Could we be financially free by investing in Singapore only? (PART 1)

Reader says...

Thank you for taking photos with me and my friends yesterday (i.e. 2 May 2015) at the conference. 

I was so happy the whole evening because I got a personal photo shot with my favorite blogger ;) 

Thank you for the chance, AK! 

And thank you for being there to share your investing philosophy - my friends and I will be patient to build our war chests, and take opportunities when the bear comes knocking on our doors! 

May I ask you a question? 

Can one attain financial freedom by investing in the Singapore stock market only or other more?  

I have many friends who invest in the US stock market, because it is volatile and offers good capital gain (and losses). 

But till now, I stayed out of it, as I do not understand the high P/E and high fluctuations - it seems so out-of-sync from reality. 

And I do not get to see the companies, unlike in Singapore where I can be aware of the local companies' operations by visiting their stores. 

Do you take a nibble at the US stock market too? 

If yes, could you share what one can look at for a start and why? 

If not, then could one continue to take faith that one can still be financially free by being in S'pore market only? >.<

Thank you AK! 

AK says...

Thank you for writing to me and sharing the photos too. :)

I have only invested in foreign stocks once in my life. 

I don't know if you know of the CLOB saga (in Malaysia) eons ago. 

Since then, I have only invested in the Singapore stock market. 






There is enough to keep me occupied here. ;)

I share your concerns with regards to investing in foreign markets. 

I am sure there are opportunities to make money in those markets but if we don't feel comfortable doing it, it is best to avoid. 

After all, peace of mind, I always say, is priceless. :)







Could we become financially free being invested in the Singapore stock market only? 

Given discipline and time, I believe that the local stock market will have more than enough opportunities for most ordinary Singaporeans with sufficient resources to make quite a bit of money and, ultimately, achieve financial freedom.






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Tai Sin Electric: Nibbling for a 6.3% to 6.5% yield.

I was first introduced to Tai Sin Electric by a guest panelist, Paul Chen, at the third "Evening with AK and friends". This was sometime at the end of March. I did some research into the company and also came across a well written article dated 24 Sep 2014 by Sean Seah. 

Since Sean's publication of his article, Tai Sin has paid dividend twice, 1.5c a share on 6 November 2014 and 0.75c a share on 25 March 2015. Having paid 2.25c a share in yearly dividends in the prior 2 years as well, it would seem that this could be the norm for Tai Sin Electric in the coming years, conditions permitting.

Looking at their half yearly results announcement on 11 Feb 2015, the EPS was 2.44c and if we were to expect similar performance in the following 6 months, then, full year EPS would be 4.88c. With a DPS of 2.25c, the pay-out ratio is 46%. This is pretty comfortable.

NAV per share has also grown as Tai Sin Electric retains a relatively big portion of earnings. NAV per share at the end of 2014 was 33.46c. This could possibly grow to 36c or so by middle of this year as I do not expect another dividend to be announced in that time, based on the timing of past pay-outs.

Visit Tai Sin Electric's newsroom: here.

Tai Sin Electric's share price has declined in the last few months since touching a high of 40c in September 2014. Looking at the charts, it seems that 34.5c could be the support to watch as the downtrend was broken in the second half of January 2015 and the share price could stay range bound for months until the next dividend announcement later in the year.

I believe that paying 34.5c to 35.5c a share for Tai Sin Electric is to pay a fair price to be a shareholder of a business that provides a combination of growth and income. If the support identified at 34.5c should break, then, the next band of supports are found at 32.5c, 32c and 31c. If they should be tested, I would probably be accumulating.

Save money by being less picky and be wealthier.

"Aiyoh, this Kimball Chilli Sauce price is up again!"

I was at NTUC Fairprice doing some grocery shopping.

"Ya lor. Price keeps going up. Now, it is $1.55 for a small bottle." 

OK, I am not sure if it was $1.55 or $1.35 by now. Such is the state of my short term memory.

Anyway, it was a conversation between an old uncle and old aunty. They looked to be in their 60s.

"NTUC is too much! Always increasing prices!" The old uncle was relentless.

I was holding on to a bottle of NTUC Fairprice housebrand chilli sauce and debating whether to take 1 bottle for $1.05 or 2 bottles for $1.85 when I heard the exchange. There was a special offer going on and I have always been a bit of a sucker for special offers.

I wondered whether to tell the old couple that they should give the NTUC Fairprice housebrand chilli sauce a chance. It looked like it was twice the size of what they were thinking of buying and a third cheaper in price! More if they were to buy two bottles. For those of you who have not tried, frankly, the housebrand chilli sauce is not bad.

So, did I do it?

I was feeling a little under the weather today and one look at the couple, I decided to mind my own business. They had faces that looked like someone just stole their CPF money. Yikes!

I feel that it is unfair to accuse NTUC Fairprice of being too much in increasing the price when it is not a brand they have control over.

In fact, NTUC Fairprice do a pretty good job of offering good quality and value for money housebranded alternatives. Here are a couple of other examples I have at home:

Is there anything special about atas branded detergent?

Is there anything special about atas branded tissue paper?

We could save quite a bit of money without compromising on our quality of life if we are less picky. We would also almost certainly become wealthier and happier people in the process.

In case you are wondering if I bought one or two bottles of chilli sauce, I did the sensible thing and bought one bottle. It is going to take me quite a while to finish one bottle, after all.

Related posts:
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NeraTel: Is 1QFY15 a sign of things to come?

I received a message from a reader last night saying that NeraTel's profit after tax plunged 33.8% for 1Q FY15. Looks bad, doesn't it?

I was somewhat surprised at the plunge since I remember that the full year 2014 results although not positive were flattish when compared to the year before. We don't usually see big negative shifts in a single quarter in a business as usual scenario. So, it is important to ask whether the decline is due to something that has permanently damaged NeraTel's ability to deliver the goods, so to speak.

NeraTel's management has for a while now mentioned that stiff competition is impacting the business. This is the reality but given their track record, NeraTel should be able to hold their ground even though they might have to give up some margin. This is just my view, of course.

In an interview that NeraTel's CEO, Samuel Ang, gave to The EDGE, some time ago, he said that it is important to remember that revenue recognition could be lumpy because NeraTel is generally a project based business. Annualising any one quarter's results would not give an accurate picture of full year performance. Now, with this understanding in mind, the weak 1Q FY15 results become less worrisome.

The following slides are self-explanatory:

2Q FY15 results, logically, should be better, all else remaining equal.

Although the stiff competition and pressure on margins are pertinent considerations, NeraTel's track record and their continuing efforts to expand their regional footprint, especially in the generation of recurring income, will likely bear fruits in future. How long will this take before we see significant results? I don't know.

However, even as we recognise the costs of expanding their business, as long as NeraTel's current businesses continue chugging along in the meantime, I would be quite happy to wait.

In conclusion, if we believe that 1Q's less attractive results were due in part to the lumpy nature of NeraTel's revenue recognition (i.e. it is an issue of timing), then, earnings over the next 9M should make up for the weaker 1Q FY15 showing.

In my blog post dated 25 Feb 15, I said that at 76c a share then, we were looking at a PER of about 17x and that it wasn't cheap as the stock was priced at 71c a share a year before that with similar numbers. Now, with a rather reasonable expectation that the numbers might remain similar this year, the current price of 65c a share looks more palatable.

See all presentation slides: here.

Related post:
NeraTel: Still a good investment for income?