Investing with Edgar

Can you sell properties like that?

2011-12-04T11:13:00.001+08:00

i am referring to private properties

My brother and I walked into a property showroom in Geylang. He got interested in a unit and so I lent my ears to the fantastic arrangement of buying a property.

I thought the arrangement should be - I like what I see at the price that I like, I sign the option to purchase and pay the 5% down payment first.

But the property agency ("Agency") and its agents ("Agent") have a different way of selling properties for the Developer/their client ("Developer"). Here is the process as I understand it. If any property agent is reading this, please feel free to correct me if I am wrong.

1. The Agent stressed that we have NOT officially launched the project and the price list is as SUGGESTED (only tentative/indicative) by Agency.

2. If we are interested in a particular unit, we will write a cheque (5% of SUGGESTED price) to the Developer's account to DEMONSTRATE our interest in that unit. (The Developer/Agency is asking prospective buyers to "shown hand" first in a poker game.)

3. After we wrote the cheque, Agency will put a small orange sticker on that unit. For some units, there were 3 or 4 stickers. Agents will use that "stickered" presentation to demonstrate to the next prospective buyers on the level of "hotness" the project is accumulating.. (I asked the Agent - who verify whether the stickers represent real interest.)

3. There will be a specific launch date, launch time and balloting time as determined by the Developer/Agency. (I am not sure when they decide on this. But if I were the Developer, I guess I will only LAUNCH when my agents have secured 3 or 4 cheques for each unit on offer.)

4. Half an hour before 11.15am on launch day, the Developer releases their FINAL price list. (If I were the Developer, I will obviously launch at a higher price given the many cheques/stickers collected.)

5. Agent will then attempt to call those who have shown their interest with their cheques. Agent's intention is to seek confirmation as to whether to put my brother's cheque into the "lucky draw" to be final purchaser of the unit.. ie. assuming more than one party has shown a willingness to proceed at the HIGHER Developer's price list.

However, if my brother decides not to proceed at the new Developer's price, we have the right to withdraw and the Agent will return the cheque with no further obligation.

6. But should my brother decides to withdraw AFTER being successful in the ballot, a penalty is payable.

7. My brother decides to proceed with the process. Agent sent a SMS to confirm our intention. He affirmed with a return SMS.

What if the prospective buyer did not received the phone call/SMS, Agent said the cheque will be withdrawn from the balloting process. (True enough.. after the balloting, we witnessed a family disputing viciously/vehemently with their Agent/Agency on the lost chance of getting a unit. For some reasons, they did not received any phone call.)

8. Balloting exercise subsequently ensue in the presence of anybody who manage to squeeze into the showroom.

9. For my brother's unit, he was duly informed of being the successful purchaser without any competing interest.

10. Normal sales & purchase arrangement follows. Bankers, lawyers, agent, CPF monies, talking about tiles.. follow.

===============================================
Besides the above, what are my other concerns?

Does any Authority need to approve the process of sale?
Can the Developer/Agency vary the details of the process during the "soft" launch?
What is "soft" launch?
Should the sales process be explicitly presented somewhere in the showroom?
Our Agent did a good job explaining the process to us. But it is not in black and white.
I find it very uncomfortable having to write a cheque to show my interest. I thought a cheque is a promise to pay. You can be sued if that instrument is dishonoured.
Isn't Developer and Agency the same party?

===============================================

Paya Lebar site - Damn if you award, damn if you don't

2011-11-05T17:30:00.001+08:00

economics of land & building

Situation - Urban Redevelopment Authority (URA) rejected the only bid from a UOL Group-Singapore Land consortium for a commercial plot in Paya Lebar. Reason given -price being 'too low' at $565.74 psf per plot ratio (psf ppr). Compared to the last awarded site in that area in April, it is actually 35% lower than the $872.16 psf ppr top bid in April.

Arguments for and against the award of the tender as follows:-

The rejection would delay the government's long-term plans to decentralise commercial activity outside the CBD and help ease business costs and reduce congestion.

URA has to uphold the interest of the nation ie. the secure the maximum disposal value for nation's assets.

URA has just wasted the bidders' resources in producing a bid without the reserve price being made public prior to the start of tender assuming that price is the sole criteria in deciding an award or otherwise.

The UOL-SingLand consortium defended their bid price after taking into consideration the prevailing volatile market, unfavourable economic outlook, site's mixed use configuration and the site being technically more challenging as the plot is split into two triangular portions by a section of Geylang River.

URA may think that there is less urgency NOW for the development of new office space on the island given the ample pipeline supply of over eight million sq ft net lettable area. (But doesn't URA know the stats on office supply and "economic feel" before it put the land up for tender?)

Price is not the sole criteria for URA. In late 2007, URA had actually awarded a plot at Marina View at 45% below the price for the next-door plot awarded a few months earlier against a backdrop of escalating office rents then. (So may we know exactly why you have rejected the bid?)

Had URA awarded the second Paya Lebar plot to UOL-SingLand at a much lower price than the earlier plot, it would put a downward pressure on the rental rate in the area as it can make do with a much lower rental or pricing level. Tenants could also benefit from the lower rental rates.

Had URA awarded the second Paya Lebar plot to UOL-SingLand, the earlier consortium comprising of Low Keng Huat, Guthrie and Sun Venture Commercial who had paid the higher price in April, would definitely not be happy. (But on willing buyer, willing seller basis, who could they blame?)

Had URA awarded the second Paya Lebar plot to UOL-SingLand at a much lower price than the earlier plot, it would induce a systemic shock. URA is artificially seen to have helped prop up the market. Good and bad to this, depending from whose point of view you are looking at this.

But what is/are the criteria of assessing a tender of a site in the "confirmed" list? There are two lists where URA lists sites available for sale. The "confirmed" list consist of sites with no reserve price. The "reserve" list consists of sites with the respective minimum price acceptable to the state being made public. A site on the "reserve" list may send a signal to the market that there is less urgency for its development as compared to those on "confirmed" list. So is it urgent or not urgent for URA to develop the Paya Lebar site or is it just money not enough?

Source - Business Times and Straits Times - Nov 5, 2011.

Are midwifes responsible for S-chips listed here?

2011-07-03T14:41:00.000+08:00

With more oversea-listed Chinese companies (S-chips) being rapped for accounting irregularities globally and particularly in Singapore, Mr Max Loh, Ernst and Young's (E&Y) new country managing partner for Singapore, says that the firm is strengthening its client acceptance procedures. It is a set of criteria to decide whether to accept or not to accept a prospective client, particularly on those entities en-route for public listing.

Mr Loh, in my opinion, correctly added that improving Chinese companies' corporate governance does not just fall strictly on the shoulder of accounting and auditing profession.

Thus here are the key questions I am asking for this article. Firstly, who are key expertises ie. midwifes, needed to identify, gestate (ie. packaging) and subsequently get them listed (ie. born) at a particular stock exchange? Secondly, what are their responsibilities for pre- and post-delivery?

Besides the accounting and auditing profession, the other midwifes are lawyers, corporate bankers, capital market specialists, the PR specialists and finally the gatekeeper ie. the security exchange. During the good times of S-chips, there are people going around in China talking and identifying companies for incubation and grooming to be listed. Once both parties agree to work towards listing, the rest of midwifes are brought in to do a makeover ie. make it looks good enough to at least last till the first day of being listed.

Once the entity is listed, most of the midwifes' responsibilities expire except for the exchange and auditor. So when S-chip bubbles imploded across the world's exchanges, the minority shareholders ended up with massive losses. When the minority shareholders look for people who should be held accountable, they were stone-walled with the famous punchline ie. "Buyers beware". In the meantime, the midwifes enjoy their bounty. In recent years' as the S-chips' gravy train has come to standstill, many of these midwifes have shifted their operations to more fertile grounds, geographically or to another trade all together.

Should "Buyers beware" be our first and last line of defence? These midwifes were delivering exactly what the investors were craving for ie. to invest in any company with the word "China" in its name. It is observed that no one from Wall Street has been held responsible and prosecuted till today for financial crisis caused by property meltdown in US.

Perhaps the financial market is a stage where every man and woman plays its part, the outcome is the responsibility of no single person but all participants.

Lunch is still on for SGX!!

2011-06-29T21:45:00.001+08:00

a building which will house many remisiers?

Mr Bocker, you have tried to buy ASX on behalf of Singapore but failed. That was certainly a bold attempt which I, with my humble knowledge of markets and financial instruments, am fully appreciative of. Everyone knew that SGX would face many hurdles and objections but it definitely worth a go.

I have a vague idea that you have spent millions on hardwares and softwares in an attempt to increase capacity and processing speed for transactions. I have yet to see the potential of that upgrades being translated to the bottomline.

You then tried to take away the 90-min lunch break of hundreds of remisiers and supporting staff but failed again. While you may have a target to boost the sagging volume of SGX by lengthening trading hours at the expense of lunch, you have perhaps misunderstand the value of lunch time in Singapore.

Firstly, many of them did not have a proper breakfast, thus lunch break is really something for them to look forward to. (yes.. a cheeky one) Secondly, lunch is perhaps when most of the business is done in this Asian society. Thirdly, is the pre- and post-lunch so overwhelming now that we need to spread the overflowing transactions into that special 90 minutes of the day? I don't think so.

Mr Bocker, you have definitely scored on trying. But let's try to lock in some success! Cheers!

Is SIA flying out of idea?

2011-06-26T13:51:00.001+08:00

By the way its shareholders have structured the company, SIA has a single nature of business ie. to focus on transporting human and cargo. On a more subtle and yet important level, SIA (as also in all govt-linked entities) must represent Singapore as a symbol of excellence with a profitability level to match.

In today's Straits Times, it is reported that SIA is again the 2nd best airline in the world for the last 3 years. SIA even lagged behind in rating for its renowned inflight entertainment system.

SIA has been where it has been over the last 20 years based on a strategy that is deemed impossible as per Michael Porter's Theory of Competitive Advantage. SIA has been able to beat its competitors with innovations and service standards. Innovations and service standards have allowed SIA to achieve highest revenue per passenger delivered at a lowest passenger unit cost. Its passenger unit cost is said to be even lower than that of budget airlines. But the key limiting factor to SIA's growth, in my humble opinion, is the landing rights agreed between two countries. But Airbus A380s helped SIA overcome this limitation by allowing SIA to carry largest number of passengers on the more profitable routes.

Should SIA focus on mergers and acquisition to fuel its growth? SIA does not aim to be largest airline in the world but rather excel in profitability and service quality. But having said that, SIA did attempt some M&A but failed miserably. May I cite ANZ? I am still not sure about the 49% in Virgin but as per SIA's books, the investment has been written off long time ago. We also tried to buy a Chinese airline, an Indian airline.. etc but BLOCKED.

But SIA must continue to be ahead of the curve!! But how?? Under the new CEO, SIA has announced recently that it will enter the budget airline foray officially and wholeheartedly. Could it be a pre-response to AirAsia's massive order placed with Airbus recently? Did SIA hear in the grapevine that AirAsia has a plan to conquer the budget airline world? We will wait and see as the story continues to unfold.

Mapletree Log and Frasers Centrepoint Trust compared

2011-05-02T22:09:00.001+08:00

In Business Times dated April 22, the two entities' performance were reported.

Mapletree Logistics Trust
- increase in amount distributable to $37.54 million for quarter ended March 31
- distribution per unit is 1.55cents (1.5 for same quarter last year)
- This represents a yield of 6.8% assuming the share price of 91.5cents and constant distribution per unit over 4 quarters

Frasers Centrepoint Trust
- net quarterly property income dropped 1.3% to $20.1 million
- distribution per unit is 2.07cents (2.06 for same quarter last year
- total distribution for half year to date is 4.02cents (3.97cents a year ago)
- This represents a yield of 5.4% assuming share price of 150cents and constant distribution per unit for remaining 6 months of financial year

My questions on Supplementary Retirement Scheme (SRS)

2010-11-14T09:56:00.000+08:00

time to spend money? donate

If I have not opened an SRS account, should I?

My simple is YES (and quickly). I opened the account on the basis that I wish to lock in on the current mandatory retirement age before I can make my first withdrawal. There are signals from the government that the official retirement age could be raised. While we won't see the kind of riots and unrests in France replicated here in Singapore, personally we need to take that in consideration.

The much touted immediate benefits of tax savings from deposits into SRS would depend on your tax bracket and availability of taxable income / free cash.

The usefulness of an SRS account would also depend on the age group. During the early part of our working life, we are living in a stage of intense spendings with little of savings ie. repaying study loans, travelling, dating, getting married, babies, home renovation, parents etc etc Thus should we need to call upon some monies for emergency reasons, your savings in SRS is an option but an expensive one (penalty of 5% and immediate taxability of amount withdrawn).

Thus you would have noticed that my recommendation to open the account is different from recommending regular amount to be deposited.

I would think twice before using the SRS account to house my investments. Please check on the service charges that the bank may levy. Given my experience with the CDP account ie. $10.70 per transaction (I think) regardless of the nature of transaction (I think), it is very expensive indeed when I am just receiving dividend.

Lorna Tan cited the example of yearly contribution of $11,475 to an SRS account for 20 years, this would translate to $2960 monthly withdrawal for 10 years ASSUMING you are able to manage your nest age to generate a return of 4% per year. Governments of the world, fund managers and insurance companies are all trying very hard to do the same, if not better.

Buyers beware, always.

Reference - Lorna Tan, "Saving a little today will go a long way", Sunday Times, Nov14, 2010.

REITable?

2010-07-25T10:43:00.000+08:00

it was vacant many years ago

In my Saturday's Business Times, 4 REITs' results were reported. May I summarise the results for quarter ended June 30, 2010 as follows:-

1. CapitaRetail China Trust (CRCT)
Gross revenue - $29.6m (-2.8% compared to Q2 last year)
Net property income - $19.8m
Distribution per unit (DPU) - 2.07cents
Share price - $1.26 (as of Friday's closing)

2. Ascott REIT
Gross revenue - $44.4m (+3% compared to Q2 last year)
Net property income - $11.6m ($11 in Q2 last year)
Distribution per unit (DPU) - 1.87cents (1.79cents in Q2 2009)
Share price - $1.23 (as of Friday's closing)

3. Frasers Centrepoint Trust (FCT)
Gross revenue - $30.7m (+45%)
Net property income - $16.3m (+35% compared to similar quarter last year)
Distribution per unit (DPU) - 2.07cents (1.97cents in similar quarter last year)
Share price - $1.39 (as of Friday's closing)

4. Ascendas India Trust (a-iTrust)
Gross revenue - $30.9m (+4% on year on year basis)
Net property income - $18.9m (+3% on year on year basis)
Distribution per unit (DPU) - 1.66cents (-19% compared to similar quarter last year)
Share price - $0.995 (as of July 22's closing)

P/S - Usual disclaimer apply.

An interesting remark on HK property

2010-07-12T09:58:00.003+08:00

Andy Xie, an independent economist said on CNBC today, "HK property is actually more risky than China."

Bernard Lo of CNBC was taken aback and he queried why it is so.

Andy said property owners in Hong Kong, who are hanging on to their property, are hoping for some stupid and wealthy mainlanders to come and pay them millions of dollars for their CONCRETE BOXes.

I am wondering whether the same phenomenon is also happening in Singapore.

General Magnetics - a lesson yet to be learned?

2010-06-05T00:56:00.004+08:00

jakarta traffic from my taxi window

General Magnetics (GM) conducted its first AGM as an unlisted firm last week. Joyce Hooi of Business Times observed that for an unlisted firm's AGM, it was really well attended but with so much outpouring of outrage by its shareholders.

GM was listed 20 years ago as a cassette tape maker, "survived the death of the Walkman age, struggled through the Discman decade as a recordable CD and DVD maker and finally succumbed to the iPod era".

It made losses by the millions since the turn of century and was put on the watchlist in 2008 before being delisted in April this year.

Why are there so much outpouring of outrage by shareholders at this stage? Some shareholders have held on to their shares years after years for the last 10 years despite the annual warning bells of losses being announced. Why lament the delisting?

In fact, they were not outraged by the delisting but rather by the fact the minority shareholders could not force the majority/management to liquidate all remaining assets and distribute the net proceeds to all shareholders. Why would a shareholder buys shares in company and hope the company goes into liquidation?

Towards the end of listed status, the shares had traded so far below net tangible asset value. For those who may have bought at those prices, they are clamouring for the company to be liquidated.

Learning point - Are you holding on to shares of companies, that in recent years, have been making significant losses year after year (eg. Creative)? If so, are you doing anything about it?

Prudential buying AIG?

2010-03-04T10:13:00.002+08:00

Prudential's market capitalisation - about GBP12.3billion (about USD18.5billion)

Purchase price - USD35.50billion

The biggest reason for Prudential to buy - rapid increase in access to a rapidly growing Asia market.

How to pay?
USD$25billions in cash and the rest in Prudential shares

Where to find USD$25billion cash?
- rights issue of USD$21billion ie. issue more shares to existing shareholders
- borrow USD$5billion

Impacts and consequences?
Marcus Barnard said - 3 times increase in the number of shares with only 60-70% increase in contribution from AIG (for now) (thus massive dilution expected for now)
Is Prudential buying at too high a price given the current weak European currencies against USD?

Gold still glitters?

2010-02-18T10:00:00.004+08:00

Global demand for gold dropped 11 per cent last year, but the the gold price gained 35 per cent - the biggest annual rise in three decades . Why?

Just like oil priced in USD and its weakening outlook, the sellers of these commodities have to asked for higher prices in USD to compensate for its weakness.
It is an alternative perennial store of value against expectations of long-term inflation as the world economy emerges from recession. (Is this still valid?)
Just pure madness when there are millions of tonnes of gold sitting idle with central banks of the world.

What do you think?

Singapore, SGX and our neighbours

2010-01-09T10:38:00.004+08:00

For year 2010 in Hong Kong / Shanghai / Shenzen
South China Morning Post reported a few days ago that Hong Kong may raise more than HK$300 billion (about SGD60bio) this year through initial public offerings albeit Shanghai and Shenzhen will do better, according to estimates by PWC. PWC forecasts there will be 60 listings this year in Hong Kong. HK$300 billion would represent a 23 per cent increase from last year.

For year 2009 in Hong Kong / Shanghai / Shenzen
- 73 IPOs in Hong Kong last year raised HK$243.7 billion (far exceeding PwC's predictions at the beginning of the year of HK$100 billion).
- Shanghai and Shenzhen bourses raised 185.6 billion yuan (HK$210.9 billion) combined.

For year 2009 in Singapore
- $2.84 billion were raised by the 23 IPOs (about 20 times LESS than Hong Kong)
- $8.29 billion from 17 listed firms delisted, called it a day and went private (due mainly to Chartered Semicon, SPC and CK Tang) (Source - BT Jan 4, 2010)
- Turnover in structured warrants hits 4-year low. Average daily volume last year plunged to $43m from $84m in 2008. (Source - BT Jan 8, 2010)

Countermeasures in motion:-
- new CEO for new ideas?
- Jan 7, 2010 - SGX proposes Special Purpose Acquisitions Company scheme and changing its listing criteria.

We will be watching as the new CEO of SGX gets to work.

Warren Buffet - Giving away his wealth

2009-08-19T01:34:00.001+08:00

My last posting on Warren Buffet was on how he made his money. In this posting, I wish to share with you his well-thought way of giving away his wealth.

His Philosophy on Wealth and Distribution
Buffett has donated much of his wealth to the Gates Foundation ie. 85% of Berkshire stock, worth about $40 billion back in June 2006.

Why donates away most of his wealth?
As he states: "The idea of passing wealth from generation to generation so that hundreds of your descendants can command the resources of other people simply because they came from the right womb flies in the face of a meritocratic society."

Buffett believes that children should not inherit money just because of the lottery of their birth. He says children should be left "enough money so that they feel they could do anything, but not so much that they could do nothing."

How do he and the Gates want the Foundation to manage the money donated?
Objectives

Together with Bill and Melinda Gates, the wealth will be used to try and fulfill shared goals of eradicating major diseases like malaria and HIV/AIDS in developing countries, and improving high school education standards in the U.S.
The monies must all be spent over 20 years on health and education.

It is one of the few philanthropic donations where the money will run out relatively quickly, contrary to the self-interest of foundation bureaucracies to survive as long as they can. He does not want the managers of the Foundation to become big fat cats ie. to preserve their cushy jobs and thus holding back on putting the money to good use.

Buffett has not set up a foundation nor paid for buildings at hospitals or museums to try to perpetuate his name.

"Buffett's ideal was a world in which winners were free to strive, but narrowed the gap by helping the losers," writes Alice Schroeder.

Source - Alice Schroeder, Buffett: Rock Star of American Capitalism, Knowledge at Wharton

Do you still trust your bank and banker with your money?

2009-08-17T12:01:00.000+08:00

I have just read an article on Business Times entitled "Restoring Trust in Financial Institutions" (FIs) reflecting the views of Mr Simon Newman, Managing Director, AVIVA Singapore.

To restore something means you must have lost it first and then looking to find and put it back. So have we the investing public lost trust in FIs? And the FIs are now trying to restore or regain the public's trust and confidence?

The collapse of structured products amid allegations of massive mis-selling by FIs and their commission-powered sales representatives was the main contributor to that loss of trust.

Can FIs regain that trust of the consumers by simply requiring them to print the sales brochures in all 4 languages (which of course, will be peppered with tons of disclaimers in all 4 languages) and to follow MAS-issued Guidelines on Fair Trading? Mr Newman said FIs need to go beyond merely fulfilling their legal obligations (yes, I agree), (but also) to truly engage consumers and meet their evolving needs in this challenging and volatile economic climate (blah, blah blah). Huh? Is this the panacea to people who have lost millions of dollars of life savings? Let me share with you a parallel example.

The travel industry too was generally in doldrum in the last few months due to the financial crisis. It was later compounded by the outbreak of H1N1. Many who have pre-booked their holidays wanted to cancel and seek refund. Some travel companies are ok to refund but with heavy penalty. The question here - what would you have done if you were running a travel agency?

An industry player opined the industry as a whole should have adopted the position to refund. Otherwise the consequence would be consumers would be more fearful of future early commitment (thus impairing your long term business viability) and prefer last minute self-arranged travels.

Bottomline - When self interest is the foundation of every party's action / decision, the debate will continue. Or given time, the pain will ease and trust will return.

Who is Warren Buffet?

2009-08-16T01:18:00.005+08:00

He is the chief icon of Bershire Hathaway. About 30 years ago, Buffett spent $15.4 million to buy 46% of Berkshire (a textile entity) including 3% for his wife Susan, paying an average $32.45 per share. With Berkshire shares recently traded around $87,200, Buffett has grown his wealth nearly 3,000-fold in some 30 years.

How did he do it?
Technically, he learned this massive capital accumulation discipline from Benjamin Graham, investment GURU of Columbia University in 1951.

Buffett's approach to investment involves using seventh grade math and common sense to analyze a company's underlying economics ie.

1. “buying a business not a stock”,
2. “ignoring the fluctuations of the stock market”; and,
3. most importantly, Graham’s main principle “maintaining a margin of safety.”

In frothy bull markets, Buffett is fearful while others are greedy, taking profits on some holdings and piling up the cash generated by businesses. Example - Berkshire sold its stake in PetroChina for $4 billion in 2007 amid rapidly rising oil prices and the craze for investing in emerging markets, having bought it in 2002 and 2003 for $488 million.

Then, during severe stock market or industry declines, he is greedy when others are fearful, buying good businesses at attractive prices. Example - Berkshire secured favourable terms in deals with Goldman Sachs and General Electric during last year's stock market panic.

Buffett's three rules of portfolio management are:-
1. Don't lose money;
2. Don't forget rule one and;
3. Don't go into debt.

Buffet’s personal traits required do the job:-

His focus,
an intellect which is a perpetual learning machine,
rationality,
an ambition from childhood to become rich,
family is secondary,
he attracts talented people to work, partner and deal with him due to his honesty, fairness, letting them do their job without interference and crediting them for success and;
he freely acknowledges making several errors.

Source - Alice Schroeder, Buffett: Rock Star of American Capitalism, Knowledge at Wharton

Creative Technology - Can see any light yet?

2009-08-10T01:55:00.004+08:00

Creative Technology reported a net loss of USD$14 million for its fourth quarter ended June 2009, including a provision of US$12.8 million for potentially unrecoverable loans due from a former subsidiary, compared with a net profit of USD$116.2 million a year ago.

Total loss in FY2009 is USD$137.9 million, compared with net profit of USD$128.2 million in FY2008. The previous year's profit was mainly due to a gain of USD$147.9 million from the sale of Creative's headquarter office and restructuring charges of USD$11.2 million.

I am sure its management knows that it is in need of new ideas that are sustainable. There was a rumour that there could be some sort of a tie up with THX. Whatever it is, the lifeline has to come really soon. Otherwise, the only card left is new Zii platform.

I don't know what it is but I hope for the sake of Singapore's entrepreneurial spirit and Mr Sim's good spirit, the company would turn black soon.

SGX welcomes new CEO

2009-07-22T09:32:00.002+08:00

Magnus Bocker is replacing Hsieh Fu Hua as chief executive officer of the Singapore Exchange (SGX), the company announced last night.

His profile highlights his fantastic track record in business development ie. putting together small bourses and finally selling the consolidated entity to a big boy. This is in addition to the fact he took his wife's name. (I cannot understand the need for that.)

Anyway back to my intention of this blog piece.. I would like to raise the question as to his competence in the area of control, maintenance, supervisory roles of a stock exchange.

We certainly need a SGX that would play an even hand to its shareholders and yet market friendly to the listed companies and big and small investors (hopefully not always in this order of preference).

Mr Goodyear, gone So soon?

2009-07-22T00:42:00.005+08:00

I just read that Singapore's Temasek Holdings Mr Charles (Chip) Goodyear, the CEO designate, has decided not to become the chief executive of the state investment firm. Reason? Due to differences on certain strategic issues that could not be resolved.

Mr Goodyear had been appointed a member of the Temasek board on February 1, 2009 and CEO-designate, a month later. He resigned on July 21, 2009.

Too short a burn-in period for the candidate to adapt to the economic and political culture and structure of Singapore? Well isn't the candidate supposed to have been selected after an extensive and intensive search for such a high profile and important position ie. managing the wealth of a nation earned with blood and sweat over two or three generations? Or perhaps the portfolio that is supposed to be taken over way too "complex" to digest ie. handover?

Whatever it is - All the bests to you, Mr Goodyear. Perhaps it is just not meant to be.

C K Tang - The Valuation Report

2009-07-14T23:13:00.005+08:00

ion's valuation - the minority hope to have?

A group of 10 shareholders of CK Tang signed, sealed and delivered a petition to the Singapore Exchange and the Ministry of Finance to protect the interest of the minority shareholders against 89%-majority Tang family's plans to take the company private.

Their main grievance - They are claiming that the flagship 5-storey store (I think, including the basement), which is part of a huge hotel that C K Tang (the listed company) does not own, has been undervalued because the company has not taken redevelopment potential into account.

There are many ways to value an asset. Thus I would be very interested to know how was the valuation done.

How to satisfy the minority shareholders? Based on what I read in the papers today, there are two options.
* Justify your current offer of 83 cents with a vigorously and comprehensively analysed valuation report done by completely independent and competent property professionals, free from any undue influence or opinion from C K Tang's management OR;
* make an offer that at least matches CK Tang's net tangible assets of 93 cents per share as per financial statements dated March 31, 2009 - 10 cents higher than the current offer price of 83 cents.

Will the minority get their report or their money?

P/S - I got no C K Tang shares.

C K Tang - U know how to do retail business?

2009-05-26T10:23:00.003+08:00

ion across tang

Hi Management of C K Tang,

I saw the news today. You have reported ANOTHER $5.62 million loss for the year ended 31 Mar 2009. The loss was more than double the $2.19 million net loss a year ago.

The recent loss is due to the following:-

stock writeoff - $7.8 millions
marketing-related expenses up 8.2% to $21.9 millions
operating expenses up to $25.7 millions
depreciation expenses also up by 13% despite relaxing the useful life of some assets from 6 years to 10 years
Sales how? Only up a miserable 3% to $238 millions

The family - which owns 86.61 per cent of the company - has COINCIDENTALLY offered to buy the remaining shares it does not own at 83 cents per share through a delisting proposal a few weeks before the annoucement of this set of results.

Why do you want to buy over a money losing business year after year? Here are my speculative bits:-

"Edgar, you are so stupid... it is not retail business that they are after. They are after the last piece of C K Tang building!!!!"
"Ion, the building across C K Tang, must have aroused their interest."
"Or is the buying back of shares, an expensive exercise to avoid listening to people like me and the public from querying their retail business management ability."

Why the need for USD$3 billions loss?

2009-05-16T20:13:00.006+08:00

ion still in the making

It is reported in various papers today that "Temasek Holdings has cut its losses on Bank of America (BOA). The Singapore investment agency has sold its 3 per cent stake in the bank, resulting in a loss of about US$3 billion as it renews its focus back home and on the region."

Question - Why the need for Temasek to sell down and realised a loss of such a magnitude?

First thing first, you make decision on the merits of individual investment. When you are not short of funds, you don't have to sell before you buy again. You cannot justify the sale and subsequent loss of that magnitude by telling the world that you are "tweaking your portfolio and refocusing back to the region". This is pure crap.

Secondly, it is obvious that the information available to Temasek's management, ie. prior to its decision to systematicly selldown all its Bank of America's stake in Q1 2009, have painted a pessismistic picture of US economy and its banking sector in near term and thus prompted their decision to sell and not wait. They obviously do not believe that BOA's share price would not be any better to mitigate the loss. Recovery is obviously not in sight.

Didn't Temasek's management get any indication from its sources that the global equity markets would run from early May? Or is the current bull run in May an illusion? Or Temasek may be telling us something we don't know or we refuse to believe given the current bull run.

Has Temasek made another "boo boo" by selling too early? Or Temasek may have taken a wise, informed, preventive action to avoid greater future losses?

Only time will tell.

C K Tang - Deja Vu again?

2009-05-13T21:47:00.002+08:00

Proposal
Tang brothers, now called themselves, Tang UnityThree LLP, are offering to buy all shares they do not own at 83cts. (They offered 65cts per share back in Dec 2006)

Background
This is the 3rd effort to privatise the company.
First time was Oct 2003 at the then offer price of 42cts was voted down.
Second time was in Dec 2006 when they offered 65cts.

Question
Still the same question - Is the current price a fair offer for a stake in a very very very prime real estate albeit in a competitive retail business and rapidly improving hotel business? Why the Tangs want to buy back the shares so badly? What does C K Tang actually own?

If the shareholders had accepted the offer in 2003, a shareholder would have missed on about 7.86% per annum rate of capital appreciation.

Read my previous posting on sum of parts could be worth a lot more.

P/S - I have no C K Tang shares as of today.

Ponzi and US Treasury Bills?

2009-02-26T00:31:00.006+08:00

News Bite 1
Even the most sophisticated investors put their faith in Bernard Madoff, the New York City financier recently accused of running a $50 billion Ponzi scheme. That breach of trust has damaged the broader markets, Professors Maurice E. Schweitzer and G. Richard Shell say.

News Bite 2
Obama signed off on the record breaking budget.

News Bite 3
Hillary Clinton visited Japan and China in her maiden trip overseas as the new Secretary of State.

Piecing all these events together, I would speculate as follows:-
The US budget deficit needs to be financed by some real US money as the printers are already working overtime trying to meet the delivery to 3 US car manufacturers after doing the AIA's order.

Where to find the real existing US dollars? Oh yes.. the Chinese and the Japanese have plenty of them. So Obama asked Hillary to go borrow some zillions from them in her maiden trip.

If the zillions don't turn up soon, the US government could be accused of doing the next Ponzi thingy with trillions of Treasury bills waiting for their promised interest and redemption?

Never say never. Well at this moment, the above is just Edgar's fertile imagination at work.

Two Singapore icons

2009-02-20T01:43:00.005+08:00

Could the two Singapore corporate icons be around at the end of this financial storm?

At this rate that they are going, I really don't think so.

One is a retailer (a premium one, it called itself) selling health-related equipment that other people make and had tried to play the M&A game with the Americans using mostly other people's monies. In yesterday's BT, the last of few hundred millions invested in that foreign land has been erased from its balance sheet.

The other has lost its way since its signature sound card. The company is burning away the USD$100mio won from Apple a few years ago trying to produce and sell products that the whole world knows how to make. After closing down its online initiative, they have just closed down their retail initiative. Sold and lease back their HQ. Sold their online music store.

Come on, guys. Are you running out of ideas? The market will punish harshly!

Are managed funds any good?

2009-02-15T21:52:00.003+08:00

Are active fees actually yielding any outperformance, let alone absolute returns? A question asked in BT dated Feb 12, 2009.

Based on public data, for a 3-year period to end January, Asia ex-Japan funds:-

Asia ex-Japan funds lost negative 9% on an annualised basis, compared to
negative 11% by the MSCI Asia ex- Japan index.

Over a 5-year period,

the funds lost one per cent on an annualised basis, compared to
the index loss of 0.13%.

Over 10 years,
the funds' record shows an annualised return of 3.49% among funds, against
2.66% for the index.

Based on the above numbers ==> the index has beaten the fund managers in 2 of 3 categories.

Have you started your soul-searching over the value of active management ie. are the fund managers any good? I have. If you refer to my earlier posting, I am concluding just that. I can't PERSISTENTLY beat the market in the long run.

I won't be surprised that high networth clients are preparing to show fund managers / private bankers the door, replacing their allocations with no-frills index funds.

Should part of sovereign wealth of a nation be in no-frills index funds too?

Temasek portfolio down 31% - My lesson

2009-02-12T00:19:00.006+08:00

r u a pedestrain?

The sub-headline said - "Measured against other indexes, Singapore's two state-owned investment companies did better."

What is that sub-headline supposed to mean? Shouldn't the Temasek team, with the best of qualification, experience and market knowledge/access, be doing better than any index?

May I cite the following info for my record:-
Temasek Holdings - down 31%
MSCI World Index - down 38%

The 31% drop is equivalent to $60bio drop to $127bio.

Looking at own potfolio which suffered a bigger decline than MSCI's and given the above information, what shall be my future investment strategy?

Since the best fund managers at Temasek team are beyond my reach, the next best option would be to invest in MSCI World Index Fund. Since it is an index fund, it should be quite efficient. Another plus point is that I am also able to bring my future portfolio performance closer to that of Temask's.

P/S - Fool.com's strategy of investing in the widest index fund possible. It is now the time for me to it seriously.

Economic nationalism economic reality or protectionism?

2009-02-05T01:03:00.005+08:00

a woman and her seated dog = lack of civic mindedness

May I quote from editorial page in BT dated Feb 4, 2009,

"As the global economic crisis continues to unfold, there are ominous signs of a rise in economic nationalism and even overt protectionism.

In the United States, the economic stimulus package is studded with 'buy American' provisions, for products ranging from steel to worker uniforms to computers.

In the European Union, authorities are directing banks to lend to domestic entities and are drawing up plans to protect their own 'national champions'.

Amid a rising wave of labour unrest, there are calls to protect jobs for domestic workers as against foreigners - and this is evident in Asia too."

Is protectionism symptom apparent in the recent Singapore's budget too?

Is the Jobs Credit scheme inadvertently say "buy Singaporean"?

What if the 9% wage subsidy or negative tax of Jobs Credit scheme inadvertently improve our flexibility to be "price competitiveness" for our exports? Will it develop into a full fledged farm subsidy debates between US and Europe? Don't think so.

"buy Singaporean" - Is it the same as sell foreign talents/workers? Are we forsaking our ethos on meritocracy?

A coffee shop discussion with an informed friend gave me an alternate interpretation. The Jobs Credit Scheme is an attempt to keep a core group of Singaporeans to continue to exercise their respective trade, business, profession and vocation over the duration of current financial storm. So that when the storm passes, this group of survived Singaporeans (ie. with the stronger genetic code) can go forth and multiply ie. sustaining Singapore Inc.

Singapore Budget 2009 - My budget chats

2009-01-26T11:37:00.003+08:00

Dear Friends,

Happy 'Niu' Year to you.

The Singapore Budget 2009 has been touted as bold. I do agree with this labelling to a big extent.

I have placed my comment on the Budget at AccountingWithEdgar blog. My latest entry is my alternative views to Dr Basant Kapur's idea to roll back GST to stimulate Consumption.

So please have a read through and share with me your views and comment too.

Gongxi to you!

Mr Richard Li and PCCW - Episode 3

2008-11-08T19:50:00.006+08:00

engine was running while the driver was yakking away over his coffee

What is the deal?
Mr Richard Li and China Network Communications Group intend to take PCCW private by buying any remaining shares they do not own at HK$4.20 a share. Total purchase consideration - HK$14.9 billion.

PCCW, Hong Kong's biggest phone carrier, will pay a cash dividend of about HK$16.9 - 17.4 billion to Mr Li's Pacific Century Regional Development (PCRD) and China Network within 20 days after the purchase date.

That is about HK$2.7 billion more to be received by Mr Li's and China Network against the buyout price tag.

Couple of hitches

The intended dividend payout is 13 times more than 2007's.
2007's dividend payout is about 74% of 2007's profit.
PCCW's net debt as at June 2008 - HK$23.2 billion.
So how does PCCW intend to find the money to pay the intended dividend? PCCW intends to borrow at a relatively high interest from 20 banks to pay it.

Sharholding structure of PCCW before the buyout:-

Mr Richard Li (in his own name) - 28.3%
PCRD Singapore - 22.5%
China Network - 20%

Shareholding structure of PCCW after the intended buyout:-

Mr Richard Li and PCRD - 66%
China Network - 34%

So what would be the impact to PCRD's minority shareholders?

Background info
In 2006, Mr Richard Li tried to take PCCW out of PCRD by proposing buyers in the form of companies and parties deemed related to Mr Li Senior and a ex-Citibanker Mr Francis Leung. http://investingwithedgar.blogspot.com/2006/11/richard-li-his-dad-and-pccw.html

EVA and Keppel Corp

2008-11-02T09:00:00.004+08:00

Quiet - my 4.30pm picnic lunch on Friday last

What is EVA?
Economic value-added (EVA) is after-tax operating profit minus the dollar cost of capital employed. It is measured in dollar figures, and not a percentage rate of return.

EVA = after-tax operating profit - [weighted average cost of capital X total capital employed]

EVA is positive as long as the residual income is positive. EVA is used to avoid situation where an investment that is profitable for the Group is given a miss by the responsible division, whose performance is measured on ROI.

Keppel Corporation is a key user of EVA. I quote the paragraph from their latest financial report.

"We have been reporting positive EVA since 2004, achieving a record $604 million in 2007.

This positive EVA was due mainly to the improvement in Net Operating Profit After Tax (NOPAT), an efficient capital structure, stringent investment criteria and strong cashflow.

The improvement in EVA by $181 million was attributed largely to higher NOPAT partially offset by higher Capital Charge. NOPAT increased by $216 million due to an increase in after-tax profit of $172 million. Capital Charge increased by $35 million due to a higher Weighted Average Cost of Capital (WACC) partially offset by lower EVA Capital. WACC increased from 6.5% to 6.99% attributed largely to a higher unlevered beta. Average EVA Capital decreased by $132 million from $9.08 billion to $8.95 billion.

In all, total EVA growth was $405 million over the last two years."

Retiree sues UOB

2008-11-02T00:16:00.003+08:00

my regular mutton fix

Plaintiff - Customer - Mr Go - age 69 - lost $350,000 over 2 transactions worth $2.75mio. Said to be an ex-property developer and experienced investor in equity.

As reported in ST yesterday, Mr Go sue on the basis of misrepresentation, negligence and breach of duty under the Financial Advisers Act on Nov 3.

Defendent 1 - UOB Bank
Defendent 2 - Mr Yeo Beng Hee - age 28 - so called Relationship Manager

While the Court has yet to decide on who is right or wrong, the rosy world of high finance for this young 28-year old is now in nightmare.. But will he survive to continue in his banking career?

Should the banks be more stringent in the quality and experience of people they put in the frontline advising clients on matters worth a lot of monies?? Quantum of funds they themselves may not even have and thus had no personal experience handling.

While I know everyone got to start somewhere, I will still say quality and experience level of people at the frontline must prevail. It should not be based just on passing a few exams and they happily go around Boat Quay telling people they are BANKERS. Sigh!!

Who is vulnerable?

2008-10-31T09:18:00.006+08:00

part of Shenton Way's history

We are hearing that the banks and other financial institutions are doing the right thing by compensating the vulnerable group ie. defined as illiterate, elderly people.

A bank said they are prepared to do that as their investigation has shown that their sales staff have failed to live up to their "high" standard of selling and marketing financial products. Such well crafted marketing communication punch line indeed AS it suggests that the sellers have "high" standards but some may have failed to deliver according to standards.

When a plane crashed, the investigators would look at how the pilots were trained and pre-qualified for the job.

Couple of questions in my mind:-

How do the banks/FIs approve a product before being "sold" to their respective custoner base? I notice some FIs are deeplyly involved with these ill-fated products but other FIs are not involved at all.
What are the profiles of their sales staff? How are they remunerated? Are they qualified to advise?
Are these sales staff personally liable?
Do the FIs really think the elderly and illiterates are the vulnerable groups and thus the compensation? Or the FIs are most vulnerable to additional liability given their "miselling" to these "vulnerable" groups?

So who is actually vulnerable here?

Old Wheelock admits mistake...

2008-10-25T16:40:00.003+08:00

Wheelock Properties CEO Mr David Lawrence apologised to his shareholders at AGM for having bought a 10% stake in SC Global in June 2007 at $6 per share.

SC Global has since done a two-for-one stock split and the counter closed at 39cts yesterday. Based on my back-of-envelope calculation, this represents a 87% decline in total investment value of $112mio.

This admission of judgement error affirms my view back in 2007 that it was a wrong move by Old Wheelock to have invested. But it was certaintly an excellent piece of business done by Young Simon Cheong to have cashed out at that time.

http://investingwithedgar.blogspot.com/2007/10/merrill-lynch-recommends-sc-global.html

While Old Wheelock said he had made mistake in the past cycle, let us see how he can recover from this one.

A saving grace for Mr Lawrence is that he has done more good than bad for Wheelock. He should be commended for having the guts to admit error.

To bet on S-Reits now?

2008-10-12T10:49:00.003+08:00

looking for value

REIT - Real Estate Investment Trust has been one of the best business models I have seen in recent time. Use other people's monies to buy your assets (acquired at lower prices) and then subsequently put yourself as managers of the REIT. Thus ensuring long term income streams for yourself in addition to capital gains and unlocking liquidity in non current assets.

Uma Shankari, in this weekend Business Times, said Singapore Reits (S-Reits) are gaining favour as prices fall and yields climb on the following grounds:-

the share prices have dropped significantly (Edgar says - but so have other blue blue chips)
a source of stable, visible and recurrent income (Edgar says - We need to check rental collection and rental rates would hold at current level. The fundamental determinants to dividend payouts. I am of the opinion that current rental levels are not sustainable.)
tolerating cost of debts to be between 4% to 4.5% (Edgar says - assuming the liquidity is available in the first place. I am more comfortable with this.)

Bottomline - Wait for rental rates to adjust first.

My notes - Singapore Reits' distribution yield has ranged between 4-9plus%. Average - 6.03%. Price/NAV has ranged from 0.6 to 1.2plus times. Average - 0.97x.

HSBC's 2% deal

2008-09-13T00:54:00.006+08:00

HSBC Singapore has gotten many people to queue up at their various branches by only offering 2%. Again the promotion was so overwhelming, HSBC has to prematurely end it today.

Whereas back in July, SCB paid more at 2.28%. To read about SCB's offer click http://investingwithedgar.blogspot.com/2008/07/scb-was-it-shrewd-piece-of-business.html

With economic activities at a slow pace, why is HSBC willing to pay beyond the market rate for a big chunk of 12-month money at this time? Could they not borrow from the interbank market? Why? Why?

P/S - UOB Bank offers its preference shares at 5.05%. Are there long queues for the shares too?

Shares as payment

2008-08-31T20:02:00.003+08:00

Sentosa being changed

On Aug 13 and 14 in the Business Times, Jamie Lee reported that PrimePartners, a Catalist sponsor, received 7.56 millions Healthway shares for helping Healthway get listed on Catalist.

The question here is whether it is all right for Catalist sponsor to receive the shares as compensation. I wish to present the pros and cons for your decision.

Yeo Lian Sim of Singapore Exchange said it is ok for the following reasons:-
a) Catalist sponsors are of so high a standard and with so good track record that they have an independence of mind not to be tainted and tempted by the 7.56 millions.
b) It is ok for the sponsored company to pay in kind so as to allow them to conserve cash to fund their business.

PrimePartners said sponsors receiving shares is not an uncommon practice. It is practiced in London's Alternative Investment Market.

The Cons:-
a) What would or could happened to the minority shareholders when the sponsor decide to sell the 7.56 millions shares in one shot? (concern of overhang or sudden deluge of shares)
b) There could be an overriding desire to put up a "good" show to ensure the shares get a good price by over emphasing the positives and relatively quiet on the negatives. (lack of independence and professionalism)

My final question here
If it is all right for Catalist sponsors to receive shares as payment, will SGX approve other professionals like lawyers, accountants, auditors etc (who are also involved in the process) to get compensated in the same way?

2 months ago

2008-08-10T23:21:00.006+08:00

About two months ago, I received a sms from an ex-colleague, who had been quiet for quite some time, with an invitation to meet up for a meal.

I accepted the invitation. During the dinner, we ended up talking about investment. I got a feeling after the whole thing that she could be sizing me up for an introduction to her boyfriend working in the investment line.

She mentioned about this investment talk that she has attended where the instructor was teaching about how to make money through some investment technique that he has become aware of.

Edgar's response then - Did you ask the guy why he is sharing with a whole bunch of people in class after class the secret to making money?

She said then she has just invested some Singapore/Malaysia funds.

Edgar's response then - I am looking to build up a sizable war chest (by opening credit lines) to buy when the market crashes.

She said she would be very interested to take on the position of marketing for investment houses.

Edgar's response then - Why?

The lean years could be here and we must know that money may no longer be easy to come by.

Why the rental spike over the last 3 years?

2008-08-02T13:28:00.004+08:00

I am duly enlightened about the escalating rental situation in Singapore over the last 3 years when I came across this gem article written by Mr Colin Tan, head of research at Chesterton International in yesterday's TODAY.

The number of rental contracts peaked at 29,694 in 2005. The average for 2006 and 2007 is 25,173. There is thus a contraction of 15%.

The average cost of rentals rose by 15% in 2006 and 43% in 2007.

So what is the cause for this phenomenon?
Mr Tan concluded from his research that the rental spike is caused by the sharp contraction in supply due to en-blocing.

It is definitely not due to increased demands from executives coming to town working on the IR projects nor due to thousands of foreign students pursuing their education here.

SCB, was it a shrewd piece of business?

2008-07-06T23:28:00.003+08:00

On the July 2, 2008, Standard Chartered Bank stopped an intended 3-week campaign after 2 days given the more than overwhelming response.

What was the campaign about?
SCB advertised on Friday last, to officially launched its campaign from June 27 to July 20, to attract deposits for amounts of $50,000 and above for a 18-month tenure by offering 2.28%.

Ms. Janice Poon, general manager, wealth management, Standard Chartered Bank said they have underestimated the response.

The development has led me to ask a few questions.

Was SCB too generous in offering such a "high" interest rate in the current "uninteresting" market environment?
Or did SCB know something we don't ie. the cost of money would be higher very soon?
Or is SCB in need of the money for a deal urgently?

So will time tell, please?

Dayen Chairman sells shares...

2008-06-14T12:12:00.004+08:00

take care of that tree during F1

Mr John Lee, Executive Chairman of water treatment company Dayen Environmental, has to sell its own company shares to meet margin call when Dayen's shares dropped by more than 30% in one day.

This has led me to ask a few questions:-

Are people in management of public listed companies in Singapore in such precarious financial position? Or are they just the minority?

There is a conflict of interest when a senior official of a public listed company geared up and purchased shares of the company he/she is working in. I noticed that purchases of shares of such nature has to be declared. It would be good to summarise such info on the nature of their respective shareholdings for investors to review.

NTUC Income rules out option...

2008-05-31T20:02:00.005+08:00

water in my room

... for policyholders to stay in old bonus scheme.

I have been waiting for enlightenment on this issue since Mr Tan Kin Lian, the ex-CEO met with the other Mr Tan, the current CEO of NTUC Income.

What I read so far in the papers are just assurances from various bigwigs from NTUC Income and NTUC that policyholders' interest will be taken into consideration. Can you provide some details on how our interests will be taken of?

I have been wondering whether NTUC Income has the right to amend the bonus features from the legal standpoint? Can you please cite the clauses in the insurance contracts that I have signed giving NTUC Income such flexibilities?

Mr Tan Kin Lian, if you could, please share some info on the meeting.

Season for CFOs to resign?

2008-05-03T11:09:00.007+08:00

I was flipping through the papers today and can't help noticing a few CFOs resigning and one even got fired making the headlines.

ASA Group dismisses CFO after 2 months citing "incompetence" and "uncooperativeness".

Apple-brand reseller Afor's CFO resigns.

Penguin International names new finance and administration director.

Jade Tech's CFO tendered resignation on 24 April 2008.

NTUC Income Annual Bonus Update for 2008

2008-04-30T22:49:00.005+08:00

When I first saw the title to the document I had just received, I thought it was trying to tell me NTUC Income is going to pay more bonus for my various policies.

Guess what I read.

They are telling me that they are increasing the Special Bonuses and decreasing the Annual Bonus, leaving the TOTAL bonuses unchanged or increased MARGINALLY.

My immediate reaction is why the change then.

Why would a Cooperative spend thousands of dollars on mailing thousands of pages to hundreds of thousands of policyholders telling them nothing much change except the allocation?

The change in allocation is supposed to give them "greater investment freedom.. to invest in higher yielding assets that COULD lead to higher returns in the long run." I am old enough to know that higher return could also mean lower return.

Can insurance company unilaterally change the terms of a contract that have been in force for years? Or is it part of the contract?

Can I say NO to the change until I am sure that the change is actually beneficial to me.

What is the difference between Annual bonuses and Special bonuses?

While Annual bonuses are added yearly to the policy, Special bonuses are paid only upon death/maturity/surrender.

Limited upside of Singapore properties' prices

2008-04-05T13:34:00.004+08:00

I was kidding with my students when I told them that White House in US is going for a song. Given the drastic contraction in housing demands, housing starts, housing prices, no. of foreclosures currently occuring in US, you may now be able to afford to buy the White House.

We were reminiscing on the Financial Crisis back in the late 1990s. I remembered a "party" I attended in KL then. A big boss of several listed companies in Malaysia was bragging away of the possibility of buying up assets in Thailand on the cheap given the collapsing baht.

A few months later, Malaysia's ringgit too went down the tube. Now in 2008, I hope the sub-prime tsunamis will be over soon.

Coming back to the title of this article - We opine that there is limited upside to Singapore property's price. Why?

Under asset allocation theory, hot monies will go to places where it can find value. Relatively speaking, the current US property market presents more opportunities. So does this explain why a middle east fund decides to drop the options (and thus dropped millions of dollars) to buy properties in Singapore?

Council of the Elders

2008-04-05T13:17:00.005+08:00

after a glass of wine and cigar with the Council

Hi friends,

I wish to introduce you to Edgar's "Council of the Elders".

This is a group of people whom I interact regularly for discussion on issues affecting our lives.

This group has been part of my life for more than 2 decades. Their opinions and recommendations are backed by their experience in diverse industries.

In future to come, I will share with you bits and bites of the wisdom I acquire through my interaction with them.

Buyer of last resort has arrived...

2008-03-01T22:54:00.004+08:00

While Monetary Authority of Singapore is the lender of last resort to banks and financial institutions in Singapore, Housing Development Board (HDB) has just introduced itself as "buyer of last resort" when it unveiled "income for life" scheme for the elderly.

What is the Scheme?

Under the scheme, HDB will buy back the tail-end of a flat lease at market valuation. The money from the sale of the lease will be credited to the new CPF Life annuity account in the name of seller. HDB has estimated that it would be enough to pay about $500 per monthly for the rest of the seller's life.

Who can qualify for the scheme?

You are 62 years old and above.

You own a two- or three-room HDB flats with little or no loan outstanding.

About 25,000 flats fit the above criteria.

Any promotion now?

Yes, you get additional $10,000 above valuation. $5,000 of which will be paid to you in cash with the rest of the monies going to the annuity account.

What are the beauties of the scheme?

For the low income households, you now have another option in addition to other options such as rental or selling it in the open market.

For the government, the scheme solves its cashflow needs ie. not having to do lump sum payouts on buy backs. Some may argue that this view maybe wrong when the government actually has to debit its bank account and credit the annuity account. But more importantly, the government can still say its citizens are largely looking after themselves.

The seller, at 62 and above, will not have to deal with the temptation of dealing with a big chunk of monies but instead have the peace of mind of receiving regular payouts for life.

Through this scheme, the government may have solved the conundrum of living asset-rich but cash-poor.

Quoted out of context twice?

2008-02-24T00:27:00.007+08:00

my thursday's dinner

On Tuesday this week, MayBank Singapore slashed its three-year fixed home loan rates from 3.58% for all three years to 1.68% for the first year, 2.68% for the second and 3.38% for the third year. The new first-year interest rate is about 40% lower than similar packages being offered in the market.

Guess what was the headline on Friday's BT...

"Maybank's home loan promotion creates a buzz
Other banks won't get into price war, says OCBC's chief executive."

A couple of questions come to my mind when I saw that.
Has the editing process misquoted Mr Conner ie. quoted out of context?
For otherwise, can he speak on behalf of other banks? I am sure he was not trying to suggest that there is some sort of collective agreement with other banks not to cut rates.

Another incident of Mr Conner being quoted out of context was highlighted on Saturday's BT.

The letter by OCBC PR entitled "OCBC chief was speaking in jest" attempts to clarify Mr Conner's response when asked by a journalist at OCBC Bank's 2007 final results briefing what Mr Conner thought of DBS's incoming chief executive Richard Stanley.

Mr Conner responded in jest and said, 'You mean since I trained him?', drawing laughter from the audience. The quote in the article had implied that Mr Conner said 'I trained him' in a definitive manner.

Moral of the story - Beware of the danger of being quoted out of context when one speaks as a public figure.

Damn if you don't do,...

2008-02-16T11:57:00.003+08:00

On the 13 Feb 2008, I read from BT that a group of shareholders has sued Yahoo! Inc asking a judge to force the owner of the world's second-biggest Internet search engine company to fully consider takeover offers after it rejected a US$44.6 billion bid by Microsoft Corp.

So what if Yahoo! Board had accepted the offer, would any other shareholders had sued them for having accepted a too low an offer without thoroughly considering alternative means of enhancing shareholders' value?

Amazing SIA

2008-02-02T12:46:00.000+08:00

my sanctuary

The headline in BT today said "SIA posts $590m Q3 net profit". Well this is about the same as corresponding quarterly profit last year. So no big deal right?

It is BIG deal as I read further down the report.

Striping out the one-time gains from disposals of SIA Building and its stake in Singapore Aircraft Leasing Enterprise in its last year's reported profit of $1.46 billion for the corresponding 3 quarters, net profit attributable to shareholders is 46.8% or $485 million HIGHER for the 3 quarters to date!!!!

The fantastic results have been achieved against the background of high fuel prices and the continued strengthening of SGD.

Aggresive management of its fuels costs through hedging and fuel surchages applied on its 4.96 million passengers, has kept its escalation to only 8% in the 3rd quarter.

Passenger yield grew by 12.7% vs a 7.7% rise in unit cost. I wonder whether the higher yield is due to efficiency improvement or ticket price increase.

Passenger load factor is now at 81.3% vs a breakeven level of 67.7%.

My sincere appreciation of your effort and the brain work involved in achieving the results.

P/S - Dear SIA, can you waive the fuel surcharge please? :)

The big picture impacts on Singapore companies

2008-01-27T10:40:00.001+08:00

looking for light in gloomy days

Ms Teh Hooi Ling, in this weekend's BT, attempted to answer 2 huge questions as follows:-

What kind of impact do macroeconomic factors have on companies?

What are the companies which will suffer the most in an unexpected downturn?

This is the list of characteristics she has highlighted.

Companies with high levels of debt ie. financial leverage.

Companies with high fixed costs in relation to total costs in running the business ie. operating leverage.

Companies with loooonng cash conversion cycle and consequence of credit crunch by their suppliers.

For external characteristics, inflation and foreign exchange movements would impact negatively.

She atttempted to back up her Econs 101 presentation with data analysis of winners and losers during market upheavals in 1987, 1997 and 2007.

But as the circumstances of excesses were different for different upheavals, the market responses were thus different. She had observed the public listed companies. How about private business entities? Thus inconclusive.

Panacea?
She ended her article with strategies that were generally adopted and proven effective by 750 Finnish companies during the recession in 1989-93.
In the medium term, companies should:-

continue to invest in new product development

continue your effort to acquire new customers.

Edgar's closing remarks
Ms Teh attempted to address 2 huge questions very very briefly in an article. It may serve as a quick read and be adopted for many out there.

Her study of Singapore companies' experience in the last 3 upheavals could be developed further and acts as standalone materials. It does not seem to fit in flow of arguments that she has presented in the preceding portion.

In the long run, similar for companies and for individual like you and I, we should generally maintain a healthy lifestyle for higher probability of longetivity.

Benjamin Yeo prophecies ...

2008-01-24T00:48:00.000+08:00

a failed bbq in december rain

Who is Mr Benjamin Yeo?
He is the Executive Director and Head of UBS Wealth Management Research. Today he spoke to about 40-50 people at today's ICPAS/ACCA Executive Lunch Series.

Here are some quotes from Mr Yeo that I managed to reap.

The initial phase of making easy money from the stock market is over. Going forth, look for valuation.
Consumption in US has never experienced negative growth. [I wonder why. Is it due to natural population growth? Or is it due to immigration numbers into US?]
Countries with high export as a percentage of GDP are Malaysia, Singapore and Thailand. As such, any slowdown in consumption in US will have a significant impact on these countries.
Korea, Taiwan and Thailand have the lowest average market PE for the Asian equity markets. Based on data in Dec 2007.
In the equity sphere, emerging market - overvalued. Among other asset classes, real estate and commodities are overvalued with corporate bonds, undervalued.
Singapore, despite a year of bad export figures in 2007, still managed to post such strong growth figure.

In conclusion

look for market with significant domestic demand

look for healthcare and infrastructural themes in your investment

flight to quality will continue ie. go for large capitalisation stocks

more writeoffs could be expected in the coming months - which would give us a more difficult first half of 2008.

Enbloc muse - Interest on 5% deposit

2008-01-21T01:14:00.000+08:00

Background

In a property transaction, the buyer would place a deposit of 5-10% of the purchase price to the seller. The money is held in trust by the seller's lawyer pending completion of the sale & purchase.

The interest earned on the sum of monies has been kept by the seller's lawyer. [Do they have the legal right to that interest?]

Situation

In this situation that I became aware of, the seller's lawyer has "kindly" agreed to share the interest income on a 50-50 basis with a few hundred sellers of an enbloc property.

Upon the completion of sale and after a few reminders, cheques for the interest income were sent to the sellers. One of the sellers asked for a statement from the lawyer to detail how the amount was derived.

The lawyer said no statement would be issued as the payment was purely made out of goodwill and with no legal obligation.

This seller persisted for the statement as a contract was crystallised [in its opinion] when the lawyer made the offer to share the interest earned on 50-50 basis.

The seller then raised the matter to the Law Society for "help" to secure the statement from its members. The Society said they are not in a position to intervene in a private contract. The seller subsequently changed its position to request the Society to review the conduct of the members in this transaction.

While the seller was in the midst of preparing the paperwork to activate the independent tribunal to review the complaint, the lawyer responded through the Society with the required statement.

Moral of the Story

Who is legally entitled to the interest earned?

Is there such a thing as paying out of goodwill for the above situation?

The interest earned can be "shared". In an enbloc sale, the interest earned could be significant given the size of the transaction and possible long delay due to legal challenges from majority sellers, minority sellers etc etc etc...

"Whose arm did they use?"

2008-01-09T18:32:00.000+08:00

When I was told that a Singapore listed company is acquiring another company for $525mio at a valuation of 25x earnings. The price was arrived at on an arm's length, willing-buyer-willing-seller basis. My immediate response was, "Whose arm did they use?"

SNF Corporation, the electronics distributor, has proposed a reverse takeover deal which will see the business of Healthway Medical Services Pte Ltd (HMS) being injected into the listed entity.

SNF will issue 2.6 billion shares in exchange for the ownership to the clinics (doctors and nurses included?) and their future profits.

At 25x PE, I am pretty sure we can buy into blue chips with proven and sustainable income streams. I would be interested in the justifications for the acquisition.

No guarantee in life.

2008-01-01T13:45:00.000+08:00

Recently in an investment briefing by a company going for an IPO, we were told in an “unofficial” way that the buying company can’t really rely on profit guarantees issued by ex-shareholders of the company that was acquired, especially if the target companies were from third world countries.

Take for example.
When Company A (who is going for IPO) buys Company B in China for a price tag of $50 million (with questionable assets with minimal book value) that come with a profit guarantee of $10 million a year for two years (when the real price could be $30 million).

Investors to an IPO also cannot be sure whether profit guarantees will result in actual profits or are merely used to make a purchase look good by playing the “PE game” and allow the buyer to have a decent-looking income statement for a few years while having purchased poorly performing assets.

What is the “PE game”? If Company A were to go for IPO at a PE of 8, the $10mio profit guarantee would translate to an additional $80mio in its valuation.

What could Company A do if the acquired entity did not achieve the guaranteed profit? In BT dated Nov 13, 2007, R Sivanithy asked what remedies investors have when guarantees fail to materialise.

They could try going after the sellers after 2 years’ of operating the business and possibly spend another few more years of being entangled in Courts with legal procedures. Assuming the buyers were to be finally successful in the Courts (after incurring heavy legal fees), the sellers may have disappeared completely or the sellers may have conveniently lost the ability to pay for the profit guarantee.

So we, the poor shareholders, end up with an emptied pocket.

Quarterly Financial Reporting - Pros and Cons

2007-12-31T13:48:00.000+08:00

Dr Lee Kin Wai, associate professor in Nanyang Business School, presented his findings in an article in Singapore Accountant Jan 2007. I have summarised his conclusions as follows.

Advantages

Stock prices do react to quarterly earnings announcement.

He then investigated and concluded on the effect of voluntary disclosure in quarterly financial reporting. He defined "voluntary disclosure" as disclosure released by management over and above the mandatory requirement in the quarterly reporting.

The more information presented in its voluntary disclosures, the lower its cost of equity capital and debt capital.

Disadvantages

Investors, market and consequently the management of these companies are geared towards short term focus. For those with some experience in doing business, we are aware of the great difficulties in producing results in 3-month quarterly windows but yet investors and market will measure their performance as such.

Management may be encouraged to "manage" ie. spread their earnings over the various quarters to generate "quarter-to-quarter growth" and "beat analysts' estimates".

Dr Lee observed incremental costs to comply in terms of human hours to prepare and approve the accounts.

The stronger a company's internal controls, the shorter the time to close the accounts. Case for corporate governance to be strengthened.

Ban Joo's woes continue

2007-12-30T00:26:00.000+08:00

seeking direction to a better life...

Textile firm Ban Joo & Co, whose financial year-end has been changed to September from June, reported a loss of $15.1 million for the 15 months ended Sept 30, 2007 on Friday last (as compared to net loss of $35.2 million for the 12 months ended June 30, 2006).

The loss was due mainly to provision for impairment of trade debts and losses associated with the discontinuation of operations.

The management of Ban Joo has had a really difficult and busy year given the following series of actions in attempting to improve its fortune.

A controversial share placement exercise completed in the middle of the year saw an injection of $3.6 million and has boosted the company's cash holdings. [refer to my earlier posting http://investingwithedgar.blogspot.com/2007/06/placement-of-shares-at-discount.html] Cash and cash equivalents stood at $6 million at the end of the period. [With the company incurring a loss of about a million dollars a month, the $6million will not last very long.]
Somehow the management managed to reduce its bank borrowings and other current liabilities by $5.7 million [ I wonder how much is the total liabilities.]
The company announced in October that it had completed a debt restructuring agreement with various financial institutions. [I wonder how were the various financial institutions convinced of its viability.]
Lastly, the management has also changed its year end from June to Sep. [Again I wonder why. Did I miss its explanation for the change in year end date?]

Dear Labroy and SembCorp, may I know which banks advised you on hedging?

2007-12-29T13:48:00.000+08:00

Background - Sembcorp Marine

When the news first broke on SembCorp Marine on Oct 23, 2007, it was reported that Jurong Shipyard paid US$83m and facing unrealised loss of another US$165m.

Of course, the figure has balloned way beyond US$300m.

Background - Labroy

Labroy is the other company who caught the forex superbug. It reported forex losses of $167m in its third quarter, but it also disclosed that it had entered into forex contracts running into billions of dollars.

At the time, Labroy said that it had entered into derivative financial transactions to sell euros and purchase US dollars 'for the purpose of hedging against currency exposures in relation to anticipated euro monies coming in the next three years'. These future receipts arise from the contracts for the construction of two heavy lift jack-up vessels that Labroy secured in March 2007, for a total combined contract value of 283.6 million euros (S$567 million).

Is there a severe mismatch in the size of hedging against what Labroy is receiving. So is the company really hedging against a forex exposure or are they involved in currency speculation?

When I was a rookie in the private banking many years ago, we were constantly reminded of "no surprise culture". If we had made a mistake in effecting a client's instruction or when a client's investment has gone awry, we are to inform our superiors as soon as possible. Time is the essence. We should attempt to cut the position asap to limit further exposure.

In reality, there could be people who attempt to sit on a mistake and pray that the market should reverse and move in his favour. The losses would keep piling up and snowball into an avalanche!!!

In summary, solve the problem first when a problem arises. Witch hunting can come later.

Value investing OR Growth investing?

2007-11-17T16:03:00.000+08:00

Can you tell the difference between the two?

Value investing is the art of looking for "out of favour" companies with discounts in price-earning (PE) multiples. Looking for established companies with proven earning records but relatively "cheap" now.

Growth investing is the "science" of looking for fast earnings growth, probably relatively young companies with possibly cutting edge, new age products seeking to change market paradigm. Such companies are usually trading at high PEs. Why? Got not much earnings to show now.

So who am I? Can I say I am both a value investor and growth investor.

In a recent presentation by Mr Jimmy Pang, a senior portfolio manager at Alliance Bernstein recently, he said,

Forecasts for exciting companies tend to be too exciting ie. optimistic.

On the other hand, investors are too pessimistic with value companies.

His themes were that

"reversion to the mean is good for value stocks but bad for growth stocks" under the current investment climate.

"there is very little value to wring out of value companies but there is a lot of value to be found in growth companies"

What is the reward of correctly identifying the "right" growth company to invest in?

Well, if you had invested $10,000 in Cosco five years ago, you would be a millionaire today!!!! (worth $1.1m today)

Mr Oei has made another $14mio.

2007-11-17T13:12:00.000+08:00

What is the deal?

On Nov 13, 2007, Mr Oei is selling the 55,000 sq ft freehold site to Mr Freddie Tan (the former publisher of Magazines Incorporated) for about $52 million - realising a gain of almost $14 million or 37 per cent since Feb 2007.

I highlighted the property purchases in my earlier posting in the share swapping exercises.

http://investingwithedgar.blogspot.com/2007/02/what-is-happening-with-mr-oei-novena.html

The two properties, at 98 and 100 Pasir Panjang Road, were acquired from Novena Holdings for some $29.8 million. His total cost, is said to be around $38 million.

Another deal in the bag for Mr Oei. The next question still awaiting an answer would be - Where will Mr Oei house the 10,000 Buddhas? One thing for sure, it will be a very nice place.

SPH is more than fixed deposit

2007-10-14T00:27:00.000+08:00

Would you consider investing in a company that gives you the following?

Company's last closing share price - $4.48.

The company is earning 32cts per share for you.
It is paying out 26cts per share as dividend. This is equivalent to a gross yield of 5.8% per annum (against share price). Compare that with how much are you getting from your fixed deposit or saving accounts?
The company is in a business of selling necessities ie. information and entertainment distributed over various channels ie. newspapers, magazines, internet etc etc etc.
Generating positive cash flow of $40mio.
Topline grew by 13.6%.
Profit attributable to shareholders grew by 18.1% to $506mio.

P/S - I have some CPF monies in SPH trying to beat the current 2.5% interest rate for the ordinary account.

Merrill Lynch recommends SC Global

2007-10-06T00:46:00.000+08:00

Yesterday Merrill Lynch initiated coverage of property firm SC Global Developments with a 'buy' rating and set a price target of $9.50. (closed at $6.45, up 45cts on Oct 4, 2007)

Merrill Lynch said the stock was undervalued and could appreciate further when SC Global launches two of its residential projects in the coming six months.

I am sorry I am unable to agree with that recommendation on the simple basis that I don't think Simon Cheong will sell himself short.

Back in June 2007, Wheelock Properties bought and Simon sold a 10% stake in SC Global Developments at @$6 for a total value of $112.1mio.

Check out my posting on that transaction.
http://investingwithedgar.blogspot.com/2007/06/young-simon-and-old-wheelock.html

It was only so recently that both buyer and seller (who are veterans in the property business) valued SC Global at $6 per share. I am sure Simon knows the value of its assets and would have present-valued certain percentage of future value.

Nothing much has changed since Jun 2007. I will be glad to lay my hand on the details of Merrill Lynch's recommendation. Please pass me a copy if you have it!!!

Till then, I am with Simon's valuation.

It doesn't pay to save

2007-09-23T17:57:00.000+08:00

He also works in Shenton Way.

Huh? Well at least for next few years where we should be experiencing negative real interest rates.

What is negative REAL interest rate?
Real interest rate = Nominal rate less inflation rate

So a negative real interest rate is when the gross interest interest rates that you are getting from your Bank for your saving account and fixed deposit are generally lower than the inflation rate.

The inflation rate is expected to be 1% to 2%.

If you let your monies sits in your saving account, your monies would buy less less things as any interest earned is outstripped by climb in consumer prices.

For example, DBS Bank offers to pay 1.8% per annum for $50,000 - $99,999 24-month fixed deposit.

I am not discouraging the age old good habit of saving.

But I am highlighting the need for you to aggressively manage your monies ie. to seek out investment opportunities which could yield higher than inflation rate at a risk level acceptable to you.

Bottomline - It doesn't pay to save amid rising inflation, low bank rates. Ask your money to work harder.

CPF interest rate increase

2007-09-23T17:41:00.000+08:00

Toward the beginning of the month, we were told that the first $60,000 in the various accounts will be given an additional 1%.

This is to help grow our retirement fund. I cheer to that.

A couple of weeks later, today, I heard it on radio that the inflation rate is now at 1-2% and it is expected to go up in the second half of the year.

From this piece of news, it dawned upon me the importance of the 1% increase in interest rate announced earlier.

Without this increase in CPF rate, our funds in the CPF Ordinary account would be accumulating at close to inflation rate. Bottomline - No real increase in purchasing power.

Bottomline - We need to ensure that our monies work even harder to ensure sufficient funds for retirement.

Mr Oei is selling down his Centillion shares

2007-09-18T16:59:00.000+08:00

On Friday alone, it is estimated that he made $26mio from selling the 300,000,000 million shares that he has.

That effectively reduced his holdings from 26.47% to 19.72%...

HUH!!!! He still got 19.72%%%%%

40.6% was the highest level he held.

Mr Oei, I will pay good attention to your next purchase decision. Really hope to learn from you.

What is "share buyback"?

2007-08-28T00:03:00.000+08:00

my sunday jog

Who is buying?

It is the public listed company buying back its own shares from the open market using company's fund. Shareholders' approval must be secured to use company's funds for this purpose.

Under the old rule, the shares would be cancelled. Current rule allows such shares to be placed in a Treasury Account ie. a holding account.

What are the possible reasons for such action?

to enhance Return on Equity
to tighten control over the company by the majority shareholders' using company's fund
to discourage any takeover attempt by restricting supply of free floating shares
to return excess capital back to shareholders
to buyback and give the shares to employees as reward under its various incentive schemes
to support the company's share price

When is it an appropriate time for the company to do it?

It is usually done during periods in which the respective company thinks its share price is undervalued.

It is reported in BT yesterday that the total value of share buybacks rose from $53.47mio in July to $174.6mio in Aug to date.

UOB Bank alone accounted for $143.32mio ie. an amazing 63% of total value of share buybacks over the these 2 months. Haw Par Corp, another company related to Wee family, bought back $40mio worth of shares.

So is the Wee family signalling to us to buy too???

Holding period for shares

2007-08-27T01:03:00.000+08:00

I just been informed by Ms Teh Hooi Ling in her article in yesterday's BT that there is a formula used to measure average holding period.

What is the formula?

It is calculated based on the annualised value of stocks traded in a month divided by the entire market cap of the stock exchange and multiplied by 365 days.

Last month ie. July 2007, the number of days a stock is held by investors in Singapore last month hit 353 days. It is the second lowest level in the last 17 years since the dotcom bubble in June 1999.

For the record, it was 309 days in June 1999.

So is it good or bad to have "a low holding period"?

Back in 1994 and 2000, average holding periods during thes 2 years dropped to the lowest level during their respective peak of the stock market.

And two months back, holding periods for stocks in Asia was at its briefest, shorter than even in 1994 and 2000.

Thus on hindsight, the correction should have been seen to be coming.

Lesson learnt - Set up the formula in your Excel spreadsheet and monitor it for the next stock market crash!!!

360 day-year or 365 day-year - What is the big deal?

2007-08-18T11:21:00.000+08:00

I have just been informed by my DBS Credit Card Statement that:-

"the basis of interest calculation will be revised FROM existing 360 day-year TO 365/366 day-year (in a leap year)"

I couldn't believe my eyes!!!!

That for once in my life, I am looking at an unilateral amendment to a service agreement that is in favour of customers.

So what is the big deal?

Allow me to illustrate with an example. Let us say I have a personal loan of $10,000 at 14% p.a. What is my interest expense for the month of August (a 31-day month) based on:-

a) 365 day-year and;

b) 360 day-year?

Answer

For a 365 day-year, my Aug's interest expense,

$10,000 x 14% x 31/365 = $118.90

For a 360 day-year, my Aug's interest expense,

$10,000 x 14% x 31/360 = $120.56

Based on DBS Bank's revision of its basis year, it has implicitly given me a discount of $1.65 per $10,000 loan per month (estimated).

If you multiply this by the billions of personal loans, credit card loans, car loans, property loans, travel loans, renovation loans etc etc etc, this would be (as I am not sure whether this is applicable to all DBS loans) a significant move by a leading bank in Singapore in the right direction ie. a fair deal to both the bank and its customers.

Cheers to DBS Bank!

P/S - Refer to http://anythingwithedgar.blogspot.com/2007/05/how-to-increase-your-companys.html for my earlier expression of displeasure.

Have you got a call from your broker?

2007-08-13T20:52:00.000+08:00

It is definitely BAD news if I had received a MARGIN call from my broker in the last 2 weeks.

What is a margin call?

Situation arises when I have borrowed money from stockbroking firm to partially pay for my share purchases AND the share price of that counter fell significantly.

Example

I have purchased 100 lots (ie. 100,000 shares) of Company X at $1 per share. At 80% financing, I paid $20,000 from my own pocket and the remaining $80,000 borrowed from the firm.

When the share price dropped to 70 cents, the firm would recalculate the loan amount ie. 80% of 70 cents x 100,000 shares = $56,000.

The firm would call me to top up the difference of $24,000 (ie. $80,000 less $56,000)!

If I got the money, I would pay the $24,000.
If I got no money, I would be forced to sell my shares at a loss of $30,000!!!

Moral of the story - You must consider the downside for any upside that you are expecting.

Do you have a CDP account?

2007-08-05T15:48:00.000+08:00

No? What is that?

CDP is the Central Depository account where your scripless (share certificateless) shares are held.

Many people have opened their CDP account in recent months (eg. in July 2007, 6,200 accounts were opened). Many are only entering the stock market from Jan 2007.

There are about 250,000 accounts that are active (active is defined by at least one buy or sell in the last 3 months). If we assume that Singapore has 3.4 million adults over the age of 20 years old, this would mean that only 7.4% of adult population have an exposure in the stock market.

So if you don't have a CDP account, you belong to the majority. But is this good for you?

Basically I don't think staying away from investing in shares is good for your retirement. Why? As equity investment consistently outperform bonds in the past, it is advisable to allocate some of your monies in the stock market.

Reference - "Not many benefit from bull run", Teh Hooi Ling, BT, Aug 4, 2007.

Things people do not care

2007-07-19T21:20:00.000+08:00

The following are things people do not care about when the market is red hot!!! The following are quotes from today's papers after the blood bath yesterday.

"People are not investing BUT trading."
[(red face) Edgar was trading on IPOs. He didn't read the prospectus.]

"It went from unbelievably bullish to unbelievably bearish in just hours."
[Edgar was searching for news to explain the suddent turn in sentiment. I thought a bomb went off somewhere in the world.]

"Traders were unnerved by a sharp sell-down..."
[Edgar has been mentally prepared for this type of occurrence. He was actually looking to buy.]

"Many heavily traded stocks are those belonging to financially strapped companies with poor earnings records."
[Edgar is fully aware of this and has been advising caveat emptor. See past posting.]

"Reverse takeovers can take as long as a year."
[Edgar understands the difficulty of doing business. A simple deal may take weeks or months to negotiate. Imagine a reverse takeover between 2 entitites under 2 different legal, accounting, financial and sovereign jurisdictions. The deal may even break down.]

"Can a company with poor earnings record be valued at close to a billion dollars?"
[Edgar cannot believe it is happening. But apparently there are many who give such valuation to those companies.]

Mr Oei again with Equation and Centillion

2007-07-18T19:46:00.000+08:00

Who are the investors?

Mr Oei Hong Leong
Mr Eddie Chng, Equation (ex-HeShe)

What is the target company?
- Centillion Environment & Recycling (ex-Citiraya)

Background

In 2005, Mr Oei and Equation bailed out Centillion by investing $8.05mio each for 37.5% share each of company.

Centillion also gave both investors the right to buy more shares. Each may buy another 950mio shares for $8.05mio.

On the Tuesday, 17 July 2007,
Both gave notice to exercise that right. Expected settlement on Friday.
Each would then control 42.86% of Centillion.

Looking forward to Friday, 20 July 2007
Assuming Centillion share price hold steady at 20cts, both Mr Oei and Equation are sitting on a paper gain of $364mio each!!!!! (computation as per BT's article)

$8.05mio for $364mio over 2 years!

My sincere respect to you, Mr Oei and Mr Eddie Chng.

Another Mr Oei's sale and profit

2007-07-15T00:53:00.000+08:00

Just over a week after he sold off his shares in Super Coffeemix for an estimated profit of $40mio, he sold off the entire 29.98% stake in China Healthcare.

Estimated profit - about $13mio.

Didn't know China Healthcare was Econ Healthcare until yesterday. Since most of the Chinese counters are in fashion, I wonder whether I can change my company name to China XXXX Pte Ltd.

May we speculate why he sold China Healthcare or why he is in the mood of selling or are these two transactions totally unrelated but coincident?

China Healthcare and Super Coffeemix are ripe for profit taking given the recent run in share prices. Just like hundred of other counters on SGX?

IPO Strategy

2007-07-12T19:38:00.000+08:00

Hi friends,

In the middle of a night of a day last week, I chanced upon the opportunity to apply for IPO for China Sunsine using the massively convenient internet banking. The IPO price was 39cts and I decided then to apply for 20 lots.

The next day after the closing date, I was informed that I have been successfully alloted 3 lots.

On trading day, I sold at 57.5cts. A nimble profit of 18.5cts per share or $500 over a few days.

Given the small success, I started to give IPO a little more attention. I applied to a few but was unsuccessful in all of them. The opportunities missed are as follows.

RH Energy - IPO at 32cts and closed the trading day at 87cts.
China Angel - IPO at 35cts. Traded as high as 80cts.

Moral of story - It confirms again - There is no sure thing. Caveat Emptor always.

P/S - Financial One - IPO'd at $1.15 and closed the day at $1.15.

HG Metal Chairman sells 1.1mio shares

2007-07-12T18:45:00.000+08:00

The point - Whenever an insider make a buy/sell activity or a series of buy/sell activities, we should pay attention.

We need to evaluate that action/s in perspective ie.

How insider is this person? Key/majority/very executive shareholder?
no. of shares bought/sold against his existing holding
any reason given for the buy/sell - Sometime, the person may sell to pay for the bungalow he is buying etc etc.
pattern based on past activities of this person

Let us take a look at what is reported in Straits Times today on the sale of 1.1mio made by HG Metal Chairman.

Who is he? The Chairman of the company.
1.1mio shares sold --> reduced his total shareholding position from 6.06% to 5.65%.
no reason given
pattern of activity - I did not check.

My view - He sold when the share price broke new high yesterday. I think he could be cashing in on some of the gains.

PE ratio

2007-07-11T14:19:00.000+08:00

What is PE ratio?
The formula = market price of share / Earnings per share (EPS)

It is how much you are willing to pay for the earnings being generated by the company. This is a tool to value the company under consideration.

Interpretations - example - SIA's PE as of 10 July - 11.3x

It would mean that an investor is willing to pay $11.30 for every $1 earned by SIA.
It would also mean that the same investor is happy with a return of 8.85% return on investment (ie. invest $11.30 to get a return of $1)
It would also mean that you are willing to wait 11.3 years to "get back" your money. (assuming SIA pays out the full $1 it earns as dividend)

The PE ratios for all listed companies are provided in our main newspapers on the following:-

price - as per last trading day's share price
EPS - as per the lastest actual audited earnings available

Example - If a company's last financial year end was 31 Mar 2007, the PE ratio reflected in today's papers would yesterday's last traded share price divided by EPS as per 31 Mar 2007.

What are the current PEs of some of bluest stocks on Singapore Exchange?
To give you an idea of market valuation,

UOB Bank - 14x
Keppel Corp - 26x
F&N - 26x
SPH - 16.7x

So what is/are the PE of the companies that you have invested in?

In search of next stocks to buy

2007-07-08T14:27:00.000+08:00

On Jul 7, 2007's Weekend edition of Business Times, Ms Teh Hooi Ling gave us the following clues to find our next winners.

"Go for stocks with high return on equity but low price-to-book ratio"

What are those ratios?

Return on equity (ROE) - We have several versions of the formula to ROE. Basically "return" could profit before tax or profit after tax and "equity" would be the summation of paid up capital plus all the reserves. Ms Teh is telling us to look for companies with high ROE.

Take for example - If most businesses in Singapore are able to generate a return of 10% on its resources, that 10% becomes the normal rate of return. Then look for companies making above the normal rate.

Price to book (PTB) ratio - What price? Share price of that company. What "Book"? It refers to the net assets value as reflected in the accounts. PTB ratio will give an indication of how much we are paying in excess of the book value per share of the target company. Thus Ms Teh rightfully told us to look for companies with LOW PTBs.

Take for example - If the book value is $1 and the share price is trading at $2.40, PTB is 2.4x.

So where to find those ratios?
Sadly, such information is not easily found and nicely presented somewhere for us to see. Ms Teh had downloaded the ROEs and PTBs of all the companies listed on the Singapore Exchange from 1990 until 2007 from Thomson Financial Datastream. She had done a lot of secondary analysis to do the article.

As retail investor, we can do calculations on the few target companies. But market or industry figures would be the value added of institutional investors.

But if you actually do your homework, you will be well rewarded as per historical data. Ms Teh found out that the top 10 per cent of companies with the highest ROE/PTB would have turned your $100 into $34,048 in 17 years ie. average growth of 41% per annum.

Buying Hope?

2007-07-07T19:59:00.000+08:00

I hope you are not buying shares of a company based on HOPE that a particular deal will go through.

A good company's fortune should not be dependent on just one deal!!

But if you had bought into these companies as mentioned below, your pocket would have been lighter with your hope dashed (at least for now).

Carats Ltd (formerly known as Daka Designs) is continuing the search for reverse takeover (RTO) opportunities, after a memorandum of intent for a potential RTO fell through.

The share price of YNH Property, a Malaysian property company has tumbled by 13% after the company failed to go through with a planned development with CapitaLand. Both companies had been hoping to develop a block of grade A commercial offices on a three-acre plot of freehold land along Jalan Sultan Ismail in the centre of Kuala Lumpur.

To buy on hope, I might as well go buy 4D. Cheaper and simpler.

The Lexicon Group

2007-07-06T18:31:00.000+08:00

This public listed company has experienced a few rounds of changes of its majority shareholders, name of company, a lot of acquisitions and disposals and I still don't know what it is trying to achieve.

The name has changed from Panpac Media to Sun Business Network (SBN) (2005) to The Lexicon Grp (2007).

The company has reported a whopping loss of $102mio for year ended 31 March 2007. SBN's grand plan involving Greater China, NASDAQ and London's AIM failed miserably.

I definitely do not have shares in the company.

But I am just curious for the sake of minority shareholders, will there be light at the end of the tunnel under the new ownership?

Mr Oei exits Super Coffeemix

2007-07-04T15:16:00.000+08:00

Mr Oei bought into Super at 34cts and 45cts per share about 2 years ago.

Yesterday he sold his total holdings at $1 per share Yeo Hiap Seng to reap an estimated profit of $46mio!!!

Amazing!

Did Edgar mirror Mr Oei's moves?

Edgar didn't. He was tracking the share price for months. The share price just exploded upwards from 40 plus cents level. He didn't follow. He regrets his inaction.

Should the market celebrate his departure by bidding the counter higher?

Sadly, I don't think so. We should take his cue.

Young Simon and Old Wheelock

2007-06-26T12:54:00.000+08:00

Still can see Wheelock from here.

What is the transaction?
Wheelock Properties bought a 10% stake in SC Global Developments. Simon Cheong (SC) sold his shares at @$6 for a total value of $112.1mio.

FYI - SC Global closed at $6.45 on Jun 22, 2007.

My objective here is to attempt to understand why the buyer bought and why the seller sold.

Why did Wheelock buy?
David Lawrence, its Chairman and CEO, explained in today's BT ie. 23 Jun.

They think they are buying into good, well-managed companies with a sense of style, and a good brand name.

It allows Wheelock to buy into property firms that can hold on to land for longer term. Wheelock, though listed in Singapore, is considered a foreign company and thus faces restrictions.
Wheelock has a track record of such investment in the past when it bought 20% of Hotel Properties (HPL) @$1.80 for a sum of $171.4mio. Today, HPL's last traded at $6.15 per share.

My view

Should we tap on the homework done by David Lawrence and its able team of directors and management, in deciding whether we should place our savings with SC Global?

Based on HPL and other successes that Wheelock have logged in todate, I think it is valid to follow albeit for medium to long term view. It will take for SC to fully unlock the full value of the landbank acquired to date. And I really don't think young Simon is in a hurry to do so.

Why did Simon Cheong sell?
No official words from him yet. Thus I hereby speculate.

To Simon, maybe it is good to bring another brand name shareholder to its stable.
Wheelock's database of buyers could be tapped upon in his attempt to sell SC's projects at $3,000 or more per sq. ft.
Maybe young Simon thinks it is a good time to take some monies off the table given that SC Global's share price has gone up so much. Is he saying that in the near term, $6 plus per share is about right?

My view

Upside could be limited in the near term.

But there will be upside as old Wheelock wanted to buy more but young Simon said 10% divestment is enough.

Penny Stock Email Spam

2007-06-25T00:43:00.000+08:00

Are you receiving emails that tell you to buy some stocks immediately as they expect the price to explode upward in the near future? Promising you quick and huge profit.

Most people either ignore or delete such emails. But inevitably there will be some people who will take the bait and buy that recommended counter.

These fraudsters send out billions of emails worldwide. But before they broadcast, they would have bought some shares @3cts for example. Assuming a small group of people respond by buying that counter and bid up the price to 4cts. These fraudsters would then unload their holdings to the buyers. They would make a tidy profit!

Their cost of this exercise - email broadcast costs.

Simple method indeed.

Irrational Craziness in Ban Joo's share price

2007-06-23T01:09:00.000+08:00

"Irrational exuberance," he said.

Here is the continuing episode on Ban Joo based on published information. [P/S - I got no Ban Joo shares.]

Jun 30, 2006 - As at that date, it owed bankers almost $68 million.

Oct 2006 - Auditors expressed doubt about the company's ability to continue as a going concern.

Nov 5, 2006 - Company made announcement on the placement of shares at 2.5cts to secure $3.57mio cash injection. Share price then was 4cts.

Early Feb 2007 - Ban Joo announced an intention to buy into various private property-related companies via the issue of 109 million new shares. [Who were the intended sellers? Were these deals an issue to SGX giving the approval?]

Mar 27, 2007 - It announced that these purchases were off because certain commercial issues could not be resolved.

Jun 21, 2007 - Sivanithy's article in BT. Should the placement go through on Jun 25, 2007, will the difference of $30-odd million be considered an expense to shareholders and therefore the company? If it were to account for it, will the company sink?

Jun 22, 2007 - The counter closed at 24cts with about 30 mio shares transacted.

My view
Going concern is an issue with the company since last year.

Company promptly went and look for white knights for quick cash to keep company going. Company also tried to look for some new businesses to be injected into the company. These deals went belly up in Mar 2007.

The company is in a precarious position.

Be damn if it gets the $3.57mio and;

be damn if the shareholders reject the proposal on Monday.

If it gets the $3.57mio, how long will $3.57mio last with the possibility of $30mio "expense" to be charged to its P&L with no new business deals?

If it didnt get the $3.57mio, how to solve going concern issue with no money and no new business?

Thus I wish to know how one justify the last traded share price of 24cts.

Is it irrational exuberance that has got into all our heads?

Buyers beware!!!

Ban Joo - Placement of shares at a discount

2007-06-21T22:43:00.001+08:00

my gifts

On June 21, 2007, R. Sivanithy of BT wrote this article entitled "Ban Joo placement: why the SGX delay?".

This is how the story started.

Nov 5, 2006 - Ban Joo & Co proposed the placement of 145 million new shares @2.5 cents to two private investors. The net amount to be raised is $3.57 million, which the firm will use for acquisitions and investment in new businesses.

Two regulatory procedures to clear for the fund raising exercise to go through.

As the placement price is more than 10% discount to the prevailing market price of 4 cents at that time, SGX's approval is thus needed.

A special meeting for shareholders to give approval to it.

So what went wrong?

In his article, Sivanithy wished to know the reason for the delay between application date of Nov 5, 2006 and approval date of May 18, 2007.

The share price has risen to 24cts as of Jun 22, 2007. The intended buyers at the proposed price of 2.5 cts, would stand to make 21.5cts per share. A whalloping $30mio profit!!!! So existing shareholders are obviously not happy with the deal.

There is no "lock-up" clause in the proposal ie. the new shareholders would be free to sell the whole 145mio shares if they so wish.

FYI - The Extra General Meeting (EGM) will convene on Monday Jun 25, 2007, for the shareholders to decide on the proposal.

SGX responded promptly on Jun 22, 2007 as follows:-

SGX received the application for listing and quotation of the placement shares on Mar 19, 2007 and NOT Nov 5, 2007 as alleged by Sivanithy.

The proposal could not be accepted earlier as the company did not have any independent directors on its board. SGX had to remind the company of its continuing listing obligations. After which, the company appointed two new independent directors. [What type of company is this when it can't handle listing requirements?]

The company confirmed that the issue price remained at $0.025 for each new share despite being reminded by SGX of the BIG discount.

The proposal was approved on May 18, 2007.

SGX is thus in the clear on this.

What is "placement of shares"? The company is selling new shares at a price agreed to some buyers payable in cash or with assets. It is different from a rights issue where the new shares are issued to ALL shareholders at a certain ratio eg. 1:5 ie. 1 new share for every 5 shares you are holding.

Everyone is making $ from the stock market?

2007-06-20T18:02:00.000+08:00

True or False?
To many, it is very true.

You will hear everyone talking about "which counter is going to go up tomorrow" or "you make how much hah?" all the time everywhere ie. in coffee shops, hawker centres etc etc.

If everyone is making money, who is losing money?
It can't be nobody is losing money.

So who?????
Answer - The last person/people holding the baby (ie. the shares) is/are the losers.

How could it be true?
Mr A buys at $2 and sells to Ms B at $3.
Ms B sells to Mr C at $4.
Mr C sells to Ms D at $5.
Ms D sells to Mr Edgar at $6.
The market crashes. Share price drops to $2.
Mr Edgar held on the $6 share and after five years, he is praying for the share price to recover.

Creative is delisting from Nasdaq

2007-06-16T00:38:00.000+08:00

Creative Technology announced that it intends to delist its shares from Nasdaq to help it reduce costs - the second time it has sought to do so.

It would save about USD$1-2mio for a company whose financial predicament is well documented.

Well you can only do so much to your middle line. For the bottomline, we still need the creativity (no pun intended) to invigorate the top line.

Where and when is it before Creative runs out of time?

Do you read the prospectus of IPOs?

2007-06-05T10:45:00.000+08:00

Dear friend,

Frankly speaking, I couldn't.

I could not read every page but I do attempt to read sections of prospectus for info on the following areas:-

What business/industry are they in? What is their business model? How do they make money? Thus is it defensible to some extent?
What is the price am I buying in into the company? I will look for price-earning (PE) ratio as my first rule of the thumb.
What are the declared risks of the business by management of the company? Many years ago, there was this IPO in the palm oil business which has declared that some of their plantations are sitting on land with ownership under dispute. Of course upon reading that, we should review for possible impact.

Gems TV - Learning Points

2007-06-05T10:04:00.000+08:00

Hi friends,

Back in Nov last year, I wrote about the handsome profit made by Hour Glass for being a 5%-seed investor in Gems TV. It was listed at $1.08 and went to a high at $1.80. Today it is in the region of $0.70.

What is Gems TV's business?
It sells coloured gemstone jewellery, made in Thailand, on TV in UK.

What happened?
The company went from a loss of US$200,000 in 2004 to a profit of US$28.8mio in 2006.

On Feb 12, 2007, Jason Choo, the Chief Executive, gave a conference call interview and painted a very rosy picture for the business.
Share price went up 17cts to $1.45.

On Feb 22, 2007, Credit Suisse reinforced the positive aura of Gems TV by recommending a buy call with a target price of $1.94.
Share price went up by 5cts to $1.54.

On Mar 27, 2007, DBS-Vickers raised their buy call from $2 to $2.60 on the basis that the company will grow at a compounded rate of 60% for next few years. Share price went up 14cts to $1.80.

On May 14, 2007, Gems TV reported a 12% drop in 3rd Qtr sales and a whalloping 88%-drop in profit. The business's expectation for the next 2 Qtrs will be DIFFICULT.

Moral of the story
It is not easy to do business and make money. A business is not built over night.

Stock analysts from big and small broking and finance houses are prone to mistakes too. You must know who are these people doing their analysis. Do they do site visits planned by prospective companies? Or do they just do desktop evaluation of a business by someone who has not run a business before in their life?

Couple of years back, a journalist asked me why I didn't sell my China Aviation Oil shares when SIAS changed their recommendation to SELL. My response then was how do you know who is right and who is wrong at THAT point in time.

My last learning point as highlighted by R. Sivanithy is whether investors do their own homework. Or we rely on entities like Credit Suisse or DBS-Vickers to do that for us?

I will continue my comment on this in my next posting.

Caveat emptor, my friends.

Back-door Listings

2007-05-31T21:31:00.000+08:00

P/S - Are you here?

Rowsley Limited
On May 2, 2007, Rowsley announced the acquisition of $2.7bio Chinese solar firm which will lead to a reverse takeover.

A few weeks later, the company presented a massive loss of $21.5mio the financial results for year ended Mar 31, 2007.

Eng Wah Organisation
Last week, Eng Wah announced it would be bought out by a Japanese biotechnology firm for $675mio which will lead to a reverse takeover.

In today's paper, Eng Wah and its Crazy Horse escapade reported a net loss of $10.6mio.

What is a reverse takeover?
On paper, I am buying you but actually you are cleaning me out. [Remember - substance over form.]

Did the losses in the respective company mentioned above signal to its management that their existing business is deep trouble? I guess Eng Wah had tried to do something about with Crazy Horse. I suspect that there is a huge sigh of relief (after months of emotional torture) when they finally decided to let the Crazy Horse go. An amazing $9.4mio of the $10.6mio loss reported is due to Crazy Horse.

Consequently, both companies are selling out of the final remaining asset ie. "Singapore-listed company status" to the Chinese and Japanese buyers.

P/S - I got no shares in both companies.

Two headlines on Chinese markets - Severe concerns

2007-05-20T01:49:00.000+08:00

"Investors should pare China holdings, analysts warn" and "China funds' values slide as foreigners flee" were the two headlines in Business Times about two weekends ago on Chinese stock markets.

Last week, Alan Greenspan, the RETIRED (but still talking alot openly)FED Chairman, warned the audience in a conference in Europe of the same issue. The markets have been in a negative mode hence.

How overvalued are domestically listed Chinese shares in the eyes of foreigners? As much as 16 per cent, based on two China equity funds for foreigners that trade at discounts to their underlying stocks.

Exchange-traded funds seldom trade at steep discounts except during times of turmoil as per experts.

As foreign investors increasingly question whether China's roaring stock market is heading for a crash, overseas-traded China funds which have more than doubled in value in the last year are now steeply discounted.

At the start of the year, the same funds traded at premiums of as much as 20 per cent above the value of their underlying stocks.

So what is the impact, if any, on regional bourses?
If there were any severe correction on the Chinese markets, we should expect knee-jerk reaction. But another report has highlighted that the Chinese meltdown, if any, should be viewed as limited to the Chinese markets or deemed as an internal affair.

So my friends, whichever way the storm could come, please tread in a measured way.

STI ETF 100 - huh?????

2007-05-17T15:28:00.000+08:00

On Apr 24, 2007, I bought my first lot of 100 shares of STI ETF 100 @$33.25.

Based on my memory, the market had experienced a correction of more than 100 points the day before. I took the opportunity to try out a new investment type ie an ETF.

As of May 18, 2007, the last traded price was $35.29. A $2 appreciation in less than a month. Good decision on the timing but not on the amount invested.

So what is an ETF?
ETF is an exchange-traded fund. For STI ETF, it invests in the component stocks of Straits Times Index according to the respective weightage.

What are the advantages?

It allows me to participate in the equity market at theoretically lower risk.
It spares me the need to comb through piles of brokers' recommendation.
It allows me to participate in the growth of a group of 50 companies representative of the Singapore economy.
My fortune is thus not tied to the fate and turbulence of a single company. Many of these companies are the bluest of the bluest chips counters.
I will receive dividends on dividends received from these companies.
Any fees payable to the fund manager? Nil. I only pay for the commission and fees as per buying and selling shares on the exchange. Thus in terms of costs against fund-manager-managed funds, ETF is definitely cheaper.

Are there any disadvantages?

I might experience liquidity issue ie. there could be occassions where there are no buyers or sellers at prevailing price. But in recent weeks, I must say liquidity has improved. Not sure whether it was due to a letter written about the higher volume done on ST index in overseas exchanges.
While I may have diversified away company-specific risks, I am still exposed to country-specific risk for STI ETF.

Unit trusts and Funds - What????

2007-05-17T15:01:00.000+08:00

A reader said in a recent posting that shares are very volatile and thus asked me to write something about unit trusts.

Unit trusts or funds are financial vehicles where individuals can pool their monies to invest in certain sectors, themes, country etc at a specific risk profile.

Individuals essentially engaged fund managers to make investment decisions on their behalf.

For that, you have to pay them $$$. The annual fees are usually a percentage of funds under management, regardless whether the fund make money or not.

In addition to that annual fees, you may be required to pay a one-time marketing fee upfront when you first participate in the fund.

Volatility will still be around as it would depend on the type of unit trusts you have selected. Eg. you should have a higher appetite for risk for you to invest in technology funds as compared to investing in essential consumer product sector.

I lost money with AEM Holdings today

2007-05-09T12:30:00.000+08:00

Dear fellow investors,

Today I am hit by another loss with my holding in AEM (my last big boo boo was China Aviation Oil).

Company requested for a trading halt this morning. Given last week's DBS Vickers' report earmarking AEM (among many others) as a potential target for acquisition, naturally I thought some deals would be announced along the same tune.

Guess what! The Company seeks a trading halt to announce that the Company is assisting with investigation by CPIB !

Upon resumption of trading, the counter dropped by about 20%. Edgar jumped off the cliff....

Why? Why? Why? Why?.................. and a big sigh....

Mr Richard Li of PCRD is at it again

2007-03-14T21:48:00.001+08:00

What is the deal now?
On Mar 3, 2007, Pacific Century Regional Developments was reported to have sold its 47.06% stake in PCI, its Hong Kong-listed insurance arm for HK$3.14 billion to Fortis Insurance International.

What is Edgar not sure of?
Back in Nov 2006, PCRD's shareholders were asked to approve the sale of 22.64% stake in PCCW for HK$9.2 billion. That deal was rejected by the minority shareholders.

He is said to be selling off his "unloved" assets in PCRD. So far, we note that he doesn't like telecom and insurance businesses.
What other "unloved" assets will he sell?
What is his "loved" assets anyway?
What is the true value of PCRD?
Can someone do the sums please?

Or is he the Richard Gere's movie character in Pretty Woman, where he buys company and strips it apart and sells them in pieces for a profit?

The biggest winner of the deal is Mr Li himself, of course. But he would have to share the fruits with the minority shareholders of PCRD, right?

Congratulations to Mr Li.

P/S - I still got no position in PCRD.

Mr Oei has struck another deal again!

2007-03-04T12:34:00.000+08:00

P/S - Appreciate what we have.

The main players
- Mr Oei Hong Leong in International Capital Investment Ltd (ICIL), (formerly Jurong Engineering Ltd)
- TT International, which makes and sells the Akira range of electronic appliances

For a complete picture of the sequence of events of Mr Oei to date, see my previous posting.

What is the deal?
TT announced on Mar 1, 2007 that it was injecting its Akira assets, business and undertakings which it valued at $90 million into ICIL.

Upon completion of deal, TT would own 77% of ICIL while Mr Oei's stake would be reduced from 76% to 17%.

Issues to be considered:-
- The two shareholders would jointly owned 94% of ICIL. As free float of 10% of company's shares is required, divestment of shares is necessary to maintain listing status.

- How to justify valuation of Akira's business at $90mio? Ms Julia Tong, exec director of TT, cited Interbrand, a branding consultant, who had attributed a value of $49 million to the Akira brand back in 2005. TT is said to have grown and now sells in more than 60 countries. Of course, Mr Oei must have checked and considered the valuation as fair for him to give away 77% of a cash-rich company in ICIL.

What does the deal mean to each player?
TT - By focusing a brand and its business into a single vehicle, it is giving prominence to it. Hopefully translating to more business at next level. Back door listing format. TT will probably get some cash from divesting a few percent of ICIL shares.

ICIL - May have found a business to continue its listing status. As no cash payout is mentioned in this deal, the cash hoarding will provide plenty of ammunation to fund Akira's growth.

Mr Oei - He has bought himself into a growing business that is scalable very quickly and can be part of his China's experience.

What is happening with Mr Oei, Novena and TT International?

2007-02-24T22:45:00.000+08:00

The main players
- Mr Oei Hong Leong thru' its Foundation
- Novena Holdings - in the furniture business
- TT International - famous for its Akira branded electronics

Sequence of Events
11 Dec 2006 - Novena bought 98 Pasir Panjang for $13.5mio.
11 Jan 2007 - Novena bought 100 Pasir Panjang for $14mio.

22 Jan 2007 - Mr Oei bought the 2 properties from Novena. Novena got $2.3mio pure cash and profit.

21 Jan 2007
- Mr Oei sold its 20mio shares in Tung Lok to Novena. Novena paid Mr Oei with 10.3mio new Novena shares.
- Mr Oei will further buy 27mio new Novena shares @30cts ie. $8.1mio cash.
- Based on my calculation, Mr Oei would be a substantial shareholder with about 25% stake in Novena.

21 Feb 2007
- About a month later, Novena announced the sale of some of its furniture business to TT International for $13.5mio cash.
- In the same breath, Novena will buy about 18.3mio of TT International shares @20cts. Novena would effectively return about $3.6mio of the $13.5mio back to TT.
- At the end of it, Novena would own about 14% of TT Intl.

What does the whole series of activities mean to each player?
- Mr Oei have purchased 2 properties (not sure whether they are adjacent to each other) for $29.8mio. He also got rid of Tung Lok shares for a stake in Novena and TT International.

- Novena made $2.3mio from the property deals. Novena got about $10mio cash from selling part of its furniture business. Total cash inflow - about $13mio.

- TT International paid about $10mio for Novena's retail assets. Could we see TT transforming itself into a Court or Harvey Norman by marrying furniture with Akira range?

Well all the players have been and will be very busy to make the deals work for ALL shareholders to come.

Useful info from today's ST

2007-02-24T13:08:00.000+08:00

Friends,

The following is an illustration of how reading the newspaper can be an important and probably prosperous exercise everyday.

I will be referring to page S25, S28 and S29 of today's Straits Times.

1. "Singapore Land's profit rises 12%"
For the YE 31 Dec 2006, EPS is 24.3cts. (Thus PE ratio is 42x)
Group Net Asset Value (GNAV) - $7.50 against Friday's closing of $10.10.
Proposed dividend of 45cts.
This would give a gross dividend yield of 4.4% at current share price.

2. "TeckWah lifts net gain to $8m"
EPS - 3.65cts
Yesterday closing share price - 21cts.
Thus PE ratio - 5.7x
NAV - 37.9cts
My assessment - Relatively low PE with NAV > current share price ==> relatively attractive

3. "UIC's gain more than doubles to $492mio"
EPS - 35.7cts
Yesterday closing share price - $2.57
PE ratio - 7.2x
GNAV - $1.77
Proposed dividend - 9cts
My assessment - Attractive PE ratio against gross dividend yield of 3.5%. Negative - $2.57 share price > GNAV.

Disclaimer - My above assessment is purely from my simple reading of articles in the papers. This is to illustrate that precious info are available if you know where to look for them.

I have no position in all of the above counters.

HG Metal - Theoretical price after Ex-All

2007-02-04T01:30:00.000+08:00

Hi investing friends,

HG Metal's offer on dividends and rights issue wil go ex-all on Monday.

Just want to present the calculation to arrive at the theoretical price after ex-all.

Based on Friday's closing of 54cts and 2-for-5 rights issue @20cts,

Cost of purchasing 5 shares @54cts - $2.70
Cost of 2 rights shares @20cts - $0.40
Total costs of getting 7 shares would be $3.10.
This would give you a theoretical ex-all price of 44cts.

P/S - Computation excludes brokerage costs.
P/S - Edgar does not have any HG Metal share.

Is something cooking in HG Metal?

2007-01-21T21:25:00.000+08:00

On Aug 15, 2006,
HG Metal secured refinancing by entering into a $10,000,000 convertible loan arrangement with OCBC Bank @36.1cts. FYI the share price was 45cts on that day.

On 13 Dec 2006,
HG Metal's share price dropped to as low as 24cts.

On Jan 5, 2007,
OCBC converted $3,176,800 for 8,800,000 shares.

On Jan 8, 2007,
SGX gave its in principle approval for 2-for-5 rights issue at 20cts per share.

There is also a special dividend of 4cts per share to partially assist to pay for the rights issue.

On Jan 19, 2007,
Its share price closed the week at 51cts. The shares are trading on a cum-all basis till Feb 5, 2007.

I am curious with the following questions.

Why would OCBC be interested in HG Metal with 4.76% stake?
On what basis did HG Metal convince OCBC to accept the convertible deal?
While banks are encourage to diversify their non-core assets, are banks allow to take these relatively "tiny" equity positions?
In 4 months, OCBC's $10mio convertible loan is in the money with a return of 41%. Will OCBC be holding on to the shares from conversion? Any more conversion to be expected from OCBC before Feb 5, 2007?

Does anybody out there got any answer to the above?

Business Trust - What is that?

2007-01-14T18:38:00.000+08:00

There is a bit of hype going on with Business Trusts as a new investment class. Hyflux is already a benefactor.

What is a Business Trust (BT)?
Essentially, BT is a vehicle that allows investors to collectively own an asset with the following features:-

stable predictable growth in earnings,
stable cashflows and;
low capital expenditure requirement in the near future ie. a generally completed infrastructure.

The BTs are set up as trusts rather than traditional companies. BTs are subject to corporate income tax rates.

Some examples of such asset would be power plant, water production plant, refining facilities, a plane, a ship, an oil tanker, etc.

It is similar to REIT. REIT focuses on properties.

Investors should generally focus on income yield. Capital appreciation is limited to those with longer term perspective.