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 (http://lippomalls.com/main/pages/about-us.html), 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. 


Monday, October 21, 2013

Lee metals group- more findings.

Lee metals is really getting interesting.

Here is a few more updates.

Preliminary calculations of the Austville EC contribution to EPS will be 5.2 cents, almost the whole of 2012 EPS. 

They are buying 1 Tuas Ave 8 and 3 Tuas Ave 8 and also a unit01-10 from E-center,  from NH ceramics. The purchases are pending JTC approval, and will be known by the end of this month.  The purchase price will be about $15 million. The leases of the 2 properties will end in 2027, so depreciation will be about 500k per building annually 

Lee metals intend to use the Tuas properties for the expansion of its fabrication and manufacturing segment, which is doing brisk business due to the construction boom. Its fabrication and manufacturing turnover has been increasing for years, so there might be reasons to believe that they are operating at near capacity.

If they do expect, they will also need to increase capex for machinery. They already have loans of about 193 million. They have mentioned they will use internal resources and external borrowings to fiance these acquisitions.  

So assume interest rate at the normalized 4% and increased gearing to $200 million for easy calculation, they are rolling over short term debts, so interest rate should be much lower, but that is also more risky, depending on the sources of loans (Not disclosed in AR), there is recall risk, although highly unlikely barring an heavy inventory write down due to a collapse of steel price.

4% will lead to higher interest cost of 6 million, shaving off 1.3 cents in earnings.

Accounting for the higher costs, and the increase in NP from manufacturing segment over the next 2 years, and the sector outlook, I think we can get 3 cents, 4 cents, 2 cents, and thereafter at least 1 cents of dividends in 2013, 2014, 2015 and thereafter.

China will be tacking the Steel Mills for oversupply, Singapore Land Use plan intend to add 700,000 housings by 2030, after the downtown line, there is the thomas line, the MRT lines will keep the industry busy till 2020. 

Barring the risk of economic melt down of the scale of 2009, leading to freefall in steel demand and hence prices, the downside risk in this counter seem contained.

What about entry price?

Assume the weaker mean years earning of 4 cents, and dividends of 1.5 cents, I would think 30 cents will offer good margin of safety.

Current price is also very attractive to me, as there are the Austvillve catalyst next year and earning visibility till 2015, and earning viability till 2020 perhaps. 

Excited, but will find out more before I take the plunge... 

Random thoughts: Counting blessing better than counting money

In investment, we like to count the money made and the money lost, and even money not earned as money lost.

I reminded myself to count my blessing instead

I made another trip to the GP again today, I was not seriously ill, just continuous eye dryness and irritation, bloated gastric and some flu.

My eye itch rather badly when I apply eye mo, and when I am in my car, driving towards the clinic, I count how miserable would it be if my eyes are failing me, and I can't watch my son grow up. 

Then when I am leaving the clinic, I saw a construction worker being helped by another worker, he was limping as he made his way to the clinic, they were accompanied by the foreman. All three look rather glum, the foreman and the injured worker looked especially troubled. I am not sure if the worker is properly insured, even if he was, how long will it take before he can work again.

How good my life was, and those that passes me by, having the money to see doctor when the need arises, not having to worry about spending money to see doctor and get dinner. Most people in Singapore are able to watch their kids grow, and do not have to scrimp just to buy some basic necessities or services.

Life has been good for me. I recently get a shot at a promotion, I may not get it, but I do not have to worry about my existing job if I don't get it, another blessing to be counted.

Feeling blessed.


Sunday, October 20, 2013

Steel companies: My preliminary summary

This post is not so much of a analysis but a summary for myself to crystalline my thoughts. It is kind of getting data overload here. Readers, if you find the trail of thoughts confusing, it most probably I am still confused.

I have did some reading up of various dept on companies that deal with steel, Sin Gheet Huat, Asia Enterprise, HupSteel, HG metals, and Lee metals. In order of preference to invest, I have the following, I have not determined fair entry point yet, but some companies look quite attractive to me already.

LEE metals

Newbiestock wrote an article about it for nextinsight in Feb 2012


This stock has done very well since.

I believed that good story is still intact.

It pays very good dividends, 30% to 50% of earnings every year with the exception of 2005, it pays 10% of earning is 2005. If you assume 50% payout and annualized 1H earnings, you get yield of above 10%, if you are conservative and use DPS of 3 cents, you still get a very decent yield of 7.9%

I invest for yield, but, there are few things that bother me. Lee metals' steel fabrication and manufacturing arm has been riding on the construction boom, and is supplying Rebar for the construction companies and earning decent margins of 8-11%. The construction boom of HDB will continue till 2014 at least, but will taper off after 2015. 2014 should be another "golden year" since the profits from the first JV property development project will be locked in 2014.

My concerns are:

1) What happens after 2015. The merchandising and trading arm might recovers with the world economy, but given the super low margin of the segment, about 1 to 2%, the high revenue will not lead to much profits. 1-2% is actually the lowest margin for a steel stockist among all the steel stockists I tracked.  They will still have the MRT lines to supply, but I think the peak earnings might be over after 2015.

2) HIgh gearing for its inventories stock up. Although inventory level as a percentage of revenue is not high, and is relatively stable, the gearing level might be a problem when interest rate starts to move up.

3) There is also no guarantee that Lee metals will pay at least 30% of earnings, assume earning revert to the mean, and Lee metals pay out only 30%, yield will fall quite drastically. e.g. 1.2 cents DPU will only mean 3.1% yield, and there is interest risk involved.

Sin Ghee Huat and Asia enterprise 


Both companies have solid balance sheet, zero gearing and in net cash position. Both operates mainly in niche market, SGH specialized in 304/304L and 306/306L stainless steel, and its margin are the strongest among the five companies I compared. With the exception of 2009 crisis, SGH net margin is between 7% to 19%. Asia enterprise serve the marine and offshore market. Asia enterprise has margin of between 4% to 9% in recent years

SGH has been generous in his dividend payout, its is almost 100%  in average in recent years, but the official payout is 50%. Asia enterprise has an payout of 40% consistently but pay more during 2012.


SGH has really narrow product range when compare to hupsteel and HG metals, it is really focused in what it is doing. That might not be a weakness, but they change have leadership renewal, and the new CEO mentioned about expanding into duplex Stainless Steel, but I have yet to see such products in their website. So this business direction is really the wildcard.


Hupsteel steel business is really deteriorating at a scary rate, compared to its peers. However, it is sitting on very good industrial land, and is developing industrial spaces within its premises. Check out what Paullow from valuebuddies had say about it.


Had its steel business not been so weak, I might have place it higher in my preference.

HG metals

HG metals has an forgettable 1H, but its revenue and margins have been very volatile. It has great product range, and has a new investor, Oriental Castle Sdh Bhd’s (OCS) investment, but have not been able to steel the company to more stable earnings.


Lee metals seem to have it good for now, and maybe till 2015, but its balance sheet is not actually strong.

Sin Gheet Huat might be the company that will ride the steel demand upturn well when it comes, but its new business leader have not prove its worth. It is also highly illiquid.

This is one post that I would like some comments, which company would you invest in?

Friday, October 18, 2013

Reply from Sabana's IR

It's confirmed. The lease renewed in kallang way, the space freed up is due to MASTER LEASEE MOVING OUT, not existing space, my hypothesis is wrong.

But the NLA will not increase further. See below for reply from Sabana.


Dear XX

Thank you for your email. Please see our responses to your questions in brackets below. Thank you for your support for Sabana REIT and please let me know if you have more questions.

Kind Regards
Grace Chen

-----Original Message-----

To: Grace Chen
Cc: Enquiry; Bobby Tay
Subject: Renewal of leases

Dear Bobby and Grace,

Congratulations to the successful completion of shares placement and the acquisition of 508 Chai CHee.

I refer to your 3q results release yesterday, I hope u can answer some of my questions.

1) which master lease, specifically is being renewed? And what is the rental revision terms like? [ Master lease at 3 Kallang Way 2A is being renewed at a slightly higher rate. ]

2) the 233058 sq feet of NLA free up after 25 November, is it due to tenants moving out or is it the existing vacant space of the master leases yet to be leased? [ The 233,058 sq ft comprises primarily space to be returned to Sabana REIT by existing master tenants who decide not to renew their master lease. ]

3) After 25 November, any of your former master lessee moving out, and not renewing the lease under multi-tenant terms. If they are indeed moving out, does your 233058 sq ft NLA inclusive of those? [ Please see reply to question 2 above. ]

4) There are 2 single tenant building, ( from prospectus), 2A kallang way and 8 commonwealth lane, given that either 1 will not be renewing the master lease, it means some uncomfortable possibilities. [ Please see reply to question 2 above. ]
1) they Are moving out. Back to qn3
2) there are plenty of non-utilized space and they wanted a smaller space for savings.

To prevent too much unnecessary speculation among the investing community, perhaps u can help provide some details. I believe non-renewal of anchor tenants is material information.


Their investor relation is doing a good job though.

Thursday, October 17, 2013

My thoughts on Sabana Q3 results

Sabana's has just added a few items that will displeased investors.

1) QoQ distribution fall

2) Only 1 master lease to be renewed. Are there is no news which of the five properties are renewed.

My thoughts:

1) I still believe the 233058sft of NLA freed up are existing space.

When the Reit IPO, the NLA is 2636560 sq ft, but sub-tenants increased from 92 to 99 in 2 quarters. Where does the 7 tenants get the space?

When Sabana went on acquisitions spree in 2011, the 5 new buildings added 30 sub tenants, and 1 quarter later, the number of sub-tenants further increased by 10 while the NLA stay constant at 3165643 sq ft.  Where does the 17 tenants find the space?

1 master tenant will be renewed, and the NLA freed up is only reduced by 7000 square feet, when the smallest building has about 83K GFA.

Lastly, there is no fall in the number of sub-tenants when the figure on NLA freed up is proposed.

2) Lorong Chuan and 200 Pandan have the highest number of sub-tenants, 27 and 14 from IPO prospectus, but has most probably increased the number of sub-tenants, and these 2 buildings has no rental revision clause built into it. The master-tenant should be getting a good deal, why have they not renewed the master lease? There is only 2 possibilities. One: Sabana's terms are too harsh, and the cost savings from reverting back to single tenant might make more sense. Two: They intend to move out after 25 Nov. If it is situation two, then impact on distribution will be significant, and it will also mean that Sabana's management is downright dishonest. With only slightly more than 1 month to go before 25 November, Sabana would have gotten the news of non-renewal by their master tenant. No price will be low enough to justify such sneaky management style. But if its situation 1, then maybe we could see some rental revision going forward.

I would stay put with Sabana for the time being. I will need 1 more quarter to know if Sabana is really a rotten apple, or if it is  a apple of lower quality, but still edible.

Monday, October 14, 2013

What does it mean by "understanding a business"

Well, the porter 5 forces does help in understanding a business.

I realized there is no end to these 5 forces.

Take for example, I am looking at Steel Stockists recently.

Just the competitors have taken me 3 days of number digging.

Their suppliers are steel millers, what affect the steel miller? What is the supplier of steel millers? Iron ore miners. How  does this whole vertical chain of business affect the company.

Then there is management quality, what have they been doing, what are their products. How much do you understand their products. I just spent a night reading up on the different grades of stainless steel and their classification. What are the external business outlook that will affect their margins? Who are the customers, what are the customers' customers? What will make the customers increase capex and hence increase ordering. How well can management of companies predict these orders and replenish inventory at decent price. How does company manage price volatility?

I have wanted to blog about my research after I concluded my findings, but then I realised it will most probably take weeks at least.

So maybe a teaser, here. Good things are worth waiting for.

Friday, October 11, 2013

My thoughts on SPH results

First, I expect dividend payout for full year excluding 1-off special dividend of 18 cents to be 21 cents at least.

They gave 15 cents with an intern dividend of 7 cents, so that was 22 cents. Satisfied with that.

What was disappointing was my hypothesis about a a better Q4 results due to a corresponding better Q2 GDP results do not hold.


The only resilient segment in advertising is only others.

However, I like that the fall in advertisement revenue fall is slowing.



Thursday, October 10, 2013

random thoughts: coping and facing inner evils

I am someone who might be called a "hermit" by others, i like and need to spend time alone, thinking about life and reflecting on my deeds. As such, I am highly sensitive to my thoughts and emotions.

I am no angel, there are many times, I have selfish thoughts and negative emotions. The best way of dealing with them is never to brush them aside or tried to suppressed it with guilt, guilt itself is a strong emotion and should not be any better than envy, fear or anger. Face it, know why and how that emotion came about, accept that emotion, be kind to yourself and give yourself time to internalize it and reach internal equilibrium too. No particular one emotion is better than another, all should come and go like the passing of clouds, if you wish "joy" with stay with you longer, it will followed very quickly by "disappointment".

Once you allow yourself time, you can now take time as a measurement of the intensity of the emotion, if it come and go in a day, we should let it go just like a day in our lifetime is a drop of water in a river. If you cannot get over it in a day, and the frequency of that emotion creeping up to you is still bothering you, you might need to talk to someone, or go somewhere to chill.

Recently, there is news of personnel movement in my workplace, and there are plenty of rumors. I felt apprehensiveness, jealousy, and anxiety. It didn't help that emotions created some unkind thoughts too. I let it be, and after a day, its still on my mind, but I know the frequency of negative emotions and thoughts are reducing, so I am quite sure it will die a natural death, nonetheless I talk to a few people about it, and I am perfectly fine now, the equilibrium balance state of mind, no joy, just peace, and peace bring sustained happiness. 

I tried suppressing or allow myself to be consumed by guilt, it took much longer to recover.

Stock investing is such a good practice ground for coping with one emotions. So, if I make a mistake in investment, I might felt anger or guilt (money could be better spent elsewhere), I might get roller coaster feelings in seeing my investment values plunging or rocketing.  The faster we come to terms with it, the lesser the chance of us throwing good money after bad or getting carried away and think we are as good as Warren Buffet. Investing should be enjoyable, you enjoy making judgement call, and getting your long term goal fulfilled (mine is financial stability and comfortable retirement), it should be stressful or taking away the pleasures in life. It should not generate intense emotions too.

(Anyway, if you have not noticed, any posts with the headings "random thoughts" are not related to investment, if you are not interested, skip the post.. haha) 

Wednesday, October 9, 2013

2 things that shaped my screening of companies: CDW as a example


2 tools changed the way I worked, I used to relied more on research reports, blogs, newspapers and forums to get ideas. Now its different.

forumers from Valuebuddies shared this google stock screener:


I find it very useful as a FIRST CUT screening, like yield, growth, etc.

Then went I read their ARs and prosepectus, I will think through the porter's 5 forces, and to some extend SWOT and PEST.

Then I use numbers to verify my thoughts and their business execution.

I stumbled upon CDW using the screening, it pays good dividends, has consistent yearly FCF, show profit resilence and has low gearing, liquidity is low but not as bad as some others, revenue is reasonable. I feel like buying immediately

When I read through the AR and prospectus, I began to sense the risks more accurately, and hold off my buys until I know more.

1) highly dependent on major customers' orders, they do not give breakdown of major customers' orders as they claim it will affect their bargining powers, since there is no effective tracking of customers now, compared to 2005 when they list the customers in prosepctus, I do not like information gap. Given how a single order from a customer can improve their results so much in 2012, I think the customers' base is still fairly concentrated.

2) Competition is intense, and China cost of production is increasing.

3) When I read their announcements, they gave generous stock option to the directors, something which I do not like, but given they pay generous dividends too, I would not say they are unfair to shareholders, it just didn't get anymore attractive.

So if it is a highly cyclical industry, and it is not a alpha company, I need BIG margin of safety. I would need to reassess the entry price


Sunday, October 6, 2013

Porter's five forces analysis: Yangzijiang and UobKayhian

After posting a guest blog at ASSI, "musicwhiz" commented about 5 forces analysis. I was intrigued after I find out what it meant. I decided to do some practices on Yangzijiang and UOBkayhian and see if I do understand these 2 counters and identify the gaps, if any.

Supplier bargaining power.

I have no idea what are the main costs to YZJ and its suppliers (To find out), I know they need a lot of steel. Its time to fill the knowledge gap.

UOBkayhian, think the supplier bargining power is low to medium, they just need to get their IT system up and going. If you consider sales representatives as supply, I do not think they have high bargaining power, but the top productive sale people can easily go to other brokerages, or even turn to the private sector and become their own bosses. 

Customers bargaining power

The shipbuilding sector is in doldrums, and shipbuilding prices are low, customers do have bargaining power. The bargaining power should be medium to high. Yangzijiang has grow and  have widen their customers base, but most of the major customers have more than 1 supplier, e.g. Seaspan contracted HHI for their 14000 TEUs shipbuilding.

For UOBkayhian, it is worse, traders can open multiple online trading accounts, and they cannot charge higher brokerage fees without losing customers, I doubt platforms and research quality are that important to traders. Also, according to a ranking of brokerage companies in Asiamoney,  KayHIan is only ranked 5th. 


There is no substitution in shipbuilding, ships are still the most used mean of transport for trade. There are however, many different type of ships, Yangzijiang can build a bulk carriers and containers ships of a variety of sizes, and have built tankers before. If there are new orders win in the area of tankers and LPG carriers, they would have strengthen themselves further. Substitution power is low.

For kayHian, substitution is also low, the trading of securities are still done through official exchange as a clearing house with licensed brokerages as distributors. I doubt there is other models.

Barrier of entry 

Barrier of entry in China is very high, China has effectively stop the issue of licenses for new yards, and the construction of new capacity by existing yards. But at a global stage, Yangzijiang still need to compete against Korean and Japanese Yards. Yangzijiang still has some cost advantage in operating in CHina. Low to Medium power of competition.

Not sure how easy or difficult does MAS issue new licenses to brokerage firms (To find out)


Within China, Yangzijiang need to compete against the biggest private yards, but the main competitors are SOE shipyards. Yangzijiang is competing fine in terms of financial strength, it has also received government support in terms of linking up of ship financing with financial institutions in China. Within CHina, the order win in 2013 are highly concentraded in the top few yards, which is also in line with the PRC plan to consolidate the sector for top 10 yard to account for 70% of the contracts. The economic of scale is working in Yangzijiang's favour. The bigger competition are from korean yards like HHI and Samsung, and perhaps also Japanese yards. Medium power of competition

There are 4-5 local brokerages and several foreign brokerages, competition is still. From preliminary calculation, kayhian has an 10% market share in Singapore, hardly a leadership position. High power of competition.


After reading up on the 5 forces, I think it is just 1 part of the analysis, It is important to see how the management is addressing the weakest links, what business plan do they have to bring the company forward.


Kayhian has been acquitting a number of brokerages in Asia and particularly Malaysia in recent years, and the numbers seem to be moving in the right direction. The contribution from the "others" segment is still small, it is a number to watch for to reduce customers bargaining power.  In terms of niche products that no competitors can replicate, I doubt they are there yet, there is not enough reach to different markets, I do not seem to hear any particular good review on that research or platforms.

Yangzijiang has been building up its capability to build bigger and eco ships, but this is a capability not lacking in SOE yards in china and the korean yards. Korean yards have the ability to attract orders to build large ships. But Yangzijiang has recently able to win orders for VLCC, so its positive. They have been trying to diversify their business, the most successful and controversial being their HTM investments. But only time will tell its foray into O&G and shipbreaking, and even property development business will bear fruits.   

In conclusion, Yangzijiang seems to be a better investment option, with the weakest link being in the power of customers to go to their competitors. Besides, better products, I need to analyse their cost structure and suppliers deeper. Will update again.

Friday, October 4, 2013

Random thoughts: What to do in investment but not in life?

Comparisons. In investment, we are always comparing. This quarter results with the last, we compare results over a long period of time. We compare the earnings and ratios with its competitors, market leaders and industry average. The more we compare, the clearer picture we have.

In life, too much comparisons can lead to unnecessary and unhealthy emotions such as envy, stress and misery.

I whatsapp a close friend of mine who knows where good food is. I ask him to give me some suggestions of a good dining place to bring my wife for a birthday dinner. He gave me plenty of suggestions, restaurant with Michelin star chef, restaurant at MBS that cause 200 per pax set menu to nice and reasonable priced food at dempsey. 

Do not get me wrong, this friend of mine is not trying to show off, he has already made it in life, he is a CFO of a listed company but is very humble, in fact, he is just like when we are in secondary school, very helpful. It is me, who starts to feel uncomfortable.

I think to myself, wow he brought his wife to all those places. (I know his wife, we were all secondary classmates), how often did I brought me wife to somewhere nice to eat. In fact, I was constantly talking about thrift, about scrapping the car, about saving money in case our parents fall ill. I know there is nothing wrong with being prudence and thrifty, and my pay is properly less than half of what he is getting. I also know my wife does not mind her current lifestyle, but the "what if" keep ringing in my head. I am not a nasty person, but I know my friend to be a kind and romantic person, and he is also rich, what if I am like him, wouldn't my wife and family be more comfortable and happy?

I enjoy my job, and is comfortable with my lifestyle, but I have been thinking about changing another job, or take a slower pace when I save enough for my passive income to supplement my income significantly, I thought of becoming a insurance agent or part-time teacher, but just now when I am driving back home in my car, such thoughts momentarily made me feel inferior: What? you still want a lower end job, people is already at the top of their game, and you want to start at the bottom again. I am so affected that I reconsider sending my son to a primary school that has a high percentage of affluence family. I then recalled another friend of mine from university, he comes from a very renowned secondary and college. During my university days, he helped me a lot as he is very knowledgeable, but I think told him once, that he gave me a feeling that he wasn't really happy. He told me his peers have all done very well in life, and he feel that he should be able to do bigger things. He wasn't satisfied.

I used to think of how silly it is for him to compare with others, now I can empathized with him. Just 1 comparison with a friend, and I questioned myself,what if I am surrounded with tons of these people, would I suffer from low self-esteem?? I recalled during an overseas exchange programme, a scholar from NUS almost cried and throw his temper when he got 3 A and 2A- for his semester exam, how sad, the best I ever got was 4A and 2 Bs and I was screaming and jumping with joy.

So, in life, we should not compare too much, excessive comparisons will lead to misery. I am older and more zen now, I was affected for only a few hours, but I thought I pen this down for anyone who might have similar thoughts or go through similar experiences. Get over it quickly, life is not fair but is full of abundance, enough for everyone to live happily. If we are already happy, share it, why bother if someone if happier? Be happy for them =)


Checking your own investment temperaments

I am no expert in this, I know expert wrote books on this, something like Financial behaviorism

But perhaps one should answer a few of these questions, if you answer is NO, you need not read further question.

1) Do you know that there is a partial shutdown at US and a debt ceiling deadline on 16 october?

2) Are you worried or thinking about the impact of these 2 events on your investment?

3) Have you contemplate selling some of your counters to raise money to take advantage of any selldown, or take risk off table?

4) Have you already sold some counters Purely because of the US impasse?

5) Are you losing sleep over it?

I guess the further you proceed with a "Yes" in your answering, the more prone you are to market noise, and the more likely you might make some decisions based on emotions (Fear or greed), and the more likely hood you have a "trading" mentality. There is nothing wrong being a trader if that is what you set off to do and has a plan for it. 

But for me, as a follower(Self-proclaimed) of Warren and Graham doctrine, the "trading on market news" mentality is more harmful than good. 

I answered "yes" until point 3. I felt a need to do something, when perhaps the best thing to do is to do nothing. I am not just contemplating to sell, I am looking also to buy. So how to prevent such trigger happy purchases or sales that will likely cause some grief later?

I ask myself, if the companies I owned will be directly hit by the shutdown or the impasse? If US really default, nothing will be spared, but I know YZJ which deals a lot with credit, will be more badly hit than say SPH. If credit is freezed, Reits will get it hard too.

So, to prevent myself from being trigger happy, I dig deep into new company research, I ask myself many questions, the one most important question is what is a good price to enter? Once I got that figure, it become easier not to buy anything.

Then I ask myself, if my existing companies, fall below my purchase price by a lot, then what do I do? I might sell my weak Sabana reit, but will most probably take the opportunity to buy more if there is a firesale. YZJ has the China banks backing, and numbers are strong, it survived GFC, so I will pick more too.

Why not sell now, then there is no money lost and more money to buy at a bargain? Well, I cannot be sure how market will react, if might just go thro a small correction, what happens if I am shut out of market then? But since I am young and I will still be earning for years to come, I can afford to keep investing, it will smoothen out the cycle.

In conclusion, its the GamePlan that will keep your sanity in times of crisis, or fear, it can be changed, but unless there is good reasons to change it, such as I have found a better one, it is better to stick to it. 

Wednesday, October 2, 2013

Yangzijiang- What I think of analysts reports that cite higher target prices

I think its all about getting you to trade to earn commission.

I am not carried away by seemingly upgrades of target prices, I feel that analysts are slapping their own faces.

I saw on a forum an analyst report cut and pasted, it has a sell call, it goes like this: 


Yangzijiang Shipbuilding: Wary of a False Dawn; Cut to Sell, $1.135 - TP
YZJSGD SP | Mkt Cap USD3.5b | ADTV USD13.2m

Ø Cut to contrarian SELL, SOTP-based TP at SGD0.98. We do not see a broad-based recovery for Chinese shipbuilders yet as (1) rise in BDI was led mainly by rate hikes for capesize vessels, (2) container freight rates remain weak, and (3) yard overcapacity issue lingers. We fear that
YZJ’s recent rise in share price may meet with downward pressure when shipping market recovery story disappoints.
Ø We do not see shipbuilding prices picking up significantly yet. While there may be some short-term spike in new orders, we still see margin contraction and EPS decline for YZJ’s core shipbuilding business for FY13-15F as higher margin contracts are depleted from orderbook.
Ø We agree YZJ would be the best proxy to ride a shipbuilding recovery cycle, but we disagree that this is the turn. We think that the recent lift in valuation is fragile as it is not supported by future EPS growth with margin decline still in the cards.


This is the last straw, and below is my response:


I generally agree with the big picture assessment that there are dark clouds, and the boom years of fat margins are not here yet. I am also agreeable that next few quarters might disappoint.

But I think we should take a report with a heavy does of salt. Let me explain why.

They have a downgrade target price of $0.98, they would have more credibility had it been a HOLD call all this while with a target of $0.98.

But from a cut from $1.135 when the orders from the next 12 months is already in the orderbook since 2011? How did you get $1.135 at the first place, was it a mistake at the first place? If other facts like increase in price of steel leading to increase in cost will weaken earning going forward in the next 12 months, is a reason cited, then I would say its quality analysis. Hello, how would BDI affect YZJ earnings? It would affect it future order books that will affect earnings from 2015 onwards, and you are cutting your 12 months target based on that?

These analyses of calling sell, and even upgrading "buys" with higher price targets are all a slap in the face of analysts, why is YZJ a $1 call 2 months ago and $1.4 call now? either one is a serious mistake unless you can strongly justify the change. For example,HYPOTHETICAL EXAMPLES ONLY: we expect margins to fall to 15%, but they managed to hold it to 20% and the property devt arm is up and going earlier than expected.(increase target price) Or, CHina is clamping down on shadow banking and wealth management products more agressively than we expect, and we are concerned that there might be some write down on HTM.(Reduce Target price)

BEWARE of all analysts that quote recent orderbook wins as justification to change in 12 months price target. The overriding motive is for you to trade so that they earn commission.

Investing community deserved better analysis by professionals. Below is my thoughts on the "highlights" of the report

(1) rise in BDI was led mainly by rate hikes for capesize vessels,
True, but panamax is increasing significantly too.

(2) container freight rates remain weak,

and (3) yard overcapacity issue lingers.
Do note that the "overcapacity" accounts for the weaker yards too, if you follow order wins in china, it is highly concentrated on the SSOE shipyards and a few other big yards like rongsheng, another one in zhejiang (can't remember name), it is less than a dozen names. The overcapacity in china is already playing to an end by market forces.

We fear that
YZJ’s recent rise in share price may meet with downward pressure when shipping market recovery story disappoints.
Agree, but whats with you $1.135 target? What makes you shift goalpoles?

Ø We do not see shipbuilding prices picking up significantly yet. While there may be some short-term spike in new orders, we still see margin contraction and EPS decline for YZJ’s core shipbuilding business for FY13-15F as higher margin contracts are depleted from orderbook.
Hello, fat margins orders from 2008 and 2009 are already delivered  please stop copying and pasting from other views.

Ø We agree YZJ would be the best proxy to ride a shipbuilding recovery cycle, but we disagree that this is the turn. We think that the recent lift in valuation is fragile as it is not supported by future EPS growth with margin decline still in the cards.


As I always say, stay away from short term price distraction, you are buying for a turnaround, wait for the turnaround, don't care if its a false dawn, unless the false dawn gave you the target price you want.

Tuesday, October 1, 2013

Stock market as an unregulated online casino?

The two casinos in Singapore are  regulated by the CRA, with restrictions on locals such as entry levy and background checks. I think they are some who take trading as an online casino.

I was following a few forums, and was quite surprised by the interest shown in penny trading. There are few observations that shown the recklessness of investors and the fact that they treat the stock market as a casino.

1) Many of the posts are not backed by TA or FA (if there is any FA to begin with anyway).

2) When the price of a penny does run, instead of taking some profits off the table, many are screaming a higher target price. Many do not realized the Law of gravity applies in stock market too.

3) When price start to correct from their peak, many new forummers seem genuinely surprised or disappointed. I mean, I do not know how much a penny can run, whether it is a 2 baggers or 10 baggers, but as it goes up, I will be very wary of the risk-reward profile is constantly changing.

4) Penny trading attracted a lot more attention, many are looking for instant gratifications.

5) They believe if the price fall, after they buy it, they make a wrong decision, and if the price rises, they have made a right a decision. This is a myth Peterlynch wants us to be aware of. For this statement to be true, you must be buying at the bottom and selling at the peak. If you can do that, you beat Warren Buffet hands down, and I think he will need to learn from you.