Monday, December 30, 2013

Random thoughts- What kind of person am I?

In investing, we always ask what kind of investors are we? It is important to know our temperaments so as to find the style of investment that is in sync with our temperament, and be successful in investing.

If we think a step backwards, we should ask ourselves also, what kind of human are we, so that we can be successful and most importantly happy in the circumstances we are in, although we can change our circumstances somewhat, change our work, maybe to the extreme,even divorce (*choy choy choy, where is the woods), many will agreed our life span out according to the circumstances.

We cannot change our circumstances, but we can change our reaction and internal reservoir so that we get equilibrium with our circumstances earlier, the faster we aligned ourselves to our circumstances, the faster the clutch hits the engines and start to move, the earlier and more effective we can start changing the circumstances. OK, if you lost me, read no further, I am just thinking out loud.

Just like there usually is not average returns in equity investment of 5-7% annually. Unless you invest in bonds, or do assets allocation actively, what you usually will get depending on the time or place of investment should be widely great performance to dismayed losses. Th earlier we recognized that are get it in our head, the faster we are able to achieve the 5-7% av. returns in the long run.

I was in the car chatting with my mum-in-law when I harmlessly remarked: my dad is having his golden years, although I am not sure if my mum is half as happy. With this my mum-in-law retorts, what is there for her to be unhappy about. To which, I replied: happiness is the state of the mind and heart, not the external circumstances. To that, my mum-in-law agreed.

Doing some self-reflection after that, I realized that I am already having my golden years now. I am enjoying the company of my son (4 years old so still cute), still find my core job meaningful (minus the management part with bosses, tried as I might, the bandwith of frequency just don't cross), and I have enough to spend or save.

So what kind of person you are determined how successful you are in life and I always tell my pupils I define success by pursuing true happiness, finding meaning and sustained contentment. In this way, they can aggressively compete in this world without feeling miserable, since failures are taken in stride, and discontentment internalized as quickly as possible...

Hmm... What am I talking about? 

Saturday, December 28, 2013

A reflection of investment journey 2013

I was reading various forums and bloggers and realized quite a number of people can achieve returns of 30% in 2013 for their portfolio. I was wondering why my results are so dismayed compare to them. And No, there people get their results not by trading or speculating in pennies. They bought stocks like M1, challenger, valuatronics, Yangzijiang, CES, etc.

Demoralization aside, I reflect hard on what could be lacking in my investment process, that created such a glaring difference. I think I have come up with several possible reasons.

1) Scope of companies under radar.

Companies under my radar of research could be too small. Also, it might be time to start looking at Hong Kong Companies too. While I have heard about challenger and valuetronics from forums a number of times, it never pips my interest. Maybe, it pays to look at more companies extensively.

I used google screening to screen for companies of interest. I think I might need to pay more attention to what bloggers, forummers suggested.

2) Size of portfolio/ circle of competence.

I only have about 9-12 counters in my portfolio. It might be wise to include more companies from different sectors and industries after extensive research. It might be good to start reading up and learning about the businesses of utilities or telecom, commodities. To give myself the bandwidth for further research when the opportunities arises.

3) Extensiveness/ disciplined of research

I believe I have done my research diligently, but I might have been too generous in my criteria.  I believe I have did what most analysts have done, look at numbers over a number of years, compare it with it peers, reading about its business strategies, looking out for industry outlook etc. But I think I should be able to do better in 2 areas:

a) Tracking of competence of allocation of capital, by comparing ROA, ROE, ROIC and record of acquisitions more closely.

b) Stop looking at just consistent positive FCF but also the size of it, e.g. COIC

c) Stop looking at FCF as FCF=OCF- PPE, but looking at finance costs, taxation and minority interest as well. (A learning journey/ school fees brought by purchase of APTT and HPHT)

4) Margin of safety

I should have demand higher margin of safety with smaller companies.

5) Temperament- Overcome laziness

I usually start serious research only when I see a company whose valuation I think is getting closer to being fair. I did not even bother to do preliminary screening of numbers of companies thrown out by bloggers, perhaps due to the fact that I know, there is a lot of reading to be done, before I can quite figure out what the company is capable of.

6) Others

a) Check various sources of news. For example, sino-shipping news mentioned another free trade zone in Guangzhou-HK_macau area is pending approval by the end of the year. I google the various key words, only to realized analysts felt the approval by central government could be  at least years away.

b) Industry news are important,but they are usually already old news for insiders. What could be useful might be to see if the management is on top of the industry news. For example, when I read about the shipping news regarding eco-ships and bigger ships, and also the demand for LNG, LNP carriers, YZJ is already sourcing for customers for those and building eco and bigger ships. If a company is only acting on the opportunities when you read about it, maybe it means nothing already.

c) Don't just track companies, track personnel with wonderful business records.

d) Read a prospectus thoroughly and repetitively. A lot of information about the business can be found. A glance through the Risks and business summary is a no-no

Lets hope my 2014 record will be better. I think I will be super busy with work when the new year start. I got 2 new bosses. Sigh.... I don't want to sound cynical, but seriously, I don't we share the same frequency in work values in the 2 weeks of contact with them. Lets hope I am wrong.

Wish everyone a good 2014!

Monday, December 23, 2013

Thursday, December 19, 2013

Year-end portfolio review - A dismay record

True to my nick, I have a dismal record. 

All my counters were bought in 2013 except Nam Lee. I used to own and sell other counters too, and trade s-chips quite heavily at one point of time. After reading "the intelligent investor", my whole investment paradigm shifted. I am also clearer with what I want, I wanted dividend income for cash flow, more than capital gain.

I decided to be more transparent with readers, showing how much was vested. Is ok if other thinks I am silly, and stop reading my blog.

I also calculate return based on costs. I know there are better performance indicators but I think this suits me fine. At the end of the day, I want to make money.



As you can see, for the year 2013, it is a dismayed 3.3 % return if I were to sold everything now.

I added APTT and HPHT to my portfolio. For HPHT, i buy in a second tranche at 0.77 cents 

But I am not losing sleep. In fact, I would have bought more of APTT if it falls to 70.5 cents today.


Wednesday, December 18, 2013

Random thoughts- what does the movie "The hobbit" remind me of in investment?

Not to trust reviews ( analyst reports) for big name movie (company)

I remember reading somewhere from peterlynch books that it is easier forgiven to be wrong about the big names, than to be wrong about a small company. Who can one blame if a big company cover by so many analysts underperformed, but be damned if u choose a under radar company and it didn't turn out well.

I catch "the storm" a Chinese movie by Andy lau and "the hobbit" on the same day with my wife. Prior to the movie, reviews gave the Andy lau show 2.5 stars and hobbit 4 stars.

Here is what I will give, 3 stars for the storm and 1.5 stars for hobbit.

Review mentioned the plot for the storm is over- played, too many twists and draggy, and the romance story redundant. Well, the romance story is a key part leading to the twist and definitely not redundant, there isn't much mushy scenes, it is still a very man show. If there is deeper thoughts put in to improve logicality and realism in the movie, I would have given it 3.5 stars. I do feel emotional stirred watching the show.

I was yawning watching the hobbit, feel like sleeping and went to the toilet in the middle of the show to freshen myself and realised I didn't miss anything.

In any movie, u need 3 elements, a great plot/story, good actors and visual enjoyment. Of the three, the first is most important, and the later 2 are used to bring out the 1st, and the first will affect the room of maneuver of actors. ( think of it as business, managers and public relation/presentation ) warren choose business over managers because he felt sooner or later, a idiot will run the business.

The 1 star I gave for hobbit is for visual by most of it felt dry since I have seen it in lord of the rings and there is no wow factor anymore. In fact, the mountains, towns, orcs, spiders look like it has been recycled. 0.5 for acting, they did ok, but with such a flat plot, who can blame the actors?

The whole show is basically a chase and run show. While Tom cruise, bratt pit have several chase and run theme movie, the resolution is always a suspense. How will they finally get away? But for hobbit, I know they will reach the mountain anyway. And the resolution in getting out of trouble?please la, just wear the ring and be invisible (yawn*).

Well, there could be some suspense in dealing with the dragon, and this is the part I will puke!! You just need big black steel arrow??!! And legends has it that one of the scale has came off already? Are all dwarfs idiots? Are the humans in the nearest port town idiots? There is only 1 black arrow left? The humans won't build more black arrows caltput just in case and for defense? Ok fine! Maybe that will provoke the dragon. Then?!! How about a contingency when the dragon is bored and fly out for a attack? An underground tunnel, an evacuation plan? Poor humans, they seem so helpless when they think of an attack but never thought of moving away!! And dwarfs!! U are venturing into the dragon lair and u didn't prepare the arrows? And the dwarf king has the audacity to comment had the human had been on target using the black arrow, the present could be vastly different? Er... No lor, because no one is intelligent enough to make arrows!! Not magical arrow whose material is hard to find! Arrows made of steel!!

Also, I thought the hobbit will answer some qns, like how is the ring forged? The 7 kings, how did they fall under the spell? Why not dwarfs and elves??

Lousy!! And to think the movie got some many good reviews !!

Tuesday, December 17, 2013

APTT :Email Qn and Ans with CFO


Thank you for for taking time to answer my questions.

I do have another concern.

From your prospectus,

Expected tax resolution is 46 million and company has set aside 50.2 million in loans for the settlement.
But the maximum amount claimed by the tax bureau is actually $122.4 million, a whopping 74 million difference.
Granted, company has mentioned the discussion is progressing well, but its coming to the end of 2013, and there is no announcement of any resolution yet.

In the event that the tax payable is much higher than what the company has set aside for, how will the company manage the shortfall, but accumulation more loans or reducing payout? Is there a contingency plan? Do the company expect to appeal? Is the judiciary process costly?

Also, the prospectus mentioned hedging loss in pre-IPO years. How is management managing that such that the problem will not recurred?

Finally is the interest rate for the revolving facility after hedging costs also 4%?


As you point out we mentioned in the Q3 results that discussions were progressing well and in line with the estimates in the prospectus. We also mentioned that administratively, settlement may push into the new year, so we should not expect to see an announcement by now. We will let the market know as soon as there is something to announce; appreciate your patience.

The hedging losses in earlier years resulted from the off-shore USD debt structure; with the IPO we brought all of the debt on-shore in Taiwan with local banks, all in NT$ at a low cost, so this historical item has been removed.

Yes, the interest rate of 4% includes hedging costs.


I think they stepsided the question of "what if", but nonetheless, glad that talks are progressing well as of dec.

APTT -- Is distribution sustainable?

APTT is a much disliked counter going by what forummers/ bloggers said about it during its IPO, but it has fallen 23% from its IPO price with a yield of above 10%. It is still a bargain now?

As with HPHT, the sustainability or the doubts of its sustainability of payout is the main reason for its under performance. Lets us look at APTT and the various threats and see if they are justifiable.

First, earning power.


If we go earlier, a similar picture emerges.


The good operating numbers correspond to the increasing basic TV RGUs and the increasing prenium TV customers.

Is such operating numbers sustainable? Competition within franchise area is currently non existence but with the rezoning of franchise areas, competition might increase, and "On 8 May 2013, the NCC approved preliminary permits for Vastar and TOP for franchise area extensions into Taichung City, which will allow them to begin the required construction according to the business plans they submitted to the NCC", Taichung CIty has the highest per capital income, and that properly explained why the competitors are keen to move in. That TV penetration rate of approximately 67.8% across its franchise areas might mean untapped market. However, given thatThe NCC only issues licenses to applicants that have built and deployed 100% of their network, and that TBC own expansion in its own Taichung City (Greater Taichung) is reported to take years,the threat while real, is not imminent. The fact that the penetration is not high would mean that its doesn't have to be a zero sum game. (Subscribers have to leave TBC). IMHO, competition is also mainly in the premium digital TV channels since there is no cap in the fees operators can charged customers and TBC has higher ARPU in the prenium digital market compared to CNS and Kbro, and the penetration rate for prenium digital TV is low. (Pie enough for everyone). I doubt the new competitors will want to compete in the price on the basic TV since the cap rate is already regulated by NCC.

As for competition by substitutes, such as IPTV. The biggest player CHT, has several disadvantages. 1st, is platform disadvantage. about 80% of the viewers in Taiwan use cable TV while broadband penetration is nowhere near, and since CHT has government stake, it cannot access certain local content such as news programme, such the competition is not a apple to apple type of competition.

The cap rate for basic TV can be lowered by the local government during poor economic times and it has been lowered by $10 in 2011 and $15 in 2013. But looking at the operational numbers,TBC is hardly affected by it, registering revenue growth in 2011. Cap rate can also be lowered as a "penality" for poor quality of service, or inability to meet digital penetration target of 50% in 2015. TBC respond to this by offering free digital boxes (capex risk, which will be explained later), and is expected to reach 50% in 2014. As for content, TBC do not make content but source for content from aggregator MCI, if there is a complaint from local government, I think they can always go for another content aggregator (There are 4 in Taiwan).

Hence basic TV cable are defensive, and make up of mostly local content, with the lack of killer content (think starhub and singtel for EPL), and that is one of the biggest generator of revenue, and a platform for bundling and cross selling.

So, barring a earthquake/typhoon knocking out infrastructure, I think we can establish the earning power is more or less "safe", given that the broader industry is also sound. (from prospectus: MPA forecasts indicate that total premium digital cable TV RGUs will grow at a CAGR of 15.2% between 2012 and 2017. Premium digital cable TV ARPUs averaged NT$188 per month as of 31 December 2012, having grown 5.6% year-on-year. MPA expects that by 2017, premium digital cable TV ARPUs are expected to reach NT$229 at a CAGR of 4.0%.)

Next, capex and finance costs 

Capex will affect distribution. To sustain distribution of 8.25 cents, they need to pay out 118 million from EBITDA of 200 million. So they have to keep to about 80 million of net costs (capex, financing costs, etc). They forecast capex of 49 million and 40 million for 2013 and 2014. This capex of 49 million include the completion of the upgrade of the HFC network to 870 MHZ and is inclusive of the free digital boxes given out.

Also, from the covenant of debt, they cannot exceed 120% of capex of a proposed year (excluding expansion into new franchise area), assume the projected year is 2013, so the ceiling (before including rollover of excess money in the preceeding year) is 60 million. The trust has incurred capex of 20 million thus far, but has not drawn down the revolving facility (only 10 million NT dollars) to fund capex.

Loans available for capex expansion = about 110 million

since out of 198 million of revolving facility, 50.2 million is earmarked for tax settlement, 56.5 million is earmarked for new zone expansion.

Assume they use 20 million from cash flow and another 20-40 million from loans to fund capex, we can assume it will take about 2.5 years to 5.5 years before they need new loans, and assume also 4% from revolving facility, there will be a further increase in Fiance cost of about 5 million

They have a all-in rate of 4% for their term loan. That works out to be 45.8 million a year, plus the additional 5 million interest for capex and 2 million interest for tax settlement, total foreseeable fiance cost for the next few years will be about 53 million.

Taken with 20 million capex, they willl be left with 7 million to pay taxes. But the forecast income tax to be paid is 20 and 16 million. So there is a shortfall of 9 to 13 million. so the more sustainable payout seem to be 7.5 cents instead, still above 10%

If interest cost increase by 1 %,  payout become 6.5 cents, yield is still respectable at 8.8%.

So, in conclusion, high dividend seem unsustainable and the fall of 8.5 cents to 6.5 cents is more than 20%, which is what is happening to HPHT now.

But wait, HPHT did not have the 1% increase in interest cost factored into yet, and APTT 2014 distribution seem possible if you work the sums between loans and cash flow for capex.

But, there is another 2 more caveats.

1) They expect tax settlement to be 46 million and has set aside loans of 50.2 million for it. Although they claim negotiation is going on well, but the actual claim is 122.4 million, a whopping 74 million shortfall.

So this is the biggest risk to distribution. If this tax issue don't work out well, kiss your distribution goodbye.

2) Macquarie has rather a bad records running MIIF.  Will they embarked on new zone expansion although it is highly capex intensive? Or will they do badly at the hedging?

So is the above 10% yield worth it???? Is your call.

Sunday, December 15, 2013

Your emergency funds - How much is enough? (Warning: Dark content)

There is a general guideline of 6 months - 12 months.

I think that is arbitrary. First, 6 months of $2000 is rather different from 6 months of $10K

We need to understand the nature of our job, how easy is it to lose our job, or is it a iron rice bowl.

I consider my job an iron rice bowl job. (I traded high pay for security if you like)

Next, how cover are you and your family when accident or illness strike?

Is there any existing illness that are excluded in your H&S plans for you and your immediate family. My wife is diabetic, so there is plenty of problems getting H&S, so we need to have good shield plans as alternative.

So, if you also have an iron rice bowl, and all your immediate family are covered, does it mean you can have a lower emergency fund of 1-2 months?

I think I miss out a very important equation in my calculation until it dawns on me very strongly.

Aging parents.

With parents, I mean both your in-laws and your biological parents.

They are from the generation, whereby insurance is a dirty word, most of them, except the savvy ones will not have accident plans or H&S, when you are aware, their age is most probably too old to get H&S plans anymore(Not economic with too many exclusions)

I am young, but I am at the stage whereby I attend my friends' elders wakes and funerals rather often, some are down with chronic illness that wiped out their child savings.

Also, what about the aftermath? Even if the elders are financially independent, you couldn't be asking the windowed for money to settle the funeral or pay the hospital bills first isn't it?

Money, when it is available, is last of thing you want to worry about when tragedy struck, but is the first thing you worry about if you do not have enough of it. And trust me, when you do not have enough of it, there will be quarrels and finger pointing, shirking of responsibilities.

I know when my time comes, I want to go in a dignified manner, not with my kid/s quarreling and my wife weeping at my deathbed. I also told me wife straight in the face when she asked if I would prefer she goes first or I go first... I said:" she, because I know I can settle everything nicely for her, and I can take all the stress and emotional onslaught, whereas if I were to go first, she will have a lot of trouble, and I will have a lot of worries." She agreed.

Although both my parents and in-laws do not need intimate care now for their daily needs, we must prepare for the eventuality that the time will come, it would be good if we are able to get a domestic helper or our job allow us some time to shuttle between home and hospitals. Such is life.

Of course, we can never have enough, and soft emotional support is more important and warmth than cold hard cash. That's why we need to build our emotional wealth too, able to take each day as a blessing and all misfortune in its stride, there is only that much cash can help. But the lack of cash, complicate matters.

Saturday, December 14, 2013

HPHT- Betting on Yantian to deliver

Readers would know that I have accumulate HPHT, when the price is beaten down recently. Let us look at the numbers again.


Capex for 2012 and 2013 thus far.

~598 mio HKD and 584 mio HKD

From prospectus,

"West Port Phase II has incurred approximately HK$0.2 billion in construction costs, with approximately HK$3
billion more required to complete construction., to be completed by 2015", and

"The Trustee-Manager anticipates that the total capital expenditure of HPH Trust in 2011 and 2012
will be approximately HK$1,986.9 million and HK$1,172.1 million"

Given Yantian phase 3 is completed by mid-2011, we can assume development capex is for West Port Phase 2 and they are still about 1.8 billion HKD short to complete it in 2015. (Maintenance capex is in the low of 150 million only )

At such, my preliminary estimate of 1.3 billion of capex every year is rather high. We can assume 1 billion capex barring cost overrun and HPHT can still complete the project in 2015.

Thereafter, 2015, there is East Port phase1, but there is no confirmation and HPHT has no stake in it as of yet, just general agreement to the rights to development, and not concession yet.

Capex is not such a big monster afterall.

Labor costs

I wrongly assume labor costs to = staff costs

My mistake, according to prospectus, the contract workers costs is under direct costs of costs of services rendered. Now lets work the numbers a bit.

From prospectus:

"Direct charges amounted to 50.5%, 45.1% and 50.4% of the cost of services rendered of HIT in
2008, 2009 and 2010, respectively. Staff costs for operational staff amounted to 26.8%, 34.0% and
28.8%, respectively, of the cost of services rendered of HIT for the same periods"

Assume 30% of cost rendered is staff cost, and this will face a 9.8% increase due to workers strike demand

And for Yantian, 25% of cost rendered is staff cost, and this will face a 30% increase (From figure from news)

Annualised 2013 figures, cost of service rendered is 4.4 billion, est 230 million mio increase in costs. There is about 5% increase in overall costs.

Expiry of TAX holiday- insignificant

FCF =OCF *0.65 - 1

= 3.1 billion -1

=  2.1 billion

Sustainability of good distribution is still dismayed.

The only hope is that Yantian which generates more revenue from moving O&D containers will be well-placed to take advantage in any US economic recovery, the recent PMI figure of 51.4 in china and trade figures in China for Dec also show both Imports and Exports to be improving.

In fact, due to the above mentioned better figures and the development of free trade zones(speculate to be either in Guangzhou or Tianjin) in China "Share prices of Chinese operators witnessed a sharp rebound in 2H 13. For instance, Cosco Pacific (1199 HK), CMHI (144 HK) and Tianjin Port Dev. (3382 HK) rose by 20%, 19% and 38% respectively, compared to drops of 9%, 3% and 8% in 1H 13. The Chinese economy has reacted well to the stimulus announced by the Government at the end 1H 13, which focuses on improving small businesses, exporters and railway development plans.  China’s official Purchasing Managers Index (PMI) recovered from a low of 50.1 in June to 51.4 in November, and monthly import growth has also gathered pace since its low in the middle of this year." (source:

Yet, HPHT has fallen 14%. Although HPHT might be more expensive than its HK peers in terms of PER, the performance is too drastic, it is not just stagnant, it is falling by a Hugh percentage of 14% when its HK peers race ahead due to better numbers from China, it is as if, HPHT ports will not benefit from the better numbers. I do not think that is justifiable.  In fact, the report mention strong optimism for Tianjin Port due to the possibility of free trade zone in that area, when the guangzhou area is the forerunning to be the next free-trade zone after Shanghai, why is the optimism only absent in HPHT? I felt there is just too much pessimism in HPHT. The article always felt Yantian will benefit from better trading in US and Europe.

This is not a buy call, but a writing to crystallise my thoughts why I am still buying:

In conclusion:

1) Capex is not such a big monster since they need only 1.8 billion to finish West Port Phase 2 by 2015

2) Labor cost increase in manageable

3) Expiry of tax holiday is insignificant

4) Positive development of the broader market (Free trade zone, and improving trade numbers and manufacturing numbers)

5) Relative shares' performance compared to other china port plays. (Time for catching up after capital group finish their sell-down?)

6) Management short but 2 years record of keeping to their projected distributions. They need to distribute 22 HKD cents for 2H.

I believe 4) and 5) to be the short term catalysts.

P.S. (I am still waiting for IR reply regarding some questions on APTT, when I received it, I will blog in details about it.The second of trusts that I bought recently)

Tuesday, December 10, 2013

Market in correction mode- silly investor making silly purchases

The market has bee in correction mode despite the general more upbeat macro numbers both in US and Singapore. Again tapering is quoted as a result. To me, even if tapering do start in dec, it is not a bad thing if u buy sound companies.

In fact, I feel that market is just going thro a correction and tapering is just a excuse.

The recent correction have trigger several accumulation of counters.

I bought more of HPHT, and did the CD and XD thing to stretch my dividend yield for SPH. Buying back at $4 and selling at 4.24 sure beat the dividend of 15 cents. My initial purchase price is at 4.03. Haha for details,refer to valuebuddies.

I am still on holiday with family at Vietnam so will be rather slow with blog posts, I can't do serious research here too, it's tiring traveling with young kids.

But I thought I will blog about my silly impulse and the various riggers points I will be looking at should market decline further.

SPH at 3.6
Lippomall at 0.36
Golden Agri at 48c
Hpht at 70c
Nam lee at 28c
APPT 68 c

I will not accumulate sabana although it has fallen about 10% which will usually put in on my alert list. Frankly I am very disappointed with management

I might also buy more of YZJ if it goes to a dollar, but I think that will be unlikely. Lee metals is stable, dun think there is much chance for accumulation.

Do note that the above stated price is for consideration I might buy at higher or lower price or might not buy at all, if. All counters hit accumulation price at same time. I do not have unlimited ammo, although my stable job and income help beef up my war chest.

Hoping silly investor get his silly tactics right. I will blog about why I have faith in my counters when I get back Singapore


Tuesday, December 3, 2013

Random thoughts: Financial Freedom is a means to an end, not the end itself

(Random thoughts series have nothing to do with analysis of companies, skip it if you like)


What I am going to say will most properly pissed a lot of savvy investors off.

What I am going to say here is run counter to many wealth accumulation rules.

1) Delayed gratification.

Yes, I agree, but we need to make sure our love ones enjoy life if we could afford it. Loans for holidays is a NO-NO, left hand in and right hand out every month? No- No! But we do not have to maximize savings like it is a trophy to be carried home. I consider myself frugal as compare to my in-laws family who is wealthy in my definition. I consider a car a luxury and they a necessity.  I still consider a car a luxury, and have been cajoling my wife to give up the car since our son is already 4 years old. $1000 a month is too much for convenience, I always say.

Now, I have a different thought. My family deserve the luxury of a car, if I can afford it, I should continue with it. I need not worry about the rain, and we could get around places fast and comfortably. Why did I want to accumulate wealth? I want to give my family a good life. Why not do it after 10 years, when my wealth can compounded my quickly. I do not know what will happen tomorrow, I want my loved ones to live reasonably well, since I can afford it and I love them. I do not think I am irresponsible here, since I already various insurance and endowment plans to cover my death, sickness and my son university fees. It is not a lot of money, we still need to work, but I do not foresee unreasonable hardship.

2) Budgeting, track your every expenses.

I used to do that zealously  when I am a single, when I get married, I realized my money belong to my family, I can't really say no to a weekend meal out. The tracking of every expense just make me very unhappy. Now, I told my wife, calmly that I think certain expenses is unnecessary. She usually respect that. When we went out for dinner with our family, or buy something luxury in my eyes, instead of sulking about the money that could have gone into which undervalued company instead, I count my blessing that I am able to afford the small luxury for my loved ones, and be content with whatever I have. If I have to work longer, or work till the day I drop dead, I am ready, life is just too boring without work.

OK, enough bad habits from me, I am a self-delusive person, I always look on the bright side. Please, do not let me hinder your progress to financial freedom, do 1) and 2) judiciously if you can, I am content with my life and count my blessings everyday.

The difference management makes to malls

It is the school holiday season again.

I have been very fortunate enough to be spending more time with my family. But when my family enjoy their dose of food, shopping and sight-seeing, I actually see the shops and foods through an investor lens. (quite fun actually, since I previously detest shopping)

I am always amazed at how crowded the suburban capital land malls are, so I was really surprised to see the shops at SIngapore Flyer almost empty. Singapore Flyer is located at an iconic place, is an integrated part of the skyline of Singapore river, but the traffic and that area is really ... hmm.. dismal. Not that it is a ghost town, but given how densely populated SIngapore is and Singaporeans national pastime of shopping and eating, the Singapore Flyer is really under performing, and is little wonder it is on receivership.

I went on a weekend, and there is Uncle Ringo Theme rides to attract kids and family, a child ticket will entitle you to 3 free rides. I am quite excited, but when I reach there, I find the theme rides very messily placed around the lobby area of the SIngapore Flyer, the bumper cars rides are not properly set up, although the guy at the bumper car rides are attentive, the rest of the part time girls are downright rude, one did not notice my son already went into the playground, and I have to pass the ticket to her; the other rudely ask for my ticket as if I am trying to cheat on them.

I like the food court there, but the rest of the F&B restaurants really have no theme, there is paradise restaurant which is rather well-known, the rest of the restaurants are unheard of. There is an arcade, a handbag accessories shop, the place is poorly lit.

I wonder aloud, what not use the river view to set up coffee houses and bars, it should be very popular. The idea of attracting family is good, but they need more than Uncle Ringo, and please, Uncle Ringo did not even send in his main troops. Given the main attraction is not actually an attraction that will attract return customers, the side attractions become really important then. The route from the carpark to the Flyer is now a ghost town, a performing theatre can be build there, invite performers, especially those that kids like to perform there.

You need more than ad-hoc shops there to attract shoppers, I know competition is stiff in the area, but the area is actually very strategic. They should be some cross selling of  tickets or joint promotion with the hotels around the area. Beside families, the Flyer should be popular with young couples, have the highest floor for Atas dinning and prenium access to Flyer.


I also went orchard for my in-laws and wife to get their retail therapy. We went paragon and then Takashemaya. Paragon basement is crowded with people looking for food, and there is a good mix of F&B choices. The second level and third level are the atas shopping, with branded boutique shops and the third level is occupy by achor tenants like marks and spencer and metro. But as I go further up, the crowd really thin, in fact, there isn't much crowd in mark and spencer and there is really any customers' service experience to blog about. After I get a book from the times bookshop, I am really surprise to see "mum and pop" shops at the fourth level of Paragon. The interior design of some shops make them look like mom and pop shops and the display of goods are also cramped and haphzard. I thought:" hmm... they cater to the budget-minded too, well, the rents are expensive, how do they compete", as these thoughts were running through my mind, I pick up an Adidas polo jersey and was shocked to see the price tag of $120. Er... you want me to part with $120 for a shirt, I think the shop seriously need to do better than that. Some of the shops did not seem to have gone through screening, given the "atas" reputation of Paragon.

But when we went over to taka, it is world apart, the place is packed with shoppers, and I remark to my wife: "angry, the more expensive the good is, the more crowded the shop is", and my wife replied, "Singaporeans are rich". Well, I definitely do not belong to the rich category. There are promoters at almost every corners, every time my mum-in-law picks up a handbag, they will appear within minutes, offering suggestions, talking about the available of colors and the discount they are offering now, although I have seen more skillful promoters, I guess you have to give very high marks for attentiveness.

When we went to the basement, there are various unqiue F&B options that wet my appetite, too bad I am vegetarian today. Just when I thought it is just Taka that is gearing itself up for the festive season, I find attentive promoters at watson too, and all the casher counters are opened, and its a tuesday afternoon.

I went away with convictions that when we talk about malls business, apparently it matters to retailers who the management is. If the rent is not too much of a difference, I would set up shop at Ngee Ann City than paragon, and think thrice before I will do it at Flyer. I am not bias, because I would rather paragon do well since SPH indirectly own it.

I am looking at the retail and F&B experience through the lens of a investor, as a consumer, I am not that critical, just give me a book and a place to sit with coffee, and I will be satisfied.

Monday, December 2, 2013

GRP- one of the weirdest company I have seen

I saw a link from another blogger for GRP.

It has zero debt, and pay dividends of 2 cents since 2008, at current price of 10.4cents, dividends yield is close to 20%

What is most amazing is it generates FCF since 2008

Well, there shouldn't be FREE LUNCH, isn't it?

I decided to find out more, and I realized the reason, they have a rights cum warrant issue.




That they have a highly dilutive rights and warrants issue is not surprising, assuming all rights and warrants are exercised, which is very likely since the warrant has a low exercise price of 8 cents, the number of shares will increase from 139,407,200  to 975,850,400. A massive 7 times increase!

Then came then next surprise, the rights were issued at a whopping " approximately 73.3% to the closing price of S$0.300 per Share on the Official List of the Singapore Exchange Securities Trading Limited (the “SGX-ST”) on 6 September 2013  (being the date of this announcement)"

I am still sour about the 10% discount sabana offer to placement of shares, and I thought LMIR 50% discount of rights 3 years ago is historical. I think this must hold the record of highest discount offer.

They will receive about 33 mio from the rights and another 33 mio if the warrants are fully exercised. The rationale of this fund raising is due to a collaboration agreement with "MGS Resort & Entertainment Co., Ltd (“MGS”) for the purposes of developing and managing properties in Myanmar."

The details of the agreement is seriously lacking, I am a not shareholder and did not receive the circular which supposedly contain more information about the business. (any shareholder can share?) But what is the share of injection of funds? What is the share of profits? I seriously do not think GRP can get a wonderful deal, since 28 mio is not actually a very big sum, they might not be able to build any mega-projects.

But what really turn surprise to bewilderment is this chart:



On the day of 6 September, instead of the price falling to account for the dilution, the price actually went up from 30 cents to 43.5 cents in 9 September, with almost 48 million shares traded.

WOW! the charm of Myammar!! But on the same day of 9 September, Zhao Bingli, one of the substantial shareholder of GRP offload 5 million shares at 36.7 cents. Well it doesn't really affect the price going by the price movement over the next 2 months.

Then suddenly, as if awaken from the sleep, the stock went from 35 cents to 12.7 cents in a day, but only on volume of 9 million shares.

This company reinforced the importance of justifying quantitative data with qualitative understanding of the business.

The fabric of the company has changed. It is no longer a yield play, or no longer attractive as a yield play due to the massive dilution and pending business diversification or diworsification.

If you like a Myanmar theme play,  You have a counter with no previous track record at PE of 26 (full exercise of warrants) or 13 (No exercise of warrant), well doesn't seem too demanding if you look at Yoma and the likes. Assume distribution of 2.7 million is sustained, you will get 0.27 cents DPS.

However, it will no longer fit into my risk profile, and my goal for stable dividends. As for capital appreciation, the Hugh warrants will provide the overhang for the next 1-2 years, depending on the pace it is exercised. I will have to pass...

Sigh.... just when I thought I found a gem, when I realized there is no free lunch.

Also, even if i am indeed looking for a Myanmar play, I will most probably search further. I placed quite a high premium on  management attitude toward shareholders. I feel they are pushing the existing shareholders to a corner with their highly dilutive and aggressive discount. Also, their track records, IMO does not speak well of themselves, especially investment in the Australian gold penny stock named Aphrodite. (There is quite some discussion on value-buddies on its track record. )



Saturday, November 30, 2013

Landuse Master plan 2013- What is my favorite?

Under the landuse master plan, they plan to add 200,000 housing by 2016 and 700,000 by 2030. There are plans to develop Tampines North, Bidadari and punggol. 


Under the Draft masterplan 2013, there are further details on how existing estates will be further developed.

They seems to be plenty of construction of buildings to go on till 2016 and beyond

What counters will benefit?

Property and construction counters come straight to mind.

Property counters are still affected by cooling measures and with the Hugh supply of housing, maybe their launches will be affected adversely too. So construction companies seem to be a good buy.

The problem with most construction companies, or buying into a construction company are as follow:

1) Fierce competition causing margins to be low. There are many construction companies in Singapore. Some of the stronger companies might not have problems winning contracts, but the problem is their margins. In the case of piling specialist CSC, they have a good track record of improving topline but not bottom line.

2)Some have net margin of around 5%.Also, it is highly capital-intensive and most construction companies need to gear up rather significantly to fund their operations. Then, there are problems of cost overrun, like the recent case of industry leader Yongnam. As such, the FCF, or oven OCF is highly volatile

How about upstream companies of construction, companies that supplied steel, concrete to the construction.

These companies are my favorites, there are Transit-Mixed Concrete Limited, Lee metals, Pan-united and the likes.

However, the choice get further dwindle down, when

1) Transit-mixed concrete is highly inliquid, the bid and sell spread can be wide and most days, there is no trading at all.

2) Counter already had a good run and is fairly valued, like pan-united.

Lee metals and BRC asia supplied reinforced steel and welded steel needed for construction of building. Both are market leaders in the area and are authorized suppliers to HDB. Competition in this area is also increasing. Between the two, I prefer Lee metals for 3 simple reasons.

1) Lee metals has higher topline, and bigger market share

2) Lee metals is a more stable cash-generating business. Lee metals is rather highly geared for its inventories, but the OCF for the past 6 years is highly positive, in fact they have a average FCF (cash after capex and finance costs) of 1.3 cents. Even in years when they went into a JV of property development, they still manage to generate FCF. 

3) It is consistent in paying dividends.

In their business prospectus, their customers include LTA and they supply steel to the north-south MRT line project before, whether that is under its merchandising arm or fabrication arm, I am not so sure. There is a strong pipeline of MRT related projects too, although I am not too sure if Lee metals will supply steel to companies building the stations. Yongnam seem a more direct beneficiary of this, lee metals at best, is a sub-sub supplier. 



Thursday, November 28, 2013

Nam Lee Pressed Metals - deserve a second chance?

Nam Lee announced it full year results, with dividends of 1.5 cents declared.

It Is still burning cash.

QoQ data is particularly ugly



Although topline improve, cost balloons and profits is the lowest in 8 quarters.

Cash Conversion cycle worsen.

Inventory and receivables are still high, and the cash burn continues.

looking at Yearly figures



Capex cycle seem to be returning, expect capex to remain high since they just move to new premises and Sungei Katdut 

Cash per share is only 9.2 cents now, with negligible gearing

Given all the bad data, perhaps we should sell and forget about it, cut loss, instead of nursing higher wounds.

I however, will give it another chance. It will give it another year this time. Here is why:

1) Revenue is at 7 year high, they are still positive about their aluminum business, which is the biggest contributor.

2) Management claim gross profits took a hit due to cost overrun of a particular project which is now substantially completed. The construction boom continues unabated, United Technology is still bullish in outlook, the capturing of higher demand is evident in the increase in top line, if the cost overrun is one-off, and the topline continue to improve, and we wait for capex to settle back to its norm again. We might just be able to ride through this.

3) Dividend falls, payout ratio increases. The company has not been generous but has been fair.Employment option scheme terms reasonable.

4) Still financial steady, the risk is in overpaying, there is no risk of loss or insolvency yet. Looking at the historical valuation, there is no margin of safety but price is hardly excessive. I would not be surpised to see it testing 52 week low soon


Well, I am not falling in love with the stock, but trying to "make the marriage work",but giving a chance to a company that is not yet hopeless. hahaha self-delusion 




Wednesday, November 27, 2013

Its all about trusts! HPHT and APTT

I have initiated a small position on APTT after HPHT.

I think confidence on business trusts have been low, with almost none doing better than their IPOs, but the fact that I am picking up the trusts at 20%-30% below IPO price means something to me.

After learning from NICK about FCF, I decided to be even more conservative and calculate FCF as 

FCF = OCF - capex - finance costs - income tax

As such, I think I can arrive at a rather conservative or if you like, worst case scenario valuation.

It looks bad, that would mean only 1.9 billion HKD per year, and a yield of 3.9%

But that is the so-called worst case scenario, can it get any worse, sure, but I think we have to be reasonable in our stress tests too. Not too much a turn off.

I tried to do a stress test for APTT too, I am comfortable that it is not going to the dogs but I am quite sure payout will fall further after the 2014 forecast of 8.5 cents dividends. 

I assume they drawn down the remaining loan for tax settlement and capex, and fiance cost balloon to 48 mio per annual

I assume they do not do a acquisition of franchise zone, and set up shop all over again, and they can keep capex to 50 million (they forecast capex of 40 mio in 2013) , and 2012 capex was 47 mio.

Assume income tax is 30 mio

Assume OCF of 176 mio (av of 4 years OCF including forecast of 190 mio in 2013)

We have 176-30-50-48=48 mio

We have 3.3 cents dividends, at purchase price of 77 cents, we have yield of about 4.3%

Then lets assume Mr Market demands 7.5% yield at trusts.

In the worst case scenario, price of HPHT and APTT will be:

COINCIDENTALLY 44 cents for both.

Hmm... I am over-paying definitely in a worst case projection. However, I expand HPHT to improve operations numbers, and I believe APTT will be able to give 12 cents over the next 1.5 years, and operations will not fall off the cliff.

So, It is about trust... with trust and faith in my own judgement, I took the plunge, If it turns out to be a silly decision, well,   it suits my nick. hahaha

Thursday, November 21, 2013

Random thoughts - Joe Dever's Lonewolf in IOS and andorid now!

I was a fan of Joe Dever's lonewolf since I was a kid. When I am in university, and tried to find the books, but they are no longer in publication. When I have the money to buy, the books are not available. I found an online version, but its rather painful to read books online for me.

I was rather excited when the game came, there is no cheating, no bookmarking, graphics is good, but the best is still the narrative story and the rather realistic game environment. What really surprised me is the battle. It is really a class of its own, its not a mindless slashing, and you cannot mindlessly down potions, or upgrade your weapon. There are cooldown periods before you can repeat a certain command. You cannot upgrade or buy weapons or potions frequently, there is only 1 shop.

It is a turn-base battle as well as a real time battle, you have a fix time to carry your command during your turn, but the enemies can dodge, parry or even hit back, although most of the time, they take damage. When its their turn, you take damage.

I spent almost an hour trying to figure the battle system, keep dying while I am learning.

You can squeeze as much commands as you like during you turn, restraint by cooldown periods, and you energy level and kai power. So you need potion to boost them and then carry the command again, but remember, you cannot keep drinking potion, so you have to plan your move.You have the almighty sword of sun, but using it will deplete your kai power. So it might not be wise to use it sometime. You do need the Kai skill of healing though, without it, you cannot really proceed far in the game.

There are even quick attack,heavy attack and balance attack, and there are skills to learn in every attack, but for it to be successful you need to execute certain action like taping the screen quickly, hit the screen at the right timing or swipe the right pattern etc.

Mesmerizing! If the enemy are too strong, and you die, you can choose to fight again,using a different strategy (it really make a different, doesn't mean you lose, you are bound for failure, sometime it is a tactical mistake) or choose to re-fight the enemies with a weaker setting, but the rewards are less tantalizing. Some battles you just can't get past...

only complaint, it is too short. After I master the rules of battle, I complete the art in 3 hour, and the next  acts will not be out till 3 months later... sigh...

Wednesday, November 20, 2013

APTT 10.7% yield- too good to be true?

A disclaimer, I am really attracted by the yield but as I read deep into the prospectus my thoughts keep running, I am writing mainly to crystallize my thoughts and not doing any advertisements. I am not vested and have not make up my mind whether to invest in this.

What are some key risks and my thoughts.

1) Competitions

Taichung city will see 2 competitors soon, they are now building up the network and I believed licences will be granted to them. I however think loss of subscribers to them will be minimum and as content are generally the same, most importantly,it will be another 2-3 years before they can compete agressively since it is only in May 2013 that the 2 competitors began constructions.

Similarly, I think TBC will have problem encroaching others area of franchises, although that is one of the growth strategy.

Taiwan rules against any cable TV operator having more than 1/3 of the nation subscribers, so the competition is mainly with the smaller players.

2) Suppliers

There is only 1 supplier for  APT for basic TV content, but there are 4 such suppliers in Taiwan, and APTT holds 15% market share, so bargaining forces should be neutal, and not so much of worry.

As for premium contents, they have multiple suppliers, but the issue here is costs. Some content might be demand inelastic.

3) Loans.

They have ready loans to drawn down but there are a few problems that will increase loans substantially. Although post IPO, loans has already fallen, a few factors will cause loans to jump again.

i) Tax provision. They have made tax provision for 46 million and is confident to reach a resolution with Taiwan Tax Authorities, but the actual tax demanded by the authorities is  actually 122.4 million, almost twice their provision.They have earmarked $197 million to fund future ongoing growth capital expenditure and the tax settlement, if the tax provision is not settled properly, there will not be much left for expansion.

ii) Capex due to expansion into other area of franchise. Since they need to build out the network before they can even get the license, it will be capex without yield until years later. In prospectus,they did not give a gauge of how big the capex will be, saying it depends on negotiation with NCC. So that is a big wild card.

iii) When the 197 million loan is drawn down at 4% interest about another 8 million will be added to Finance costs, putting in doubt the sustainability of distribution beyond 2014.

In my opinion, the best strategy would be to grow organically. That would keep capex and loans under control.

4) Substitution

Personally, I do not quite understand why people still pay for cable TV, at least for the residential consumers. They are so many substitution. I am not quite sure if the pie will grow. The pie is not growing and NCC is encouraging competition, doesn't seem too business friendly here...

So... worth a buy???

Sunday, November 17, 2013

HPHT update: Learning from Nick of valuebuddies

Hi all readers,

I made a mistake in my calculation of FCF of HPHT. I hope I didn't cause any loss. Below is my exchange with Nick from Valuebuddies.


[quote='Nick' pid='67279' dateline='1384748216']
Hi Greenrookie,

I was reading your recent post and I don't think the FCF figures are entirely accurate -

[quote]3) Price paid, I am paying for a 7% yield at current price, using the conservative DPU of 36 cents. No brokerage houses IIRC forecast a DPU as low as mine. If they are right, I am happy. [b]To pay this amount, they need to payout about 3.6 billion HKD. 9 months OCF is already about 3.7 billion[/b]. If you annualized it, you should get 4.9 billion. To have a FCF of 3.6 billion is not a tall order, accounting for capex of 1.3 billion in for the whole of 2013 would mean a capex of about 700 million in 4th quarter, not too liberal in my view, given that 9months capex is only 584 million. Even if capex increase to 1 billion, yield will still be above 6.5%. To me, a 6.5% -7% yield is sustainable in current circumstances for years to come, with potential for upside.[/quote]

I do not think it is correct to assume that OCF - Capex = FCF since the Trust have substantial minority interest in the various ports that they own with majority stakes but consolidated fully into the Group financial statements. This means that the more accurate FCF = OCF - Capex - Dividends Paid to Minority Interest.

In 9M 2013, HPH Trust have registered a cash out-flow of HK$1.8 billion to Minority Interest. So the real FCF that can be distributed to unit-holders in 9M 2013 is around HK$1.5 billion. In 2012, no dividends were paid to Minority Interest in 4Q 2012 so I think the dividend paid to MI is fixed for the year. This means that 4Q 2013 FCF needs to be rather substantial to meet your forecast. Another means to meet your target would be to drawdown debt to finance capex.

The same problem occurs in trying to compute HPH Trust EV/ EBITDA. The EBITDA has both HPHT and the Minority Interest EBITDA combined, the debt fully consolidates both entities but the market capitalization only considers the value of HPHT stake. I faced a similar problem with CM Pacific since its largest expressay is only 51% owned - the minority interest needs to be paid its dividend too so I have to adjust the FCF for that. Similar EV/EBITDA cannot be calculated directly - I had to use a reverse EV/EBITDA to see if numbers make sense.

Please correct me if I am wrong. Keep up with the blogging mate !

(Not Vested)

Hi Nick,

Thank you for pointing out my mistake. I will repost your comment on my blog. I admits I don't quite understand how non-controlling interest work even when I google it and investpedia it. Now, I am much clearer.

Hmm.... I will have to reassess my numbers...

Thanks!!! again

To get to my forecast... it means OCF has to be 5.53 billion HKD instead. Or 1.38 billion per quarter. In the case of 2013, 1.83 billion OCF in Q4. Look likes HPHT have to either further postphone capex or draw down loans.

I use a simplistic 0.65:0.35 shares of dividends in my calculation, if Yantian grows and Hong Kong slows, then such ratio again become inaccurate. For the lastest quarter, the ratio is 0.69:0.31.

It seems like I overpaid for it again.. hahah :P

School fees to Mr Market:(

Random thoughts- investment temperaments= unfeelings??

In investment, we value cool mindness. We frown upon panicky, emotional decisions that will cause us pains. We look at companies in a unemotional way, looking deeper than price crashes and business competitiveness etc.
Recently, I was quite taken by surprise by the free flow of tears when my boss of nine years is given a transfer. I like my boss, I look up upon him as a fatherly figure as he cares for his staff, I am apprehensive about my scholar-type new boss. My boss gave me many opportunities and I will not where I am today at the workplace without him. So I am genuinely grateful to him.
We organized a good farewell party, with good pictures and videos of past years, most of the staff are in tears or having red-eyes, and for me, while I feel a tinge of sadness, I am perfectly unaffected emotionally.
I took its only the ladies who are emotional, nope guys too. I wondered aloud: he is leaving us for another department, it is not as if some misfortune befall him (touch wood), neither is he retiring. He is still well and around. Why are we crying for him when the Philippines typhoons flatten a city and no one is crying. Why is aid trickling so slowly and no one is panicking??
I suddenly remember words from 鲁迅, his literatures alway talk about human emotions as a drama theatre. We amplify simple occasions with dramatic emotions.
I wonder if my investing practices is making me unfeeling, or is the world really so dramatic?

Initiate position on HPHT at 85 cents

Me bad, I couldn't wait for 84 cents.

I am willing to accumulate further if it drop further.

Why I am buying and what should you be concerned with:

1) Labor costs will not cause a dent to earnings even if you give an 20% increase in staff cost, as staff cost is small. Inflation will be a bigger scourge. Staff cost just make up 2% of revenue.

2) Quality of assets. This is more qualitative than quantitative, the shortest concession is 30 years for Yantian Phase 2 ports, Hong Kong ports have 34 years concession, better than some of the industrial properties leases. Yantian is the biggest port in Shenzhen, and I seriously do not think trading at 2 such places will be dying anytime soon. If economy of US and Europe improve, these 2 ports should improve. Ports are evergreen industry, it is choosing the winner ports that are important. Forget about the fast growth in both Yantian and Hong Kong though, Billionaire Li will not sell them if they are still fast growing like Shanghai, but it should get better with better economic numbers.

Also,  "Guangdong, is applying to establish a Guangdong-Hong Kong-Macau free trade zone, which is likely to be approved by Beijing by the end of this year. Different from the newly established Shanghai free trade zone, the Guangdong-Hong Kong-Macau free trade zone will cover multiple cities at the Pearl River delta." (source: sino-shipping news Yantian should benefit from such development

Yantian still attracting looping calls from P3 shipping companies despite not owned by any of the P3 shipping companies. (Source: Hellenicsshipping news), losing only to Shanghai  and equaling Singapore.

In short, I felt the worst in terms of operating numbers for the ports should be near, barring economic crisis.

3) Price paid, I am paying for a 7% yield at current price, using the conservative DPU of 36 cents. No brokerage houses  IIRC forecast a DPU as low as mine. If they are right, I am happy. To pay this amount, they need to payout about 3.6 billion HKD. 9 months OCF is already about 3.7 billion. If you annualized it, you should get  4.9 billion. To have a FCF of 3.6 billion is not a tall order, accounting for capex of 1.3 billion in for the whole of 2013 would mean a capex of about 700 million in 4th quarter, not too liberal in my view, given that 9months capex is only 584 million. Even if capex increase to 1 billion, yield will still be above 6.5%. To me, a 6.5% -7% yield is sustainable in current circumstances for years to come, with potential for upside.

4) They refinance their 3 billion USD loan recently, there is no information of tenture of loans, will have to wait for AR2013 to study them, but risk of interest rate hike impact earnings should be few years down the road.

5) Unlike reits who can buy and sell properties to renew that overall leases, HPHT has a fix concession to ports assets, so one should treat the investment as a return to capital type of investment. It is not an investment whereby you can sleep on it for passive income for decades.

6) Selling pressures from Capital Group. Capital group do not own HPHT directly but act as manager for their clients and their funds, apparently, they do not like HPHT, and they have been selling down since IPO. They only bought once, and is a forgettable amount. DBS is a net seller, although it bought recently at 72 USD cents.

This is not a buy call, I have no idea the price movement over the next few weeks. If it fall below 80 cents, I might buy further. Its your money, take care. Just sharing my thoughts and doing some "advertisements", you need to do your own research, I will not be liable for any losses.

Tuesday, November 12, 2013

HPHT is nearing my re-entry price target

I used to own HPHT, I sold it off after the Q2 results.

I thought I will have to hold on to it through the thick and thin, but I was surprised that several brokerage firms actually give a buy call after the results. I managed to collect 1 full year of dividends and managed to exit with a small profit.

I was very puzzled about the research reports then, as far as I can see, no one mentioned about:

1) The capex that has been postphoned, that should happen this year, my conservative estimate will be 1.5 billion in developing Yantian.

2) They mention the weaker results are due to the strikes at HK ports, but most ships are directed to Yantian, so the impact on HPHT should be rather muted, and the strikes should not be used an reason, but it does provide a convenient excuse.

3) The eroding net margins

One brokerage company correctly pointed out that HPHT will face labour costs increase due to the renegotiation of salary after the strikes at the ports.

I realized at prices then, we are just looking at about 6% yield, and hence there is no margin of safety. I also have better alternatives then, so I sold out and bought Sabana Reit, which didn't turn out too well either, but there is no loss of capital from HPHT or sabana.

After doing some quick calculations, assume operations do not worsen drastically, and factoring labor costs  increases, HPHT should yield 7.5% at 80 SGD cents, I would think that would be a good price to pay for HPHT. But I might take the plunge from 80 cents to 84 cents. Some 5 cents away from my target, will it get there? I do not think the assets will go to the dogs and should recover with the economies of US and Europe, 80 cents should provide some margin of safety and potential of upsides.

Well, I am not in a hurry.

No nasty surprises for Yangzijiang and Golden Agri Q3 results

There were no nasty surprises for Yangzijiang and golden agri Q3 results, although golden agri profits deteriorated rather badly. Golden agri's China division turn in a loss again, within my expectations and again pointing to the fact of how unreliable is China's operations to golden agri bottom line.

I bought into these 2 cyclical knowing results might be bad, if things turn well earlier, it will be a bonus for me, if not, I will just wait out the bear cycle. There might be a few triggers for sell, and luckily, I did not need to do it.

They are:

For both companies

1) Loss making quarters (Their operations and scale should allow them to weather the storm)

2) Significant gearing for diversification beyond their core business (I like companies who focused on their core competencies unless they have a track records for other businesses)


1) Big jump in default rates or bad loans

2) Drastic fall in margins

3) Delay in deliveries

In conclusion, story intact, continue to hold. In terms of price, I would think that Yangzijiang is fairly priced now, with expectation of turnarounds priced in somewhat, golden agri is still weak.

I was hoping for more information from YZJ in terms of their LPG/ LNG carriers orders, and also their application for a banking license, there was none. Yangzijiang has diversify rather successfully, and the property development of the old xinfu yard will start to show results, that will be keenly watched. Given how Chinese are obsessed with properties and I not really worried about the residential and commercial properties selling.

Given Yangzijiang is a s-chip, there is always concerns of it being a fraud. I am quite happy that my recent research into taxes paid by YZJ to Jiangsu tax bureau show up no red flags. YZJ is the top 20 tax payers in Jiangsu for the past 2 years, unfortunately, I can't find the actual figures, but the risk of it being a shell company is rather low.

Assume YZJ Q4 results do not fall drastically, they should be able to reach EPS of 17 cents, and should be able to pay out 5 cents dividends (30% payout), when I bought into Yangzijiang, I am prepare for 4 cents DPS, as I am not sure how much longer the doldrums of shipping will impact Yangzijiang, so there is already a consolation for me.

Saturday, November 9, 2013

Random thoughts- Bucket list and Financial freedom list

I was asking myself some rather silly questions recently.

If I have a bucket list, what would it be?

1) I would like to start a social enterprise.

2) Do something about poverty overseas.

3) Teach in a school with highest FA pupils

4) Visit Europe

Then the next question, if I achieve financial freedom and have a million to spare, what would I do? What am I looking forward to after achieving FF?

1) Slower pace of working

2) More time with family.

3) So that I can work on 1,2, 4 (any combination) of my bucket list.

Then I realized how much I have already achieved in terms of wishlist for FF but not before I kick the bucket.

I don't mind a slower pace, but it is not actually killing me, and I do spend the evenings and the weekends with my family. I can even do 3) of my bucket list without achieving FF (financially free). I have some idea of 1) and 2) but not sure if I can carry them out in my life even if I achieve FF, but perhaps it is easier in terms of time commitment after I achieved FF.

I have shared my bucket list with my wife (of course I didn't use the work bucket, and I didn't share 4 yet, that is the last of my priority because it is the easiest to achieve as long as one has the money ), she is supportive of setting up a social enterprise.

I am young, I have many decades ahead of me, I hope I do achieve/ do something about either 1) or 2) before I kick the bucket.I also realized how much life would not be difference with or without FF. It is not actually stopping me from achieving most of what I wish I could do. (Sour Grapes or self-denial at work perhaps.. hahaha)


Friday, November 8, 2013

Lee Metals Q3 results- generally within expectations

Lee metals report a glowing results from 1st glance, Compare to a year ago, 48% increase in net profits and YTD 68.6%

2012 is a weak year, I expect earnings to be good, they have delivered but they are some concerns.

QoQ Revenue fall from 180.9 million to 149.5 million.

The fall of revenue from steel merchandising is a given, but the rate of fall took me by surprise. QoQ turnover fall from 78 million to 48 million. Fabrication and manufacturing hold up well, with turnover of 100.7 million compare to 102 million last quarter. QoQ profits would have hold up as well as last quarter have it not been the big drop in the business of steel merchandising.

Lee metals is getting more and more like a fabrication and manufacturing company, although margins is better, I consider the merchandising arm a integrated part of its  business operations. 

Debt fall with inventory, and more cash get collected. No surprise there.

All in all, a result I would expect. Story intact.


Wednesday, November 6, 2013

LMIR results review-- A mix bag

LMIR report its Q3 results

The headline comparison of results from a year ago is misleading, since the acquisitions of new malls contribute to income only from Q42012.

QoQ DPU actually fall.

Operational wise, there was disappointment. Although overall occupancy held stable, and there are positive rental revision, the impact on DPU is still poor due to currency weakness.

Pluit Village, the biggest mall under LMIR actually has a slight fall in occupancy after carerfour move in. Occupancy rate is moving too slowly, beside carrerfour, they seem to have difficulty filling occupancy.

Medan Plaza did well, but the next 2 biggest malls The Plaza Semanggi and Sun plaza actually report a fall in occupancy.

Given the strong consumer spending in Indonesia and the influx of western brands trying to get into indonesia, such operating results mean weak competitiveness.


So, am I throwing in the towel?

No, there are still a few things going for it.

1) Growth by acquisitions, there are 15 malls whereby LMIR has a first right of refusal from sponsor. Gearing is at 28%, and most properties are unencumbered, they will most probably issue rights to fund the acquisition of malls

2) Q3 show the most volatile period of IDR depreciation and record the lowest of IDR exchange to SGD, yet DPU is just mildly impacted.

3) When the 2014 debt get refinanced by the issue of MTN notes, interest rate hike risk will not be significant till 2015, since the MTN notes are secured at comparable rate as the bank rate of 4% that will expire in 2014

4) Given status quo, yield is still attractive at 7.6% at current price. Reasonable enough given the weakness of IDR and one of their malls are going through AEI.

In conclusion, LMIR pass the currency stress test, but occupancy rate will be closely watch over the next few quarters.


Sunday, November 3, 2013

Golden Agri -- 6 months review, Is the story intact?

Golden agri is now above my purchase price, is the story intact, getting worse, or getting better?

I think the story is intact, but it is not getting better.

I bought golden agri for it high correlation to CPO price, I felt CPO is already in doldrums, and given golden agri vertically integrated operations and healthy balance sheet, it should be able to ride out the doldrums and worth much more when CPO price recovers. Golden agri is also a purist, as compared to wilmar, it business is mainly in CPO, China form just a very small part of its operations.

However, I felt the recent run(close to 15%) in price is not actually back by fundamentals.

1) CPO price still depressed

2) Golden agri should/might have its first revaluation loss in years (lowest 3-year average price of CPO, and production plateau, means no way to use volume to offset weak margins )when they announce full year results

3) Indonesia currency weakest in recent years.

Wait a minute, shouldn't that means story is worsening.

No, because with the exception of point 3, I already expect point 1 and 2 when I invested, and I expect Q3 to be a weak quarter, as long as no loss is incurred, I will not waver. Given the Indonesia subsidiary is still eking a profits, I believe a weak profits is not a tall order.

Some good development too, although I wouldn't count on them.

1) Biodiesel law  in Indonesia and Malaysia could increase demand for CPO, a natural choice for Bio-fuel mix for diesel. Reuters report Golden agri is building a refinery for bio-fuel, although there is no confirmation from golden agri

2) Inventories continue to fall, and stablizes, China operations has stablizes too.

3) Scathing attack on Wilmar by greenpeace when golden agri is going on a "responsible corporate promising sustainability in CPO industry" PR drive... I hope they are really doing the good work, which they should.

Point 1 will take years to make an impact, point 2 situation is highly fluid and might reverse anytime. Point 3 seem achievable.

There are many a times when golden agri goes near the 50 cents mark and I feel like accumulating, but I will stick to my plans of accumulating when it falls by more than 10% if the story is intact, if the story changes for better, I might accumulate more. The story is unlikely to change over the next quarter. Will update if there is nasty surprises or good news in their Q3 report. For me, I expect a QoQ fall in profits, but not a loss. I believe many did not factor in valuation losses in full year results, which is non-cash in nature, I believe I will still have a window of buying opportunity

Tuesday, October 29, 2013

Property counters - determining future earnings

Most people would have already know about the following, but for someone just beginning looking into property plays, it might be a good idea to calculate future earnings from the various projects.

Quite a number of developers are sitting on various sold-out launches 2-3 years ago. Most will start recording the earnings as their projects TOP in the next 1-2 year, as interest rate is still relatively tame, It is unlikely to see a high number of returns to developers, but you can give a 5-10% discount if you like.

Now the numbers:

1) The price sold and the number of units and whether the project is wholly owned or a JV

e.g. Lee Metals Austville (Data from sq foot, you can use free data from uRA)


11 22



I use the conservative average price of $700 psf and multiple it by the number of units and the smaller of unit area range. Since Lee Metals own 35%, I then multiple it by 0.35, that should be the revenue generated from this project.

Want a more accurate figure? If you like, you can do each transaction one at a time and add them all up.


I then use a margin of 20% to calculate net earnings.

Why 20%? That is the conservative estimate that I get from my comparison of projects from CES, and other property counters.

Austville is a EC development, there isn't a lot of comparisons, if you want a more accurate gauge,  look at similar development by the company in the past, look at its margin and then look at land cost.

land cost info is also available




Square foot only archive info for past 2 years. If you keep tracking for years, this will not be a issue, or you get dig URA figures.

BCA track contruction costs

I do not calculate construction costs psf. I simply look at past margin, and the land cost and construction then to achieve that margin of SIMILAR development, then I look at land cost and construction cost now, and if info is available from sqfoot research, what is the break even price. I would then know if the margin is realistic, or conservative. I will estimate the margin and then give a discount of few percent, and then arrive at the figures.

Do it again if the developers have multiple projects.

I only look at data if the project is sold, but I do keep track of developers future development and landbank if any. When they first launch their properties, you can go to the showroom to scuttlebutt the demand or call an agent to sound him out. Similarly, you can just look at the company track records in selling the projects.

Other valuation apply too, such as gearing level, NAV discount, RNAV discount.

Basic info, hope you find it useful


Using 300K to buy blue chips is a fool-proof dividend investment plan???

I was talking to a close friend who was a ex-insurance agent.

He told me a potential client told him that he would not buy any Investment Link Product, and that he would use his 300k to buy blue chips, and leave them for his son, the blue-chips like Singtel, Keppel, etc give good dividends. My friend is tongue struck, and agreed.

I told my friend, things are not that simple. Of course, I believe buying in blue chips is still better than buying a nonsensical ILP, but perhaps I will not say its a fool-proof, and if there is a good endowment policy with a decent guaranteed yield (almost non-existence in current market, I had 2 from asialife 6 years back, the guaranteed yield is about 3% ), you might not have to worry about loss of capital or bad timing when liquidation needs arises.

If you buy blue chips at the right price, you are good.

But splurging 300K on blue-chips sound very much like a show-off of wealth rather than a plan, If I were my friend, I would have asked the following:

1) Are you spending the 300K at one go?

2) How long are you holding to your blue-chips?

3) What blue chips actually are you thinking of?

Buying the blue chips now yield 3-5%, take the average of 4%, it is still better than the asialife plan.

But you will be exposed to

1) Market price fluctuation, if you buy at a low price, the plan is fool proof, but some blue chips are hardly doing well. Look at SIA, NOL, golden Agri.

2) During a bear market, price can come down by half, we are not in one now, so there is no margin of safety, but if the investment is purely for dividends, and there is no "maturity", you can ride through the high and lows, then there is no risk. Hence the first and second questions are important.

3) If you buy all the blue chips in the index, you are better off just buying the index, if you are selective, are you aware that Keppel is cyclical, it is doing very well now, and is expected to do well in the foreseeable future, but if oil price collapse due to cheaper alternatives coming online, or extraction of shale oil and gas become so much cheaper, what would happen then, even if price is stable, there could be oversupply. Is dividend the only thing you are looking at? If you bought at a inflated price, you can be sure the first few years of dividends are paying out from your own pockets.

Sunday, October 27, 2013

Updates on my counters- A reflection

Yangzijiang's main suppliers are steel suppliers and the engine parts supplier. Steel prices has been favorable for YZJ, although the fat margins orders of 2008 will not be back anytime soon, YZJ do not have to deal with the high steel price of 2008, maybe that partly explained why its shipbuilding margin can be still maintained at a decent 20%.

Shipbuilding orders are still aplenty, many China yards have been winning orders. I am not actually in a rush for YZJ to fill order book. I think the quality of the contracts are important as well. For example, the recent 10000 TEUs order from seaspan is of lower value than its first contract with Seaspan. Given the slots for shipbuilding is used till 2016, I believe Yangzijiang can afford to be a little more choosy.

Lippomalls next quarter report will be closely watched for currency weakness's impact on its operational numbers. If my analysis of the company is right, it should not affect the cashflow of the business, or the top and bottom line. Indonesia's import is growing faster than its exports, while the bunk of it is  due to import of energy needs, it also point to the fact that the consumerism in Indonesia is still very much alive. I read from lippo malls latest happenings (, there are new openings at Plaza Medan Fair, and there are not shortage of events at the malls, so I do hope the operational numbers bear this out. The refinancing of loan is also done at lower interest rate (too insignificant to contribute to DPU), but taken together, if DPU can improve by 10%, yield will be almost 8.8%. (Dreaming, because vested... )

One reason I bought into Lee metals is due to the big pie of construction till 2016 and the one-off Austville earnings. I believe market has not taken into account both events, but of course, there is competition risk. Steel demand is in doldrums since 2009, is 5 years now, if a turnaround is to occur, 2014 or 2015 may be a golden year where Lee metals can fire on both cylinders.

As for Sabana, sigh... Management competence is  a disappointment, but the yield is still supporting the price somewhat, lets hope they deliver on the 508 Chai Chee and fill up the spaces vacant due to the expiry of master leases. Next 2 quarters numbers will tell if the business story holds.

Namlee is another company whereby the business story has sour quite badly since I bought into it. Will wait for the full year report before deciding if I should sell.

Golden agri, I have been waiting to accumulate at weaknesses, but so far has no luck, (or should I say lucky), I will stick to my plan, since the outlook and story generally remain the same, I have no needs to accumulate at higher or same price.



Thursday, October 24, 2013

Random thoughts: My unhappy experience with UOB one card

I have been using the UOB one card for about 1 year already.

I focus all my purchases on one card, to get maximum benefits. Prior to my UOB card, I have OCBC Titanium, and I spend about $900-$1000 a month, for that I usually get around $280 amount of rewards in terms of redeemed gift-vouchers.

For UOB one card, I should get $80 cash rebate per quarter, and with that about $320 cash rebate, I thought cash is more useful than vouchers and given the quantum of reward is higher, I should go for that.

Problem is, I only got $80 rebate for the first quarter, thereafter $30. 

Here is how it works, spend minimum of $300 per month with at least 3 transactions for 3 months, you get $30 rebate, if you spend $800 per month, for 3 months, you get $80, with $1500 every month, you get $150

When the telemarketer call me, touting rebate return of about 3%, I thought it is quite decent. I ask him what happens if there is a particular month I spend a lot, maybe more than $1500, but there is a month, I fall below $800, will I get the lowest $30 rebate. He says the bank calculate the average. Hmm.. fair enough for me.

Turns out, it was not true. They will take the lowest tier to determine their rebate, you can spend 1 million for 2 months, as long as you spend less than $800 in the third month, you will be entitled to only $30 rebate.

I have been getting $30 rebate for 2 quarters, I did not calculate if I hit $2400 in a quarter for the first quarter, so I let it go.

This time round, I check my accounts, I paid $1517 in July, $1058 in August and $790 in September, so I spend more than $3300 dollars, and was only $10 short of the $790 quantum, and I get back $30, my rebate is less than 1%, significantly worse off then holding on and spending on my OCBC card. 

I call the bank, told them about my experience, the customer service guy was quite polite, told me about the tier system, which I said I understand, but was told the bank take into account the spending of the quarter as an Average. He ask for name of telemarketer, I said I didn't ask. He told me he would put up an appeal for me, after I used the word "misrepresentation". 

Don't get me wrong, I appreciate the customer service man efforts to resolve my problems, and I don't really care for the additional $50 in rebate!!! I am upset because I felt CHEATED.

I have decided to cancel the card regardless of the result of the appeal. At least I can use my OCBC rewards to exchange for mooncakes to make my mum-in-law happy.


My stock portfolio as of 24 oct

Was wondering if I should let readers know my stock selection, and I realized many bloggers have it, so here goes.

I invest mainly for yield, and is willing to hold for the long term. I do not consider an investment a bad investment simply because the current price is lower than my average purchase price. I consider it a bad investment if the "story" I have about the company changes for the worse and I made a judgement mistake either in the business assumptions or valuations.



Lee metals is a small company that give higher yield, but also come with higher risk, since it's business is cyclical and it balance sheet is not actually rock solid. I expect at least 7% yield till 2014.

Nam Lee is in net cash position with projected yield of 5.8%, I will review this counter and might sell this if the next quarter confirms that it is still burning cash, and is earnings deteriorates further.

SPH is a stalwart with dividend yield of around 5%

If lippo-malls and Sabana fundamentals do not change, it should yield  above 8% till 2015 at least.

Yangzijiang would probably yield 4-5%, but with golden agri, I invested in them more for capital gain. YZJ is one of my favorite, both a yield and growth play, but not a long term counter due to the cyclical business.

Noticed I mentioned that I invest for yield, I deliberately left out the word "passive income". This is because with the exception of SPH, I do not intent to hold any of the counters for the long run, e.g. more than 5 years. I have a horizon of 2-3 years for most counters. I will review them as and when the "story" changes, if the story is getting better, it might be longer than 3 years, if not, it might be less than that. I am not dogmatic in my approach.

Do note that this is not a buy or sell call, you need to do your own research. 

I have money set aside for investing in bear market, I have several insurance; H&S, life, endowment plans, Critical illness term plan for myself and my family before I invest in the stock market. I have a stable job, and has also set aside money for my kid school needs, and other expenses before I invest. Prudence is encouraged. Take care of risk, before taking care of rewards.

I do not use my CPF for investment, I treat them as compounding bonds purchases, although I do transfer money from OA to SA. I might use it for investment only during ultra-bear market. (e.g. more than 50% fall in market, and will most probably do it tranches, even then)

Comments are welcomed. 

Wednesday, October 23, 2013

Random thoughts: Broadening the definition of success

Some readers might know I am in the line of education.

I make no apologies in pushing those under my charge to get the 1 mark more, the do well in exams, but most of the time, I see the process as equally important as the products. A person willing to persevere, fight against all odds, will succeeded in life even if he is not brilliant academically.

Recently, in order to take away more gadget time from my 4 year old kid, I decided to enroll him in some enrichment classes, we ask for his opinion and he agreed to go for a Art class. My wife asked her cousin kids along, to see if they are interested in enrolling their kids together. Her cousin wife agreed, but suggested another center that has exams that certified Art skills. "Please, the poor kid is just 4 years old, what art skills can you possibly hope to attain?" was my immediate reaction.

Many of my concerned colleagues and friends always have suggestions for enrichment, Sheshida (NOt sure if I got the name right), Kumon, and for older kids, learning labs, etc. I always brush them aside, I just want him to develop as and when he is ready. I might sigh him up for swimming, and Taekwondo, but not cognitive development, there will be plenty of that and rat race when he goes P1

I felt the stress at times, wondering if I am shortchanging my kid when the whole world is going for enrichment. Looking back at my life, I think the answer is a "No"

I want my kid to succeed if possible, but I want him to be contented about life and be happy more than anything else. I want him to be able to feed himself and shoulder the responsibilities of being the bread winner of a household, able to hold a job well, if that means being a doctor, lawyer or the likes, fine, but if becomes the common engineer, teacher or even a soldier, I am fine with that too.

The academic path is the mainstream path with the clearest route to success (monetary-wise ), but it does not mean other paths are doom to failures. I know of many friends who didn't do well in studies but are doing very well as salesmen, hairstylists or make up artistes.  I do know, however, other paths are much tougher in the initial years.

I study hard, and do academically well enough to go through university, but when I am out working, I suddenly realized what really differentiated the able workers from the mediocre ones are their experinces, their CCAs experiences of "fighting spirit", the volunteers work that spark the human spirit, and etc, no one ask about their grades, except me, and it proved that point that straight 'As' in work has no correlation with work competence, some with poor grades are great, of course they are great workers with straights 'As" too.

I also felt that how well one do in the future depends no less on the stake of the economy, as the more vibrant the economy, the wider the spectrum of jobs. For my kid, I am willing to accept or even tolerate FTs, over-crowding. It is a trade-off I take for my kid. For that, I am grateful that our government while far from perfect, is generally competence when economic policies are concerned.

 I want my kid to be able to take stress, and I want the current system to remain status quo, competition is there, whether or not you like it or not, I want him to embrace competition, fight hard to win, win fair, or lose gracefully. I want him to stare at competition in the eyes and fight, but if the results are unfavorable, I want him to pick himself up. Failures are just stepping stones to a more complete life. 

I do not want to give him all the head starts in life, I hope he can find his own tempo and overcome his own handicaps, if he can't, then I will help him. I won't be around all the time. 

Sound a lot like preaching? Sorry, occupation hazard.