Came across the following advice while I was reading an investment book. The book advocates Buffett style of fundamental investing.
1) Buy good, growing business that you know about
2) Buy stocks that are out of favour
3) Be patient
The principles above seems simple, yet how many of us really practise it faithfully. Every advice actually contains more wisdom than the sentence suggested on the surface. Think about it, keep reminding yourself, may all have long investment success.
Wednesday, 26 September 2007
Stock split is good for share price?
According to one of Bloomberg news:
Buffett said in a letter to shareholders in 1983 that to reduce price fluctuations, Berkshire wouldn't split its stock. Investors should be ``focused on business results, not market prices,'' he wrote.
In theory, stock split offers no real benefits. The company management is the same, earning per share is the same, ROE is the same. The only thing changed is you get more shares for the same percentage of stock holding. However, a split would incur additional expenses that is actually not good for the business.
But, does this theory applies to Singapore market? Look at this
According to Reuters news:
Shares of Jiutian Chemical Group rose as much as 12.6 percent to S$0.68 with 13.6 million shares traded after a 5-for-1 stock split.
"The stock has become cheaper and much easier to enter," said a local dealer. Jiutian shares were trading at around S$3 on Tuesday before the stock split.
Obviously, the reality is different from what we perceived it to be. Market is driven by supply and demand. In the short term, as long as demand exceeds supply, the price would keep going up. Increase the number of share would facilitate some traders in trading the company share and this in turn, driving up the price. I can recall some of my friends said the stock is too expensive, no money to buy. A $2 dollar is expensive to them, compare to 0.20 stock. Even though, in PE terms, the $2 might be cheaper.
Having said that, a stock split does not guarantee the share price would go up in the long term. At the end of the day, fundamental still counts.
Buffett said in a letter to shareholders in 1983 that to reduce price fluctuations, Berkshire wouldn't split its stock. Investors should be ``focused on business results, not market prices,'' he wrote.
In theory, stock split offers no real benefits. The company management is the same, earning per share is the same, ROE is the same. The only thing changed is you get more shares for the same percentage of stock holding. However, a split would incur additional expenses that is actually not good for the business.
But, does this theory applies to Singapore market? Look at this
According to Reuters news:
Shares of Jiutian Chemical Group rose as much as 12.6 percent to S$0.68 with 13.6 million shares traded after a 5-for-1 stock split.
"The stock has become cheaper and much easier to enter," said a local dealer. Jiutian shares were trading at around S$3 on Tuesday before the stock split.
Obviously, the reality is different from what we perceived it to be. Market is driven by supply and demand. In the short term, as long as demand exceeds supply, the price would keep going up. Increase the number of share would facilitate some traders in trading the company share and this in turn, driving up the price. I can recall some of my friends said the stock is too expensive, no money to buy. A $2 dollar is expensive to them, compare to 0.20 stock. Even though, in PE terms, the $2 might be cheaper.
Having said that, a stock split does not guarantee the share price would go up in the long term. At the end of the day, fundamental still counts.
Tuesday, 25 September 2007
Company update Sep 24 - Tiong Woon
A very common scenario in Singapore market. After a company has turn around, people start taking notice, more and more analyst would start cover the company. Today, here is the comment from CIMB-GK regarding Tiong Woon. In the short term, one more buy call would definitely support the share price. We are unlikely to see it goes back to 0.6x region. Hopefully I would be able to buy some at 0.7x or 0.8x.
I do hope there is a second wave of sub-prime problem which would trigger another correction. I believe after another round of correction is cleared, then the market would be prepared to go back. On the other hand, we hope some of the foreign money or china money would enter South East Asia market in coming months.
CIMB-GK:
Initiate with Outperform and target price of S$1.50, set at 15x CY08 P/E,
comparable to valuations for SGX-listed construction peers. Our target implies
upside potential of 43%. TWC trades at an attractive 10.7x CY08 P/E against a 3-
year core earnings CAGR forecast of 50.3%.
I do hope there is a second wave of sub-prime problem which would trigger another correction. I believe after another round of correction is cleared, then the market would be prepared to go back. On the other hand, we hope some of the foreign money or china money would enter South East Asia market in coming months.
CIMB-GK:
Initiate with Outperform and target price of S$1.50, set at 15x CY08 P/E,
comparable to valuations for SGX-listed construction peers. Our target implies
upside potential of 43%. TWC trades at an attractive 10.7x CY08 P/E against a 3-
year core earnings CAGR forecast of 50.3%.
Saturday, 22 September 2007
Forbes Asia 200 'Best Under A Billion' list
According to Business Times,
TWENTY Singapore Exchange-listed companies have made their way into the latest Forbes Asia 200 'Best Under A Billion' list, which ranks companies with less than US$1 billion in turnover but which have shown consistent growth in sales and profits over three years.
Forbes Asia 200 'Best Under A Billion' list
Asia Enterprises
ASL Marine
Best World
BH Global Marine
China Sun Bio-Chem
CSE Global
Ezra
Food Empire
Hongguo International
Inter-Roller Engineering
Jiutian Chemical
Labroy Marine
Midas
Midsouth
Multi-Chem
Raffles Education
Raffles Medical
Rotary Engineering
Tat Hong
Unisteel Technology
Interestingly, some of the companies on the list are actually found in my portfolio or my watch list. We have to access the fundamental attractiveness of each of the company, before deciding whether to invest. Consistent growth is a very important factor here, people value consistent increase of profit and doesn't like fluctuation.
TWENTY Singapore Exchange-listed companies have made their way into the latest Forbes Asia 200 'Best Under A Billion' list, which ranks companies with less than US$1 billion in turnover but which have shown consistent growth in sales and profits over three years.
Forbes Asia 200 'Best Under A Billion' list
Asia Enterprises
ASL Marine
Best World
BH Global Marine
China Sun Bio-Chem
CSE Global
Ezra
Food Empire
Hongguo International
Inter-Roller Engineering
Jiutian Chemical
Labroy Marine
Midas
Midsouth
Multi-Chem
Raffles Education
Raffles Medical
Rotary Engineering
Tat Hong
Unisteel Technology
Interestingly, some of the companies on the list are actually found in my portfolio or my watch list. We have to access the fundamental attractiveness of each of the company, before deciding whether to invest. Consistent growth is a very important factor here, people value consistent increase of profit and doesn't like fluctuation.
Company update Sep 22
For the past week, stocks under my radar released some news. Here are some analysts' view on them. Generally, the companies are on track for future growth, and we should stay vested.
Due to Rotary venturing into LNG in China. OCBC research is upgrading the fair value.
Upped fair value. We are optimistic of Rotary's pursuit in the LNG business in China. As the first transportation route will only be operational from November, we do not expect this to have much impact on its FY07 results. However, we expect this business to contribute 9% to our FY08 estimates. We are keeping our forecasts of S$46.7m in FY07, but revising up FY08 to S$54.5m. Based on 18x PER FY07/08 blended earnings, we are raising our fair value estimate to S$1.60. Maintain BUY.
DBS has reiterated a buy on Swiber citing
Revenue visibility for Swiber is high. Our offshore EPCIC revenue projection in FY07 is now fully backed by orders on hand, as compared to 94% previously. Our FY08 offshore EPCIC revenue projection is 30% backed by secured orders. Swiber’s orderbook now stands at US$230.7m.
Kim Eng initiated coverage on Orchard Parade Holding with a Buy
We think that OPH offers a rare dual exposure to hospitality and F&B. With
tourism in Singapore set to grow further and YHS being a household brand
name, we think that OPH is an enticing value proposition. We are initiating
coverage with a price target of $3.31, based on parity to RNAV.
CIMB-GK reviewed again the call on FJ Benjamin
Maintain Outperform. Following our earnings adjustments, we have lowered our
target price from S$1.29 to S$1.17, still based on sum-of-the-parts valuation. Our
new target continues to value its retail/entertainment business at 16x CY08 P/E and
takes into account potential capital distribution from the sale of investment
properties and warrant conversion.
DMG maintains the view on FJ Benjamin
FJB announced the listing of its associate, St. James Power Station through a reverse
takeover. The RTO is targeted for completion by 1Q 2008. FJB’s 30.4% stake is valued
between S$24.3m – S$32.8m, depending on the financial performance of St. James. Post
listing, FJB’s stake will be reduced to 25.2% with potential for further dilution upon a
subsequent placement. Maintain BUY with price target of S$1.03.
I always believe if you buy a good company and hold for long term, you would be rewarded.
Due to Rotary venturing into LNG in China. OCBC research is upgrading the fair value.
Upped fair value. We are optimistic of Rotary's pursuit in the LNG business in China. As the first transportation route will only be operational from November, we do not expect this to have much impact on its FY07 results. However, we expect this business to contribute 9% to our FY08 estimates. We are keeping our forecasts of S$46.7m in FY07, but revising up FY08 to S$54.5m. Based on 18x PER FY07/08 blended earnings, we are raising our fair value estimate to S$1.60. Maintain BUY.
DBS has reiterated a buy on Swiber citing
Revenue visibility for Swiber is high. Our offshore EPCIC revenue projection in FY07 is now fully backed by orders on hand, as compared to 94% previously. Our FY08 offshore EPCIC revenue projection is 30% backed by secured orders. Swiber’s orderbook now stands at US$230.7m.
Kim Eng initiated coverage on Orchard Parade Holding with a Buy
We think that OPH offers a rare dual exposure to hospitality and F&B. With
tourism in Singapore set to grow further and YHS being a household brand
name, we think that OPH is an enticing value proposition. We are initiating
coverage with a price target of $3.31, based on parity to RNAV.
CIMB-GK reviewed again the call on FJ Benjamin
Maintain Outperform. Following our earnings adjustments, we have lowered our
target price from S$1.29 to S$1.17, still based on sum-of-the-parts valuation. Our
new target continues to value its retail/entertainment business at 16x CY08 P/E and
takes into account potential capital distribution from the sale of investment
properties and warrant conversion.
DMG maintains the view on FJ Benjamin
FJB announced the listing of its associate, St. James Power Station through a reverse
takeover. The RTO is targeted for completion by 1Q 2008. FJB’s 30.4% stake is valued
between S$24.3m – S$32.8m, depending on the financial performance of St. James. Post
listing, FJB’s stake will be reduced to 25.2% with potential for further dilution upon a
subsequent placement. Maintain BUY with price target of S$1.03.
I always believe if you buy a good company and hold for long term, you would be rewarded.
Wednesday, 19 September 2007
Fed surprised the market
Looks like the subprime problem is affecting the market and they are willing to have a bigger cut - 0.5 points. Story here. This sent the Dow to +335.97. We would expect the Asia market would follow this across the board.
However, the buyers were not back yet. In the short term, we are on the uptrend, but buying interest is not there. After a while, stock might fall back a bit. Still not a clear time to go all out attack on buying.
However, the buyers were not back yet. In the short term, we are on the uptrend, but buying interest is not there. After a while, stock might fall back a bit. Still not a clear time to go all out attack on buying.
Tuesday, 18 September 2007
At Sep 18, market is undecided
Earlier this year, many analyst forecast that stock market volatility would increase as the index goes higher and higher. True enough, that's what we got now. Suddenly, subprime problem become prominent and we are being affected by some poor guy in US. Although in my personal opinion, it would have slow down the US economy, but it should not affect Asia greatly as last time. Because the export share to US has dropped.
Many people is waiting for tonight's announcement. Whether FED would cut the interest rate. If it is 0.25 cut, stock remain flat. 0.5 cut, most likely to go up. If the rate is unchanged, we would see red tomorrow. We pray all is well in US and the attention would be diverted from US problem to internal Asia growth at the later stage of the year. We shall see. I think since the inflation in US is catching up, at most they would cut 0.25. Tomorrow we see STI coming down and a period of stagnant follows.
Having said that people with spare cash, it is your time. Buy only when short term people trying to punish the share price. Few years later, when you look back, you would be glad that you made the decision. My watch list remain the same, but waiting for good entry point. For short term, I might want to read the technical indicator and hopefully can capture the fluctuation of 20%. That's good enough for this period. But the key is to buy a fundamental strong stock, in case, you are caught, we can still look for the future.
Some good news for two of my holdings. FJ Benjamin announced the back door listing of St James Power station. This should increase the value of FJ Ben equity in the venture. Kim Eng start coverage on Orchard Parade with the target price of 3.30. It is quite amazing how they arrive at this valuation. Nevertheless, for the coming few years, OP is probably one of the safe stock you can find on SGX. With record tourist arrival and contribution from Yeo Hiap Seng, the earning should be stable. However, if it reach the fair value fast, I might decide to cash out and re-deploy the fund.
Many people is waiting for tonight's announcement. Whether FED would cut the interest rate. If it is 0.25 cut, stock remain flat. 0.5 cut, most likely to go up. If the rate is unchanged, we would see red tomorrow. We pray all is well in US and the attention would be diverted from US problem to internal Asia growth at the later stage of the year. We shall see. I think since the inflation in US is catching up, at most they would cut 0.25. Tomorrow we see STI coming down and a period of stagnant follows.
Having said that people with spare cash, it is your time. Buy only when short term people trying to punish the share price. Few years later, when you look back, you would be glad that you made the decision. My watch list remain the same, but waiting for good entry point. For short term, I might want to read the technical indicator and hopefully can capture the fluctuation of 20%. That's good enough for this period. But the key is to buy a fundamental strong stock, in case, you are caught, we can still look for the future.
Some good news for two of my holdings. FJ Benjamin announced the back door listing of St James Power station. This should increase the value of FJ Ben equity in the venture. Kim Eng start coverage on Orchard Parade with the target price of 3.30. It is quite amazing how they arrive at this valuation. Nevertheless, for the coming few years, OP is probably one of the safe stock you can find on SGX. With record tourist arrival and contribution from Yeo Hiap Seng, the earning should be stable. However, if it reach the fair value fast, I might decide to cash out and re-deploy the fund.
Tuesday, 11 September 2007
Market direction for Sep 07
In TODAY's first page,
“The fact is, if every sub-prime mortgage that could possibly default defaulted, the most it could do is slow down US gross domestic product some,” he told the media on the sidelines of the Forbes Global CEO Conference here yesterday.
“The US economy may slow down, but so what? Because the US is the biggest economy, they tend to think that when the US gets a cold, the world is going to get pneumonia. This, today, is wrong,” said Mr Fisher, a long-running Forbes Magazine columnist with a reputation for accurately forecasting market trends such as the bursting of the dotcom bubble in March 2000.
I certainly hope this prediction would be correct. Financial market is just a place to test human's greed and fear. Very often fear is being spread fast and furious, people always think safety first, sell then talk.
However, the risk appetite is not going to return overnight. Still maintain the strategy of keeping some cash on hand. Maybe 60% stock 40% cash, buy on severe correction and sell on strength. When market is really picking up, then we can go back in to enjoy. For now, just sit tight.
“The fact is, if every sub-prime mortgage that could possibly default defaulted, the most it could do is slow down US gross domestic product some,” he told the media on the sidelines of the Forbes Global CEO Conference here yesterday.
“The US economy may slow down, but so what? Because the US is the biggest economy, they tend to think that when the US gets a cold, the world is going to get pneumonia. This, today, is wrong,” said Mr Fisher, a long-running Forbes Magazine columnist with a reputation for accurately forecasting market trends such as the bursting of the dotcom bubble in March 2000.
I certainly hope this prediction would be correct. Financial market is just a place to test human's greed and fear. Very often fear is being spread fast and furious, people always think safety first, sell then talk.
However, the risk appetite is not going to return overnight. Still maintain the strategy of keeping some cash on hand. Maybe 60% stock 40% cash, buy on severe correction and sell on strength. When market is really picking up, then we can go back in to enjoy. For now, just sit tight.
Friday, 7 September 2007
Swiber - company update Sep 07
After the quarter 2 result which
Revenue: 1H Y-o-Y growth: +220%
Net Profit: 1H Y-o-Y growth: +280%
Swiber announced following news.
06 Sep - Swiber acquires AmClyde M-80 offshore derrick crane for US$53.13 million. The derrick crane will be one of the largest heavy lift cranes in the Asia Pacific region with a maximum lifting capacity of 4,180 tons
30 Aug - Swiber continues fleet expansion with acquisition of four vessels for US$70.6 m
24 Aug - Swiber successfully places inaugural bond issue for S$108.5 million. Proceeds will be used to finance Swiber’s fleet expansion programme
22 Aug - Swiber Appoints New Vice President for its Floating Production Systems Business
I went through the annual report, recent announcement and news flow. I think this is a good company. They aspire to be top EPCIC specialist in Asia Pac and management is taking serious steps to achieve it. Buy on dip. Accumulate across different period.
Revenue: 1H Y-o-Y growth: +220%
Net Profit: 1H Y-o-Y growth: +280%
Swiber announced following news.
06 Sep - Swiber acquires AmClyde M-80 offshore derrick crane for US$53.13 million. The derrick crane will be one of the largest heavy lift cranes in the Asia Pacific region with a maximum lifting capacity of 4,180 tons
30 Aug - Swiber continues fleet expansion with acquisition of four vessels for US$70.6 m
24 Aug - Swiber successfully places inaugural bond issue for S$108.5 million. Proceeds will be used to finance Swiber’s fleet expansion programme
22 Aug - Swiber Appoints New Vice President for its Floating Production Systems Business
I went through the annual report, recent announcement and news flow. I think this is a good company. They aspire to be top EPCIC specialist in Asia Pac and management is taking serious steps to achieve it. Buy on dip. Accumulate across different period.
Thursday, 6 September 2007
Singapore chemical hub story
Exxon Mobil announce the new chemical complex at Jurong Island. Including the previous project and project from Shell. Singapore is attracting major oil company to set up processing centre here.
"Implications – an obviously positive development for both the economy and Singapore’s petrochemical sector which the market has been eagerly awaiting for. Together with Shell’s Houdini project, SPT will keep the downstream engineering construction sector humming for the next 3 to 4 years with obvious benefits for players which have been servicing the likes of EM and Shell over the past 20 years or more. Our picks include Rotary Engineering (TP S$1.79), Hiap Seng Engineering (TP S$1.33) and Tiong Woon (S$1.15)." -- Comment from Kim Eng
The 3 companies were all my radar. Prefer to buy on dip. Although at this juncture, no one can see the bull coming back, we still have time to wait for something bad to happen. That is the time for bargain hunting.
"Implications – an obviously positive development for both the economy and Singapore’s petrochemical sector which the market has been eagerly awaiting for. Together with Shell’s Houdini project, SPT will keep the downstream engineering construction sector humming for the next 3 to 4 years with obvious benefits for players which have been servicing the likes of EM and Shell over the past 20 years or more. Our picks include Rotary Engineering (TP S$1.79), Hiap Seng Engineering (TP S$1.33) and Tiong Woon (S$1.15)." -- Comment from Kim Eng
The 3 companies were all my radar. Prefer to buy on dip. Although at this juncture, no one can see the bull coming back, we still have time to wait for something bad to happen. That is the time for bargain hunting.
Sunday, 2 September 2007
Model unit trust portfolio
I do unit trust investment with CPF money. Since CPF is meant for retirement and we cannot take it out until x years later, it is good to generate better return with it. I usually buy once or twice a year, when I have money and when the market is down for some reason. I think it is good to set up a model portfolio to test my unit trust skill.
Assume start up capital of 5k. Frankly speaking, I am aggresive investor, not everyone is suitable with the following allocation. The buy price is base on 31 Aug market price and sales charge of 2%.
Aberdeen Pacific Equity - 499.89 x 3.9209 = 2000
Aberdeen Thailand Equity - 208.78 x 4.694 = 1000
Prudential Pan European - 692.58 x 1.415 = 1000
Lion Capital Japan Growth - 1140.86 x 0.859 = 1000
I would add more money to this theoritical portfolio when there is market crash or correction. I would also sell some holdings if the market become overvalued. Let's see after few years whether this portfolio can achive above 15% return per year.
Assume start up capital of 5k. Frankly speaking, I am aggresive investor, not everyone is suitable with the following allocation. The buy price is base on 31 Aug market price and sales charge of 2%.
Aberdeen Pacific Equity - 499.89 x 3.9209 = 2000
Aberdeen Thailand Equity - 208.78 x 4.694 = 1000
Prudential Pan European - 692.58 x 1.415 = 1000
Lion Capital Japan Growth - 1140.86 x 0.859 = 1000
I would add more money to this theoritical portfolio when there is market crash or correction. I would also sell some holdings if the market become overvalued. Let's see after few years whether this portfolio can achive above 15% return per year.
Saturday, 1 September 2007
Market ended 31 Aug
"Federal Reserve Chairman Ben Bernanke pledged Friday that the central bank will "act as needed" to keep the credit crisis that has unhinged Wall Street from hurting the national economy."
"President Bush on Friday outlined ways to help homeowners facing foreclosure - the administration's first effort to deal with an expected wave of defaults fueled by the mortgage crisis."
Dow is up by +173.23 at the time of writing. Looks like the US administrative side is start to looking at measure which would calm the investor. This would be good for the world. If US going to recession, everybody would be affected.
However, when the foreign fund would return to Asia remains as unknown. Invest only at your capacity. Don't trade on margin or loan, you should be able to stand any kind of volatility. Buy little on dip but keep your emergency fund intact. If the trading volume rising strongly, then it might signal the investors are back.
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