Tuesday, December 30, 2014

Random stories: The dark teacher

The dark teacher has many souls waiting for a second life. 

Teacher is called the soul engineer, not for nothing. 

"You can be what you want to be. Think hard, work hard, the potential will be unlocked in your future life"

The crowd start talking among themselves 

"I want to be rich" ...

"I want to be healthy!"...

"I want intelligence..."

"I want wisdom and charm..."

"I want happiness..."

After a while, the crowd quiets down...

A voice asked:" if I want 'everything', is it impossible?"

The teacher said:" nothing is impossible, work hard. Although it is easier to focus...
Remember, you need to find the people that emulate what you want and observe them. Once you find them, find the shape of the soul, find the common shape, and I can help shape you at close as possible. The more similarities you find ,the more accurate it is. If you want more strands of goodness, you will to decipher the shape.

The crowd went silent. "Learning by observing and analysising is never easy, it is up to you, what reap what you sow. When u are ready, come to me, and then you are ready for your next life, remember , you have all the time in the world, you can work together, share information, it will be easier to decipher what shape is for intelligence, what is for health, etc" 

Soon, the crowd dispersed, eager to find the souls of living people and study them. Many famous names were thrown around, many of different nationalities to be case studies. 

The teacher sighed. It then noticed a lone soul. It said:" do you have no idea where to start?"

The soul said in a very soft voice:" can I have..."

The teacher said:" sure, draw me the shape"

The soul hesitate:" but I want ...I want nothing"

"Why are you so lazy!!" The teacher yelled.

"I will live my next life as it is, seizing every day, I do not want to cling to anything, since nothing is for sure anyway, uncertainty is scary but also beautiful, I want it that way."

The teacher smiled. He had never smiled for centuries. 

Tuesday, December 23, 2014

Random stories: A letter from Santa

Hi Mike,

It's Christmas. I hope everything is well with you. 

Although everyone believe I do not exists, with people thinking I am a commercial gimmick for higher sales, you know existence does not equate to being real.

You have been wondering about the spirit of Christmas, and is counting your blessings. You also wonder if the reindeers are actually too fat to fly anymore. Thank you for your concern, they are fine, just that no one puts up Christmas socks for me to leave a gift anymore, and even if they do, the homes are all of tight security now, CCTV, police alarm. Not that I do not have a way of disarming these, but I just no longer feel welcome.

I started giving, hoping that people will understand the joy of giving. 

Alas, my intention while pure, is misconstrued as a commercial gimmick nowsaday. Also, it is never my intention for anyone to feel stress over what gifts to buy. Giving does not have to be restricted to real presents, just like existence does not mean it's real. 

You have ask yourself, what have you give this year. You start to think in the line of charity, the amount you have given and the beneficiaries that you would have helped. That is wonderful. 

I am glad you move on further to ask if you have gave love to those around you, gave time to those who need it, and gave your best in whatever you do.

It is clear, you find something missing, and nope, that cannot be given. It is with you, you are holding it without realizing it.

Stop counting your blessings. Give them away. 

Have a Merry Christmas.
Non-existence Santa.

Monday, December 22, 2014

Random thoughts: teaching my son Maths

My son going to K2 soon.

I always feel he is weaker in Maths than in languages. Maybe because we read every night but do not do Maths every night.

If u believe in gene, he did not inherit any Maths genre from his Maths Major Mother and his money obessed and stock retail analyst father who is always calculating.

He is relying on mermory to do Maths. Teach him a way to do addition and refresh his mermory, he can do it. 

Go deeper, he has problems understanding "more than" and "less than"

Not that he do not understand literally what it means, he can read lonewolf off my iPad game with only some words he can't pronoun. 

I explained until I become Thor ( Thor Huey; vomit blood) the concept of 1 more blue ribbon than red ribbon when teaching number bonds. I visually show him pictures, give him
Manipulatives to move around, he just don't get it. 

I know of schools that teach accelerated Maths in P1. 

But really, what set me
Thinking is: 

No worry, when he grow older, it is really a super blessing if he have not concept of more than or less than.

He earned more than me, his friends birthday gift is bigger. He has less tutors lol.

Let him take his time.

Random thoughts: silly's valuation method

There are tons of valuation methods out there. You name it you have it.

Do note what I am saying here is my own view, I am not insulating any view of the merits or lack of the valuation method.

PE and PB are child play when u look at reproduction cost basis, DCF, DDM, ROIC, WACC, EV etc... 

The convention wisdom is used a range of valuation metrics for the right category of investment.

What do I mean? 

If u doing asset play, most probably u need to break down all the balance sheet, look at intangibles etc, look at reproduction cost ( see B's blog post)

If u want stable yield, then FCF, DCF, DDM, etc

So what is my point?

I think it is important to have a story backed by numbers and not a story of numbers.

Why? Because numbers are highly dynamic, fluid. It is the story ( moat analysis, business anaylsis that is more stable) 

Is a business a lousy business just because it has a few quarters of poor results? Is the business doom to ridiculous valuation just because the industry outlook is bleak? 

Be careful of extrapolation pitfall. When a company is doing well, analysts like to extrapolate that it will continue to grow, just read aerospace analysis just 6 months ago. Similarly, when a sector is not doing well, analysis like to extrapolate the downward trend too. 

Not that it is wrong to know a industry outlook, but it is of vital
Important to realised that good news is negatively correlated with valuation. Vice versa.

A company, or a good one, with moat, do not disappear because it is facing business challenges.

Yes, profits might plunge and if u are purely looking at numbers, you will think hey, the valuation is not that fantastic. 

But, when the news is good and the profit  soaring, the valuation will be not fantastic too. The only time to get fantastic valuation is during severe bear, like the AFC or GFC, but by then, u need not valuation method. Like uncle temperament said: put up a dart board with solid blue chips ( strong balance sheet and still eking profits) , close your eyes and throw your darts. Keep your balls with you and buy. By then, all that is needed is capital and balls, not so much knowledge. 

When market is not at a bear, then valuation method is important. But the business is of paramount importance. The business makes the numbers, not the other way round. People make the business. 

So, when I look at a business. I only ask the following.

Is balance sheet strong?
What is the yield? 
How sustainable is the yield?
What is the foreseeable growth? ( growth can compensate yield, SPH need higher yield as growth is missing as compared to SSC) 
Can I average down with balls intact when correction happens? 

These are the broad questions. To answer these questions, you need numbers but also qualitative analysis which is equally important, such as customers analysis, competitors analysis. 

After looking at this, I ask myself, what is the bad case scenario yield? Worst case means bankrupt. Look long term. 

E.g. Lee metals. Iron ores and steel
Price is falling off the cliff, next quarter of it is still making profits, ( which I strongly believed it will, although margins might suffer) mean it should do ok in a competitive commodity environment, at least until 2020 with the boom of construction In singapore. Assume 1.5-2 cents dividends, yield is very decent. Multiple it by 5 years. What is the MoS for capital loss? And that price if dividend is maintain, what yield are one looking at? 

U might think then one might be better off buying bonds which guaranteed 3-4% and long term CARG of 30-40% in a decade.

In equities, I plan to not loss money, and hopefully in the process, pick up some bonus. 

My way might not beat the bonds or index investing. But I am comfortable with it, and I find company prospecting interesting and intellect stimulating. By analysis on company also go thro LDMR and in particularly the number part. The qualitative part is what intrigue me now. 

For example, when I am reading Keppel, MTQ, SCI, Sembmarine, i go straight to the business analysis and review than mugging the numbers. What is their strategy? What are their new products, what are their views? 

The new CEO of Keppel is less forthcoming than MTQ in details is how I feel when I read their AR. 

In short, look beyond numbers. Numbers are more misleading than reading a story with numbers. Numbers do not make a story, words do. 

Thursday, December 18, 2014

Random thoughts: paradigm shift of the thought of a second child

My wife and I have been talking about a second child for a long time.

It is as it is, only talk.

We always have this worry, that worry. She worry about the care giving, managing her work, baby, and her family time. I worry hell lot about the finance resources or strain it will put on me.

However, this year, the conversation get more frequent and detailed, and I finally get the feeling that she is now really more prepared mentally and emotionally.  

I have to secretly admits I am rather half- hearted in this pursuit of a second child. I know it will set me back in what I hope to acheive. 

Whe she starts telling me her period of "fertility", I know she is really dead serious. So I decide that I really need to get serious too.

I have been half hearted in keeping a healthy diet, especially in this year end holiday. In order not to "short-change" my second child in anyway, I decided to watch my mouth again (what I eat). I also remember when we were trying for the first, we bought quite expensive tonic in the thousands to boast our health and chances. I told her I will go get it again. She said :" maybe just try first" I said our first child is really healthy except inheriting my sensitivitive airway and nose. It might be a coincidence but I do not want to shortchange my future child. 

I mange to find the old prescription of tonics. I went to another more reputable TCM shop and realised in the 5 years, inflation applied to TCM too. LOL

Anyway, the bill is significantly higher than what I expect. I hesitated. The sale person told me I can consider other cheaper options, but I am not sure if the effect will be the same?

I walk around the mall in another round and decided that my future child is worth it.

It now dawned on me having money to pay for all these, is a blessing.

Screw the 30 years plan. Live the day as it it Ba. I am happy thou, I went through the state of flux. At least now, I have my wife aware of my status, she ask to go to the food court during our precious 2 alone time. I myself has also better curb the temptation for indulgences. 

And if after all these positive exercise, there is no progress, so be it. My family is worth it.  Remind me of the romance of  three kingdoms game from Koei. I always play the underdog at the worst screnario using the highest difficulty. I enjoy winning and losing and fighting back to win. When I am assured of winning, I stopped playing. I am living my life like a game, what to ask for

Monday, December 15, 2014

LMIR update- No regret catching a falling knife

More information is released regarding the consideration shares.

I am not sure why Mr Market is giving it a double thumb down, except that it might be feeling depressed.

It went to as low as 30.5 cents. I accumulated in 34 cents, and will be willing to accumulate further at 30 cents, plus minus a few bids.

The latest considerations shares is nothing new, except that the price will be at a minimum of 38 cents. Thus, the maximum of shares to be issue and hence dilution and can be assured.

When I did my sums in my previous post, I already

1) take into consideration the dilution of both consideration shares and placement shares and both at the price of 34 cents

2) Take into consideration Pluit village is going to be around 80% occupied instead.

What are the possible risks then, to distribution?

1) Further weaknesses in operation and occupancy in the rest of the malls

2) Sharp increase in interest rate since they have debts due for financing in the next three years.

It is up to one to decide if indeed 1) and 2) is killing LMIR. Operation numbers in IDR terms has indeed been weak in recent quarters as compared to a year ago. And if the most recent advance distribution is any guide, it is getting weaker. But I am using the weak operating numbers in my calculation.

I look at the Kemang village development:

The residential developments are almost fully sold. Of course, fully sold does not mean fully occupied, but unsold means unoccupied, which is worse. There are another 2 phases of developments in the area.

I also further give a 10% discount to the expected NPI Kemang mall should generate from the pro forma

I believed, I have already heavily discount operation weakness, and found the high 7% yield to be decent and reasonable.

The further weakness could mean 8% yield is now in sight.

Of course, what I am doing is just looking at the knowns knowns, there could be unknowns unknowns.


Sunday, December 14, 2014

Random thoughts: Looking back at 2014

Random thoughts series has nothing to do with fiance, it is more like my open diary.

2014 is coming to an end, I have 3 more weeks to go before 2015, but I am in the mood to take stock.

My career
The high point is the move to a new workplace, playing a new role. Although transition has not been easy and learning curve steeper than I expected, I eased into the new environment without major hiccups.

The core business is unchanged, and still passionate about my job. What more can I ask for. My career is definitely my hit and my high point in 2014.

The only area for improvement could well be I should really stop comparing my new workplace with my previous. My previous work is "glamorous" to a certain extent, and I think I need to stop living in the past. It means a lot to me when my colleagues say that they missed me, and actually arrange a farewell lunch, and personal meet up sessions before I go. Some walked up to me and ask why am I leaving, and my presence will be missed. Too much feeding into ego, and I have not snap out of it.

I always make it a point that I do not bring work home. I am always home for dinner, and I believed I put my family in the priority in after work hours.

I think I still have a fiery temper, but I think there are a number of occasions where I controlled it better. I think I experienced what damages a flare up can do to try to be funny again.

I think it is always on my mind to be a good husband and father, but I am not sure of the how, and if I am doing it right.

I do not have many friends that I meet up regularly. My colleagues are not my friends, although I am close to several of them. I just meet up with my usual "gang" for a drink and supper. I think as we grow older, we are more protective, we do not like to talk about our aspirations or problems like when we were younger. I actually think I blog more about more true feelings and thoughts than what I have said with them in the whole of 2014. When I send one of them home, we have more time in my car to chat, there are a few occasions I feel like telling him how I felt about my life, just like how I blog, but I just stopped. That protection gear is mutual.

We usually end up "suan-ing" the most successful of the group. Oh well, the part that gathers the most suan is not his money, he has no lack of them, but rather his ability with women, LOL.

It is only when one "over-spilled" with problems, do we hurdle together and laments about our life, give honest thoughts on matters etc. Otherwise, it is just "wind flower snow moon"

"Me time" is always in greater abundance at the end of the year. Me time is really important to me. I talk to myself a lot (blogging is a lesser form of me-time). When I work, I always find pockets of me time too.

Spiritually, I think I am screwed, no need to go into details here.

Physically, I am out of shape, living more unhealthy, especially towards the end of the year.

The high point really is I started to consciously save money whenever possible, I brought breakfast to work, and go for simpler family dine out whenever possible.

However, I seriously think the low point is I am really too obsessed with money. I think I should really chill a bit. You know what, I seriously believe money can buy "some happiness". Money cannot perform miracles, but some happiness, yes I do think it can do some of the tricks. If money cannot buy "happiness", through buying of "time", why do you aim for financial freedom? You are kidding yourself right?

Money makes me compare with others. No, I do not feel angry or hate others, I seriously don't. I just feel inferior. I feel inferior, not because I has less, I am fine with that too, really. I feel horrible, because I am making little or no progress.

The high point in money matters, is really having the heart to heart "whatsapps" with my wife about finances. I told her given that almost all the household expenses fall on me, I really do not have much disposal income and I couldn't really save monthly. I work out all the expenses, and told her that although I am earning much more than her, her disposal income is actually several times higher than mine. I think she finally gets it. She is not a bad woman, never one to start with, it is my ego that stopped me from letting her know. Of course, I do not think she is ready to share the burden, LOL

The low point is really when I have to sell a winning counter to pay for a expensive overseas trip. Yeah. I know. Although the year-end bonus is more than enough to pay for the trip, it did create "cash flow problems", given that I have an iron bowl job, I do not really keep a big emergency fund. That is basic finance 101, I know. I didn't have it. An irony of a finance blogger.

There is plenty of talk about chasing the dollar, how mindless it is. With all respect, it is mindless only after you have "enough", although everyone define "enough" differently, those who had enough can never understand how it feels to have "not enough". I do not have enough. I am working hard to have "enough", and I seriously do not think I am greedy or set too high a bar.

We can all talk about the wisdom of balancing the life and not allow law of diminishing returns to set in for the pursuit of money. Those are all rich men talk. Most finance bloggers I felt, are rich people. "You" (if you are reading this, chances are you are into investing, whether you own a blog or not) are really nice people, simple and sincere. But "you" are rich in my definition, and they reached the stage of being rich through hard work and perhaps some luck. The light will never see darkness.

The insecurity and the loud "what if I am single..."voice in my heart, is feel I a result of obsession with money. Although it is always very quickly drowned by the choruses of "a happy son, pretty wife and a luxury life (a car), for example, and words of contentment, rich people have their problems, I would still lead my life the same even if I strike toto", etc... The fact is ... I am unhappy about my situation, and I do not know what more can be done. I told myself that I should stop comparing myself with investors but maybe with simpler people. Too bad, the fact that I have built up knowledge of it for a decade, however inadequate, means I should be making full use of that knowledge to meaningful actions with significant consequences.

Looking back at 2014, the longest paragraphs is reserved for money. Obsession! On well, if you are expecting a portfolio review when I talk about money, I am sorry to disappoint me. Although I have more misses than hits this year, and returns is mildly negative perhaps? (didn't really count), I am still comfortable with my get dividends and buy more when price drop strategy.

Seriously, keeping a diary perhaps is better than blogging? I sure sound like I am pandering to get sympathy here. Should I actually publish this? LOL.
Maybe I should ... The blogger-sphere has enough success stories, time for diversity. LOL

Have a happy thanksgiving session.


Friday, December 12, 2014

Reits and the common grouses

I have heard of these grouses too many times, and is guilty of some of these. But are these really the issue, are there ways to look beyond these?

1) Fund raising
It diluted the shareholders' interest.

Me: How else would you like to do it, there is 35-60% limit and soon to be universal 45% Loan limit.

2) Shares placement 
Damn, why don't they do a rights exercise instead?

Me: Placement exercise is faster, and does not required the big owner to cough out cash. I used to prefer rights, now, if the fund raising exercise is less than 10% dilutive and is used in yield accretive exercises, I prefer placements.

3) DIscount in rights or shares placement.
WT... Why is the discount so excessive? 

Me: if there is no discount, it is difficult to get big players. Usually, if the discount is 1-3% plus the dilution effect, it is considered not too bad. If it is more than that, it reflected the weakness of the reit. LMIR and Sabana are weak in this respect compared to Ascendas Reit. 

Also, AIMS rights discount is rather excessive too, but Mr market see it as a opprtunity rather than Weakness. Again, it is not the discount per se, but the track record of using the money for yield accretive accquisition.

4) Payment of fees in the form
Of units.
This leads to further dilution. 

Me: But if payment is done in the form of cash, there is less cash for distribution at the end of the day anyway. However, I do not take kindly to management who received the units at discount at sell it off almost immediately. 

5) Management fees or performances fees pegged to AUM and not DPU.

The management just do dump and recycle and earn management fees at the expense of shareholders!

Me: There are indeed management who do that. But it's the track records of management that matters, not the pegging to DPU or AUM per se. Some
Management pegged perfoRmance fees to DPU growth, but never deliver. Instead they keep buying and buying to earn acquistion fees and earn higher base fees. To me, there is a BIG BIG difference in buying a 92% occupied mall at 10% dilution cost and buying a 50% factory at 10% dilution cost!!

If u see management that do that, run! But do note that management changes. Vested and biased, but LMIr past acquisitions are yield destroying, they did highly dilutive rights when gearing is low to buy mall. Straight in your face dumping in action. Alvin, the new CEO, reduce dilution by raising less money to buy a 92% occupied mall (that is new), and stretch cash and gearing. It's shows hell of a difference in management style. Who is Alvin? The ex-manager of PST, the only shipping trust that is privatized and is giving a yield of close to 9% to me. Too bad...

Keppel reit managers are accused of that too, but when the yield improve, everyone keep quiet again.

6) Dividends reinvestment plan.

Me: This is something new, have not heard any grouses about it yet. You can use your dividends to buy back units at discounted price.

Again, it depends on the discount. But my gut feel and infoRmal tracking seem to suggest reits with dividends reinvestment plan seem to do worse than  those without. 

But, if u ask me. If The big boss take units as dividends when it is trading above NAV, and the boss holds it, it is not that bad a deal. 

7) Weak parent or sponsor, or small stake  of sponsor
If it is so good, why didn't the sponsor hold more of it?

Me: this is one grouse I considered valid. Also, there are few real tangibles for a strong sponsor.
1) pipeline of acquisitions
2) big sponsor and reit with big AUM usually has lower interest costs 
3) possibility of bailout by parent when shits happen. ( don't worry, as retail investor, you are screw when that happens, read conclusion)

8) lousy management 
Anything that goes wrong, blame management.

Me: I gauge management in 3 areas.
1) portfolio management, ability to keep properties at tip top conditions, and occupancy rate high as compared to industry norm and achieving positive rental revision when rent is lower than spot rate. 
2) Capital management. Spreading out refinancing needs with different refinancing sources. 
3) growth management. Clear track records or pattern/predictability of fund raising to acquistions
I, however think, it is unfair to blame
Management for lower revenue due to currency exchange weakness. Blame them on wrong hedging would be more justifiable.
Blame them on timing of fund raising. As no one can predict the performance of share price in the short term, that a share price under perform and fund raising go ahead is a tad too demanding. 

REITs as a asset class, has its inherent flaws and risks. Understand it so that there will be less grouses for your own health benefits. LOL

Reit as a model, is inherently flawed. In the case of rapid falling property prices due to falling occupancy, reits will be in serious trouble unless their ah gong ( parent) come to the rescue, by then, the rights will be highly dilutive and heavily discounted.

Silly talking again

Thursday, December 11, 2014

Random thoughts: how to draw the line between entertainment And corruption

I read with vested interest in ST ex-employees charged in court for using bribes to get contracts.

I do not want to go into the moral high grounds... So far, what I read was the bribes was given to get contracts, I have not read whether their wallets are fattened directly. I also read the CFC was charged with falsify entertainment accounts.

I SPECULATE only here, that the bribes were dump at the "entertainment expenses" during auditing.

I do not work in the business work, this is just my naive thoughts, maybe battle hardened readers can answer?

I know entertainment is part and parcel of doing business in Asia. From my conversations with friends and relatives,I know the west, ( Germany, specific is the country my relative talk about), might not put so much emphasises in entertaining cilents to get a contract. 

I have heard also how "elaborated" entertainment can get, wine, women, etc. If entertainment expenses is legal, in the sense that it can be claim under tax rebates, how do one draw the line between corruption?

The amount involved? 

When in Rome, do as the Romans do. 

It does not apply when corruption is concerned? How to win that contract.

Call me inmoral, but I am not sure if there is double standard here, but if it is just "do whatever, just don't get caught". Good luck if you are caught.

Monday, December 8, 2014

LMIR - Not too bad if you ask me

The Kemang acquistion deal has more details.

Discount rate of 8.4% vs a lower dilution of 4.8% (for 40 mio raised instead of the initial planned 110 mio), seem excessive to me. Apparently, Mr market agreed in the morning.

While I appreciate the lower dilution and the utilisation of cash from the 2013 placement, there are also more questions that need to be answered.

About 100 mio is raised in the last placement, more than enough to cover the 70 mio difference the initial placement exercise want to raise.

So altogether, 170 mio of cash(excluding the 40 mio and consideration units to be issued) need to be set aside for this acquisition. Looking the Q3 cash level of 223 mio. it seems that the lower dilution is a pleasant surprise.

However, the pleasant surprise is offset by a nasty surprise of only 0.55 cents of advance payment. while it is not confirmed, lets assume the full quarter of distribution is 14% higher (13 days more out of 90), which is 0.62 cents. It is still an almost 10% fall in DPU QoQ from 0.69 cents.

The Pluit Village effect coming into play?

Looking at the currency exchange for the past 6 months, hardly any big swing to answer for that lower distribution

I almost wanted to accumulate at the lower price, until the lower distribution caught my eye.

A quick calculation:

Total dilution from equity raising and consideration shares will be about 10%.

So, 0.55 cents could be a conservative new normal QoQ DPU going forward for the next 1-2 quarters with all the one-off costs causing more downward pressure.

Assume 15 mio increase in NPI for distribution, yearly DPU should 2.75 cents, which translate into a yield of 7.9 % annually.

Seem not too bad a deal if you ask me.

Monday, December 1, 2014

Do you own companies in the O&G sector?

If you invested in any O&G company in post GFC. You are most probably staring at losses. If you bought more than 1 year ago, it should be "ouch"

In fact, it is during these moments of loss, that it provide a very opportune moment to stare at yourself at the mirror and ask if your mind is really in coherence with your method.

I am vested with SCI with paper losses too. 

I have always worried about marine being a drag, but I thought I have gotten it cheap at 4.6. 

How do I feel?

Nothing. And call me shameless, delusional, I am proud of it. 

It took me almost a decade for this mental state. Everyday, I read about oil prices collapsing, to a low of even $40. I do not agree with that, because way before that, shale and several OPEC countries will be fighting for their life. When people fight for their life, creative solutions abound. How about$50, I don't know, and I am not really interested. 

These are the reasons for me  buying SCI, and if you regret it now. You mind is at loggerhead with your method, and u will get into trouble sooner or later.

1) I do not know the bottom. I know SCI will continue to pay dividends althought they might reduce it.

2) Assume Marine earning half, and utilities remain status quo for the next few years, dividends should still flow if they increase payout, even if they keep to the current payout. 10 cents a year of panadol, is not too bad.

3) The longer the drought, the stronger the rebound thereafter. How about a drought of 5-10 years. That is pretty scary, but hey, if you say you are a long term investor who will pick up a bargain, u now know if u mean what you say. Or are u having second thoughts now? Are you thinking how come no stop loss? Why not sell now buy later. Nothing wrong with stop loss or buy now sell later, at long as they are your plans at the initial stage when you click the buy button. To say things have changed, and I am selling now, my plan do not work, could means seriously that u have to change first for your plan to work. 

4) I will most probably have chance to buy ST and SCI soon. If it falls not too badly, the dividends will heal itself, if it falls badly, the yield and entry gets better. 

5) so, am I betting on a recovery soon? You must be kidding? The upcycle just ended. Even if oil goes back to $80
And above, the rigs orders will not come fast and furious.

6) there are better alternatives. This is my weaker link. But do understand good news and valuation are usually negatively correlated.

Are you asking yourself plenty of questions? Are you panicking? 

Ask why. It is important 

Sunday, November 30, 2014

Random thoughts: Key performance indicators

Was overwhelmed with work the last week. Finally get some time off to blog in holiday inn at Sydney. Phew...

My last 2 weeks was plenty of report writing, review of targets and KPIs, setting of new ones, if necessary.

The last 2 weeks of the years are always the low point of my work. Because I seriously think it's a very unproductive way to deploy the most precious resources of manpower and time.

Any value of the appraisal framework are all gone in the wind when managers scrutinized every single word to "score point". I have been through that, I have learned the language of report writing. I also know it's 江湖 arh, my boss themselves have KPI and record to uphold. 

But while I always think the framework for   Institution appraisal and self-assessment in my industry to be robust and useful, they (those that introduce this system) forgotten that theory always manifest itself in hundred and one form when applied. 

What has caused a wonderful tool for self-assessment to become a total waste of 2 weeks efforts doing paper war gaming with all the management hurdle up together, when so much more can be acheived if these capable managers are fan out to "walk the talk" and create value that directly impact out most important clients.

What makes the best intention for progress degenerated into a senseless rat race. 

So, with intelligence (the robust system) we need wisdom, (way it is implemented with humans, who are the the most diverse creature on earth), for a system to run properly.

What ills?

1) human's denial or fear to be at the bottom. Say whatever you want, say it's just for the sake of progress, say it's just a report of what's is done and a process of validation. When you score low compared to others, or when you score lower compared to the past, there is plenty of "stupid pressure" to improve.

2) benchmarks become model answers, just like when I give sample answers to my pupils, 90% of them will write something similar. Because KPI are supposed to be SMART, every organizations set SMART KPI without realizing how silly the whole game is. Hmm... We cannot set a target lower than last year? What nonsense is this? I told my boss, KPI should be scientific. YZJ KPI is to emerge from downturn 1 year earlier than the industry, Warren wanted iirc 5 year CAGR compared with some benchmark like S&P. No business man in the right mind will set 10% growth in top line and bottom line every year. Why not take the "industry average, or competitor average" whichever is closer to our own "results" and add 2% more. Wouldn't that make more sense? How about keeping a target even if it is exceeded, until it is consecutively exceeded for three years?

We cannot set a target by working backwards and using hindsight knowledge, target is forward looking. My boss knows what I am talking about, she just says let's make use of the info we have since we are reviewing a lot of new things this year. The unspoken words that is loud and clear to me: I know what you are saying, but no one do such things in the appraisal, so let's not risk it. Sigh... 

3) The ill of documentation. Not that it is not important, but my colleagues were sharing with me what they have done, I told them it is rather impressive work, I said:" you didn't know the art of reporting but when the "evidence finding" phase come in, you have nothing to worry about" and I offer to help her with her report writing, which I think she appreciate. But being a big picture guy, after I did those projects that I thought were useful, I need to spend a least a few more days after I return from my family holidays to add this column to my table, and that table to my plan to make it lOok proper. Sianz!! I know the private sector take documentation super seriously, especially the banking and finance sector, but I always thought my sector is unique and is beyond these. (oK, sour grape here) 

I believe I  am better than some of my colleagues in my workplace in this paper war gaming. But the actual fighting in the battlefield, I am Not so sure because it is a new battlefield for me, and I rather spend more time hitting the ground.

Not sure why my tone of writing sound so much like grumbling as I write. Anyway, enjoy the year-end people, it's thanksgiving season.

So much to worry, so much imperfections, so much 无奈,but in the end so much is also nothing and nothing is abundance.


Thursday, November 20, 2014

Check on Sino Grandness Food

I think the tax thingy check on Sino Grandness food.

I am not implying anything, just sharing what I gather in an 4 hour search.

I search for top coporate tax payers in shenzhen. The only yield I get is for 2009.



Why did I choose this?

Refer to AR 2010

Shenzhen Grandness Industry has concessionary tax status, hence its rate is 20%, and we can then deduce the tax paid by Shenzhen Grandness Industry is 16 mio RMB

Going back to  the top tax payer list.

Rank 95 and 98 are listed companies in Shenzhen exchange.

Rank 95 is 深圳赛格股份有限公司, I download its past Annual report 2009, its tax paid is 30 mio , refer to page 64, item 29 of the link below


Counter check this with morning star record of provision for income tax
 (http://financials.morningstar.com/income-statement/is.html?t=200058&region=chn&culture=en-US), shows the same figure 30 mio

I think go to rank 98 Company, another listed company Shenzhen Jieshun Science and Technology Industry Co Ltd, (http://financials.morningstar.com/income-statement/is.html?t=002609&region=CHN&culture=en-US),

Its income tax paid is only 7 mio.

Sino Subisdary Shenzhen Grandness Industry= (深圳振鹏达实业集团有限公司), should appear between rank 95 and 98, isn't it?

Maybe someone can enlighten me?

Another ranking of 2012 top tax payers at Shenzhen


Also, Although I can't say I do it very carefully, since it is at night, but I did scan through twice from 50 to 1000 plus, I didn't see the subsidiary Sino Subisdary Shenzhen Grandness Industry= (深圳振鹏达实业集团有限公司

Wednesday, November 19, 2014

Random thoughts: My Adsense application rejected

Was allowed to apply for Adsense just 2 months into blogging.

Was thrilled. After a few days, was given a account and was told that to place a Ad code and wait for final review.

Final review was rejected twice.

Reason was not enough content.

Er... I wonder how much is enough content.

I went through the list of potential issues.

I write in full sentences, no in phrases.

I don't use test site. 

I have few pictures, most are words.

The only problem I guess was a navigation system of pages, which I created with pride. Was something I wanted to do, but never get on with it. 

So I send in a review request.

Thereafter, I was rejected again. 

I might try again after a few months with more posts, but seriously with close to 300 posts, I hardly think the reason is content.

I told my wife I blogged almost about everything under the sun, can the crawling find recurring key words frequently to get a sense this is a financial  blog or whatever they think it is.

LOL, seems like they can't. I do not think blogging only about companies for the next few months will change anything. 

I will do just 1 last effort, thereafter, I will have the serenity to accept that the Adsense challenge is fail.

Here comes: 

Successful bloggers out there, any advice for me?

The list of issues are listed here: ( which I think I addressed )

  • Make sure that your pages have sufficient text - websites that contain mostly images, videos or Flash animations will not be approved.
  • Your content should contain complete sentences and paragraphs, not only headlines.
  • Ensure that your website is fully built and launched before you apply for AdSense - do not apply while your site’s still in a beta or “under construction” phase or only consists of a website template.
  • Place the ad code on a live page of your website. It does not have to be the main page, but test pages that are empty except for the AdSense ad code will not be approved.
  • Provide a clear navigation system for your visitors so that they can easily find all of the sections and pages of your website.
  • If you’d like to monetize YouTube videos, please apply for the YouTube monetization program. Note that blogs and websites that contain only videos will not be approved.

Anything I missed out?

Tuesday, November 18, 2014

Portfolio review 17 Nov

Quite a bit of movements in my portfolio.

Sold SPH and APTT for a profit of 12% and 18% profits respectively.

Both are "victims" of my switching strategy. It might be a bad strategy, see here

The money raised was vested into Sembcorp Industries and the rest kept as cash.

I will just hold out for a while longer.

I will like to increase exposure on my existing counters, in particularly Lee metals.

Lee metals has 2 quarters of poor results, and the price has fallen more than 20% from its peak.

However, I think Lee Metals has a lot going for it.

A lot of people point to the falling revenue and high debt as red flags.

Lee metals has 2 business segment: 1) Fabrication and Manufacturing and 2) Merchandising

The poor demand in steel price and trading has cause Merchandising revenue to plummets.

The expansion of the Manufacturing and Fabrication business seems to be happening at a bad time when weaker steel price offset higher volume, net margin is also affected by higher costs of expansion.

So, Why do I still think it is getting valuable.

1) Track records (read here )

2) Dividends
This year, due to the one-off gain of Austville, 9 months EPS is already 5.99 cents. Assume Q4 EPS is 1 cent, full year EPS would be 7 cents. Lee metals give payout of 30% to 50%, 1 cents would be already be given out , we are then looking at final and special dividend of 1.5 cents to 2.5 cents.

3) Discounting merchandising and trading arm
Theafter, assume Merchandising business is non-existence, it should not add too much to the cost, its warehouse facilities etc are fix costs for its Manufacturing business anyway, no trading of steel, no profits, hardly any reason to believe that this Merchandising will push Lee Metals into loss.

Assume the expansion of capacity did not yield growth in EPS but status quo, just the Manufacturing arm would have yield 4 cents EPS. 2 Cents DPU seem sustainable, and the worst case scenario of 1.5 cents DPU  would also yield a decent 4.5%

4) Outlook
The steel overcapacity has already claim one casualty in China (http://www.hellenicshippingnews.com/china-major-private-steel-company-files-for-bankruptcy-protection/)

I think we are closer to the bottom of steel than we think, how long we stay at the bottom is anyone guess. The important fact is, how much lower can steel price go, since market supply is already doing self-adjustment.

As for demand, the MRT building will continue to provide the demand although competition will be a problem.


5) Debts

Most of Lee metals debts are bills payable to banks, which are short term loans for the inventories. Unless there is no demand for the inventories, the bills get paid once the inventories move. The bills payable to banks is directly correlated to inventories, there is no evidence of build up of inventories, in fact, Q3 inventories in lowest YTD despite the expansion of capacity.


I am also tempted to trade golden agri.

Why do I say Trade?

Golden agri do not have time on that side.

Compare Golden Agri and First Resources, their old profile of their trees is unfavorable. Management has not laid out plans for replanting, and I have never heard of them update their liberia fund, which is supposed to provide the growth in plantations.


As for the worst performing LMIR, I have already blogged about its earlier Quarter result.(Read here)

I think the Kemang Mall is yield accretive and at worst, status quo.

In the short term, there might be some admin and fiance costs relating to the equity exercise that will affect distribution, but the longer term consumer story at LMIR is still sound.

I will not be adding though, as there are pockets of concerns, particularly with Pluit Village mall


I might also add ST engineering. I will just wait for a while.

My radar of companies is now bigger so I believed there are plenty of chances to redeploy the cash from sale of APTT.

Sunday, November 16, 2014

Random thoughts: The paradox of money

The paradox of money is:

The more one  have; the more insecure one feel or the more you want.

The less one have; the tendency for one to blow it all or become a spenddrift is higher.

I speak for myself and some of the people I observed. There are always exceptions or Maybe I am the exception.

When I am in secondary school, I do not actually have a low allowance. I bring $12 to school everyday. However, the problem is, I spend 3 meals out too. I will usually only be home after dinner time. My CCA is hectic, we trained 4 times a week and the training last till 7p.m. On other days, I am either out playing basketball leisurely with my friends or going to a friend house for video games.

I spent a lot of money on drinks. Because after a session of basketball or volleyball, nothing beats a cold coke. That's how I never manage to save on my pocket money. Yeah, I know, the shame is on me. My friend brought a 1.5 liter water bottle to drink whatever he is out playing basketball with us. Strange, I never ask why my friends have money for shopping and Macdonald but I never had enough. 

There were quite a number of occasions where I borrowed money just to have a drink or desert. I remembered hanging out at our favorite hawker center that sell deserts. I have no more pocket money, my senior told me to just order, he can lend me the money. I felt quite pie say, and asked if he is sure he had enough. He said no problem. When the desert arrived, he didn't pay for me. I was very embrassed, he was just playing a prank on me, and shouted in front of the auntie, "aiyo, no money also order!" He laughed and then paid my share. Come to think of it, I super no backbone then, I am sure I will rather starve or just walk away if I have not enough money now. Anyway, I hate that guy. I reminded myself never to do that to anyone. 

My spending habits remain very much the same even when I was in the first year of NS. 

My NS allowance will be spent within the first 2 weeks. Leaving me having to borrow or ask dad for money. I remember borrowing money at Brunei from my platoon mate so that I can enjoy ice Logan at every opportunity at that cursed  camp.

When is the turning point?

During my NS days, our vocation allowance is withheld from us until we officially "graduate". We will get our "back pay" from BMT onwards when we have our passing out parade. It's about several hundreds dollars for 10 months. The rationale was more than half of the cohort will not clear the course, now there is no more such arrangement, the recruits can have their vocation allowance too immediately.

I remember very clearly, in that month of February, my bank account shows more than 2.7 k. My first thousand in my entire life. I was so motivated. Although I did get a CD player and play station with the money, thereafter, I was scrimping and saving to grow that little "prize" of mine. When my platoon mates go to Bugis and Tampines  mall for nights off, I prefer to just go to Changi point to enjoy Bar chor Mee. I don't feel short changed not following  them to the town, I am not sure why I am not interested anyway. 

I even offer to do weekend COS or guard duty for $150. LOL

Towards the end of my NS, when I am more free, I did weekend work and night shifts at NYDC cafe. Ya, I know how to
Make the pizzas and mud pies there LOl.

When I got married, bought house bought car, got our first baby, money become left hand in, right hand out. I struggled very hard and tried to squirrel away some savings every month only to see it gone due to some unforeseen expenses. Thereafter, I become quite a spenddrift and 醉生梦死(self-delude)again. 

I realised I am not the only one facing the parodox. My relative who is very wealthy, spend excessively and more than usual after her son blow her lifetime savings on gambling. Her son clear all her debts, but still live like a king. His wedding costs is at least 4 times more than mine and he went Europe And brought back branded bags as gifts.

Some FAS students that my wife taught has the lastest phone and has SCV at home. I didn't even have SCV. 

Recently, I realised the cause of this paradox is "hope". When something happens and we lost a big chunk of our money, we lost not just money but our "hope" that a better future is gone. 

When our "hope" of a better future is intact, we are paranoid about losing it. 

It is easier to be 潇洒,when one has enough or its "hope" is fulfilled. 

Of course, values played a part too. 

The paradox of money and hope. "Hope" should be priceless and the light at the end of tunnel. 

But hopeless is a disease worse tha helpless. Never give up "hope"

Friday, November 14, 2014

My wife portfolio is doing better than mine

This is quite embarrassing and at the same time amusing.

My wife portfolio is 100% built upon my advice. Since she knows nuts about investing. 

My thoughts then is she should just buy and hold and not get worried about the movement in markets. She should also take less risk than me. 

For fun sake, I tabulate her returns for these 2 years, her CARG returns is 15%! Wow, much better than my active prospecting process! LOL.


There are two reasons. 

1) when I feel that a company is fairly to undervalued, I will buy. And if it goes further below my purchase price, then I ask her to buy some.

2) while I do "switching", meaning selling stock that I believed has reached full value to buy cheaper alternatives, I never ask her to sell unless I think it is "super profits", or I think something fundementally has changed so badly that she need to get out!

3) I ask her to take her 50% profits ( buying at $1.09 selling at $1.36 and they buying at $1.25 and selling at can't remember is $1.6 ir $1.65) on singpost on the EVE of alibaba announcement!!!! It would be a super duper investment and her portfolio would be even better had I not ask her to sell. And the irony is, I feel Singpost 5% dividend is not attractive enough for myself. 

Maybe I should become my wife in my investment journey? LOL

The only lemon I ask her to get is SIA, but even that she is sitting on 3% capital gain without taking into considerations dividends!! 

If only I have my own such "enviable track records". Maybe I should start a new series of post: my advice for my wife. LOL. She even managed to get sembcorp at recent bottom... She must be the lucky star. 

SMOL, if u are reading this, I bet you will say:" see, planning and targets!! LOL"

Just doing imaginative dialogue! No offense 

Wednesday, November 12, 2014

LMIR latest results

Again, depreciating IDR affect results. However, ignoring the currency weakness, there are still pockets of concerns to highlight:

1) Pluit Village mall is the biggest mall in LMIR portfolio. It has a drop in occupancy from 87.9% to 81.6%.

2) In IDR, while Gross rent and net rent is stable, it is the third consecutive quarters of YOY fall. This is despite occupancy rate remaining stable and positive rental revision. The cause should then be due to fall in GTO rent. Consumer spending in Lippomalls has not seen any revival.
If oil subsidy get a big cut, it will be good for Indonesia economy, current account and FDI, and perhaps also currency, but it will have a negative impact on consumer spending.

Although there is no info on GTO tenants, my gut feel and guess will be its Sponsor affiliate/ subsidary, Matahari department store, which takes up to 11% of the gross rental income

3) Dilution of shares due to  the pending equity raising. LMIR shares has been trading below 40 cents now, more shares will have to be issued than when they first assume 40.5 cents issue price. If  issue price is 37 cents, there will 10% more dilution.


The CEO cannot do any share buyback to boast the price before equity raising. The company results while not too bad has no catalyst for price to increase.

Generally, an unexciting results with nothing much to look forward to except the distribution.

Random thoughts: after thoughts after watching Joy Truck

Random thought series has nothing to do with investment, it is more like my online diary.

Yesterday episode of joy truck showed a single mother family whose son lacked much self-confidence even when he is out playing at RWS.

Reminded me of a colleague who lack some self-confidence since she is a divorcee.

We always say words like "it's all in the mind", "always look at the bright side". Of course I do not deny the wisdom of these words. However, I think we sometime underestimate the negative energies of external forces. Of course, there are people with huge reservoir of positive energy to counter this. 

For anyone who with encountered anyone that is having lower self esteem, I bet 50 bucks that he should be facing more failures than successes than you. Of course, again, we can brush it aside that they only have themselves to blame for their failures. Not positive, not self-reflective enough etc. 

Recently, work have its fair share of setbacks, today, I finally realized what is the cause of my imbalance. The clinging of a "name"/虚名。I used to think why my ex-supervisor mind criticism so much. I now totally understand. Not boasting here, but in my ex- work place, I think I shine quite brightly to the extend of shadowing my boss. I always comfort her not to take things too hard and chill. How karma goes in cycle so quickly, my weakness is recently (not very recent, think 2 months liao) exposed glaringly to 2 of my subordinates. Although they are still very respectful and friendly, it constantly haunting me subconsciously, not that is affect my work, but it affect my morale. 

Erh... 虚名啊!in my previous workplace, if something similar happen, I will grumble and complain, thereafter get on with work. Now I will have questions like are they comparing me with their ex-supervisor? It's is the name of "supervisor" that is the baggage, silly isn't it?

After understanding this, I felt so relieved  suddenly. I also felt relieved that I am working hard and saving hard towards my goal, it doesn't matter anymore the money saved is most probably not making a difference, at least I know I am no longer deluding but trying. I know I will still lead my life like this even if I have half a million portfolio. I will most probably leave a lot for my kid? But ... Why be unhappy over numbers. I will strive hard to save even a dollar but not feel poor. 

Whatever it is, everyone will have their low point, I am lucky because I have so much more positives than negatives in my life, once in a while, external forces get stronger, I usually get back In equilibrium rather quickly. If I in the most fortunate of circumstances than 90% of the populace in the world can foolishly 庸人自扰,I surely should show my patience for those having their lows...

How about people with more negatives than positives? They might take longer, be kind and patience. There might be a time and place for tough love, but be more forgiving. 


A bit more feeling reading this and it keep ringing in my head. 

Silly investor 

Random thoughts: world vision gift catalogue and my son

We all have our pet cause for charity.

For me, is world vision.

Their concept of sustaining an Eco- system such that a whole village get lift from proverty is particular appealing to me. 

You can google world vision to learn more. 

Towards the end of year, world vision have the gift catalogue, for u to pledge donation to give blanket, school bag, etc. 

See here:

This is a great chance to teach my son about giving. I promised my son a $40 worth of toys for Christmas.

He had wanted to buy it immediately last month. He keep pestering me to get it immediately, I said No.

A week later, I asked him if he still wants it. He said yes. I say I can get one for him, or if he can wait till christmas, he can get all 3 different series. So which one will it be.

He said he wants it immediately. I tried to teach him the concept of delayed gratification, good things are worth waiting for. After some snake oil selling, he said he will wait till December.

When I received the world vision catalogue, I show him the different gifts, told him how different people have different needs. I asked if he want to help. He says yes. I told him he has no money, how about giving up his gift? He can donate up to $50 and choose his gift for the less fortunate.

He didn't think long and said No, I want my gift. I was very disappointed. But at least he was honest. I tried to persuade him again, I said:" how about giving up one or two of the three sets, so that he can at least donate $12 or 20 over Dollars.

He thinker for a long time and said ok, he will donate one blanket worth $12. I say thank you, how about 2 blankets, he angrily said No, papa, I just want to give up one toy.

Personally, I am quite happy liao. 

Had fun trying this with your kids?


Monday, November 10, 2014

Random thoughts: Advice for a close friend who wanted to start investing

Recently, I talked to a close friend about financial journey, how I seem to be taking 2 steps forward and 1 step back.

She becomes very interested in the concept of investing and compounding returns. She told me she was sold a few times before about the idea and was worried that she get conned by salesmen.

There is so much to explain about investment, so I Think hard how to explain the most important quickly. I thought my explanation to her might be useful to beginners.

How it works:

Assume a 6% return of dividends (Not capital gain), and reinvestment of that return yearly, it will take 12 years to double the capital base.

Build up a base portfolio of say 50K first, keep the rest of the money as warchest to enter the market as correction happens, or bear returns.

I highlighted 2 important criteria:

1) The sustainability of  dividends, the suitability of Company is a no brainer.

2) The ability to accept paper loss of more than 50% without panic, or rushing to sell.

With skills and luck, one can expect returns above 6%, but better not be ambitious at the beginning at stick with 5% and thereabout. 

most important question: in a severe bear market is this one company I would average down, or at least leave it as it is to wait for the sun as you collect "smaller dividends" as you wait 

She ask me to highlight companies, I ask her to do some research on her own.

She surf some blogs and ask me about Sembcorp Industries, LOL. Vested interest, conflict of interest, LOL. Luckily, she told me she get the idea from ASSI, at least I know AK is no con man and is one lucky man. LOL

I told her I can meet her to give my details. In my opinion,

It is important to learn:
Balance sheet, debt ratio

Cash flow, ESP FCF.

Profit resilence.

With these, u know u got a rather sound business.

The super tricky part is that of valuation. 

1) basic is yield, DCF and PE

Also, probability of growth. This is what people say is like betting. 

Lastly, read valuebuddies and investment book. 

Last advice, stick to the plan. Try new strategies only with excess money, and do not be tempted by CFD, penny trading, options, ES and warrants. 

Saturday, November 8, 2014

Random thoughts: Use positive energy to drive change

Random thoughts series has nothing to do with investment, it is more like my personal diary.

I have not been able to be in harmony with myself lately. I know, because I

i) Compare excessively

ii) Felt agitated easily

iii) Felt lousy

I know why.

i) Unexpected expenses pushed back my route map to financial goal.

ii) Money saving exercises attracting the wrong negative energy.

When I said I compare excessively, it is not that simple like how can he can have so much at this age, when I do not. I got past that already. It is more of a comparison with myself, why am I always making 2 steps forward only to take one step backwards (Unexpected expenses).

When you feel lousy about yourself, you feel jealous of others. Bad, negative energy.

The money saving exercises have been successful beyond imagination, until I think it can goes on auto pilot. But while it is beneficial monetarily and physically (less junk food), it has been detrimental emotionally. I lost that Zen feeling for almost 2 weeks now. Constantly worried about my goal. Lower self-esteem, do not feel like blogging, felt like slapping myself after I post something about financial matter, the thought of "a loser talking about stocks" is so freaking loud in my head.

I thought it will go away by itself.

I think it is those moments again in life, whereby the equilibrium is harder to achieved, by when harmonized, allow me to be at a higher plane.

I questioned very hard now, if my Zen is not built on character strength but rather on delusional tactics. I am going to fight for that one inch for my goal and not feel the negative energy.

Better not use negative energy to drive change, even if it is highly effective, just like using rage to do something which one usually would not dared.

Stop deluding, and stop whining. Fight for that goal with all the might, pick up and run, Fall and stand, and run again.

Stop chasing shadows, they are all people, not numbers.

Weird, when I interact with the "super successful", I do not feel inferior, because I am friend with them, and that "loser" voice just disappear and I forget about comparing.

Hope my zen will also take this chance to really step out of the shadow. Stop hiding in comfort. Aggressive pursuit of ideas and contentment is not a conflict.

In short, Zen should not be built on delusional tactics but on
1)  Relationships
2)  Life goals and dreams that will still be cherished at one's deathbed.

Anyway, I think I too free, think too much.


A closer look at ST engineering and Sembcorp Industries latest results

ST engineering aerospace results:

There was impairment losses on an associate. The CEO mentioned there is some restructuring of operations at Europe, and so I assume the impairment comes from Europe.

Looking at the segment results, it is not difficult to pinpoint the problem.

It is the component/ engine repair and overhual segment that saw the plunge in profits, the actual same segment that overlapped with SIA engineering.

Personally, I think we cannot use one quarter of results to assume worse to come for SIA engineering, but I think it is a bit of stretch to lump ST with SIA engineering together.

This segment forms only 30% of ST aerospace revenue, the rest of the segment show more nuance fall in profitability. In terms of geography, Europe form less than 10% of revenue. Further dilute this with the Electronics, Marine, and Land System segment, you get to sleep soundly. I believe "restructured" means scaling down operations in Europe. 

The other regions are still doing well, especially US, I think the third wing of growth, after US, might not be Europe, as the management has hoped. Lets hope China pick up the slack, with the new Guangzhou facility contributing. 

Sembcorp Industries:

India's Andhra Pradesh, INDIA (1,320 MW) power plant, of the 1320 MW capacity, "first 660 MW unit commenced commissioning, on-track for completion by end-2014" and "Secured power purchase agreements (PPAs) totalling 900 MW to-date". This should start to contribute at Q4. 

The pipeline of projects also provide visible growth as long as power rate do  not collapse. 

With the high expansion capex, Sembcorp is now a 0.2 net gearing company. 

Thursday, November 6, 2014

Core reasons for buy and sell decisions (ST engineering and Sembcorp Industries)

The earning reporting season is here again.

It is with some irony that I am writing this.

We always have a list of reasons to buy and sell, and why we think a stock has room to move upwards or downwards.

It happened I am wrong on the nitty gritty but right on the bigger reasons, core reasons.

Let's look at the reasons that I got right.

1) I was looking at both SIA engineering and ST engineering and deciding which to get. SIA engineering actually give better yield. I got ST engineering because it has better FCF, and also because I felt it will be less volatile as it is exposed to four sectors, with the defence/ electronics segment being more defensive. Indeed, when aerospace MRO segment turn, both SIA engineering and ST engineering aerospace segment are not spare, but ST engineering has some buffer.

As for the things I got it wrong, they are plenty.

1) I expect aerospace and electronics to deliver the growth for ST engineering, for this quarter, only electronics deliver, and I believe it is due to its large scale system group. Aerospace is actually a drag on results.

2) I initiate a position Sembcorp Industries today at $4.6. I have been watching it since it go below $5. I always thought that the marine will be the reason for my waiting to be not in vain. Look, lower oil price, higher supply of rigs, keener competition, etc. I however think that utilities is the Gem and the Urban development to be the grower.

Ironically,  while the weak oil prices has been putting pressure on Sembcorp, it is the 20% fall in utilities Net profits that let Sembcorp shoot to the downside. If you ask me, it is a overshooting to the downside. For my previous analysis, read here

The 20% is largely due to one-off items such as IPO gain and impairment. Take away the one-off item, market should not react in this manner. UK operations turning in profits again mean the impairment should be over, Singapore Utility NP actually show a QoQ improvement. China, is the biggest spanner. But as I said again, all these reasons/ analysis are the nitty gritty which I could easily get wrong or right.

Reasons that allow one to sleep soundly are core reasons

I might get many reasons wrong, but if Sembcorp if to say drop another 10-15%, I think I will accumulate, the same goes for ST engineering. I think the long term moat is still intact, and these poor quarterly results provide opportunities for entry.

The fact that they pay decent dividends also provide pain killers during the long wait for recovery.

It is for this reason, that I finally decided to take yet another switch. I take profits off the table of APTT. It has been a good ride, and will most probably continue to be good. But compare to Sembcorp Industries with negligible debt, lower payout ratio, and clear longer term growth drivers, I decided that at about 10xPE, it is Ok to take the plunge. Marine will be clear over the next 2 years, just like APTT. In fact, it is OK if Marine has lesser orders if the whole sector is having lesser orders, better to have smoother cyclical than a Feast and Famine type of cyclical.

Interest rate raise? While APTT as a trust will be affected, the impact on Sembcorp or ST engineering will be much nuance.

Tuesday, November 4, 2014

Random thoughts: playing the mind games?

Random thought series has nothing to do with investment. It is my grumbling, and most of the time, talking to myself, or bo liaoing with myself.

The mind or heart is a scary thing. In my previous post on making savings, I mentioned tapping on the heart to feel poor, so that I do not indulge on any excesses. According to lady killer, it is a call a nuero-- whatever la.

It is kind of scary to play mind games, even with oneself. It is very successful, I have not spent a single cent on breakfast  outside of my office. I toast bread and cheese. 3 bundle value pack of cow head cheese and big value NTUC bread that cost less than $10, and can last me for at least 2 weeks, plus oats bought on the cheap during those weekend getaways to Johor with family. I even packed left over dinner to office for lunch. 

Most amazing is when I went orchard to pick up my wife, I have some half an hour  waiting time to kill. The perfect place and time to get a snack at my favorite Taka basement. 

Temptation is super high. I thought "chill, today will be the day that my feel poor exercise come to an end, it has lasted almost 2 weeks, not bad already!"

I went around the basement twice, several snacks did catch my attention. "Wa, $6.9. So expensive! Forget it" "hey, it just cost $3 for this!, but i just bought little gifts for my pupils"

I stand at the basement, looking at the bakery, looking at people sipping Starbucks. I suddenly feel poor, feel low, and demoralized. I walk away and went to wait for my wife, without buying anything. 

When I was a kid, when I am hard up, I felt actually the same way, lousy. With the lousy feeling, came the feeling of low self-esteem and I keep comparing myself with my friends. I realised rather shockingly, I am falling into the same trap, I am comparing rather excessively. With blogger X, with my secondary school friend. Pretty scary. 

I told myself, I am better than my emotions. I activate this and I can manage this, I can manage this feeling of proverty and overcome the low self-esteem with Zen and contentment. I can have the cake and eat it.

So far, it is not successful. 

Mind game? Sound silly? That's me.

I tried to use this game to lead a healthier  life, going exercises more regularly etc, but I cannot find the feeling where I desire exercise so badly as compare to wanting money badly. So I have not been that successful. 

I tried to remind myself how it feel to be bloated. LOL. 

I remember very strongly how it felt to not give a hoot of others, the self-fulfilling sense of contentment. I wonder if the problems at work is troubling me too, and this mind game is just my imagination.

If the mind and the heart has a switch, I think I am getting closer to switching it on and off. Just has to remember and has the will to switch it. Today, I did an mental exercise of how it felt when I feel contentment. I switch it, it came on. I saw something, I compare and felt lousy. I know I can easily switch on the Zen button and get it over. But... 

Am I going too far?? 

Ignore if u do not understand. Because I don't. LOL

P.S: hope u dun feel conned after reading this whole post

Sunday, November 2, 2014

Correction to "Random thoughts: The singapore property cycles." Post

I made a error in my calculation, and I think I need to point it out. Thank you to Chan Yuan, who leave comments that alert me to the error and generate more discussions. My apologies. Will be more careful with numbers.

I mentioned a growth rate of 2% on non resident population with means 320k more residents every year. The correct figure should be 32k

I also state there is a supply of about 30k units without buyers in the pipeline, that will come on the market over the next few years. 

There is also a link provided by him.

Of which he think only 25% of the residents will get a unit. I assume he use EP, S pass and students.

It is a significant error as the verdict is different. In my original post, I think 30 k surplus over a few years can be absorbed by real demand.

Now, assume all the 25% buy Condo, or become rental demand for condo, and 10% of newly wed go for condo, there is only a 10.7 k real demand to be absorbed. 

If u ask me, how likely is s pass holder buying a condo, I think it is highly unlikely.

So 25% seems generous.

So we need the HDB upgraders ( as pointed out by Chan Yuan) and investors 
To pick up the rest. 

Highly unlikely that there will be no more GLS over the next few years too. 

So supply should be higher than projected, investment and speculative demand should be kept in check due to rising interest rate, and already above average vacancy rates.

I personally know of many people that lament it is tougher to be PR now, so the PR equation will not be significant IMO, given the low base, and the HDB as a first absorber. 

Elections is due latest by 2016. Do not think they will do a U turn anytime soon in terms of letting in PR and workers.

So yes, I now agree that 30K is a concern

Saturday, November 1, 2014

Random thoughts: The singapore property cycles.

I was thinking about property cycles.

I think to myself, there are plenty of unsold units from various listed developers, mostly the luxury segment. 

Given that in another 1-2 years, most will be hit with penalty for holding them vacant, they either can pay the penalty or reduce price to move them. 

When they slash price to move them in the environment of increasing interest rate as well as supply, wouldn't it create a domino effect? 

Maybe it would be a good time for some property shopping for this new property cycle in a year or two.

I decided to check my "theory" or thoughts.


Indeed, there is no shortage of supply, there are planned supply of 74kof private 
Properties units excluding EC units, 12k remain unsold. Not bad, most already have buyers. 

But include the planned GLS and EC, planned supply become 97K, so we need to find 30K of owners over the next few years.

It did not seem really like an oversupply to me. Given that every year, singapore register about 27 k of new marriages. Granted, most will start with HDB. But non-residential population is big in Singapore. About 1.6 million, excluding tourists. These are the people who cannot buy HDB. It used to grow at around 4% annually, assume the tightening continue and they grow at 2%, ,that is still 32 K increase per head. Some will rent, some are families etc, but the 30K supply do not seem scary then.

Refer to page 11, 

Most importantly, I think due to the highly regulated property sector in Singapore, through GLS, it seems supply decisions are based on price, rather than price a result of supply demand balance. 

Looking at the last graph from property cycle. 


The supply directly correlated with the price, I would expect an inverse correlation. I tried to search backwards on the data during the 1997 year, where the property price went on freefall. I could not find detailed details on non residents growth, although from 1994 to 2004, resident population growth rate is stable at around 2.

Anyway, take sometime to take a look at this page

Various macro trends, Sibor does show some inverse correlation with PPI. The next will be vacancy.

The website has the same conclusion, that barring population growth of 0.5% or lower or unexpected economic hardship, there do not seem to be a case of over-supply. Also barring above average of 4% sibor rate, which hardly will happen in the next 2 years, the impact on PPI will be mute too, but watch the vacancy rate.

In conclusion, I do not think waiting for a year or two will cause a big downturn in property cycles. But I think there is plenty of ammo for the news to be alarmists, oversupply, vacancy, interest rate.