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Friday, 11 January 2013

Bearing the fruits of investing


Finally got my maiden interim dividend from ASTRO.Although it is quite little, but the 1.5cents dividend per share is out of expectation. Thought it will not give dividend to utilise reserves for further expansion. I expect more growth prospect for its astro beyond and astro on the go packages. It will attract more affluent youngster to subscribe for the package to generate higher Average Rate Per Unit (ARPU). 

Stock price gone back to RM3, patience is a virtue in any investment. My buy and hold strategy pay-off.


ASB just announced dividend for 2012. Performance not bad, the growth on return is on upward trend since 2008. Seems like my leveraging on bank loan to invest in ASB is worth the magnified risk. This is a type of good boring investment that lay golden eggs.

Thursday, 27 December 2012

MSM interim dividend

























Finally got my first interim dividend from MSM of 8cents/share. 

Thursday, 30 August 2012

Market Outlook for the Month

Speculation is very tempted when coming to huge short term game, alot people though they can outsmart the market. It is just like a gambling and passing a time bomb from one speculator to another and earn the bucks out of their pocket. Fear & greed will ride the euphoria all the way to the sky. Whereas, value investing is a win-win situation between company with loyal shareholders. Investing through waiting the company generates earnings funded by normal business activities. Stick to a good company and hold for long term is the only way for unbeatable gain. When u understand the value and price u pay out of the figures beyond the balance sheet, you will do things differently. (Jacob Chong, 2012)


Pasukhas has made a decent return for speculator for these two days. IPO price of rm0.12 surged to 0.62 on its debut before the closing of the market.

Some syndicate is trading on their own table, there is less likely have genuine buyer at this price level. P/E ratio reach 120 times. Despite bursa malaysia has query on the unusual market activites (UMA) on the company unusual volume of share trading. The market still allowed it to trade and further hikes up to a higher level of rm0.83/share and plummet back to rm0.70 before the market bell rang.

This is the most crazy IPO i have ever seen. Speculator made a 5 folds return in 2 days. This is a WOW! Nobody dare to dive in for a counter. This is a pure gambling, wonder where has the MCCG code in practice. When the music stops, the ball ends, and soon the bubbles will burst!


 


My current portfolio holdings

Will be looking to  hunt some good quality REIT in upcoming investment. Since the KLSE index has reached its euphoria of 1,646. Wait for the bubbles burst and shopping at a bargain hunting price. With global uncertain economic event, my ears will be on Ben Bernake at Jackson Hole upcoming speech then decide future investment decision.

Looking at upcoming IPO, will park some of my fund in ASTRO. Since it is a monopoly player and has a promising dividend policy of 75% of their earnings distributing to the shareholders. Wait the cash cow system works, not more than 2 years, i will have adequate cash reserves to march my fund to property market. 

EPF has channel fund to its special purpose vehicles (quasi subsidiary) to loan out the fund to younger generation to afford to buy a house. They don't need to pay any upfront payment for house below rm200,000. This makes the property more affordable and further hikes up the prices. All these is taxpayers money. They may default the loan repayment and soon the bubble will burst. The property mortgage will soon becomes toxic asset. Citizen retirement fund may not be secured. This is totally bad for economy, the sub-prime loan crisis of US is created by this way. Most of the property in Malaysia is speculated by high net worth foreign corporation and less likely is genuine house buyer. Government should charge higher RPGT to speculator instead of giving out a loan to young generation. The property price needs a cooling off. Otherwise, a graduates with average rm3,000 salary/ mth couldnt afford to own a house in the future.  

I am so blessed that i have investment awareness ahead of my peers. I need not borrow fund from my parents to afford a house in the future. Live frugaly and delay gratification.  I will laugh at the bank when the time comes!

We spend money that we do not have, on things we do not need, to impress people who do not care.” -Will Smith






Wednesday, 9 May 2012

Felda Global Ventures Holdings Berhad (FGVH) IPO

After the listing of a subsisdiary of Felda in june last year, MSM holdings berhad, which was takeover by BN cronies from the hand of reknowned billionaire Roberk Kuok.  whose core business is operating in sugar refinery with an individual IPO offering price of RM 3.38 and has surged to RM6+  within 3 days of trading in bursa malaysia. It has now remained stable in the range between RM5.10-RM5.20. There is 10 lot remained in my portfolio and made an unrealised gain of RM 1,820.00 based on the pricing of RM5.20/share. As a long term investor like me, I would hold it for long term to generate dividend income for such a good dividend counter like MSM.

The holding company Felda is going to be listed in upcoming June. Its core business activities includes plantations, refinery of oil palm and sugar refinery within Malaysia and some offshore land and plantation investment. The main reason is to unlock the value of the company and invite foreign investor to participate in investing in Bursa to encourage groundfield investment through foreign direct investment (FDI). Besides, it is in lines with economic transformation program to help those employee in rural area generate bonus and provide them with ESOS scheme to share the fruitful growth returns of the business.  Let us look into the fundamental of the share based on bookbuilding offer price of RM4.65 with a par value of RM1.00. It will be the third largest share cap plantation company in the world and top ten heavyweight share cap listed in Bursa Malaysia.

(1) Based on the prospectus,  it made a pre-tax profits of RM804.3 million in 2009 doubled from 2005. Its revenue has jumped by almost two-thirds to RM11.8 billion in the same period. Which means it represent a P/E ratio of 18x of its earnings. With the significance growth on its book, there maybe some windows dressing made on the financial statement to encourage participating in investment though.

(2) Compared to pure plantation stock like IOICorp, whose P/E ratio is 16x. The pricing of Felda IPO is a little overvalued. However, the stock price is abit hard to determine since it is not a pure plantation stock, it has land investment and some offshores investment in Asia, Europe and South America. Fluctuation of FOREX may need to take into account.

(3) Besides the IPO of facebook which will be issued in upcoming month, there are also indonesia based plantation stock Bumi Utama to be listed in (IDX). Based on analyst research, the plant of Bumi Utama is younger than Felda existing oil palm tree, which means after getting funds from the IPO. Felda may incur large amount of CAPEX to replant its plant. Oil palm would have to wait at least 5 years to become a "cash cow" assets.  This may deter foreign investor from investing in Felda.

(4)  Since it is a government backed company, Koperasi Felda is owning 51% stake of the company directly and indirectly. Government may not want the share price to plummet on first day of trading. This may depress the employee of koperasi felda, which means government may pump in money to the stock on the first few days.

(5) Election is around the corner, which means government may try to preserve the share price. Felda employees vote is threshold importance to them.  Otherwise, opposition party may take out the issue to attack BN cronies. Their throne will not be secured.

Based on the above issue, I personally think that the fundamental of the company may not be very optimistic. However, based on other factors considered, it is a good hit and run share for the first few days of trading. It is similar to PCHEM and MSM. Although is little overvalued, but market will still have confident for them in long run since they are government owned.  I personally applied 20 lots of the share through MITI which is half of my personal net worth with the IPO pricing of RM4.65/share.

















Wednesday, 21 December 2011

ASB 2011

ASB finally announced their dividend for 2011. Not bad though, slightly better than last year. Dividend 7.65% and Bonus 1.15%. ASB investor can check their dividend in any Maybank, RHB bank or CIMB bank branch and post office or PNB outlet on the 3rd of january 2012.

                                   

Friday, 16 December 2011

Bursalchemy Pasar Malam Theorem

Has been a long time i didnt touch my blog. I would use a simple way to explain some knowledge of investment through my learning outcome.

Pasar malam theorem.

Arbitrage
Let say Abu went to Sunway Pasar malam  saw a nice T-shirt was selling at rm10. The demand is quite high over there, everyday also sell until stock out. After that, he went to visit Pasar malam in setapak, the same brand and design of T-shirt was selling at rm9. Then he bought the T-shirt in bulk at credit in setapak's pasar malam and sold it at rm10. Since the demand is there, he can easily secure the sales at rm10 or lower. Any price range above rm9 he can still make some small profit rm1 or lower.

In the capital and currency market, this is usually occured due to pricing imperfection. Our capital market are efficient but not perfect. Due to supply and demand, the price fluctuate everyday. In the short run, our irrational market is a voting machine. However, it will be a heavyweight machine in the long run. Therefore, arbitrage is totally risk free. However, this kind of opportunity is rare, since nowadays markets are all computerised, any inefficiency will soon be corrected by the market shortly.

Warrant
Let say Abu went to Setapak's Pasar malam and saw a T-shirt he likes, but he doubt rm10 is a fair price and he also not sure whether the merchant will raise the price somewhere higher than rm10. To secure his position, he would like to give the merchant rm0.50 premium to hedge it at that price. So that the he can buy at that price next day if Setapak's pasar malam shown adverse pricing.
The second day, he went to setapak pasar malam and saw the t-shirt was selling at rm9. Since the price is cheapo, therefore he will not exercise the warrant in sunway's pasar malam because he can get the same shirt in setapak market.  He would let the offer lapse. Then total cost  of the t-shirt would be rm9.50 for Abu. He can save rm0.50 from buying at sunway since it was selling at rm10. The sunway's merchant also would be happy to keep the rm0.50 premium free paid by Abu to insured against the fluctuation of price.

 Warrant is similar with option. It is traded in the secondary market. It is sometimes act as equity sweetener.  For investor, they are said to have risk a small amount of premium so that they can get certain number of ordinary shares after exercising the warrant in the future. They will make a gain,  if the security price is traded higher than current price.The prices are subject to fluctuation everyday. You either call or put an option. However, Investment bank will usually issue warrant (put option) when the overall stock market is in bull. They will bet the stock will plummet in near future, investor who call the option are speculate against the price will rise in the near future. Investment bank will still make profit even when market slump. As an investor, we should make our own judgement whether it is worth calling the option. There are 2 types of warrant in the market.

European style warrant- Investor can only exercise the warrant upon maturity.
American style warrant- investor can exercise the warrant at anytime without time control.

Think. risk control.

Saturday, 26 November 2011

ASB Financing. Is it worth?

This is really a busy month and i am preparing for my coming ACCA exam.Totally exhausted with all those hectic revision.

Today, i want to discuss about a PNB product, Amanah Saham Bumiputera (ASB). Those bumiputera out there must have heard about this scheme before. It is the best investment in the town for those who are really prudent. Why i say so? because its risk is near to zero (backed by government) and the return is quite high. The maximum investment for an individual is up to rm200k.

There are 3 local bank currently providing this scheme in the market. They are CIMB bank, Maybank and RHB bank. Should we take up the loan? Does it really worth to take the risk? Let us carry out some research here.

CIMB bank     BLR-1.65%     longest tenure 20 years
Maybank         BLR-1.65%     longest tenure 25 years
RHB bank       BLR-1.55%     longest tenure 20 years
EasyRHB        BLR-1.00%     longest tenure 20 years

All loan package is built-in with MRTA insurance, thats mean if you are deceased (touchwood). Your dependent can inheritate the loan borrowed and no need to repay the remaining obligation. The loan is collateralise by certificate, if you default the loan payment for a consecutive of 3 months period, the bank has the right to cancel the loan on behalf of you. Since the bank got the certificate as collateral, the loan is also easy to be approved.
     
Let us look into the past return of ASB,

Year Dividend (sen) Bonus (sen) Total (sen)
1990 8.00 6.00 14.00
1991 8.50 4.00 12.50
1992 7.50 5.00 12.50
1993 9.00 4.50 13.50
1994 9.50 4.50 14.00
1995 10.00 3.00 13.00
1996 10.25 3.00 13.25
1997 10.25 1.25 11.50
1998 8.00 2.50 10.50
1999 8.50 1.50 10.00
2000 9.75 2.00 11.75
2001 7.00 3.00 10.00
2002 7.00 2.00 9.00
2003 7.25 2.00 9.25
2004 7.25 2.00 9.25
2005 7.25 1.75 9.00
2006 7.30 1.25 8.55
2007 8.00 1.00 9.00
2008 7.00 1.75 8.75
2009 7.30 1.25 8.55
2010 7.50 1.25 8.75

Based on the historical performance, the dividend has never dropped below 7.00% p.a. Besides, the bonus are counted based on the average historical savings inside your ASB account for the past 10 years. Thats mean the longer you save, the higher the bonus will be.
The interest for the loan is count based on reducing balance method. Therefore, the longer you finance the loan, the interest will be lower. Whereas, the ASB investment is based on compound interest basis.

I personally found that CIMB has better offer. Let me do an assumption here, the bank loan is based on compound interest basis

Take up ASB Loan rm100k, Interest BLR-1.65% throughout the tenure,
Monthly commitment will be rm657 for 20 years.

rm657X12mthsX20years= rm157,680

substitute into compound interest formula,

rate of interest for bank is unknown for compound interest basis, 
P(1+r)^n
100,000(1+r)^20= 157680
r= 2.303%

In worse scenario, we still can get 7% dividend from ASB scheme. After doing some calculation and logic thinking, my conclusion is taking up the loan is more profitable than self savings. It is a simple arbitrage, you use a lower cost of financing to invest in a higher return investment. It is leverage on bank resources to earn more money.

To take up this loan, we must be very patience and discipline, do not use the dividend to cover personal expenses or spend on luxury (before the maturity of the financing) but retain it in the subsidiary bank account.

The risk to be considered are:

1. OPR shoot up, BLR will goes up proportionately, but for short term it is unlikely. Since our government is encouraging foreign direct investment (FDI), We need more foreign fund to encourage GDP growth. interest too high will drive out foreign investor.

2. ASB dividend drop to a certain unexpected level. Refer to historical return, I think the chance of occurence will be very low. (if this really happen, you can cancel the loan at any time, since the lock in period is 3 years, there will be no penalty after 3 years if you cancel the loan.)

Below is my strategy.

(1)  Create an Airasia savers account from CIMB, so that you can earn higher interest for the fund inside your subsidiary bank account. (since the interest rate p.a. is 1.6%, quite high for savings account though) for the sole purpose of financing this loan. (dont get an atm card to avoid temptation on spending it and can save rm8 annual atm charge.)

(2) Dont take full rm200k instead of taking rm100k loan from the bank, so that if you have more cash flow every month, you can pump the money inside the account until rm200k full. Finance it for a tenure of 20 years. (the longer the tenure, you will have more free cash flow every month).

(3) Monthly commitment is rm657 (based on BLR-1.65%), thats mean ur yearly commitment will be rm7,884.

e.g. if you can save rm300 every month, you can transfer it to the subsidiary bank account monthly. Take out rm4,284 (rm7,884-rm3,600) from your ASB account and inject to your subsidiary bank account. It your monthly savings is not enough to cover the loan, transfer the ASB account fund to your CIMB bank account as a last resort. Maintain a fixed float of at least rm1,000-1,500 inside the account as a cushion for margin of safety.

(4) Arrange standing order with the bank to debit the monthly commitment of rm657/month from the subsidiary account.

(5) After 1 year, let say ASB will declare dividend of 7% (worse scenario, the yield will be higher if dividend higher), so you will get rm7k and havent taking account of the bonus and your existing savings inside the ASB. Then take out the dividend of that year and transfer to the subsidiary account and let the bank direct debit again.(maybe you need to contribute more rm600-700 yearly from your own pocket if worse scenario happened).

Do this consistently and let the compound interest do the job, after 20 years, the rm100k all is yours. Although rm100k may not be as much as today value due to inflation. But you can hardly find any investment better than this in the town. Your initial capital is only rm7.884-10,000 and get rm100k ROI after 20 years. (Thats mean your ASB is compounded at 12.00% at least if you substitute in the compound interest formula.)

If any bumiputera investor wishes to take up this loan, feel free to contact me, i can introduce a financial consultant  to you all.

Happy investing. =)