The email address in "Contact AK: Ads and more" above will vanish from November 2018.

PRIVACY POLICY

FAKE ASSI AK71 IN HWZ.

Featured blog.

1M50 CPF millionaire in 2021!

Ever since the CPFB introduced a colorful pie chart of our CPF savings a few years ago, I would look forward to mine every year like a teena...

Past blog posts now load week by week. The old style created a problem for some as the system would load 50 blog posts each time. Hope the new style is better. Search archives in box below.

Archives

"E-book" by AK

Second "e-book".

Another free "e-book".

4th free "e-book".

Pageviews since Dec'09

Financially free and Facebook free!

Recent Comments

ASSI's Guest bloggers

Stock picking: Spotlight on Marco Polo Marine.

Friday, February 22, 2013

I received a very well written email from a reader with some very good questions. I have a gut feeling that the questions and my reply could be of interest to other readers and decided to publish our emails:
 
Hey AK,

I have been quite an avid reader of your blog since I chanced upon it last year. Your blog has taught me a lot about investing, in particular, fundamental analysis (I was a complete klutz on this before). I believed more in technical analysis back then, but your blog has shown that a good investor has to accord time and effort to both technical and fundamental analysis, in order to make rational decisions. So, just wanna say a word of thanks for showing me the ropes and helping me be a better investor.

I find your analysis very objective and illuminating, and truly I am learning something new with every post you publish. But above all, I am struck by your humbleness and willingness to help other budding investors out with tips to aid our financial journey. I dare say, precious few who are blessed with such good grasp of the market as you are, will be willing to share this with other people.

If you don't mind, I like to ask you a question on fundamental analysis, as I concede I am really terrible at it. Take for instance, Marco Polo Marine, where you have astutely highlighted out its sound fundamentals and strong economic moat. Can I just enquire what made Marco Polo stand out as an outstanding stock to you in the first place i.e. how did it get on your radar? I read that you noticed the high insider trades... is monitoring of insider trades a first requisite step to identifying strong fundamental plays? I'm asking because, there are so many companies out there, and one cannot possibly research everything, so I was wondering what aspect of their fundamentals you will notice first, before it gets on your "monitoring list" for further research? (Btw, I have taken your advice, and taken a closer look at MPM and am now vested in it too - so really wanna shoutout a word of thanks)

Secondly, and still on MPM, I understand that a great portion of the moat comes from the cabotage law. Would you say that actually this makes MPM rather vulnerable to policy uncertainities in Indonesia? For instance, if Indonesian authorities face strong appeals from the Indonesian oil and gas lobby and then decides to rescind the cabotage law - then surely MPM could be, pardon the pun, be left high and dry, its moat all gone. Additionally, is reflagging one's vessels under Indonesian colours a substantial barriers to entry? If not, then we could see supply (in terms of reflagged vessels) coming back into play, eroding any advtg MPM had. Of course, I do still have my
eye on the attractive P/E of MPM at 6 vis a vis its peers e.g. Jaya, ASL. But in your opinion, if not for the Cabotage Law, would the P/E of 6 be sufficient reason for you to purchase MPM?

Keen to hear your thoughts on the matter, and once again, thanks for all your insights.

Cheers,
T..


 
 
My reply to T..:
 
Hi T..,

First off, I don't give advice. I am not allowed to. My blog is a place where I talk to myself and I cannot help it if people overhear what I say (as I talk rather loudly). If overhearing me talking to myself has helped you on your own journey, I am happy. ;)

Regarding Marco Polo Marine, yes, it was the continual insider buying that prompted me to dig into the stock. Insiders could sell their stakes for myriad reasons but to increase their stakes and by large amounts, it could only mean that they think the stock is undervalued.

Keeping a tab on insider buying activities is one way we could possibly find undervalued stocks since insiders know their businesses best. Of course, it should not be the only thing we look out for. We would still have to look into the numbers from reports and look at analyses by research houses if they are available.

As for how to generate a "monitoring list", I try to read as much as possible. I like to get a feel of macro economic trends which are helpful in telling us about the health and prospects of different sectors and countries. This is, of course, a top down approach.

This should be followed by a bottom up approach as we look at different companies with businesses in the sectors and countries which are likely to do well. Of course, this is where we examine the income statements, the balance sheets and the cash flow statements. Then, there are all the different ratios.

Having done all these, I would look at the charts as I believe technical analysis provides a window into the collective pyschology of market participants. In a bearish situation, cheap could get cheaper. In a bullish situation, dear could get dearer.

Then, make a decision. Of course, decision making is based on the best knowledge we have at any point in time. That best knowledge must also include the risks involved from a fundamental as well as a technical perspective.

The most important knowledge of all is self knowledge. Can we accept the risks involved? Don't just think of the possible gains. In the event that we should suffer a paper loss, how would we probably react? I always say that a peace of mind is priceless.

Now, all these might make me sound like I am infallible. I am not.

Sometimes, I get lazy. Sometimes, I make mistakes. Sometimes, I get in too early. Sometimes, I miss the boat.

Before I digress further, on your concern that Marco Polo Marine's moat might dry up, I would say it is a pertinent question.

I cannot make any representation as to how probable a change to the cabotage law in Indonesia is going to be. However, if we take the cue from Mr. Lee Wan Tang who probably knows the sentiments of the Indonesian government better than us, then, it is a reasonable risk that we are accepting as investors, isn't it?

Foreign competitors could reflag their vessels if they are willing to take a minority stake in a potential Indonesian counterpart. Whether they are willing to do this, I don't know.

Would Jaya be willing to go into a joint venture with an Indonesian company, taking a minority stake, so that 3 of their OSVs (in a fleet of almost 30) could get back into Indonesian waters? Your guess is as good as mine.

Marco Polo Marine was able to react very swiftly and decisively to the cabotage law because the Lee family are Indonesians and the Indonesian company that Marco Polo Marine took a 49% stake in was their own. Indonesia is Marco Polo Marine's own turf, so to speak.

To answer your last question, although the cabotage law has been fortuitous for the company, without it, Marco Polo Marine's much cheaper valuation against its peers in the sector would be compelling reason enough for me to buy its stock as sector fundamentals suggest that positives are on the horizon.

I hope that I have addressed all your concerns.

Best wishes,
AK
 
Related posts:

New coins for Singapore!

Thursday, February 21, 2013

The new $1 coin is beautiful! Actually, all the coins look beautiful!


I don't know about you but just by looking at them evokes a feeling of pride in me. I feel proud to be a Singaporean.

I think the MAS has done a good job here and I can't wait to see the physicals when they start circulating in a few months from now.

"Coins reflect the events, persons or symbols significant to a nation. The new series coins depict local icons and landmarks that are familiar to Singaporeans and reflect various aspects of Singapore's progress as a nation," said Ravi Menon, Managing Director of the Monetary Authority of Singapore (MAS).

Read full article: here.

Asia's 50 Best Restaurants!

Want to know which are Asia's 50 Best Restaurants?

A list of top 50 hottest new restaurants in the region is the result of careful selection by over 900 leading chefs, food journalists and gourmands around the world.

Find out more at: Asia's 50 Best Restaurants!

The Official Financial Services Sponsor for the awards is Diners Club International (DCI).

Over 400 invited guests will attend the event in Singapore including many of the top 50 nominated chefs, the media, VIP guests as well as sponsors.

Why a wealthy nation cannot afford to retire?

Wednesday, February 20, 2013

CNBC just published an article titled "A Wealthy Nation That Can't Afford to Retire" a few hours ago. Instead of cutting and pasting the entire article which some have done, I would like to pick out a few paragraphs and make some comments.







"According to a latest study by HSBC, the citizens of this country, which has one of the highest per capita incomes in the world, face the grim prospect of running out of their savings almost halfway through retirement as the high cost of living and increased life expectancy eats into their nest egg."

It was not stated how HSBC measured "nest egg". Was it just money in our CPF accounts?

Now, I believe that anyone who is preparing to retire with just money from his CPF accounts need to be shaken by the shoulders (quite firmly). Of course, the money wouldn't be enough.

"More than half of the 1,000 Singaporeans interviewed for the survey said that either they were not adequately prepared or not prepared at all for retirement as they expected to continue working beyond the age of 65 to be able to afford their desired lifestyle."







So, more than 50% were not adequately prepared or not prepared for retirement. The rest were adequately prepared? This was just a measurement of sentiments on the street, wasn't it?

What people feel is one thing. What is the reality? How many are actually adequately prepared for retirement? How do we measure this?

Further on in the article, I believe there was a chance to do something more constructive when they interviewed a Mdm Janice Tan. However, it didn't happen. Let me try here:

"Tan and her husband are currently paying for the education of their two children, including a 21-year-old daughter studying in Perth, Australia. While Tan, an administration professional, hopes to retire soon, she says she knows it might be another 10 years before that happens."

Mdm Tan, if you hope to retire earlier, why did you send your 21 year old daughter to Perth to study? I do not know which course your daughter is doing but a quick check revealed that the annual tuition fee for Economics is A$22,500 in Murdoch University. Over a three year period, if fees stay constant, you would have spent A$67,500 on school fees alone for her!

Would it be too much to assume that a three years stay in Australia for your daughter could cost some S$160,000 to S$200,000 in total? That is a significant amount of money. (A$1.00 = S$1.28)







"With retirement savings drying up at a time when Singaporeans are most vulnerable to health problems, funding medical bills could become a big burden, HSBC said. Tan backed that sentiment, saying that medical bills from a motorcycle accident that her husband was involved in last year have been a drain on their finances."

Mdm Tan, did you and your husband get a good H&S insurance policy with a rider? I hope you have policies that pay out in case of critical illnesses. I also hope that you have policies that protect your earned incomes too as you seem to need them still.

Articles such as this one from CNBC do little other than to sensationalise issues. Unfortunately, few would bother to ask the questions which matter. Some would instead use such articles to fan the fear and resentment on the ground.







Yes, costs are rising and this is not about to change. Is complaining about rising costs going to change anything?  Is fearing rising costs going to change anything?

We should, instead, ask if we are doing enough to prepare for retirement in the face of such challenges.

I would suggest a critical look at our lives and to examine ways to increase income and reduce expenses. While we are at it, look into getting good insurance policies to safeguard our earned incomes (if we still need them) and to take care of expenses related to H&S as well as critical illnesses.

Related posts:
1. Millionaire or not, plan for retirement.
2. Enhanced incomeshield for my mom.

Read CNBC article: here.

Marco Polo Marine: Insider buying continues.

Mr. Lee Wan Tang, Chairman of Marco Polo Marine, purchased 1,000,000 shares at a price of 42c per share yesterday. This was disclosed in an announcement today.


Mr. Lee's direct and deemed interest in Marco Polo Marine increased to 59.52% (202,811,374 shares) with this latest purchase. He has, in slightly more than a year, since December 2011, increased his interest in the company by about 9,000,000 shares.

Conventional wisdom tells us that a high level of insider ownership suggests that the management's interests are aligned with shareholders'. When there is a meaningful increase in insider buying activity, shareholders should be more than just interested.

Insider buying at 42c a share could explain why those of us who have been waiting to collect at 41.5c or lower have not been able to get our orders filled. Technically, immediate resistance is at 43c, the last high.

Nobody wants to buy at resistance and this is probably why volume has reduced which suggests an overall picture of caution.

Insiders probably don't care much for technicals and using insider buying activities as a guide for short term share price performance is probably not a good idea. However, using the same in our longer term investment decisions could prove to be more fruitful and for those of us who bought some at 42c a piece, we could take comfort from knowing that Mr. Lee did so too.

Conservatively, I value Marco Polo Marine at 50.5c a share which is 8x PER based on the EPS of last year. They are likely to see higher earnings this year. So, keeping 8x PER as a guide to a fair valuation, 50.5c could turn out to be an understatement.

See announcement: here.

Related posts:
1. Marco Polo Marine: Indonesian Cabotage Law (Part 2).
2. Marco Polo Marine: Still cheap.

Soup Restaurant: Special dividend declared.

Tuesday, February 19, 2013


When Dian Xiao Er became independent of Soup Restaurant last year, the expectation was that Soup Restaurant's earnings would be hit badly. If we look at the year 2011, 42% of Soup Restaurant's profit was contributed by Dian Xiao Er.

In 2012, although profit from continuing operations, net of tax, jumped 126.9% year on year, removing the contribution by Dian Xiao Er reveals a more modest increase of 59%. Even so, we should take note that the performance of Soup Restaurant was boosted by a one time gain from the divestment of Dian Xiao Er to the tune of $3.4m.

If we examine my initial motivation to invest in Soup Restaurant last year, a big part of it was because I thought the probability of a special dividend being declared was quite good. Of course, since I like Soup Restaurant's food and would patronise their restaurants monthly, there is the benefit of getting a discount as a shareholder during my visits too.

Well, the special dividend did not happen then as the management decided to plough the money back into the business. However, since then, I have received dividends twice and this would be my third round of dividends.

Total declared this round:
Interim dividend: 0.35c
Special dividend: 0.8c
Final dividend: 0.35c

As some would say "third time lucky" and a special dividend has been included this time round. A total dividend payout of 1.5c translates into a dividend yield of 10.95% based on the high of 13.7c per share touched this morning. Without the special dividend, dividend yield would be a less exciting 5.1% but still not too shabby.

See financial statement: here.

Related posts:
1. Soup Restaurant: Special dividend?
2. Soup Restaurant's S-card.

Oz The Great and Powerful!

Monday, February 18, 2013

I have always enjoyed movies by Disney. I guess I am still a little boy at heart. ;-p

Well, a new Disney movie is coming to town!

“Oz The Great and Powerful!”


When a small-time circus magician was transported from dusty Kansas to the vibrant Land of Oz, he thought he had hit the jackpot until he met the three witches who were not convinced he was the great wizard everyone had been expecting!

I have always enjoyed the messages embedded in Disney's movies. This movie is probably no exception as the magician transformed himself not only into a great and powerful wizard but into a better man too!

“Oz The Great and Powerful” screens in Singapore on the 7th of March 2013.

Visit the official website and you could also take part in a contest to win exclusive movie premiums at:
Disney's "Oz The Great and Powerful!

Yongnam: Broke resistance! 29.5c tested.

On 14 February, in a reply to a reader regarding my take on Yongnam, I wrote:

"My view? Technically, positive momentum is very strong and there is a chance that resistance could be taken out if this keeps up."

Hot on the heels of that statement, the share price broke resistance at 28c today on the back of heavy volume to touch a high of 29.5c. Spooky!


Of course, based on my observation that Yongnam's share price seems to move in bands of 1.5c, 29.5c is the new resistance to watch. 28c is the new immediate support.


On 15 February, in another reply, I wrote:

"Although I don't have a working crystal ball, I am almost sure that Yongnam would hit 31c a share in the next 12 months. There, I know I shouldn't say things like this but I am not WB. So, indulge me."

Now, if 31c were to be reached this week, it would really be spooky!

Related post:
Yongnam: Partial divestment at 27.5c.
(See the comments section.)

China Minzhong: Sharply up! Going higher?

Mr. Market certainly likes the news that Indofood has become a substantial shareholder of China Minzhong. Like a child on a sugar high, its share price rushed upwards today.

I did another partial divestment as share price closed the gap at $1.20. This tranche which was divested had shares which were purchased in June last year at 55.5c a piece. So, the ROI is pretty high.

Together with the tranche of shares I divested last month, I have in total sold about 60% of my investment in China Minzhong. With the gains from these divestments, it also means that my remaining investment in China Minzhong is "free".

Will China Minzhong's share price continue to rise tomorrow? Only Mr. Market has the answer.

If share price should progress higher, watch those golden ratios.


138.2% is at $1.30.

150% is at $1.37.

161.8% is at $1.435.

Related posts:
1. China Minzhong: Indofood is a new substantial shareholder.
2. China Minzhong: 2Q FY2013 stellar results.

SIM Open House 2013.

Sunday, February 17, 2013

Thinking of pursuing a Diploma, a Bachelor’s or a Master’s Degree?

You might want to consider going to SIM Open House 2013 and learn more about what SIM Global Education (SIM GE) has to offer.

Partnering 11 international universities that include the University of London, RMIT University, University of Manchester and University of Birmingham, SIM GE offers more than 50 full-time and part-time programmes.

Also, find out more about the scholarships available!

Be entertained and inspired as current students put on an exclusive showcase of music, dance and martial arts. Go on a campus tour of SIM Headquarters and hostel facilities!

Help is also at hand to assist parents who want to learn how to guide their child in making an informed education choice.

Start by visiting online:
SIM Open House 2013.

A banker's advice on retirement income strategy.

This is from the blog of a reputable bank providing advice to retirees:

... Start by figuring out how much spending money you will need from your portfolio over the next five years. Let's say you are using a 4% portfolio withdrawal rate, which means you plan to spend a sum equal to roughly 20% of your portfolio's current value over the next five years.

You might take that 20% and stash it in conservative holdings like savings accounts, certificates of deposit and short-term bonds, so you know that you have the next five years of anticipated spending covered, no matter what happens to the rest of your portfolio.

You can then invest the other 80% of your nest egg for total return using an appropriate mix of riskier bonds, U.S. stocks and foreign shares. You will want to consider carefully what combination of stocks, bonds and other asset classes to buy, because each has its own unique benefits and risks, and also how to diversify within each of these asset classes.

In years when the markets are kind, you might cash in some of your gains and use it to replenish your pot of spending money, so it once again holds enough to cover five years' worth of portfolio withdrawals. What if the markets aren't so kind? You could sit tight and see if the markets recover. Thanks to your five years of spending money in more conservative holdings, you should be able to go that length of time without touching the 80% of your portfolio that's invested for total return.



AK71 says,
"Sailing into the sunset should not be sailing into the dark."
Basically, it is advising retirees to take out what they need in spending money over the next five years and invest the rest in a mix of riskier bonds (junk bonds?) and equities. In case Mr. Market is not kind over the next five years, these retirees are still OK because they would have already put aside enough spending money for that period of time.

I want to draw attention to the words I have underlined. These are basically the ideas I have problems with.

Is securing five years of spending money without taking into account average inflation enough to provide a peace of mind for retirees? What is an appropriate mix of riskier bonds etc. and are riskier bonds even appropriate? Sit tight and see if the markets recover if things don't go well? That sounds like plenty of hope analysis to me.

I am most uncomfortable that retirees should be mostly invested and 80% in this case. What if the markets should go into a protracted downturn? Being retirees, these people are less likely to have the ability to fill up another war chest with earned income. Shouldn't they have a war chest ready just in case Mr. Market suffers from a bout of manic depression?

I don't have a Degree in banking or wealth management. I am just another retail investor sharing his concerns using what he feels is common sense.

Please forgive my ignorance.

Related posts:
1. Be cautious even as we accept higher risk.
2. A letter from a 66 year old retiree.
3. If we want peace, be prepared for war!


Monthly Popular Blog Posts

All time ASSI most popular!

 
 
Bloggy Award