SERIOUS Investing

Compounding and Rule 72

2013-05-25T08:19:00.000+01:00

I guess many would have known the power of compounding but some would not know the significance and how much impact it can do to one's portfolio. I have mentioned so much about investing and the earlier one knows the strength of savings and investing (and know how to invest comfortably), the better it is for a person. A person's work life can only stretch to as long as 60 years of age in Malaysia. That means a total of say 37 years of work life. Man is known to live longer now, as an example, my grandma is now 92 and healthy.

Hence, over here I am going to reiterate the power of compounding although many would already know about this. Some however don't.

If I make 10% every year from my investment (and reinvest), how many years would I double up my value of investment? It is not 10 years. That is why the Rule of 72 is being used. (Note that the exact period may not be that accurate, but it is a guide nonetheless)

For a person to manage to get a consistent return of 10% every year, it will take roughly 7.2 years for the investment to be doubled. How Rule 72 applies is through, say you want to double your principal, and you want to know how many years your principal can be doubled assuming the interest or return you are getting is on a consistent basis. You do that by dividing 72 from the consistent return you are going to get. From below table, assuming one gets a consistent return of 8%, he / she would double his principal from investment in 9 years.

The significance of it

To our daily life, the significance is quite drastic. If we put our money into the bank and get 3% (that is what we are getting for many years now), it would take a long 24 years to double up our savings.

If EPF consistently pays 6% every year, it would take 12 years for the person to double up his savings there. Hence, if you have savings of RM500,000 in EPF today, and if the managers have done well to return you 6% every year, you will double your money to RM1 million by 2025, assuming there is no fresh savings.

Say I am targeting a 10% return on average from my investment, I would need to take 7.2 years to get my investment doubled. What if I am a better investor, and I get say 18%, that's only 4 years to see my investment doubled.

On another note, for a company which has a consistent Dividend Yield of 6%, your investment would probably see it doubled in 12 years.

The flip side of it, for those whom have credit cards debt of say RM20,000, you will double your debt owed to the bank in 4 years, because they are charging 18% on your credit.

See the significance!

Where is the bullishness on IHH coming from?

2013-05-24T11:37:00.001+01:00

I was wrong to think that IHH would probably be too expensive when this stock was listed last year. It actually is expensive and getting more expensive. Today, its market capitalisation is RM32.1 billion. Amazing!

IHH's last year's IPO price was around RM2.85. Today, less than a year it is priced at RM3.95. But with the much fanfare, is it really that attractive?

Just yesterday, it announced its first quarter result. This result would perhaps be closer to the more real result, we expect to see in future, after the opening of the Mount Elizabeth Novena in Singapore, apparently a 6 star like hospital. This 1Q13 quarter's results is where you would not see extraordinary income from the locking in of profits from just accounting entry.

For the 1Q13, it registered a Profit Attributable to Shareholders of around RM127 million. See below. Hospital's business is hardly a cyclical business. If any, in fact the lowest period would be the fourth quarter where people are moving away for holidays. Hence the first quarter results is expected to be a better one. So, from here, what can we expect looking forward for the full year? It would only register a full year real results with profits of somewhere around RM500 million.

With this number, I in fact was too bullish. I was thinking of somewhere more than that - between RM600 to RM700 million profits attributable to shareholders, at the top end, last year. Remember, this year is supposed to be the performing year. In the 1Q13, where is the performance?

If it is going to be performing somewhere along the line of RM500 million to RM600 million, that is about 64 times PE we are talking about. Many people would like to use EBITDA, especially when they are finding it hard to explain the slower growth.

EBITDA is great but it is greater for companies that have spent a huge sum of money previously to expand because of the huge depreciation or amortisation. An example of a good company to look at EBITDA would be Malaysia Airport, post the KLIA2. However, IHH is a company which would need to continuously invest. It is promising or rather telling about the China (or Hong Kong) and South East Asia stories. That means what? It needs to invest.

Another thing about hospital is also about investment for equipment. Look below, for the 1Q13, where is the free cash flow? Somewhere along the line of RM148 million for one quarter. It is not good enough for the valuation one pays.

From the latest numbers, IHH still has around RM3.6 billion debt against cash of RM1.7 billion. That is not worrisome, but it is not fantastic either. The company is talking about expansion. We already see the free cash flow to be not too exciting, hence the reinvestment has to be much controlled. The balance sheet is not too strong, hence good dividends will be tough in near future, although it will pay some. So where is the bullishness coming from?

Talking about STAR

2013-05-24T03:15:00.001+01:00

I am actually sad that a once Penang based newspaper is now at its position today, No, it is not in trouble but it has gone the wrong way. It has lost its middle ground as a newspaper, but more to serve its political masters. Already the newspaper business is so tough nowadays, where we see demise after demise of many all over the world.

I guess Malaysia they are a little bit lucky where printing license is limited and is probably only opened to one side of the political divide.

However, on the business side, Star is not entirely dead. It is a very decent company, but just that I do not know where it is heading.

The internet and Malaysian demography does disservice to Star as well. Why? People whom want to read Chinese for example, may go for Sin Chew or any others. However, if I want to read English, I do not go to Star. I go to all sorts of sites from New York Times, Washington Post to Bloomberg to Malaysiakini to TheMalaysianInsider. I will just go everywhere else except probably buying the Star newspaper.

The young demography of Malaysia, is not going to help. Star has to reinvent as what the earlier comment says on Jobstreet, needing to continue reinvent. But the main product for Star - which is the paper - is already wrong. Then it went to buy 5% of Catcha, who did the buying decision I wonder. It is now building by going strong on RedFM etc, but yet again I listen to BFM more than RedFM. Many more would like RedFM but the point here is options and choices.

The survival for Star now is because there are no strong competitors in the shrinking segment it serves. It is lucky that I do not even want to talk about New Straits Times.

Jobstreet continues to amaze (Updated)

2013-05-23T08:17:00.000+01:00

I am not saying this because I own this stock. In fact I am upset cause I did not buy more. Sometimes when there are doubters, I tend to pull back (not blaming anyone but myself). The business of Jobstreet continues to do well, now perhaps not in one country but 3 countries - Malaysia, Singapore and Philippines. It is not a "jaguh kampung" anymore.

See below:

Each of the 3 countries I mentioned exceeded RM10 million in revenue for the first quarter 2013. The business is easy but hard to quantify. As I have said before, and those whom have read my blog in this company would probably be tired (sorry) of me continuing to comment on Jobstreet (nope, I am not paid, in fact I am only a small shareholder), but it is not easy to comprehend. Me myself had doubts before. Just see the previous blog and its comment.

We have doubts because of the competition at hand. There is again Star (as I see it going nowhere yet), LinkedIN and perhaps many more. I have invested into Monster, it is a different "Monster", I can tell you that - don't know why. LinkedIN? I doubt so as LinkedIN itself would not be able to get so much market share. Perhaps the soft job market still in US and Europe.

Now, based on the above segmental, look at below for the previous corresponding quarter comparison:

Almost every ringgit earned is a ringgit gained. As long as it grows its revenue, it will perform amazingly.

I do not know how much the company spends on marketing costs, but the main strength now is the database which in the balance sheet you do not see. What do you see in the balance sheet? Besides to tell us that it has a strong balance sheet, nothing much...

Currently, as the company continues to be on the uptrend, its Price to Book Value will get widened. The cash that it holds will cover its expenses for slightly more than a year, I think. And that's it, nothing much to analyse.

Until now, Jobstreet has its policy of distributing 50% of its profits as dividends. It has just upped that to 75%. It has made some mistakes of using the additional cash that it had by investing into some companies. While some of the made sense, i.e. investing into the dotcom job search companies like in Taiwan, there are others which are not bringing much returns. The monies that Jobstreet invested into are the ones boxed in red above. I am just glad that they are preparing to share more of its profits in the form of dividends.

The beauty is in the cashflow, hence dividends (be prepared for more) as well as the P&L. I should have bought more...

YSP: You Shall Pass?

2013-05-22T08:44:00.000+01:00

With the recent market hike, it is really getting more and more difficult to find good deals or something which we can digest. While globally, market is on the uptrend, Malaysia included, I have just noticed Malaysia in fact is lagging behind markets like Singapore, Hong Kong, Thailand - in fact almost everywhere else now.

I would not call the market as expensive but I am surprise of its strength. What provides that impetus for the bullishness. I do not know actually. Lesser people with pessimism the last few months?

Anyway, as I was looking at some companies, one did really get me to hmmm... wanted to know more. Most companies that announced to Bursa are either doing well, I have sort of covered, but there is one which started with "Y".

Once Warren Buffett used to joke to his audience, "do read through the Annual Reports of all the listed stocks in the exchange." The other person asked, "But, Mr Buffett, there are more than 10,000 companies listed". Buffett, replied, "Start from A". I sort of did that. And now reaching "Y" although Malaysia is far from having 10,000 companies. And anyway, along the way I did jump quite a few alphabets.

YSP SAH is a pharma company, something I can digest, have a decently good growth prospect. Small (around RM150 - RM160 million market capitalisation), I can digest as well as long as it is doing consistently decent or good. It is controlled by Taiwanese. Well, if I have invested into Wellcall and Latitude Tree, previously put some money into Uchitec, did decently well, I may want to try on this. More importantly, is it consistent and is it providing good enough return previously and perhaps for the future. If you look below, there is a sense of consistencies although not too bullish.

Yes, its Return of Equity is deteriorating but this is one company which is a growing. It does reinvest. I have done some checking as well among the hospitals, well this one is pretty small, no doubt but it has been supplying to hospitals for quite a while. Started its business since the 90s, its growth is far from amazing but consistent. Importantly, the dividend is above 5% yield, which in Bursa, not many now you can find. If you are getting some 3% from FD, I would say check out this one. The PE is slightly more than 10x.

Pharma in future is probably going to be a much more recession proof and more and more generic drugs companies are doing better due to many patents are expiring or already expired. It is a competitive business but yet there are monies to be made for many companies. YSP is not a fantastic company, there aren't any with regards to pharma in Malaysia. Why? Pretty much dominated by the big brands globally. With the current price though, it is still a buyable company, pretty much like Wellcall. You would have noticed that a small portion of my portfolio is meant for dividends stocks. Wellcall is one, so is Jobstreet but with the rise, it's Dividend Yield is moving further from the 4% to 5% threshold. For a small portfolio like this I couldn't be bothered with holding cash like what most fund managers are doing i.e. holding some 20% to 30% cash. This is unless the market is grossly overvalued and I am not good at timing the market, so why bother?

Anyway, I am not going to be taking too much of a risk but I am spreading my risk a bit as Wellcall seems to be tapering off in terms of performance, although still providing good dividends. Hence, I am selling half of my Wellcall and move to another which similarly provides good dividend - proposed to be 6.5% this year.

Any wonder why Taiwanese companies some of them provide good dividends? This is your food for thought.

Now that you think you have the formula for Bursa, what about NYSE and Nasdaq?

2013-05-19T11:04:00.002+01:00

There was a time where some of the readers were asking about whether to diversify their investments overseas. I said yes. But, let me say this as well. Be prepared to lose some money as overseas market may not be the same as Malaysia.

There was once I attended a talk by OSK on investment in Hong Kong in one hotel in KL. I remember seeing thousands of potential investors. At that time, the HKSE was on the run (uptrend). Hot Chinese stocks like Bank of China, China Life, China Construction Bank were the order of the day. I did not know how many signed up to invest in Hong Kong through OSK Hong Kong. The people whom had attended were probably trying to park their money overseas legally. I was thinking of the same as well. If I can remember, at the point of time the Hang Seng index was almost touching 30,000. It has since came crashing down to about 22,000 despite China did not see any hard landing between then and now. I can see some guys were losing their pants.

Now, why do I say this. I can guess that on that talk, OSK probably did some good business signing up lots of people to trade in their brokerage house in Hong Kong. At around the same time, Public Mutual and CIMB introduced the East Asian fund if I can remember. Today, it is below the issue price.

This happened to me as well. I thought that I could do well by parking my money in US this time. The NYSE and Nasdaq were very attractive for me having dropped due to the crash post-Lehman. I remember Ford went to around USD2. So was Bank of America. I thought it was opportunity time. It was opportunity time for real. But if this is the first time you are into a new market, be prepared to lose some money or not doing well. New market means new trading patterns. As well as new companies to look at. That's not easy.

Remember me always talking about company, company rather than market, market. In US, I was looking at market market - which is proven wrong. Why was I looking at market (i.e. macro level). I do not have that good a feel on the micro level. I thought that I could have known what Wal Mart is doing, or Bank of America, or Citi or GE or Visa. I am partly right. I am not in US trading US stocks. I am doing it from Malaysia. I thought I can know how Gap is doing by looking at Gap Malaysia. So is Starbucks by looking at Starbucks in Malaysia. Not quite right.

The feel can be totally wrong. I invested into a company called Monster. It is the equivalent of Jobstreet or Seek - or so I thought. I thought it could have done well (later), despite the bad job market in US. It is not doing well. I invested into Corning whom is the largest glass (screen) supplier for the LCD or the smart phones market like Iphones, Galaxy. It is doing decently well but the stock is not doing that well.

Over the last few months, the US market was on the run and now on its all time high. So is my portfolio of stocks in US, but it is not performing very well. It is doing probably just as well as the Dow Jones Industrial Index (Bursa CI equivalent) or the S&P 500 (Emas index equivalent), which is not I wanted. If I would have taken the same amount of cash and put them in Malaysia, there is a high chance would have done much better despite DJIA's trend being better than Bursa over the last 3 years.

Why?

My strategy in US is different. I would invest into companies that are large being the Fortune 500 because these are the companies that would have presence in Asia or at least I can read much about. In Malaysia, I take a different approach by looking a mid-sized companies most of the time.

In investment there is no doubt to me (at least) that looking at the companies would be the answer. Timing the market is a strategy but still you have to know the companies. As an arm chair investor sometimes it may not be enough. Even if we visit the place, I have come across when you do a site visit, obviously the management would do their best to paint a good scenario of the company - who wouldn't? You see even analysts no matter how smart they are can get cheated. Hence, sometimes by relying on what you read may not be enough. That's how hard investment can be - but can be interesting though. Think about it.

Now you know why so many funds that have done decently well here (like Pubic Mutual, I think) but failed overseas. I cannot be using me as a benchmark, but market is not just knowing the index, or we thought we know the market situation. Market is knowing your backyard, and the more you know the better it is despite the internet bridging the knowledge divide.

Is DKSH still worth it?

2013-05-17T18:17:00.001+01:00

Blankly, I do not know actually. People who read my blog would know that I actually look at the business and company first before looking at the stock. When I first discovered DKSH, I knew the company as its office was just quite near where I hang out usually, at that time. Now no more. There are a lot of brands which uses DKSH to distribute its products. Hence, if a person is observant, they would not miss the company. Usually the brand is the brand, say Enfagrow, the distributor can be DKSH. It does the distribution or market expansion thing for companies like Mead Johnson. People whom have kids will know the brand.

In fact, DKSH does extensive distribution for a lot of pharma brands, and of course people who are in the medical field would know DKSH as well. DKSH is into distribution of many products for many overseas brands in Malaysia as well as the region. In fact, if I call them a distributor, one day I may get a call and ask me not to term the company as a distributor but a "Market Expansion Company", which is precisely what they do.

Over the last few years, especially since the crisis, many Europe and US companies are looking for expansion. You can see it from Heineken's bid for the beer distribution and bottling business in F&N. Many of these companies are willing to pay a good price for prized Asian assets as long as they are good, strong and decently well managed. Why? Because when you want to expand, the best thing to have is a good well managed company so that you can hit the road running from Day 1.

Turning around sounds good, because usually it is cheap, but turning around are for turnaround experts. Look at Dell, Micheal Dell is now doing a turnaround but he is still doubting himself by not paying more for privatising Dell at its current stage. Hence turnaround is not easy.

As a CEO, if I want to say build my market presence in South East Asia, I would want to buy a good company not a bad one. And as said before, many of these companies are looking for good companies in Asia.

The next best thing to look for if you do not want to look for acquisition is to look for a market expansion company. Say, you have a decent brand in Europe (Germany). You do not have a presence in Asia, strong that is. To build that network, you cannot do it your own. It will take years. As I see it, DKSH is a good candidate. It has the billing, collection and distribution system and it is the best in Malaysia.

The beautiful thing is that many companies now could possibly be looking at expanding in Malaysia with this country being part of Asia. DKSH seems like a good fit in assisting.

When I looked at DKSH, it was trading at around RM0.70 - ridiculously cheap by today's standard. But DKSH was not a hit with investors then. It was most of the time untraded, just had a turnaround (remember the turnaround thing I said). But in this case, the company had all the things in place. It was a good company which probably needed better management of its system and finances. It was good but not excellent. I guess today it is moving towards excellence with the financial performance.

At RM0.70, though it was trading at some RM120 million market cap. Ridiculous. Remember I was putting a wild guess in my very early article of the company could be worth at least RM500 million. Now, at RM5.00++, it is trading at around RM800 million valuation. Can you think whether it is worth that amount?

Now, let's not think of PE, or profits or anything else in terms of the usual valuation. Would a business that wants to build a network like DKSH, be buying DKSH Malaysia at RM800 million? Coca-cola is spending billions to build a factory and getting the distribution network ready after the split from F&N. Even then it is not yet ready today, as I can see it. There are still issues with the system.

A company needs refining especially when you are into a new country, and if you can get some help, you will need all the help you can get. We have talked about Parkson facing challenges in the countries it is exploring into - like Vietnam, Indonesia. But there are things you need to do and you need to do. To build a business takes time and this is where I see the value is in for DKSH i.e. to help to speed up the building process.

Freight-WA may be interesting if its risk you are seeking

2013-05-17T03:16:00.001+01:00

I have looked at Freight Management's results for the 1Q 2013. It seems that the company is on track despite the reducing gross profit margin. You can see that the company is still trying to grow with controlled investment into some of the areas. I have liked the company for its asset light business as compared to some of the other logistics companies.

However, another play which can be possible is the Freight-WA. Its exercise price is RM0.97 and expiry is sometime around 2017. Current parent price is around RM1.35. With the warrant around RM0.39, it is close to in the money with about 4 years of holding.

Warrant would be good if you have a good feel of the company moving forward. If the company trends the other way however, you can potentially lose all your money. Its higher risk, for those who like that.

What's wrong with DCF?

2013-05-15T14:27:00.002+01:00

DCF or Discounted Cash Flow if you do your research, has been said to be one of the most preferred valuation model. It is preferred due to its assumed accuracy in terms of projecting what the valuation of a business based on what is projected down the road.

I like cashflow, it is one of the most important measurement on how well a company or business is doing. But DCF is all bullshit. Why?

I have done tonnes of them (DCF) and everytime I feel that I am bullshitting. Most of the time, the DCF that I do is for the company I work for or to make someone happy that the company is worth so much. From a DCF, one can just make a major change to a valuation based on a slight change in the assumption.

Before we go further, what is a DCF? DCF is a method of projecting a company's worth using mainly the future cashflow of a business and a discount value. Both are equally important. But both are equally difficult to project.

A future cashflow - imagine for a business, can some company project its cashflow say 5 years down the road? Or perhaps 10 years down the road? If that person being the CFO, CEO can project that close to accuracy, then he / she is almost superhuman. Future numbers are amazingly hard to predict. It is like someone (a super analyst) projecting what is the Bursa KL Composite say in 31 December 2018. People change, situation changes, management move around. And are you telling me management is not important in a business? Well DCF is saying that, isn't it. DCF can be assuming a scenario 20 years down the road and we are supposed to be taking the number say 2034 as correct for the valuation to be accurate.

In a DCF, the projection is not only for one year, but for a period. If it is for 10 years, then it is for 2014 to 2023 or even in perpetuity. And it has to be almost accurately provided. Can a business be consistent? Some yes, mostly no. In fact, very few yes. Then how are we to provide a DCF accurately?

Then comes the discount value! A 1% difference, in a lot of times cause significant changes to the valuation. So which number to use 10%? 11%? 12%?

Why the hell then someone still wants to use DCF. Most probably, the current valuation is not good enough. And most of the time that current value is not good enough, some guy has the indigenious thought of why don't they come out with a projection over a long stretch of years and project the value backward, considering time value of money.

Well, if someone wants to bullshit another, you can contact me to do the future cashflow for you and discount them to today's value, cause I am pretty good at that!

For investment though, go for the tried and tested, based on historical track record and what you feel the business is heading in the future.

There are only some businesses which a DCF can probably be used - mostly concessions. Even then other factors are so important.

Where's the RM60 million?

2013-05-14T14:17:00.000+01:00

I have been reading through the announcement. I can't find anywhere that is worth RM60 million in the merger. Can you?

Should one relook at Parkson now?

2013-05-12T08:17:00.002+01:00

It comes at a time when stocks are getting more and more expensive, but Parkson is moving the opposite direction. I once used to hold AEON Malaysia and at that point of time it was way cheaper than Parkson - perhaps half the size in terms of market cap i.e. AEON to Parkson. Surprisingly, slightly more than 1 year later, AEON's market cap is now larger than Parkson.

Share price of Parkson over the last 1 year

Of course, one may say that AEON is performing well - no doubt. While Parkson is sort of having a drop in terms of its performance. I however would be asked that if given the choice, which company would I own. AEON is only with its Malaysia's operations. Parkson is the holding company that holds the group's China's and South East Asia's operations. No doubt in terms of profitability AEON is slightly ahead of Parkson today. But Parkson vs AEON Malaysia is a different ballgame.

I like AEON's business in Malaysia. I like Parkson as well. But if you invest into Parkson, it is the one that holds the brand. AEON Malaysia is the licensee to the AEON's brand in Japan. If any wants to buy AEON Malaysia, they would only be buying the Malaysian outlets, not the brand - pretty much like when AEON Japan bought Carrefour's outlets in Malaysia. It currently has the rights to the brand in Malaysia. That's all.

If one is to own Parkson - they are not just buying the outlets and its location. They are buying the business. Given the choice, a business would definitely gain more value if the earnings are at par.

Now, what makes Parkson's share price trading sluggishly? Its performance over the last 12 months. The poorer performance are due to 2 main factors - competition and expansion.

The retail segment is a very competitive business. Besides competing against each other - AEON, Parkson, Tesco, Giant - company like Parkson is competing against individual brand retailers which have their own stores such as Gap, TopShop, Uniqlo, H&M to name a few. But a brand and retailer like Parkson has its own strength. Imagine a mall without the like of Parkson or Isetan. The malls would call them anchor tenants. Malls need to work with anchor tenants to bring the crowd. Hence, malls need companies like Parkson and Isetan and as such these players normally will provide a better terms as against for example you want to open your own Bally shoes store. The rental per sq ft would be different.

AEON, nowadays prefer to open their own stores, buy their own land and build it, be the mall itself. So are Tesco and Giant. Parkson it seems has started to own its first mall in Setapak, Kuala Lumpur. I believe that it may be looking at this model much more in future. But at the moment, malls still need them.

On expansion, Parkson is now aggressively expanding in South East Asia besides having the largest part of its business in China. This Chinese operations is of value - believe me. The expansion in South East Asia would have caused some cashflow to be used for capital expansion sake, but if one if to buy such a business, I think it may be worth it as if it manages to do well in Indonesia and Vietnam, Parkson may be up for a re-rating despite it being a Malaysian owned and branded supermarket chain.

Due to this, I am taking a plunge by buying 2200 units for the portfolio.

Purchased at RM4.22 per share

Is it time to hold cash?

2013-05-08T14:43:00.001+01:00

When Bob Pisani of CNBC said that many markets are now at all time or at least 52 weeks high, he forgot to say about Malaysian market as well. Before election, Bursa had already reached all time high. Post election, it went berserk, with the KLCI climbed beyond 1,800 points to later taper down to around 1,750 points. Now, after 3 days it is at around 1,770 points.

Is the market overpriced? I don't think so, if you consider the amount of liquidity that are available in the market. Bernanke is still printing money, not leaving his foot from the gas pedal. Japan is even more aggressive, looking at doubling its issuance of bonds. Basically, everywhere in the world, we are seeing people (rich people that is) do not know where to put their money. In Asia, property has gone to prices where it has never reached before.

Well, so it seems for stocks as well. People whom are holding cash will feel like cash is NOT KING. I provide a scenario. Even with stocks, a decent pick would have its dividend return better than returning a 3.2% interest from Fixed Deposits. Don't believe me. Look at the comparison between Fixed Deposit vs dividends.

Fixed Deposits earned if I would have put the money from Felice's Fund

Based on above, the total FD that I would have earned from the money put in is only RM2,664.55. Against the dividend earned from the portfolio, which one provides me with a better return so far? Few years ago, no one would have expected total dividend earned to be higher than the interest earned from FD.

Now, it seems like it is an issue if one is to hold cash. The return would not even beat real inflation (do not believe the number provided to us...). Hence, all kinds of riskier assets are sought. It in fact seems to me holding cash is the riskier of them all currently.

Nevertheless, the exuberance over the last few days caused me to re-plan. I had wanted to hold Time Dotcom for a longer while, as I wanted Digi's distribution as part of my holding. But it seems that with the sudden rise in stocks over the last few days, I think that selling Time Dotcom would be the better thing to do while I look for another stock to hold.

Sold Time Dotcom

I think I know which one to have if the price is right as there are some stocks which retreated a bit despite the rise in KLCI.

p.s. the sale is partly to do with I believe some of the hands are pushing some stocks up to prove some point...

The lessons of GE13 on stocks investment

2013-05-06T07:07:00.003+01:00

By now, there are many who would be feeling frustrated and disappointed over the GE13 results - especially for those who are hoping for a change in federal ruling government. If the percentage of popular vote is taken into account of the support, probably there are a higher percentage of those whom would be disappointed as Pakatan has managed to garner a 51% popular vote as against BN whom managed a 49%.

For those who are disappointed as we are Malaysians and the fact that I see some of my friends whom have been overseas, and made their point by coming back to vote speaks volume of their patriotism despite being away from the country for many years. The majorities who traveled thousands of miles just to put in that one vote may have been voted for the opposition, ended up disappointed but at least they have done their part. They are very much a Malaysian.

Fortunately, for stocks investment, the attachment need not be that strong. There should not be that sense of too strong a feeling for one's investment, but you must know the company that you invest in. Without that, you are just blindly supporting the company by putting your money.

As a minority investor, one should know that there is only a limit that one can exercise. Just like a voter, your vote is one out of the 13 million whom can vote in Malaysia. As a shareholder, you can vote, but your vote is just as much as the number of shares that you hold. In fact, it is even worse as in stocks, the majority shareholder pretty much can dictate the vote as they are the majority. And being a minority, in most cases (despite the protection that is provided to minorities) investing is that much you can do. You can highlight the wrongs and rights that the management have done, or pretty much avoiding the companies that do not have interest of shareholders is probably the best thing to do. No point getting upset over what the management have done which may not be to our interest.

I have invested in many companies which over time, I feel that they have not done to what I believe is right - an example of it is AEON when it uses its parent holding in Japan to buy Carrefour in Malaysia. After I have sold the stock, its prices continued to rise. But I still believe in what I believe, and that's my decision. Even if it continues to be doing well, there must be a certain principles which one should follow as being a minority investor, you should know what you are doing. Not having the right principles in investments can cause heavy losses and holding to something bad for a long period which will just disappoint one as an investor. An example is KNM, which many a times, people just hoped that it turned. It has not so far - how much longer should you wait?

The beauty about stocks investment is that there are a whole long list of stocks which one can choose. Sometimes, there are no right or wrong company. A person who knows the oil and gas industry may like Dialog. As I am not too familiar with that industry, I tend not to buy the stock although it has done well for many investors.

In yesterday's election, one tend to get overly excited and hope that things can change overnight. Change is good but change does not happen overnight most of the times. The common flaw that most people do in investment is that thinking any change in event or management will cause change in the prospect of the company. That most of the time do not happen - in stocks and country you live as well.

A bad company despite one can put in the hope - chances are it will remain to be a bad company. A good company, despite some turn of event that may affect it over the short term will in most cases be a well managed company. While the leader is important, the core of the company or country are the people.

Hence, try not to be too disappointed. If you believe in the people, you should be with the company that you invest in. If you do not, change your portfolio.

That can't be said of the country you are born in though.

Moving from SP Setia to Wing Tai

2013-05-04T10:59:00.001+01:00

After holding SP Setia for 4 months, I have decided to sell the company at RM3.49, taking a profit of RM765.00 from this small shareholding.

If you looked through my previous postings on SP Setia, although I do like SP Setia, I did also mention of it being a short term shareholding. SP Setia will remain to be a great developer but the fact that Tan Sri Liew has been buying land (possibly through proxy like his son and friends) while diluting his stake in SP Setia probably convinced me to sell. I still do not think he is SP Setia, but the fact that it is a pure developer and me being not too comfortable with a full-fledged property developer at this stage, allows me to sell.

Yesterday, it was a small opportune time for me to pick up some of the stocks which may have dropped to their original level when I may have started to look some of the stocks with more in-depth.

This I believe, is due to the jittery effect of the general election which may chart the future of Malaysia when the market is reopened this Monday. Anyway, as always I have mentioned of non-government aligned stocks and I will still keep to that mindset. Time Dotcom and Malaysia Airport are not really government aligned stocks - they are businesses which are largely owned by GLCs. Time Dotcom is managed and to a large extent owned by a group of individuals who happened to run the company but they are majority owned by Khazanah. So is Malaysia Airport which is controlled by the government.

Anyway, over the past one month I have looked and relooked at a company called Wing Tai Malaysia. It is a decent developer with some slight diversification - fashion retailing. Currently, the contribution for the group is around two third property and one third retail. While I am ok with property business, I am as well attracted to its retail arm despite it being a smaller contributor. For its property, it is one of the more prominent developer in Singapore with some projects in Hong Kong and China, but these are held through different listed entity. Hence, it is not a newcomer when comes to property development. Much of its projects are medium and higher end in Malaysia now but its landbank in mainland Penang will cause it to build more affordable housing.

As for the retail business, this is where I think it will achieve more consistent results from. It has more than 10 brands under its arm and the more popular ones are TopShop and its joint venture into Uniqlo. Since 1 - 2 years ago, the government has done away with taxes on clothing and luxurious retail goods. This, I believe has cause brands such as H&M, Uniqlo, Debenhams to be aggressive in the Malaysian market - which from this is good for Wing Tai Malaysia. On its background, you would know that Wing Tai Malaysia was called D&P (Dragon and Phoenix). From my experience, it was a clothing manufacturer reinventing itself into brand retailer, which it to an extent has done decently well. This reinvention of itself makes me believe of the group, of its ability and I have decided to purchase 4200 units at RM1.89 per unit.

You can look at my update on my portfolio here.

What type of business you should invest in?

2013-04-26T16:12:00.001+01:00

I always treat investment like investing into a business. If it does not pass one of my test, "Is it dependent on the government's largesse?" I will stay away.

I was reading this article on Bloomberg, where in one section, it interviews the CEO of Supermax. For a businessman, usually they are not that brave to say what he said. But then again, for the type of business he is in, he probably could not care less. Or probably he had already made a calculated move. His business is not affected whoever wins. His market is global. The banks will still stick to him as there are enough choices for him to go to. For him to get license to operate, I think it does not make much impact due to Supermax' size.

Now this is what you should invest in. I remember many were asking on the potential impact of the general election to the market as it was drawing near. You see any, so far?

I think for some who held on to much cash, they probably missed the boat - and one of them is probably Icap!

Add on to Timecom

2013-04-23T09:12:00.003+01:00

I have decided to add on to TimeCom by buying another 400 units.

Price bought was not too good i.e. RM4.10 but I guess this is to allow when provided with Digi shares as dividends, there are no odd lots. As per announcement, for every 2500 units of TimeCom shares held, the shareholder will be provided with 600 units of Digi shares.

Prior to this I was holding 2100 units of Timecom. The purchase of 400 units will increase the holdings to 2500 units.

The distribution will be quite soon as I can see it. I am looking forward to holding some of the Digi shares.

Airport's Dividend Reinvestment Plan - What to do?

2013-04-15T14:24:00.001+01:00

I remember I was questioned twice on the Malaysia Airport's Dividend Reinvestment Plan. Well, here I am going to go to basics on what to do with it.

Today's Malaysia Airport closing price - RM5.72
Dividend declared per share - RM0.0763
Reinvestment Option price - RM5.14

In today's announcement, here is part of the form as announced.

Now, see the closing price of RM5.72 is way higher than the reinvestment option price at RM5.14.
I am going to take the option of reinvestment plan. Based on Felice's Fund, I am entitled to RM0.0763 x 2,126 = RM162.21 dividend.

However as I am taking the option of reinvesting the dividend, I shall take a total new Airport's shares of
31 shares @ RM5.14 = RM159.34.

Hence, I am taking 31 new shares and a paltry sum of cash totalling RM162.21 - RM159.34 = RM2.87.

LION Air skids into sea in Bali

2013-04-13T12:32:00.001+01:00

Lion Air, the operator and minority shareholder of Malindo Air had one of its plane overshot the runway in Bali and landed in the sea. All passengers safe. Read below:

Lion Air plane skids into sea in Bali; 22 hospitalized

Lion Air has been a tough competitor to Airasia in both Malaysia and Indonesia.

On another note, I went to have a look at KLIA 2 recently. Don't think it will be ready for scheduled launch on 28 June 2013. I can still see the entire runway covered with red earth. I think Malaysia Airport has to be more upfront to the public as well as shareholders.

It is not just the private sector who can be good at it

2013-04-09T15:37:00.000+01:00

I was listening to BFM this morning about the hidden and unknown portion of Malaysian public debt.

http://www.bfm.my/teh-chi-chang-refsa-steven-wong-isis.html

One should know the financial crisis that collapses AIG, Lehman and Citi to a certain extent is not knowing the extent of the liabilities that the financial institutions have taken.

Is our government just as guilty in using off balance sheet financing to fund public projects?

Quite interesting this morning's conversation.

Election time but portfolio still the same...

2013-04-03T15:32:00.001+01:00

As mentioned in several of my replies, I am not too concerned over the election and today the parliament has been dissolved. It is uncertainty period but in shares it has always been lots of uncertainties - just have to pick the right stocks.

I have updated my portfolio report, but just to say sorry that nothing has changed over the last few months - just the price. I could not find much reasons to buy or sell. Over the last few weeks, I was looking for opportunities to buy a little bit of Time Dotcom to make up to 2,500 units as I am now owning 2,100 units. I however could not find the right price to buy them. It has now gone up further, hence gonna wait further.

Because of the position is full, I do not have much money left to buy. Of course, over the period I have mentioned of several good stocks which I may have bought - one of it Freight Management. Run out of money for the portfolio now though.

Over time, you may see me posting lesser and lesser as my point of view on stocks will always remain to be consistent while the universe of good Malaysian stocks is running out of my list to be mentioned. Again, if you found good ones, please do send me a note. I will try my best.

Why Penang should just proceed with the tunnel

2013-03-30T03:41:00.000Z

I am a Penangite and I am reading with surprise the amount of rejections from the NGOs (CAP as well) and some individuals viewpoint here. While environmental issues are a concern, one should know that for the past, one of the reasons why Penang has been under the rule (until March 2008) of the current sitting Federal Government is mainly due to the fear of being bypassed for development. Penang as a state has been bypassed for development for decades now, probably ever since the free port status has been taken away in the 70s. This is despite many times plea for reinstatement by Tun Dr Lim Chong Eu who was Chief Minister then. Even when we had a Penangite as a Prime Minister (and two Finance Ministers - Badawi and Nor Mohamed Yaacob), Penang has been bypassed. During then, the Iskandar Development in Johore was initiated. Monorail or any kind of major transportation system was not even introduced despite the Penang city really needed it.

The very people whom rejected to the tunnel and several link roads just do not (or refuse) to acknowledge what state government can and cannot do. There is obviously a limit to what the state government can do. I have been doing my search and realise that the amount of revenue the state is able to generate is pathetic compared to the federal government. In 2009, the state government for the first time managed to generate revenue exceeding RM1 billion. My question is what is RM1 billion compared to what a federal government can generate? I would think most of the revenue that a state like Penang can collect are things related to land - assessment, rent, sale of state land, any transactions involving land transactions (from duties), billboards, sale of sands perhaps. For Penang, there are no loggings, very little agriculture revenue, definitely no oil and gas - basically very little natural resource to gain from.

Companies and individuals that are taxed from their profits and income - these goes to the federal government despite I would think Penang assisted to generate quite a few of them. In return, the federal government would re-distribute the revenue for states development. Obviously for Penang, usually that is a paltry sum - now probably worse.

Then, as a state government what should they do? Sit still and relying on the beauty of the beaches while trying very hard to promote the tourism sector of the state? Can, but you won't last long. To do that you need to develop the state. While people will want to remember the nostalgic experience of the Penang state during the 60s or 70s, obviously that is not possible without more development and better infrastructure.

For a state government, they have resorted to the earliest form of trading for progress (barter). Basically, they offer toll collections, land to be reclaimed for improvement of basic amenities (roads). Why? A Penang (or Selangor for that matter) state unlike in US for example is not able to raise state or municipal bonds - never have I heard of this in Malaysia. Without borrowings, your options are just very limited. Without development, that is equal to backward development for the state - do most Penangites want that?

Another thing which surprises me - these NGOs and some recalcitrant individuals mentioned of better transport infrastructure - buses, trams, monorails etc. Better infra means more money needed. Seldom have I seen public transport makes money - if they do, for the first initial years, much initial investments have to be spent. Spain, Singapore, Hong Kong, China spend hundreds of billions for their public infra but have yet to see direct return - indirect yes. This is social responsibilities where a government needs to provide. But for the government to do that, they need money - where is the Penang state government going to get that without increase in revenue? Bonds? Nope, as mentioned. Borrowings from the federal? Fat chance for now. Tell me what the state can do then.

Further, we want the state to build more public housing. We also want the state to build public housing on land that are today very expensive - in some parts of the island. Island is preferred over the mainland. Public housing is to be built on land that costs RM400 per sq ft or more. Is this logical? Does public housing need more capital injection from the state or is it a money generating affair? Public housing is very much needed, but it will just take up more state funds - which is why the state government has to find ways to generate more revenue.

The state government, I believe is looking at improving the state collections and revenue further for the future. With more revenue, then only more development can be further improved. Where are they going to increase their revenue? Again land, assessment, improving the infrastructure, tourism which also means more people into the state, real estate, more property transactions by the richer locals and foreigners - that is the only way to build their development warchest.

Hence, before any person reject, think before they do it. Social responsibilities cannot be improved without development - and the very group have been against development - of any massive scale - for a while.

One should not be afraid of Freight Management

2013-03-29T06:46:00.000Z

This is one company which slips right through before my eyes. Why? I have never had the positive mindset for logistics services business. In my mind, I have always thought that this business is in a very competitive landscape. I have seen some entrepreneurs with the call cards registered in their phones, after a number of years of experience, came and venture out themselves - they are able to survive with very few people working for them. With the contacts and some licenses, they can basically operate.

On the other part of the landscape, companies like Freight Management are up against the very large freight forwarders in this world like Kuehne and Nagel, Expeditors, CEVA etc. This is a borderless business. While there are licences involved in their ability to operate, it was most of the time never a problem. Hence, you are seeing in Malaysia as well as in countries that Freight Management operates in the very large and smaller players are there as well.

However, despite all the fear how can we fault the consistent growth that Freight Management has been able to register over the last 10 years as below.

5 years Financial Highlight 2003 to 2007

5 years Financial Highlight 2008 to 2012

If you look at the track record, the revenue and Net profit were registering growth every year without fail. That is almost impossible to achieve but yet is happening. How can this happen? I guess as in most people whom are not very aware of the company, this is partly the reason. You can almost missed the company if you are looking for trading volume. However, the unfettered focus by the management to grow the business and profitability, after that let everything else runs its own course - this in every investments is almost more important - no doubt. The thing that probably will differentiate my earlier failed investment of very good companies is that Freight Management does pay consistent dividend and it is mainly a services company. Hence, cashflow is more consistent - and from there it will continue to be able to pay good consistent dividends.

On the industry outlook, this region's shipping volume grows and Malaysia continues to be a very important regional and global logistics hub. It seems that despite the continuous tough competition, Freight Management is not losing market share - it in fact seems like gaining market share.

Having looked further, I like Freight Management for many other reasons. Compared to Tasco and Century Logistics, this company is slightly lighter in terms of Fixed Assets (things like trailers, prime movers, warehouses etc). This shows that as in its namesake, its primary focus is freight forwarding (around 70%). The others like warehousing, haulage, tug and barge etc. are more complementary to the group than being the main contributor.

To be able to do that well - it is not easy but it shows where the company's strength is. Consistent volume from its main customers, strong customer service and deliveries. That is hard to achieve, but if you do them well, hardly a reason for its customers to leave the company. Hence, I can see the strength of this company is strong services as well as account management.

Freight Management is trading at around RM190 million market capitalisation, hence based on last year's financial performance, its current price is below 10x PE. And if it is able to grow at such consistencies and pace, why should anyone be worried of what it is trading against its peers and industry? My question is, are you able to find another business at less than 10x PE with a strong assurance from strong previous track record? Maybe some, but not too often.

Judging from what I can project into the future, there is no reason why Freight Management cannot continue to be strong. It has gone through tougher times of the 2008 and came out strong, hence this is a good candidate for one's portfolio.

Another thing I note having flipped through the company's many years of Annual Reports - see below. The directors are paying themselves only the basics. Others come from dividends from their shareholdings as well as capital appreciation. That is something which we should applaud and respect. Again, it is hardly seen.

What you can expect from me

2013-03-28T04:50:00.001Z

When I started this blog, I did not expect myself to be active - but very much so into understanding blogging and the new media which is gaining traction and allowing us having the chance to pit out our own opinion. The main thing I know is stocks investment, hence there is no doubt that I uses this area as the main conversational point.

Although there are quite a few readers who read my articles nowadays, it is important to know where do I stand, what type of stocks do I look at, which do I prefer. As in a kid who is a picky eater, I am a picky stock picker. However, I am not just that - there are just a number of sectors which I am particularly more interested in - banks, finance, insurance, telcos, properties, IT, plantation, education, consumer stocks, and some part of manufacturing. There are several areas which I am particularly bad at i.e. oil and gas, construction, mining. And in areas which I have no expertise or knowledge, normally I would avoid. I do not try to be knowledgeable in everything although I do acknowledge that it is good to learn.

Many of you would also know that I have the Felice's Fund which I put up since 2 years ago. Why do I put this up? Well, to mainly show what I stand for. And of course, many would ask why I put the year 2027 as the target date. If one is into investment, there is no date actually. Our date is when our time is up and even then for those who have beneficiaries, these of course can be passed to them. Hence, there is no specific date. This very particularly applies to most of the stocks I put up - Airasia, DKSH, Malaysia Airport, Wellcall, Padini, Oldtown, NTPM, Jobstreet, Top Glove and to a large extent SP Setia.

My analogy is simple. When I was small, we used to buy Milo - that was more than 35 years ago and during then costs us slightly less than RM10 for a 1.5 kg tin - today, I still go to supermarket to buy Milo at RM25 per tin, and I believe Milo will outlive me. That same principle applies towards how I view most of the stocks that I buy. Yes, sometimes things change, Airasia may face many challenges and beaten by a better airline - if that day happens, we sell the stocks. Selling a stock is easy, unlike properties - which is why despite properties is another good investment, I do not like the hassle.

In my investment experience, I used to buy a very undervalued stock - Selangor Properties. If you study the stock and do a simple calculation, its Revised NAV to its traded price, it was well undervalued. That property company had prime land in Damansara, a decent developer etc. But of course, I was a very naive investor. The price of the stock would not move if the largest shareholder holds a large chunk, not going to pay much dividend as well as not doing anything about it. When the major shareholder, Dr Wen passed away, the stock surged - I had already sold. Are we buying to wait for this kind event? Hence, although sometimes a stock can be undervalued, it may mean nothing. The same story applies now for Hwang-DBS, as there is much speculation on it being sold, with the founder's passing. I am not good at guessing who is going to take over who - as I deem these as speculations. People who have been speculating the acquisition of Public Bank - all of them failed so far. And those who continues to try may succeed one day - that is 1 out of say a million guesses?

Some of you may send me messages asking about some of the stocks. You have to know that I have to be very careful with what I say. A recent example, Fitters Malaysia. It is now not just a fire prevention manufacturer - which to a certain extent I like, but also a property developer and a renewable energy player. It is now trading at much below its NAV and also has a very attractive PE of below 10x based on latest results. When I look at this company, I usually try to separate the different businesses and value them separately. If the fire protection business covers much of the market value, I may be interested. However, much of the profits went to its property development arm.

Now, this is my problem. Is Fitters now a property developer? If it is, where does it stand in future. Will it be in the mould of Mah Sing, a plastic player now turned into a massive developer. The problem is I am not sure, and I am sure that many are not either. Then another question is, after the current development, what's next?

When I bought SP Setia, I was looking beyond its landbank. I was looking at its brand. This is probably why PNB is buying it. SP Setia has proven to turn a decent land into a prime property and it continues to do so, and it will buy many more new landbanks and turn them into good and sellable properties. Even then, there is bigger risk in this investment when compare to say investment into Malaysia Airport. I was looking at the developers of the 70s. None of them are strong today, maybe with the exception of Sime Darby - and we all know why. (I in fact was told in one of my lunch conversation that Sime is a poor developer - they are what they are today due to their massive landbank - not so much due to their capabilities - to a large extent, I agree.)

Now, this same principle I apply to a construction as well as oil and gas companies - except for exploration companies like Shell, Exxon etc. The biggest problem with these kind of companies are that they are very dependent on book orders. Can someone be very sure what is going to happen to say Gamuda, Sapura Kencana or even Dialog in 2020? All analysts reports that I read mention book order. The stock can be undervalued, but sometimes an investment may not go as smooth as we thought. Investing into a business that regenerates income without being dependent on book order may pick up back, but for those who needed book orders may not be so. If we want examples, do look at Scomi and maybe Muhibbah. I am sure there are many more. This is probably why some of these companies like WCT, IJM and Gamuda as well are looking at assets that can regenerate. By the way, book orders sometimes can have a problem where projects may be bidded at a lost. Can any analysts know that?

On the other hand, buying a company that consistently generates using its brand, know-how, advantages that it has - sometimes it does not matter if it is at 15x or 20x PE. McDonalds was at one point of time in doldrums, it picked up back. So was Starbucks, Coca-cola, Johnson and Johnson. Many a times, none of these can be said for those that are dependent on book orders or worse still some of them handouts.

Hence, you may notice that I try to be careful when answering - and sometimes, some of these stocks can be invested due to the large discounts to asset value but just that I do now know when it will pick up in value. Anyway, does anyone know besides maybe the owners?

How do you smell a rat? PART 2

2013-03-27T03:55:00.001Z

This one is much more difficult to spot than my earlier article. Seriously, until now I am not able to be very sure. Since my article few months ago, Asia Media went downhill further - reporting a first time quarterly loss (if I can remember) and asking from shareholders for money, raising funds via rights. However, if you notice the quarterly loss is due to mainly the taxation which sometimes can only be a P&L item.

If you notice, again on paper it is a healthy company - registering 2 continuous years of profits and revenue trend continue to improve over the period. These numbers will definitely pass through any systems that only checks through revenue and Net Profit.

Asia Media Group's P&L as at 31 Dec 2012

At its today's price of RM0.14, it is trading at RM67 million valuation. Based on the Net Profit 2012 of RM11.7 million - that's around 6x PE we are getting. On the P&L above, notice the growth in Revenue...

The stories does not end there. The balance sheet is not squeaky clean but yet again if we look through there may not be much fault to be identified. Cash was at RM12.5 million while debt was at a manageable RM4.5 million.

Balance Sheet as at 31 Dec 2012

Then, where is the wrong? Nothing much that can pass through a normal investor, unless we look further. Still, I do not like the high PP&E but yet again I invested in Airasia which has an even higher Fixed Assets in proportion.

One of the favorite spot to look at - cashflow and a little bit of intuition i.e. gut feeling. As I have mentioned before, its operating cashflow vs capital expenditure. A growth company will most necessarily be requiring more cash - Asia Media seems to be so. As you can see, it is eating up cash faster than it can churn - capital expenditure for broadcasting equipment? How much does that costs?

Cashflow 31 Dec 2012

Now, I am not implying Asia Media is doing this but do you know that capital expenditure numbers can be boosted up? Say the equipment actually costs RM20 million but an arrangement with supplier can make it looks like RM50 million. Hence, on paper it can look like the PP&E is purchased at RM50 million while that difference in numbers is passed through back into the operational cashflow. That's why free cashflow is very important.

Again, I reiterate I am not saying Asia Media is doing this. The onus to check this is dependent on the auditors - not investor. Hence, as an investor we can only depend on the auditor to pass through the accounts for us to believe in. In an investment, look for a better quality auditor as in the Big 4 or at least the middle tier auditors. Names of auditors that we have never heard of sometimes can be a bigger suspect. One thing though I would like to highlight is the substantial drop in net cashflow from operations but the trade receivables did not increase much. Neither was the cash which was cushioned by the additional raising of cash from new private placements and borrowings during the year. Net total RM11.8 million. This scenario looks like a huge portion of the cashflow from operations in 2011 was even collected upfront. Where is the upfront from? Other payables? I am not sure.

I am looking through the cashflow (unaudited) for Asia Media for 31 December 2012. Notice the ones I box-ed in Orange. If you notice, the capital expenditure paid was most probably for the other payables which was extremely high the year before. Other payables to me was still un-explainable. Why other payables for capital expenditure. Shouldn't it be trade payables. For 2012, there was barely much capital expenditure being spent with a net addition of RM1.3 million. Still, I do not understand the need for broadcasting equipment with today's availability of technology capable of delivering content through the 3G, 4G and whatever not. Asia Media does not need to do live broadcast.

The rights issuance proposed is to beef up the balance sheet of the company for more capital expenditure - I presume (otherwise why?), and I am not so sure one should be confident enough to put in more money into it.

How do you smell a rat?

2013-03-25T02:58:00.001Z

There are reasons why many would want to avoid Chinese stocks. In every few stocks, I am sure there are some decent ones but we just would not know which is good, and which is bad. By the way, all of them on paper looks decently good, in value. There are however stories of accounts and even cash balances are forged - I don't know how but just we have to be careful.

China Stationery is one of the Chinese stocks. Its accounts look good. It has a NTA of RM0.98 per share while the cash balance was at RM0.73 per share as at 31 Dec 2012. No debt. It however is trading at RM0.465. That looks very good? We are buying at substantially lower than cash holding - how fantastic is that?

Just last week, there was a transaction by the major shareholder selling 4.02% of his stocks and guess at what price? RM0.60. If I am the major shareholder, and in my bank balance, I have RM0.73 cash per share, I would not sell at RM0.60. That looks very stupid, isn't it? The sale of RM0.60 was to an unknown party, could be left pocket to right pocket. But yet it is no good. It is not at all transparent.

On top of that, the IPO a year ago was raised at RM0.95. Who again would sell, way below IPO price if on paper it is performing as in the financial accounts?

Anyway, who cares...there are just some people who would still be interested. Much stranger things have happened in Bursa and this is not it.