $0.205.
Drew up a list to sell, but was too slow in executing.

Frankly speaking, I'm unsure why CMA and Capitaland continues to trend down whether market went up or down. It's ridiculous and this is making CMA look even more like a con job. What the hell is the CEO and board doing? Is there any point getting awards, getting record profits, but not caring a hoot on shareholders' value?

I'm still clearing some cobwebs and loose ends in my head, and looking to restructure my portfolio, probably realizing an estimated paper loss of $20k (on past mistakes when I first started) to clean it up. Cheap deal for 3 years of lesson I would say. More to read up.

I'm looking to do something different in the year 2012. Somehow life's events are pushing me towards a path where I once pondered if I embark on. Let's see how it goes.

STI EW count?

2011-06-30T21:53:00.003+08:00

Been too busy.
This is a latest EW count?

Just my 2 cents.... It could be wrong. For viewing pleasure and for entertainment value.

Primary 4:
A: 3314 ~ 3118 (-196)
B: 3118 ~ 3280 (+162)
C: 3280 ~ 2916 (-364)

Primary 5:
1: 2916 ~ 3208 (+292)
2: 3208 ~ 3000 (-208)
3: if 1.618 of 1, then +472 = 3472 (3165 is critical due to downtrend line not drawn in)

Alternate count:
Primary 4 has not ended.
A-B-C-X-A-B-C

My 2 cents. That's all. Back to work.

Ceasing Updates to this blog

2011-04-15T15:00:00.001+08:00

I'm ceasing updates to this blog. Simply have no time nor mood. I might return if and when I have more time after I complete some of my targeted goals.

Please kindly visit the following blog links instead. I will be back, but not so soon.

Blogs on Singapore
The Finance.sg
Passive Income Investing
CookieGuy's KT Wealth
AK71
SingaporeanInvestor
Rick Kid Wannabe
Dividends Rich Warrior
kmchang's investment journey
DIY Value Investing
Sanye Investment Portfolio
A Investor -- Alvis
Ghchua's Investment Portfolio
AC88 Blog
Bully The Bear
Investment Moats
SGBlueChips
SGMusicWhiz
SGFinancialFreedom
My Willy Nilly Thoughts
The Wealth Journey
NTU Chartist
Synapse Trading
Holy Fish Shrine
A Notable Quote
The P-T Trader
Hahalol
My Market Opinions
Singapore Stocks Picker
Create Wealth 8888

March 2011 Portfolio Update

2011-04-03T12:27:00.000+08:00

March saw a terrible disaster at Japan, leading to my holdings of companies with Japanese exposure going down substantially. In addition, panic selling brought down prices further. Unfortunately, I have used my opportunity funds to enter Singtel the previous month. But fortunately, Singtel did not go much lower than my buy-in price at all, displaying the resilience of this telecom company. Neither did Starhub budge much too.

Since I have no opportunity funds, I did not enter this month. The good news: prices have not substantially recovered since the Japan crisis. The bad news: my rate of growth of opportunity funds wasn't as fast as I would like it to be.

While we profit from the crisis, do spare a thought for the Japanese by donating to Red Cross or the little donation box at Yoshinoya counters around Singapore.

A short summary of my core holdings:

Portfolio cost: $190k
Portfolio value: $205.4k
Percentage gain: 8.07%

There is no change in my dividend amount as I'm back to accumulating cash and working on my book. I have to admit writing up the guidebook took much more challenges and time than I expected. I do not expect to meet my personal deadline for it. Furthermore, my commitments are increasingly taking my time away from blogging and the market... Let's see how this goes...

Adding to the $24k in the basket I hope to sell off at the bottom, my total cost continues to stand at $214k with no difference from the previous month. I do have some funds in my bank account, but looking at the pathetic 0.59% in philips MMF, I rather leave my cash in the bank at the moment.

I took a quick look at my CPF Education Loan and I'm pleased that only $4k remains to be repaid, from $25k when I started working 2.5 years ago.

Trading Basket -- Hoping to sell off

I want to sell these off when I can, or cut loss when I can take the loss :(
Portfolio cost: $24.3k
Portfolio value: $18.4k
Unrealised loss of around $5.9k

(red = freezer stocks to remind myself of my mistakes)

30 lots of Hor Kew at 0.125

27 lots of LC Dev at 0.177 (accepted the rights + 3 lots excess)

2 lots of Cosco at 2.67

160 lots of Berlian Laju at 0.065

Follow Up Quick Views on Eratat

2011-03-09T18:14:00.004+08:00

In my earlier post on Eratat, I stated my views of the business and the events happening without taking a good look into the balance sheet. I got interested to pour through Eratat's business, etc, because it appears that quite a number of people are interested in it.

In this post, I will share some quick calculations on Eratat.
Also in this post, let's assume that the financial figures presented by them is correct and all cash is indeed there, else all calculations would be wrong anyway, which sorts of defeats the purpose.

Finally, I take all calculations rounded off, and an exchange rate of 1SGD to 5RMB for simplicity of calculations. Some of my calculations will be in SGD and charts are in RMB.

As of 31st Dec 2010, Eratat mentioned an NAV of about 0.30 (SGD). At a current price of 0.215 (SGD), this represents a discount to the NAV. It has cash of 0.077 (SGD) per share too. In fact, over the past 8 quarters, NAV has been steadily rising. Q1 ends 31st Mar 09, and Q8 ends 31st Dec 10. There was no change in the number of shares for these 8 quarters.

ERATAT's NAV in RMB (fen)

However, there is something that worries me here, that is, the trade and other receivables, which is included in NAV calculations. The total per share value of its trade and other receivables is a rather staggering 0.21 (SGD) in SGD. That's like 60% of its total assets, and 70% of its NAV!

The problem with trade and other receivables is that these are trade deposits placed with other companies. It is thus not easy to audit such receivables and verify it.

Essentially, if you are paying for "assets" that is not yet collected, that is at the mercy of other distributors, assuming what is reported is true. The reason why this assumption has to be made is because I know how certain individuals in China can create separate holding companies for such purposes of siphoning, but I shall not go into the details how this work.

The breakdown of the age of trade receivables are as follows. There was no quarterly breakdown given before 2009.

(RMB ’mil)	1 to 60 days	61 to 90 days	91 to 180 days	Total
Balance as at 31.03.2009	127.9	33.6	6.2	167.7

(RMB ’mil)	1 to 60 days	61 to 90 days	91 to 180 days	Total
Balance as at 30.06.2009	217.5	19.7	-	237.2

(RMB ’mil)	1 to 60 days	61 to 90 days	91 to 180 days	Total
Balance as at 30.09.2009	177.9	68.7	-	246.6

(RMB ’mil)	1 to 60 days	61 to 90 days	91 to 180 days	Total
Balance as at 31.12.2009	184.1	53.8	-	237.9

(RMB ’mil)	1 to 60 days	61 to 90 days	91 to 120 days	> 120 days	Total
Balance as at 31.03.2010	138.9	72.5	57.7	-	269.1

(RMB ’mil)	1 to 60 days	61 to 90 days	91 to 180 days	Total
Balance as at 30.06.2010	188.0	90.7	26.4	305.1

(RMB ’mil)	1 to 60 days	61 to 90 days	91 to 180 days	Total
Balance as at 30.09.2010	217.3	101.9	28.5	347.7

(RMB ’mil)	1 to 60 days	61 to 90 days	91 to 120 days	Total
Balance as at 31.12.2010	216.2	102.8	47.9	366.9

Putting in Chart Form will show it clearly.

Chart of Total Trade Receivables

Chart of Trade Receivables aged >60 days

In my opinion, Trade Receivables > 60 days (2 months) is a rather long time. What's more, it has been increasing over the last few quarters. Doesn't look very healthy to me at the moment...

I also computed a chart of NAV minus Trade Receivables per share for Eratat over these past 8 quarters.

Chart of NAV less Trade Receivables per share

As we can see, the net NAV remains moderately constant, which sort of tells me that most of the profits went into the trade receivables portion. Of course, there were some dividends given out, but I believe it won't affect the result too much as the payout wasn't really consistent in the beginning. It also tells me that the ratio of trade receivables to total assets or net assets have been growing over the past 8 quarters.

It is thus of utmost importance for any potential investors to monitor the growth of trade receivables. I know this post is only on 2 years (8 quarters) of Eratat's history, but all in all, I remain extremely skeptical of Eratat's growth story.

My views on China Eratat

2011-03-04T09:07:00.004+08:00

Recently, I noticed quite a bit of interest in this S-Chip counter called China Eratat. Upon doing some really basic research (note: just basic one), I came upon the conclusion that it isn't worth a punt. While it may eventually turn out to be a multi-bagger, I wouldn't place my bets on it.

I posted some of these in http://www.sgforums.com/forums/2092/topics/423944. I rather not share this over at CNA forum because I know, once people gets extremely bullish about a stock, some would snare, insult, or exhibit some form of mentally incapacitated animalistic behaviour. Might as well share it at places where people are more willing to take note or share with. As CW88 puts it, analysts like to give bullish views because that is what most people like to hear.

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My initial views
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China Eratat is a sportswear company operating in China. To me, China Textile companies aren't a good fundamental buy at all.

1) Low barrier to entry.
2) Highly competitive.
3) Traditionally low margins. It would be very suspicious if the margins are high.

And the weird thing is, why the need for placements for $13.45m cash on Jan 2011 when the company has $30+m cash in its balance as of end Dec 2010?
==> This is suspicious.

And if the cash is needed for growth, why bother to give dividends of total $2+m? Giving dividends not only deplete cash (if needed), but also incurs extra unnecessary expenses.
==> Suspicious too.

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Views from a forumer
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Regarding Placement:

Have a look at this. http://www.nextinsight.net/index.php/story-archive-mainmenu-60/912-2011/3549-eratat-97-surge-in-latest-quarterly-net-profit-and-why-it-wants-to-place-out-shares

CFO Ken Ho was specifically asked during the briefing how the placement would affect expansion plans - the simple answer is that with the placement would allow them to grow even faster, but that even if the placement does not through, their expansion plans including the launching of the new Eratat Premium Product Line will continue to go through.

They feel that the placement with CMIA will also add credibility and raise the profile of the company, as CMIA is a well-recognized fund known for long-term investments in China's growth, in particular its rapidly growing consumer market, as China transforms from a manufacturing-export dominated economy into one that is consumption--focused.

With all the blanket-stereotypically negative sentiment towards and distrust of Chinese companies going on in the Singapore market, the establishment of a major fund such as CMIA as a major shareholder, which according to Ken Ho spent 2 months doing its due diligence on Eratat's balance sheets prior to the attempted placement, also serves to increase investor confidence in the reliability of its numbers.

Despite doubling profit over the last 2 quarters on a year-on-year basis, Eratat has actually decreased its dividend payout ratio, presumably because it wishes to retain more cash for expansion. However, to eliminate the periodical dividend payouts altogether would be rather drastic and may induce negative investor sentiment over its cash position, since it has a policy of regular dividend-payouts, as long as this constitutes only a small percentage of its cash position, as is the case with this 2 million, I wouldn't be too worried and am in fact pleased as an investor that they are sharing profits with us.

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My comments add on
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Btw, all CEOs have to make their plans sound nice. If CMIA wants a share of Eratat, they can jolly well buy direct from SGX market. The two points remain that why the need for a placement of 13m when they have 36m cash and can still give out 2m worth of dividends.

One more thing, big funds entering doesn't mean they are right. Tradewinds Global Investor entered China Hongxing in Jan2011, and Hongxing is now suspended for accounting irregularities. Hongxing has been giving dividends too. Think about it.

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Additional Views from the forumer
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No one is denying that it's still an s-chip, I like certain s-chips like Eratat because they are sorely undervalued due to the blanket judgements done by most local investors on Chinese companies listed here as unreliable, they fear these companies, I like to purchase when people fear, especially irrationally - because it cannot be the case that all of the few hundred Chinese companies listed in Singapore are lying about their balance sheets, that is statistically extremely unlikely. It also helps that Eratat is rated second by the Business Times among all Chinese companies in terms of corporate transperency. Yes I'm not saying that you can be 100% sure about anything, but then again there are risks with every investment.

CMIA can buy from the open market, but we're talking about 65 million lots here. Eratat's daily volume is barely a few million. If they were to buy from the open market, it may well cause Eratat's share price to skyrocket before they can complete the bulk of their purchase - hence the desire to negotiate for a placement. Also, they're going to become a major shareholder that participates in management, their experience and networks in the Chinese market may well also open doors for Eratat. Coupled with the fact that their addition raises the profile and credibility of the company, CMIA may well feel that they also have a feel bargaining chips to bring to the table. Eratat has shown so far that it is able to turn its excess cash into profits and I therefore see no reason not to be confident that the increased cashed position from the placement can be translated into increased profitability.

2 million is much smaller than 13 million. The 13 million will serve only to bolster its expansion plans but as CFO Ken Ho has said, is not critical to its expansion plans, which is why they would not simply settle for any deal.

As for why they are still giving out divdends, as already explained in my previous point, to eliminate dividends altogether decreases investors' confidence - they have compromised and are in fact paying less dividends, both on a prorated absolute basis and in terms of payout ratio compared to last year, despite doubling net profit over the last 2 quarters, retaining a higher proportion of cash to facilitate expansion plans.

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My comments add on
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To me, not eliminating dividends so as not to decrease investors confidence isn't a good reason at all. A growth company that is well managed should never distribute its dividends if it has much better use for the money.

Next, companies seeking for growth and are confident about it will give shareholders a better deal by growing via debts instead of growing on net cash. Getting a huge placement with no concrete plans other than to increase the cash level will severely dilute existing shareholders. Any EPS or any dividends to be received will be severely diluted in the future as well, unless profits can grow just as fast.

Disregarding the above and the fact of being S-chip, the first 3 points I raised in the first post are sufficient to make me not touch this for a long term play. A world famous investor mentioned in his most recent shareholders letter that it was his mistake to have moved into the textile industry. I guess you should know who he is.

It's your money. You decide.

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Reply by isaac
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one more point to add on:

look at eratat’s cash balance: RMB 159,319,000

Interest earned on that amount: RMB 154,000

Interest rate: 0.01%. [Pointed by comments below, it's actually 0.1% for 3 months]

I believe PRC’s interest rate is 1.5% thereabouts.

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Further views from the forumer
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A growth company should never distribute dividends? Can we categorically say that it is statistically proven that growth companies that pay dividends, even if only amounting to a tiny fraction of their cash position grow less than growth companies that pay absolutely no dividends at all? I highly doubt that any statistical analysis would show this, and even in the unlikely scenario that it does, it also does not imply that every growth company that pays dividends would tend not to grow. Common sense would tell you that with a bit of research, it would not be difficult to find a growth company in any market out there that has had a policy of paying dividends throughout the years but still managed significant growth through the years, especially if the dividends amount only to a small fraction of net profits, hardly detrimental to the growth plans of any company.

Conceivably, not paying dividends at all, especially in the case of s-chips given the unfortunately negative perception that every Chinese company listed in Singapore is tarnished by at the moment due to a few bad eggs would actually signifcantly decrease the stock price of the company, because it could be the case that local investors perceive dividend payouts by Chinese companies to be a validation of its profits and cash position. Whether this is the case is difficult to verify but this is conceivably how the management perceives the situation to be and that therefore not paying dividends would actually result in negative perceptions due to factors out of its control, and that therefore eliminating dividends would not be in the interest of its shareholders.

Furthermore, with working capital amounting to the region of 480 million RMB, it does not seem that paying dividends amounting to 10 million RMB would signficantly affect expansion plans, the benefits of protecting investor sentiment quite possibly outweigh the the opportunity cost of not using that 10 million RMB for growth. It's hardly as if it's 65 million RMB, if it was paying 65 million RMB in dividends and then getting a placement amounting to that I would certainly be concerned - but that is hardly the case at all.

It is also surely an oversimplifcation to say that every company in the textile industry will fail. The growth stories of the likes of the many famous apparel/fashion accessories companies around the world tell the story - Nike, Kappa, Esprit, Polo or even Chinese equivalents like Li Ning, Anta and 361 Degrees tell the story - compare their prices from as far back as 8 years ago to what they are now - we're talking about multi-multi-baggers here. I'm not saying Eratat will definitely be another one of them but I'm optimistic and bullish based on what I've seen so far - not only is it a potentially great growth story, it is also potentially highly undervalued at a forward PE of between 3 to 4 due to the blanket negative sentiment that s-chips are currently suffering from, resulting them in many of them being in prices and valuations that you would only normally only see during a recession for other companies.

As for [isaac] and your point about loans, please read up on the loan situation in China, it is not as simple as you think, and I would trust that the CFO of a listed Chinese company would understand the situation better than someone like you who has probably never applied for a loan in China before.

http://www.nextinsight.net/index.php/story-archive-mainmenu-60/912-2011/3549-eratat-97-surge-in-latest-quarterly-net-profit-and-why-it-wants-to-place-out-shares

I think I've made my points clear and will make no further comments for now, to each his own.

My add on here on the loans in the forum post yet:
Why would one believe blindly in a CFO without question? He might know better, but still, 0.01% interest is still weird. Even a basic savings account here gives at least 0.1% interest. 0.01% is 10 times lesser!!

~~A quick look at the Bank of China for local context shows an interest of 0.475% for SGD100k and above.~~
~~http://www.bankofchina.com/sg/bocinfo/bi3/201002/t20100207_961728.html~~
~~Compare with 0.01% again???~~

~~Comparing with SGD is fair because Eratat is listed in Singapore, and IPO and placement funds are in SGD.~~

~~Admittedly, I didn't check up the books to see if it was really 0.01%, but isaac is a personal friend.~~

Thanks to Joshua's comments, the interest rate is 0.04% instead of 0.01% as the interest is for 3 months. However, I do think that 0.04% is still too low.

UPDATED: The effective interest rate is 0.4%, so it does look more normal now. Sorry for the calculation error. My bad for not verifying it completely.

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My comments add on
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To me, dividends of 2m out of 36m cash (5.5% of cash pile) is hardly a tiny fraction of the cash; utlised properly, it could be used grow even faster. While it is true that s-chips are suffering from negativities, the question remains on whether the cash is indeed there. Dividends are not the way to judge if the cash pile is valid. Anyone who used that as the meter for judging and had bought into CHX would have been in for a rude shock.

I fail to see how any of my posts meant every company in the textile industry will fail. I mentioned that the textile industry is one of highly competitive and low barriers to entry. There's no point comparing with just the established brands as you have. We have a moderately new entrant CHX in the same industry as Eratat, and CHX advertising in the NBA, yet what happens?

The growth story could be nice, your reasons extremely valid, but the uncertainty is not about the growth or your reasons. The uncertainty and risks lie in the integrity of the reported statements. Again, with the established brands like Nike as you mentioned, the uncertainty of the integrity of their reports is much lesser.

It is already tough enough to judge and take the risks of whether a business will take off; what's the point of taking on additional risks of the integrity? Unless I personally make a trip to China, see their shops and sales, etc, I find it hard to put my money on a company that I have little idea how their products are like, and how their customers feel about their products compared to others.

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Upon further research of the mentioned investor CMIA and its credibility, I digged out some additional information on it:
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Additional Information about CMIA and its track record:

CMIA invested in FerroChina, which is now suspended
http://www.asiaone.com/Business/News/My%2BMoney/Story/A1Story20090503-138965.html

http://www.pr.com/press-release/301406

Admittedly, they invested in ChinaMinZhong as well, although they have been selling while the price has been continuously rising. ==> Hardly a long term investor.

From the website:

CMIA Capital Partners ("CMIA") is a private equity firm focused on investment opportunities in China and Southeast Asia. To date, CMIA has led over US$600 million in private equity investments. CMIA is primarily focused on Growth Capital opportunities, and has also financed Greenfield, Buyouts and Privatizations selectively. Established in 2003 and headquartered in Singapore, CMIA also operates out of offices in Shanghai and Hong Kong.

US$600m is hardly a big enough fund with muscle power.

But now, there are lawsuits against CMIA for negligence:
"Directors of Fund II are suing Mr Lee and CMIA in Singapore for alleged breach of fiduciary duties. CMIA and Mr Lee are counter-suing the directors for defamation and breach of investment management agreement, among other things."

In conclusion, the following paragraph does not hold:

They feel that the placement with CMIA will also add credibility and raise the profile of the company, as CMIA is a well-recognized fund known for long-term investments in China's growth, in particular its rapidly growing consumer market, as China transforms from a manufacturing-export dominated economy into one that is consumption--focused.

To me, CMIA does not add credibility at all. It was only established in 2003, hardly long enough to be considered a long-term investor nor sufficiently well-recognized.

Remember that if funds lose money, it is their clients and investors that lose, and not the managers themselves.

Feburary 2011 Portfolio Update

2011-02-28T17:44:00.001+08:00

Feburary was a down month. Lots of selling. Many of my holdings went very red, especially Capitaland and CapMallsAsia. I guess it has something to do with what the China govt is doing to their economy to put on a brake.

My entry this month was GLP, 3 lots at $2 and 3 lots at $1.88, giving me an average of 6 lots at $1.94. I believe GLP will benefit in the long run from the growth of China as an industrial play. My average is slightly below its IPO price, and I do think it offers a marginally safe entry point.

I also entered Singtel at $2.89. This is for yield, and I will ride Singtel for its ups and downs if possible.

A short summary of my core holdings:

Portfolio cost: $190k
Portfolio value: $207k
Percentage gain: 8.69%

Dividends went lower to $1083/mth on average. This is mainly due to Aztech's poor result. The Material Supply segment of Aztech failed to secure new contracts again and again. I will be considering whether to sell Aztech, take the loss, and move on to another counter.

Adding to the $24k in the basket I hope to sell off at the bottom, my total cost stands at $214k, an increase from the previous month's $197k. All my MMF units have been redeemed. I sort of "showhanded" at GLP and later on, Singtel. Basically, I'm 100% vested at the moment, and the dividends and salary received today will all go to fund Singtel's purchase, leaving me with about $500 left in bank to start March.

While this is dangerous, I do this to make myself short of cash, so that I would work harder to look for more cash. This has worked in the past, and pushed me to establish myself in the tuition arena. I'm looking to push myself further to complete my book and get it out asap. It is a risky holistic strategy I employ on my own financial health, and I do not recommend anyone to follow this risky strategy. I do not have much debts, and I have in place my dividends that will be coming in mid March, more tuition fees coming throughout the month.

Trading Basket -- Hoping to sell off

I want to sell these off when I can, or cut loss when I can take the loss :(
Portfolio cost: $24.3k
Portfolio value: $17.2k
Unrealised loss of around $7k

(red = freezer stocks to remind myself of my mistakes)

30 lots of Hor Kew at 0.125

27 lots of LC Dev at 0.177 (accepted the rights + 3 lots excess)

2 lots of Cosco at 2.67

160 lots of Berlian Laju at 0.065

Personal Updates

2011-02-22T10:03:00.001+08:00

As you might have realised, my updates are getting less and less frequent.

I'm bogged down by work and tuition as usual. But my time for writing blog posts have now been mostly re-directed to working on authoring my A level physics guidebook. As such, I will be reducing updates to this blog substantially till I complete this book, this aim, this dream of mine.

Granted, such a guidebook will not yield high margins when it gets published. According to http://www.business.gov.sg/, publishing gives the lowest margin compared to other businesses. Indeed, the ROE is probably between 50% to 100% after most expenses are deducted if I'm the author.

Then again, while I do need the money for food (I'm being practical), I'm more concerned on getting a book out and attempting to make a small contribution/impact on the learning of physics in Singapore. I find that a number of students get disillusioned about physics around O levels, and most ceased to take it at A levels, or perhaps struggled at A levels physics because of self-beliefs that physics is hard.

In my opinion, schools have to take a responsibility, and I do think that most schools perhaps do something wrong in teaching physics. I have my own beliefs and ideas, and by implementing it, I have successfully gotten a total of 5 As out of 7 students I taught over the past year for O level physics. That is 71.4% of my total number of O level students in my group class. The remaining students, 1 received an unexpected B3 of which he was sorely disappointed, the other received a B4 of which he was extremely happy because he fought back from a fail grade without giving up, perhaps because I did not give up on him.

At the same time, I'm planning a personal road map for growth. This is to complement Goal 2013. For my current engineering job, I would probably stay till the end of this year, or latest, end of next year, before I decide on either of the following paths

(1) Find a new job to get new experience in a different company environment and culture.

(2) Freelance Tutor like LP.

(3) Start a business with the aim of learning how to build working systems, while living on my savings and dividends. My first aim is to have one focused on creating high quality educational materials, of which my first target is the guidebook I'm authoring. However, I do not think I could fit into the timeline I set for myself in Goal 2013. Nevertheless, I shall try.

(3) is more important to me at the moment. Perhaps I would do all 3, but I wouldn't be sure at this juncture. I'm pretty sure that if I embark on such a path, my income and growth rate will initially drop a great deal such that

(i) on financial status, I would start lagging behind
(ii) on emotional status, I would start doubting
(iii) on relationships, I would perhaps need more support

As for my equity portfolio, I will be waiting for the next bullish phase. I believe STI is now under-going a correction, and it will soon be time for STI to cross 3200, to move to 3400~3500 region. That will be the time when I start taking some money off the table, perhaps leaving only profits and money in my perceived more stable dividend stocks like Starhub and SPH. I will be looking to offload Aztech after being sorely disappointed at their results and their IR who do not even bother to reply any email.

As you can see, while equity investment is a huge portion of what I have now, it is probably going to play a smaller role for me in time to come. That's my plan for time to come.

Last is housing and marriage. Currently, I'm expecting this to occur in about 2.5 years to 3 years time. But I guess I will put my energies and focus on this after I finish my book, which will currently be top priority.

A Quick Take on the recent results of some companies I own

2011-02-16T09:51:00.000+08:00

Quite a number of my holdings released results over the past two weeks. The companies are
Starhub, AIMSAMPIREIT, Saizen REIT, Silverlake, new purchase GLP, CitySpring, Starhill, CCT, K-Green, First REIT, GRP, ST Engg

Time is really tight for me, with family commitments due to Chinese New Year, with my recent take up of being a trainer for a sec sch's Junior Physics Olympiad team and the long hours spent on preparation of materials, with my continuous authoring of my planned A level physics guidebook, and with my engineer work.

I took a quick look at the recent results, and but I know time doesn't allow me to do and post a detailed analysis on each and every counter. The main thing I garnered was buying cheap defensive blue chips giving good dividends in a recession seldom go wrong.

My comments collated over the last few weeks:

1) Starhub
Overall, the results are in line with expectations. Dividends remain at 5c for this stable defensive counter, and intends to remain the same for FY2011.

This is one counter where I had been truly successful by being contrarian. Most of my purchases were done when they announced a loss of EPL contract to Singtel. I still remember that was the time where many analysts were calling for SELL because of the EPL loss.

Starhub was distributing 4.5cts dividends per quarter at that time, and on the following quarter, started distributing 5cts per quarter. The analysts that were calling for SELL immediately decry that this is not sustainable, and maintained SELL.

My contrarian view and action to purchase was based on my thoughts:
http://wealthbuch.blogspot.com/2010/02/starhubs-dividend-yield.html

It was there that I mentioned about the loss of EPL: "Of course, the true impact will only be known from Jun 2010 onwards. Let's see how it pans out. My belief is that the impact will be minimal."

Analysts report are now claiming more bullish views on Starhub. In fact, one of them mentioned that "overall, the impact of the EPL loss on STH’s subscribers has been less significant than previously feared". Are we to trust these "professional analysts" who called for SELL on Starhub at $2, and call for BUY at $2.6?

In fact, I'm waiting for the dividends to eventually grow higher.
http://wealthbuch.blogspot.com/2010/02/starhubs-potential-for-growth.html
"I have confidence in Starhub's management and its ability to exceed expectations again. The final blow to the analysts' report will come if and when Starhub raises its dividend payout to 5.5 cts come 2011 or 2012."

I'm glad I listened to what I know about electronics as an electrical engineer, and not some analysts who probably don't even have an idea how telecommunications work.

Moral of the story, read analysts report with a discerning mind. This applies for all blog posts as well, including mine.

I shall still hold on to this counter for its stable dividend payouts.

2) AIMSAMPIREIT
Again, results were within expectations. 0.51 cents was declared for the quarter.

What gives the twist was a sudden announcement of private placements, and AIMS has decided to issue another 0.285 cents dividends before the new units are issued.

There are some who decry that private placements are always bad. Not necessarily so for my case. My warchest has dwindled substantially due to recent purchases of GLP, so a rights issue might not be right for me at the moment. Furthermore, I'm not concerned of any dilution because my stake is too small. This exercise merely reduces my stake from 0.006% of AIMS to 0.0054%.

To me, people just like to complain. If they give placements, there will be complaints why rights aren't issued where everyone gets to participate. If they give rights, there will be complaints why they rights are issued again. It's a never ending complaining process which leaves me scratching my head. I prefer to see it in a simple way. I'm contented if there's little change to the DPU. Dilution doesn't matter to me if yield and gearing remains comparable.

My Quick calculations on the DPU after the placements.
Assumptions:
1) Only 42m (that they are paying in cash) can provide dividends to us, and the 30.9m they are drawing from loan gives zero dividends
2) Dividends per annum is at 2cts
3) Rounding off, we have 2b units now, and 0.2b units are issued.
4) The new building indeed gives 7.6% yield.

A conservative estimate of the new DPU would be
(2 * 2b / 2.2b) + (0.076 * 42m / 2.2b * 100) = 1.96 cts per share.

I'm pretty sure my estimate is much too conservative, and in all likelihood, it will remain the same.

The gearing remaining rather constant, 34% to 33.6% following sale of property announced earlier, while NAV should drop from 27cts to about 26.5 cts.

All in all, I'm supporting this placement as having a larger and more diverse property base would ensure a more stable property income. Having lots of tenants offers stability in income receivable in itself.

3) Saizen REIT
Dividends of 0.52 cts was declared. While it may seem low (0.52*2/16 * 100% = 6.5% yield on my cost), one have to take note that
(i) properties have been sold to reduce the absolute quantum of the YK Shintoku loan.
(ii) 0.26 cts per share was used to reduce YK Shintoku's loan.

Supposed a breakthrough manifests itself that YK Shintoku's loan was successfully refinanced, and assuming that a conservative 50% of the 0.26cts is distributed as dividends, the yield on my cost would then be (0.13 + 0.52) * 2 / 16 * 100% = 8.125%.

There are still warrant proceeds which have not been used yet to clear the loan. I believe the refinancing would become more attractive to banks once the loan is reduced further.

If anyone has the warrants at a cheap price, please convert to help :)
I have a tutorial to help here: How to exercise your warrants?

4) Silverlake
There was a 62% increase in revenue, along with many other increases. However, we have to take note too that there were acquisitions done, and hence increases in revenue is expected.

Dividends of 0.3 cts have been announced.

I believe this company is interesting, and I shall continue to monitor it.

5) GLP
GLP profited. I entered at $2 and $1.88 the subsequent day, having a total of 6 lots now and an average price of $1.94, just 2 cents below the IPO price.

Nothing really interesting.

6) CitySpring, Starhill, CCT, K-Green, First REIT, GRP, ST Engg
I group these together because there are nothing big in their reports, to me at least.

CitySpring: 1.05cts dividends declared. Nothing new for a boring company, apart from promises, be it empty a not, to review the capital structure of CitySpring.

Starhill: 1.04cts dividends declared. Nothing exciting this round.

CCT: 3.93 cts dividends declared.

K-Green: 4.31cts dividends declared, slightly more than expected. A no gearing trust with potential to increase this payout, even though it might be paying down from depreciation.

First REIT: 0.87cts dividends declared. Defensive healthcare REIT with low gearing.

GRP: 0.01cts dividends declared... How much more boring can it get? But I like boring dividend stocks :)

ST Engg: 11.55 cts dividends declared, with a larger orderbook and expectations of even higher turnover in FY2011. 30.3% ROE with EPS 16.1cts. This is a true testament, along with Starhub, that it is very very seldom wrong to buy into defensive dividends blue chips during recessions at lows!!

Digiland.... Beware again....

2011-02-08T18:45:00.001+08:00

Earlier, I posted about Digiland...
http://wealthbuch.blogspot.com/2010/06/digiland-beware.html

We had Digiland calling for a 'massive' rights issue - a 1-for-1 renounceable non-underwritten rights issue of up to 8,526m new shares at $0.001 per share, to raise $8.25m!

It failed. SGX did right.

Digiland did not give up. They gave placement shares, amounting to $8.2m in total.
http://info.sgx.com/webcoranncatth.nsf/VwAttachments/Att_A21A84CBFA42A2064825780A00300423/$file/Anncemt-PlacementShares31Dec10.pdf?openelement

A total of 1.7b placement shares was issued to add to the 8.5b float.....

And finally you get new substantial shareholders in
1) Fortune Woods Global Investment Limited (10.8%)
2) Smartful Global Holdings Limited (5.7%)

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Rule 1311 of the Listing Manual which states that the Exchange will place an issuer on a watch-list if it records:

(i) pre-tax losses for the three (3) most recently completed consecutive financial years (based on the latest announced full year consolidated accounts, excluding exceptional or non-recurrent income and extraordinary items); and

(ii) an average daily market capitalisation of less than $40 million over the last 120 market days on which trading was not suspended or halted. For the purpose of this rule, trading is deemed to be suspended or halted if trading is ceased for the full market day.

Investors should also note that pursuant to Practice Note 13.2 Paragraph 2.1, the Exchange conducts quarterly reviews to identify issuers to be included on the watch-list. The quarterly review will take place on the first market day of March, June, September and December of each year. The Company will make an immediate announcement should it be notified by the Exchange that it will be placed on the watch-list.

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At 8.5b shares trading at $0.005, Digiland's market capitalisation is $42m.
It appears that the placement shares, etc, are all to prop up the market capitalisation to ensure that it will not be put on the watch-list.

With this round of $8.2m injection, the market capitalisation grows to $50m...
Could they be expecting SGX to change Rule 1311 to be $50m soon? Or is something else up their sleeves?

It's quite unimaginable to me for anyone to want to put their monies into a company with 3 years of consecutive losses. I wonder how real the two new investment companies are...

I think something is fishy... Beware...
I wouldn't bet my money on it.

Robert Kiyosaki's Who Took My Money

2011-02-08T00:43:00.001+08:00

Recently, I finished reading this book from Robert Kiyosaki, which I think is a good read after Rich Dad, Poor Dad.

In this book, Robert stressed on the three asset classes (business, real estate and paper assets), the velocity of money, and the accelerators for money. He stresses a lot on using Other People's Money (OPM) and Other People's Time (OPT).

The reason why he thinks employees have the greatest risks is because
1) you are not guaranteed any job security at all
2) your income is taxed after expenditure, which doesn't make sense to him

As a business owner, while interviewing for potential staff, he looked around and saw all the young guys, and thought to himself: "I wouldn't hire myself". The reasons, he mentioned, included being older than everyone else, more expensive than everyone else, and finally, less technologically savvy.

In addition, his purchases of properties, assets, etc, are all done and protected with legal entities. These are company costs, and are all expenses before taxes. The amount of savings is substantial when a large sum of money is involved. To him, taxes are the single greatest expense.

Cash Flow vs Capital Gains
In his book, he likened about Cash Flow vs Capital Gains to Dairy Farmers vs Cattle Ranchers. The main difference between the two is that both have cattle as assets, but both treat their assets differently, and operate via different business models. To him, true investors invest for cash flows, and gamblers are there for capital gains. "Capital gains is the dream of gamblers. When you invest for cash flow, you are investing in a money-back guarantee. If you invest in capital gains, you invest in hope. The biggest thief of all is hope."

While he emphasizes on building cash flow, he does invest for capital gains as well. It is all about a matter of priorities.

Building cash flow is similar to building pipelines, and expanding the cash flow is about expanding the diameter of the pipelines. Robert mentioned how he move cash flows from one assets into another new asset, and then repeat for a 3rd asset, and this process continues. Bringing down to more layman terms, it is a little similar to buying a dividend counter, then use the dividends to buy another dividend counter, and so on. The big difference is that Robert does it with leverage, while we don't do the same for paper assets.

While some might view leverage as risky, I do agree with Robert that this is a matter of perceptions and financial intelligence. The same event viewed with different people eyes will result in different conclusions. Again, it can be analogous to a maths question seen through my eyes and my students' eyes. I will most likely find it much easier than they do.

Banker's View

There was a little interesting anecdote about a banker's view on who to give loans too. Robert asked a banker whether the banker would loan him money to buy mutual funds. The reply was negative. But the banker would consider loaning him money if he was to invest in business or real estate.

The banker replied that he won't loan money to buy mutual funds, but he would consider loaning money for a business start up or for purchasing a piece of real estate.

Insurance

I like the sentence. Those who need insurance are probably those who cannot get insurance anymore.
How true this is :x

5 considerations for each investment

1) Earn / Create
==> How is it going to help you generate your cash flow?

2) Manage
==> How are you going to manage this investment?

3) Leverage
==> How much leverage can you get for your investment?

4) Protect
==> How are you going to maximise your profits, and protect it from creditors?

5) Exit
==> How are you getting back your original investment money back?

The 4 quarters of our life

This is another interesting way to see how our life is. Basically, we can assume that we start work at the age of 25 and retire at the age of 65, working a total of 40 years.

The 4 quarters are each of 10 years, which means
1st quarter: 25 ~ 35
2nd quarter: 35 ~ 45
Halftime
3rd quarter: 45 ~ 55
4th quarter: 55 ~ 65
Overtime

Basically, we aim to win in every quarter. However, winning in one quarter doesn't mean you will definitely win in the other quarter. Things could change drastically.

While this is an interesting way to divide our working lifespan, to be honest, I only found this portion interesting, but how it really applies, I could not yet fully comprehend.

All in all, I do like this book. It's a refreshing read as it is quite different from Robert's Rich Dad, Poor Dad. There are a number of things that were mentioned (but I didn't write down) on what businessmen really do to protect and accelerate their networth. You could borrow from the National Library for a read.

January 2011 Portfolio Update

2011-01-31T18:06:00.001+08:00

January was supposed to witness the Capricorn effect. Indeed, the first few days of January registered a STI increase. I've read somewhere that if the Capricorn effect did not materialise, then the market would be worse off in the later part of the year. This happened in 2008.

The only change to my portfolio this month is that I purchase another 23 lots of AIMSAMPIREIT at $0.215 2 days ago to round it up nicely to 120 lots. Apart from that, I didn't see anything good for buying for myself. I'm getting more and more cautious at the moment, only entering very selectively. There's a time to buy, there's a time to wait, and there's a time to sell. To me, I believe this is the time to wait, to be excessively patient and cautious. While I believe markets can still rise, most stocks at this level have a low margin of safety as compared to before, so I would wait.

A short summary of my core holdings:

Portfolio cost: $173k
Portfolio value: $196k
Percentage gain: 13.37%

Dividends reached $1155/mth on average. No dividends this month, but I'm expecting dividends to come (starting from 28th Feb) from Starhill Global REIT, CapCommTrust, AIMSAMPIREIT, KGT, CitySpring and First REIT. I'm also expecting dividends to come from GRP and Saizen after they announce their results. Starhub's yet-to-be-announced dividends would most likely be delayed, typically coming after their AGM.

My percentage gain rose mainly because of First REIT's rebound. A number of holdings went XD this month as well, namely AIMSAMPIREIT, CapCommTrust, and First REIT.

Adding to the $24k in the basket I hope to sell off at the bottom, my total cost stands at $197k, an increase from the previous month's $192k. Adding these to my MMF units, my total available funds for investments stay constant at $205k. I did not pump any new money into my MMF this month.

Trading Basket -- Hoping to sell off

I want to sell these off when I can, or cut loss when I can take the loss :(
Portfolio cost: $24.3k
Portfolio value: $18.5k
Unrealised loss of around $5.7k

(red = freezer stocks to remind myself of my mistakes)

30 lots of Hor Kew at 0.125

27 lots of LC Dev at 0.177 (accepted the rights + 3 lots excess)

2 lots of Cosco at 2.67

160 lots of Berlian Laju at 0.065

Musings and Ramblings

2011-01-23T03:03:00.001+08:00

Seriously, I have no idea what to write for this post, but I'm just rambling along.

Much as I would like to have a more relaxing 2011, Jan 2011 turned out to be a crazy month so far. I had so many things on hand.

As my dividend investing strategy continues, I realised that my cashflow gets better over time. While having achieved a $1.1k average monthly dividends does not ensure retirement, it does give some form of flexibility if I ever want to strike out on my own. Given my current circumstances, if I were to remain in my current state, I could retire if I want to right now, giving the occasional tuition and doing the occasional trading.

But I'm not going to do so. Why? It's not really about money, although more would be nice. It's about my passion, it's about what I want.

Why do I teach tuition? I really find it fun, but that's only one side of the equation. The best reward comes from successfully turning a failing student into acing the exam! The most recent example would be my 7 O level students with a score of 2 A1s, 3 A2s, 1 B3 (had expected an A2), and 1 B4 (from failing). It's a feeling of euphoria that I can't really describe with words when I know that these students who ace their exams were once lacking confidence, scoring badly, and looking for me to help pass their exams.

Why am I aiming to write a physics guidebook? I want my book to really benefit students in scoring, because I really do think it would have an X-factor, something extra to it, as compared to the books on the market. I do dream of being able to autograph my own book for my students. It's fun, and it's an experience that I want to have.

For the last 2 years, I helped teach a secondary school for Junior Physics Olympiad. It's another great feeling when I know some of the students achieved awards for their respective categories. What makes me happier was to know that this school just received the best non-IP school award for this competition. I was approached this year to help teach another secondary school for this same competition. Let's see if I would be able to do a repeat performance.

Why am I still in my full time job? It pays peanuts (to me at least), but I stay because I really like to do programming and solve problems (engineering). What makes the place even more fun is the colleagues I work with, the things we talk about, etc. They are the reasons that would hold me back and make me think twice if ever I want to leave for greener pastures.

So while I'm setting goals here and there, in actual fact, I'm setting a target where I want my passion to grow towards. I guess I'm an addict to seeing achievements, not just my own, but also people I helped, people I trained, people I know, etc. This is the main reason keeping me awake every night, thinking how I could author and write my notes better for the common student, thinking which are the best questions for training my A level and olympiad students, thinking of any new educational techniques and tricks I can conjure to arouse the interest of students, etc.

Guess I'm rambling too much. I better go sleep.

Growth Strategy for 2011 and beyond

2011-01-04T01:46:00.002+08:00

Happy new year to readers in the year 2011!

Year 2010 was a rather good year for me in terms of networth growth (nearly doubled). It was a year where I was super busy, but monetary and spiritually rewarding. Why I said it is spiritually rewarding is because I believe it is my calling now to assist and help students do well in their studies, through active teaching and through books.

Year 2011 and beyond is indeed more exciting than ever before. This post is not going to be about any new year resolutions, because I have already set myself in place with Goal 2013.

Apart from Goal 2013, this is my view of the economy and market in concise form:

1) Asset prices continue to rise.
2) Markets continue to rally.
3) Precious metals and commodities may continue uptrend.
4) While I believe it will rally, eventually, there will be a very very great crash. Just when. My estimate is 2018 based on a ten-year cycle.

The first reason is the apparent bearishness of many in the market. To me, a bullish/bearish appearance in stock prices does not indicate a bullish/bearish emotion of investors in the market nowadays. The main reason is because of institutions and liquidity, as explained in the second and third reasons below. Yet, many bullish/bearish indicators are usually dependent on price movements. Is that really accurate when currencies are depreciating at such a fast rate? IMHO, there are a huge number out there with bearish views of the market. Not based on prices, but based on observations and my interactions with people, and by putting myself in their shoes. To me, many have been "financially awakened", have read many financial blogs and financial books, and hence are more aware and cautious of playing the market unlike before. The recent bear is still fresh, and naturally, fears will linger about an impending top. I try to be contrarian and call for another mega rally with a time frame of 6 years.

The second reason is because of the presence of high liquidity in a world that is more financially awakened than before. Is it not scarier than before that more and more people, especially the younger ones (like me), are talking about the concepts of financial freedom? While there are indeed still people who do not bother, I believe there's a rise in the numbers who do bother. Hence, I believe more and more people will buy more and more assets (including paper assets like stocks), leading to a buying fervour that will grow and grow.

The third reason is that with printing of currencies by so many countries, the value of currencies are dropping. So what if a government owes lots of debts; when desperate, one only need to "print" more cash to return the creditors. Furthermore, quantitative easing provides even more low interest cash to institutions to borrow and buy assets worldwide. Who cares about currencies and debts anymore. It's a never ending cycle:

use spare cash buy assets <==> borrow cash to improve liquidity and position for more purchases

And how to get the extra cash to lend? Just print more. Eventually, printing of currencies can help buy up more and more assets till currency gets worthless. Quite a gloomy eventual outlook on currencies, but a mega bullish outlook on asset prices.

But eventually, all good things must come to an end. All parties must end. Will the world greatest economy allow their reserve currency status be removed? I don't think so. That will be the time when these borrowers sell everything at a large profit and return the cash, solving the problem of debt of the country. A conspiracy theory I believe in. When it will end is up to anyone's guess.

The stock market is like a sheep farm. The institutions borrows the cash to feed to the sheeps in these sheep farm, and slowly fatten them up over a period of time. We see this as a bull market, where everyone is buying. Everyone is earning money and everyone is happy.

When the sheeps are ripe for harvest, it's time for the slaughter to lock in the profits. Institutions will start a mega selldown to lock in their profits. TA practitioners will see supports being broken, and start selling at the same time, further fuelling the selldowns. This is what we see as a bear market.

Eventually, most of the sheeps are all slaughtered. It's time to grow and fatten a new batch of sheeps. This is what we see as market recovery. And yet with all these financial manipulations, no value is created. I'm just a small sheep in this farm, but I believe the fattening process will continue, and hence I'm staying vested.

This is why my growth strategy for 2011 and beyond, apart from remaining vested in the market, includes growing my own asset, which is a business, one which aims to value create instead of competing. One which aims to assist instead of destroy. And for myself, I have identified to be in the business of creating educational materials to help students score. This, would be my main thrust and growth strategy through year 2011.

December Portfolio Update + Quick Review of 2010

2010-12-31T16:00:00.000+08:00

December was a rather quiet month.

The main changes to my portfolio are

1) First Reit. I initiated a position in First REIT rights at 0.165, and subsequently exercised the rights by paying another 0.50, bringing my price to 0.665. This gives a yield of about 9.64%. This is a stock I wanted while it was 40c region, but procrastinated too long. While, hindsight is 20/20.

2) Silverlake. I initiated a position at 0.33, and I have written 2 posts about this.

3) CapitalMallsAsia. I initiated a position at 1.86.

4) Cut loss on China Sky at 0.22. While on hindsight, I could have done better and sold it this week with a profit instead of a $500 loss.... :(

5) Took profit on Breadtalk. Again, on hindsight, I could have earn more if I sold it this week, but then again, it's hindsight, and my number of lots is so little it would have mattered much anyway.

6) Subscribed for LC Dev rights.

A short summary of my core holdings:

Portfolio cost: $168k
Portfolio value: $184k
Percentage gain: 9.82%

Dividends reached $1115/mth on average, after all the changes in my portfolio above. Of course, this can change over time, either through portfolio shuffling, or through changes in business of the stocks I hold. In the month of Dec, dividends came in from Starhub, SPH, CitySpring and AIMSAMPIREIT. I have already spent some of these dividends on a new All-in-one PC from Dell (Price $2k) :)

The percentage gain dropped a great deal because I have inserted quite an amount of spare funds into the market this month. These fresh funds have yet to gain much. In addition, a number of my holdings went XD, so some of the gains were realised back as dividends.

Adding to the $24k in the basket I hope to sell off at the bottom, my total cost stands at $192k, an increase from the previous month's $177k. Adding these to my MMF units, I have reached near $205k.

Trading Basket -- Hoping to sell off

I want to sell these off when I can, or cut loss when I can take the loss :(
Portfolio cost: $24.3k
Portfolio value: $18.4k
Unrealised loss of around $5.8k

(red = freezer stocks to remind myself of my mistakes)

30 lots of Hor Kew at 0.125

27 lots of LC Dev at 0.177 (accepted the rights + 3 lots excess)

2 lots of Cosco at 2.67

160 lots of Berlian Laju at 0.065

Quick Review of 2010
The year of 2010 went rather well for me. At then end of 2009, my investible capital (by cost) amounted to $112k. At the end of 2010, today, my capital has reached $205k, an increase of about $93k for 2010. This include both realised gains ($11k) from the market and from savings from active income sources ($82k).

I made quite a few mistakes in my timing of exits; i.e. I exited China Sky and Breadtalk on a down day. But it does give me a peace of mind and some opportunity cash to lie in wait.

Year 2010 also saw my amount of technical analysis reduced by a fair amount, and having a greater focus on the fundamentals of companies. While my analysis on fundamentals, balance sheets and businesses is still at the extremely basic stage, at times, I ponder over whether one should spend a substantial amount of time to delve so deeply into a company's statements apart from picking a few critical points to look at. Time is of essence, and returns per hour is of priority to me. I like the checklist that cookieguy has for analysing stocks (must get it from him!). What he does is to analyse the stock based on his pre-determined checklist which he has made from his investing experience.

I will try to get a post on my views and goals for year 2011, and how I would set out to achieve them.

Quiet Good News for Starhub

2010-12-30T11:01:00.001+08:00

Financial numbers should never be the absolute decision maker/trigger when determining whether to buy into a business. Here's one quiet good news from Starhub:

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StarHub secures deal from Marina Bay Sands

SINGAPORE : Info-communications provider StarHub said on Wednesday that it has secured a deal from Marina Bay Sands to provide telecommunications and entertainment services.

It added that the services will extend to both Marina Bay Sands (MBS) Expo and Convention Centre and its luxury hotel rooms and suites.

StarHub did not disclose the actual value and the period of the deal, but said it was a multi-year, multi-million dollar agreement.

In a statement, StarHub said the services will include mobile voice and data services, high-speed broadband and Internet lines.
In addition, a range of StarHub pay TV services will be available in all of MBS' 2,500 guest rooms, as well as on all 75 public screens around the resort, including the casino area.

As part of the agreement, visitors to the resort can also buy a co-branded prepaid mobile SIM card.

Ng Long Shyang, head of Sales and Marketing at StarHub, said the agreement underscores the company's commitment to offer a suite of business solutions that meet the needs of the hospitality industry.

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Starhub does not merely serve the telco and broadband industry; it has its foot too in the hospitality and home-entertainment industry.

What does this bode for Starhub? As an infrastructure company providing content based services, such contracts help to further increase the cashflow inwards to Starhub, with perhaps a lesser capex in providing such services. If I'm not wrong, license fees for TV broadcasting do not increase with more subscribers coming on; it is a fixed cost, and the average fixed cost will only decrease as more and more subscribers come on board.

A blue chip STI-component company with its infrastructure ready, operating in industries with ultra high barriers to entry (telco, broadband, cable TV), with forays into home-entertainment (karaoke on top of cable TV) and hospitality (as above)... What more can I ask for with a 10.5% dividend yield on my cost?

While I won't seek to buy more at current prices, I will definitely increase my holdings if its price ever comes down.