Sunday, 29 June 2014

OSK's Deal Coming?

Since selling its core business OSK Investment Bank to RHB Capital in 2012 for RM1.95 billion, OSK Holdings (OSK) does not have a core business.

In return, OSK was paid RM147.5mil cash and 245mil RHB shares at RM7.36 per share. After dividend reinvestment, now OSK holds 9.91% of RHB (252.3mil shares).

Currently OSK involves in property investment and capital financing business which generate little revenue and profit compared to what its investment bank has contributed before. Sooner or later it will inject a new core business into it.

The new business can't be finance-related that compete with RHB within 6 years. However, It is not hard to guess what kind of business OSK will acquire soon.

OSK's controlling major shareholder, CEO & MD Tan Sri Ong Leong Huat (40.5%) is also a major shareholder in other listed companies such as OSK Property (73.8%) and PJDev (21.4%).

Ong LH has hinted that property development will be OSK's new core business back in April 2014. The news will be announced within 6 months from April.

All the discussion written below are just my inexperience and laughable opinion, which might be inaccurate and not true.

Anyway, I think I will learn something from OSK's corporate exercise.

Will OSK Holdings purchase development land by itself and compete with OSKProp and PJDev in the property market? I don't think so.

So there is straightforward speculation that OSKProp and/or PJDev will be consolidated into OSK Holding.

The question is both or one of them.

If OSK acquires both companies then Ong LH may risk diluting his shareholding in OSK as OSK may need to issue new OSK shares to acquire those companies.

So I think OSK may acquire one of them which should be OSKProp as they have the same name and Ong LH holds 73.8% of it directly & indirectly.

The deal seems to be close as OSK's share price surged in the last 2 trading days while both OSKProp & PJDev's share prices are at new high.

All 3 companies owned by Ong LH above are still trading at a relatively low PE ratio even though their share prices have gained handsomely this year.

Price@27/6/14 (RM) 1.98 1.66 1.83
Shares (mil) 243.7 456.1 969.1
PATAMI (RM mil) *55.5 #97.0 *195.6
EPS (sen) 0.228 0.213 0.202
PER 8.68 7.79 9.06
OLH % 73.8 21.40 40.54

Equity (mil) 434.7 999.0 2628.0
Cash (mil) 124.5 110.6 1.9
Loans (mil) 162.2 467 240.6
Net D/E 0.09 0.36 0.09

* PATAMI for FY13
# PATAMI for Last 4 Quaters

Currently PJDev has slightly lower PE ratio compared to OSKProp but PJDev has significantly higher gearing.

Both have warrants which will dilute their future EPS. Once fully converted to mother shares, OSKProp's (Year 2017) EPS will be diluted by 30.7% while PJDev (Year 2020) will be diluted by 31.7%.

If OSK is really going to acquire OSKProp and make it its core business, I guess it should be a good news to shareholders of both companies.

Should speculators & investors buy OSK Holdings, OSK Property or PJDev now?

I have no experience in the rational of such business transaction so my opinion might be wrong.

Firstly, how to value OSKProp as an acquisition or merger target?

If we use book value or net asset per share, OSKProp's latest figure is RM1.81 at end of Mac14. Current share price of RM1.98 is 1.09x higher.

OSKProp has RM938mil of unbilled sales in Mac14 and its future development in Sg Petani alone carries a potential GDV of RM3bil. It has approximately 1,540 acres of land for development, with 1,500 acres in Sg Petani (Annual Report 2013). How many times book value is fair to acquire OSKProp?

OSK Investment Bank was sold to RHB at 1.77x book value about 2 years ago.

Can enterprise value being used here?

EV of OSKProp = 1.98(243.7) + 17.5 + 162.2 - 124.5 = RM537.7 mil or RM2.21 per share. It is still 11.6% below current share price.

EV 537.7 1097.5
EBITDA 86.6 146.0
EV/EBITDA 6.2 7.5
EV/share 2.21 2.41

OSK will need to pay more about RM1bil to take over PJDev from EV point of view.

OSKProp has slightly lower EV Multiple (EV/EBITDA) compared to PJDev, which means OSKProp is more attractive for a take-over as it takes only 6.2 years to pay off the cost compared to PJDev's 7.5 years.

As OSK is low in cash (only RM1.9mil), it must borrow to fund the acquisition unless it divests its investment in RHB which is unlikely at the moment.

OSK should have no problem to borrow as its investment in RHB is worth RM2.1bil and net debt to equity ratio is merely 0.09x currently.

If it borrows the entire EV of RM537.7mil of OSKProp from financial institution to fund the acquisition, its net gearing will only increase to 0.30x which should be fairly comfortable for a property developer.

This does not include the 101.6 million OSKProp-WC warrants though.

So if it does not issue new OSK shares for the acquisition, then I think it is good news to current OSK shareholders as not only net profit will rise tremendously, there will be no dilution of shareholding.

Nonetheless, I'm not sure how many percent of OSKProp that OSK will acquire should it happen. Will it acquire 100% and delist OSKProp? Ong LH has already owned 73.8% in OSKProp & 76.5% in OSKProp-WC.

Will it issue new OSK shares to existing OSKProp shareholders as part of the deal?

Is it possible that Ong LH who currently enjoys 73.8% profit sharing in OSKProp would want to reduce it to only 40.5% after consolidating into OSK without issuing additional OSK shares to OSKProp shareholders?

Will OSK acquire PJDev instead of OSKProp, or both, or neither of them?

I think it is very likely that the share price of those involved in the deal with increase, unless the deal tabled is unfair or does not meet the expectation of small shareholders.

How is Ong LH's reputation?

Last year Ong LH has attempted 2 take-overs of his companies which failed eventually.

  • July13 - offered RM1.68 for OSK, share price at that time RM1.65, net asset per share RM2.58.
  • Dec13 - offered RM0.58 for OSKVI, share price at that time RM0.52, net asset per share RM1.06.

Those offers were not good.

Anyway, I think OSK Holdings might be a good stock to hold in anticipation of new business injection.

* This article is just for sharing. Readers should not take it seriously :)

Tuesday, 24 June 2014

Boustead Plantation IPO: Is RM1.60 Certainly A Good Price?

Boustead Plantation (BPLANT) is going to be listed in 2 days time on  26th June 2014. It seems to be in a good timing as plantation sector is gaining upward momentum because CPO price is expected to move up further.

BPLANT will raise RM1.05bil from its IPO at RM1.60 per share. Its total paid-up shares will be 1.6 billion after some corporate exercises and then IPO.

Is BPLANT a good company to invest in?

Specifically for a plantation company, I would look more into a few criteria such as:
  • Growth prospect
    • Unplanted reserve
    • Tree age profile
    • Replanting strategy
  • Management efficacy
    • FFB yield
    • OER
    • Gross margin 

Boustead's Estates & Mills:

  • Total 41 plantation estates & 10 palm oil mills (all in Malaysia)
  • Total 86,363 ha of land (70,991 ha planted, 5,494 ha unplanted)
  • Total mills capacity 415 MT/hour or 1.96mil MT/year

The unplanted land reserve is limited...

Tree age profile:

Age profile Years %
Immature 0 – 3 7.4
Young mature 4 – 9 16.6
Prime mature 10 – 20 59.3
Past prime 21 – 25 15.8
Replanting > 25 0.9

From the age profile above, its future growth potential is not so exciting, as 76% of trees are already at or over prime age.


  • Plan to expand by 10,000 ha in 3 years, 20,000 ha in 5 years
  • Plan to replant 4,375 ha in year 2014/15

It is a 15-30% expansion of plantation area in 3-5 years.

       Location of estates & mills

For me, BPLANT's future growth is not exciting. Anyway, how efficient is BPLANT running its estates & mills?

FFB yield:

  • With high percentage of mature trees, its overall FFB yield is still below national benchmark. Not impressive.


  • Overall OER is slightly above national benchmark from 2011 to 2013. This is good.

Gross margin:

  • BPLANT's gross margin 2011: 33.3%, 2012: 22.4%, 2013: 15.1%. It is in declining trend to a lowish 15%. The low CPO price surely has a major effect on it.
  • Compared to gross margin of some peers chosen randomly (year 2013 figures), BPLANT is not good but not too bad either.

    • UTDPLT: 39.5%
    • KULIM: 32.1%
    • THPLANT: 24.7%
    • IJMPLANT: 23.7%
    • KMLOONG: 19.4%
    • IOICORP: 18.1%
    • BPLANT: 15.1%
    • KLK: 12.5%
    • SOP: 10.5%
    • FGV: 7.0%
    • BLDPLANT: 6.0%

Lets check how did BPLANT perform for the past 3 years.

FFB & CPO production:

  • FFB & CPO production are flat from 2011 to 2013, as 75% of trees are in prime age and may be biological tree stress from dry weather in 2013.

Financial results:

  • Revenue & gross profit are declining from 2011 to 2013, due to weak CPO price & no growth in FFB/CPO production
  • PATAMI rose YoY in 2013 mainly due to a RM92.8mil gain on disposal of plantation assets.
  • ROE in 2013 is at a decent 11.6% but it is also heavily affected by the special gain.

Debts at 31 Dec 2013:

  • Cash: RM32.3mil, Loans: RM977.4mil, Net D/E: 0.53
  • After IPO, Cash: RM587.2mil, Loans: RM977.4mil, Net D/E: 0.17

Overall, BPLANT's recent performance is only average for me.

Is the company worth to invest in? Is the IPO price fair?

Its net asset per share after IPO is RM1.43, so the IPO price at RM1.60 is 12% higher.

Base on 2013 earning of RM161.5mil, EPS of 2013 will be 10.1sen. Thus PE ratio at RM1.60 per share is 15.8x. Because of this, the director said that IPO at RM1.60 "is certainly a good price".

However, as mentioned earlier there was a one-time special gain of RM92.8mil in 2013. Without this huge special gain and with high finance cost in 2013, I think BPLANT's PATAMI should be around RM80mil. 

So the EPS should be cut by half to 5sen and PE at RM1.60 per share should double to 32x.

Anyway, CPO price has advanced in 2014 and BPLANT's earning should pick up as well.

HLIB has projected BPLANT's core net profit in 2014 to be RM119.9mil. With this figure, EPS is 7.5sen and target price will be RM1.13 if fair PE is 15x.

BPLANT has just announced its FY14Q1 results. Its PATAMI of RM30.1mil is a good 36% higher than previous year's RM22.1mil.

However, revenue just increases by 3.3% YoY to RM198.6mil. Higher CPO price YoY but flat revenue, has FFB & CPO production dropped??

Anyway, gross margin improves to a good 27.5% which is great. 

If we annualize the PATAMI, it will be RM120mil for FY14 which is similar to HLIB's forecast above.

       Boustead Plantation CEO & Chairman

So for me, BPLANT at RM1.60 is not a good price, unless it has a very strong growth prospect with many immature/young trees or eye-popping acquisition. However, it is not the case.

The only good surprise is its dividend payout policy of at least 60% of net profit. If it were to register RM120mil net profit in FY2014, then dividend will be at least RM72mil or 4.5sen per share. 

Nevertheless, this works out to be only 2.8% dividend yield at IPO price of RM1.60.

With this high dividend payout, it is also unlikely that the company will grow in an aggressive way, even with the money from IPO.

Overall, BPLANT is not a bad company. It's just not my cup of tea in term of investment as I like growth more. 

Almost all plantation stocks are traded at high PE well above 15 currently. So RM1.60 for BPLANT might seem to be fair. To invest in it or not will depend very much on your investment style.

Monday, 23 June 2014

Scientex: Best Ever Quarter, Again.

Scientex FY14Q3 Financial Result

Revenue 426.8 383.5 364.8 371.2 345.1
PBT 48.1 44.4 37.8 40.2 38.2
PBT% 11.3 11.6 10.4 10.9 11.1
PAT 37.2 33.9 29.3 30.3 29.5

Manu Rev 317.2 288.5 289.2 277.4 275.3
Manu OP 16.4 15.9 17.7 20.6 16.7
Prop Rev 109.6 95.0 75.6 93.8 69.8
Prop OP 32.5 29.3 22.2 31.4 23.3

Total Equity 686.2 649.9 635.9 628.7 584.8
Total Assets 1333.2 1304.4 1263.1 1286.4 1180.9
Trade Receivables 274.8 251.7 209.7 195.5 211.1
Inventories 82.1 76.3 86 80.7 73.5
Cash 56.4 89.3 91.2 152.2 58.6
Prop Dev Cost 71.8 74.4 57.5 68.5 56.4

Total Liabilities 624.9 633.3 606.8 637.7 577.6
Trade Payables 238.9 214.2 229.4 258.4 221.3
ST Borrowings 179.1 205.8 167.9 167.6 143.8
LT Borrowings 156.2 163.7 164.3 167.8 168.4

Net Cash Flow -95.8 -62.9 -61 115.8 22.3
Operation 89.5 30.9 13.5 209.7 131.4
Investment -106.7 -67.0 -54.1 -345.0 -325.2
Financing -78.6 -26.8 -20.4 251.2 216.1

EPS 16.43 15.34 13.27 13.80 13.73
NAS 3.1 2.94 2.88 2.84 2.72
D/E Ratio 0.41 0.43 0.38 0.29 0.43

For its FY14Q3, Scientex's revenue and PATAMI increase 23.7% and 26.1% respectively YoY. For 9 months of FY14, revenue at RM1.18bil is 36.9% higher compared to corresponding period of FY13, while 9-months PATAMI at RM99.6mil also increases 21.8% in the same period.

The better results are contributed by both manufacturing and property arms, in which both register better sales helped by better demand.

Cash is depleted in current quarter mainly due to capital expenditure and repayment of loans. Operation cash flow is still good though FY13 was even better. Thus, net debt to equity ratio improves slightly from 0.43 to 0.41.

Everything in Scientex still looks good for me except its profit margin in manufacturing division. Anyway, Scientex manage to achieve a stable overall PBT margin of around 11%.

Its operating margin in property segment has been good at above 30% in line with other developers. However, its manufacturing segment only registers an operating margin of 5-6% (5.6% in FY14Q3). This might be due to lower margin from industrial packaging.

Scientex's major competitor Daibochi which is mainly in consumer packaging industry achieves an operating margin of 10.3% in its latest quarter ended Mac14.

With the significant increase in the capacity of its blown film lines in consumer packaging acquired from GW Plastic, hopefully the overall margin in manufacturing can improve.

Property segment continues to perform well with unbilled sales of RM569mil at the end of FY14Q3. It still has 979 acres of development land with outstanding GDV of RM5.6 billion.

      Boosted by Scientex Senai

For simple comparison, MKH has a potential GDV of RM8 billion from 1,326 acres of land.

With better than expected result (for me) of  RM99.6mil net profit attributable to shareholders after 9 months, improved manufacturing capacity since 2014, and traditionally strong quarter in Q4, I will raise my FY14 earning forecast for Scientex to RM140mil (from RM120mil).

With total shares of 230mil, estimated EPS will be 60.9sen, and target price will be RM7.30 base on PE ratio of 12x for FY14.

Daibochi is currently trading at PE of 18.4x, while MKH is at 16x.

Nevertheless, I don't think MKH is expensive at the moment because its plantation segment will experience exponential growth starting from this year.

Scientex has announced an interim single tier dividend of 8sen for FY14 which ends in July14. Normally it will pay dividend 2 times a year. The next announcement is expected soon around October.

With a dividend payout policy of at least 30% of net profit, I expect Scientex to pay at least total 19sen dividend for its FY14.

A total of 26sen dividend was paid for FY13 including a special dividend for the first time since 2007. This represents a payout of 54%. Will Scientex pay special dividend again this year?

If it is to payout 50% as dividend, then it will be about 30sen per share. This translates into a good yield of 5.2% even at current share price of RM5.90.

Scientex's shares are rather illiquid with only 230mil of outstanding shares in the market, and the top 30 shareholders are holding 70% of them according to 2013 annual report.

With the abundance of retained profits in its equity, it is very much capable of giving bonus issues anytime.

I think Scientex has done a good job in expanding its business and enhancing shareholders' value. It was proven for the past 45 years. Hopefully it can be continued in the future.

Sunday, 15 June 2014

My Experience To Shanghai Under Groupon Deal

Now I have returned from a 6D4N Shanghai trip purchased from groupon. I will share my experience here so that those who are interested can know what to expect.

This is how the groupon travel deal work for this particular trip to China:
  1. Before buying the groupons, fill up an online inquiry form & send to groupon, stating preferred travel dates & number of travelers
  2. Awaiting reply from groupon
  3. Settle doubts and inquiries through emails with groupon staff
  4. If available travel dates are suitable, proceed to purchase groupon.
  5. Email groupon staff with attached proof of payment or purchase.
  6. Fill in a travelers detail form provided by groupon staff, with name, IC, passport number & expiry date, preferred room type & vegetarian meal etc.
  7. Groupon will book & pay for the Airasia air tickets, using your email.
  8. Log in Airasia website to manage your booking eg. baggage allowance, in-flight meals, pick-a-seat, and make payment.
  9. Apply Visas by yourself
  10. Local tour agent will contact or email you regarding the final itinerary, travel detail, contact & name of tour guide in China about one week before departure.
  11. Just board the plane and the tour guide will wait for you in the airport of your destination.

This trip is a 6D4N trip with 2 night time flights.

Day 1: Airasia X flight departing KLIA2 7:25pm, arriving Shanghai Pudong airport 12:35am
Day 2: Shanghai - Suzhou
Day 3: Suzhou - Wuxi
Day 4: Wuxi - Hangzhou
Day 5: Hangzhou - Shanghai
Day 6: Airasia X flight departing Shanghai Pudong airport 1:35am, arriving KLIA2 6:55am

So it is actually 4 days 4 nights trip excluding time on flight.

       Shanhai - Suzhou - Wuxi - Hangzhou - Shanghai

As we went to 4 cities, it ended up that we only spent little time in each city as most time were wasted while traveling on bus. Traveling between Wuxi-Hangzhou and Hangzhou-Shanghai took about 3-4 hours each.

       Shanghai's traffic

The summary table below compares the itinerary given by groupon before purchasing the groupons, by travel agency before departure and the actual trip.

Groupon Travel Agent Actual
上海 新天地 新天地 Cancelled
Shanghai 石库门 石库门 Cancelled

城隍庙 城隍庙 城隍庙

东方明珠塔(外观) 东方明珠塔(外观) Omitted

乘坐敞篷双层巴士 乘坐敞篷双层巴士 Omitted

逛南京路 逛南京路 逛南京路

上海同仁养生 上海小蜜蜂珍品堂 上海同仁养生

上海鸿润珠宝 天脉艺术博览中心

苏州 金鸡湖 金鸡湖 金鸡湖
Suzhou 圆融时代广场 圆融时代广场 圆融时代广场

苏州鸟巢 苏州鸟巢 苏州鸟巢

唐伯园林 藕园 藕园

苏州丝绸工厂 苏州丝绸工厂 苏州丝绸工厂

无锡 灵山大佛 灵山大佛 灵山大佛
Wuxi 灵山梵宫 灵山梵宫 灵山梵宫

紫砂壶博物馆 紫砂壶博物馆 紫砂壶博物馆

万达广场 万达广场 万达广场

蠡湖公园 蠡湖公园 蠡湖公园

珍珠养殖场 珍珠养殖场 珍珠养殖场

杭州 乘船游西湖 乘船游西湖 乘船游西湖
Hangzhou 苏堤 苏堤 Omitted

南宋官窟遗址 南宋官窟遗址 Omitted

西湖龙井茶 西湖龙井茶 西湖龙井茶


We made a terrible start to our trip, as the Airasia X flight from KL to Shanghai was delayed for 4 hours! So when we reached Shanghai it was already 5am.

After reaching Shanghai then only we knew that we have 20 persons in our group.

Because of the delay, the China tour guide suggested that we went straight to hotel to rest and cancelled the visit to Shanghai XinTianDi 新天地 as according to him, it is just a place to "drink coffee". Thus ShiKuMen 石库门  which is also in that area was also missed. We only went to ChengHuangMiao 城隍庙 in Shanghai in the first day.

Later I found out that XianTianDi is not like an ordinary shopping complex and is worth a visit.

       Shanghai: Commercial area at ChengHuang Miao

The subsequent visit to Suzhou & Wuxi went well according to schedule but for Hangzhou, we only viewed the SuDi 苏堤 at west lake from very far away and did not go to 南宋官窟遗址 without being told. We went to XiHu Museum 西湖博物馆  instead.

For the last day, we actually still have plenty of time in Shanghai in the afternoon. However, we were sent to 2 "shopping stations" which were 上海同仁养生 (Chinese Medicine) &  天脉艺术博览中心 (Jade & Jewelry). 

Without being informed, we were not brought to board the double-decker tourist bus and view the Oriental Pearl Tower in Shanghai as stated in the itinerary.

The worst thing is, those two "shopping stations" in Shanghai are obvious "black shops" for me. The staffs in the jewelry shop even acted according to script like a drama in front of us.

Other "shopping stations" such as silk, pearl, teapot, tea leaves were alright but I guess most tourists may not be sure whether those products sold are real or fake, especially when the price can be marked down tremendously.

       Suzhou OuYuan: Home of the rich

For the issue of changes in tourist spots, it is earlier mentioned in groupon that the itinerary given is subjected to change so we have nothing much to say.

However, we have paid RMB450 per person for 4 recommended tourist spots or events and it ended up that we only went to half of them. We have lodged complaint to the Singapore-based travel agency but I don't think we can get our money back.

苏州观前街 Omitted
无锡三阳广场 Omitted
杭州西湖之夜歌舞秀 Yes
上海黄浦江游船 Yes

       Hangzhou: Beautiful West Lake

For the accommodation, I was initially attracted by "5-star Sheraton Hotels" in the groupon. I think this is misleading because they are very unlikely to give you Sheraton or Four Points for the whole trip. For me it is just a sales trick.

The hotels that we stayed in were not too bad though .

Groupon Travel Agent Actual
Four Points Shanghai 宝龙喜来登 宝龙喜来登
Four Points Suzhou 威联豪生 威联豪生
Sheraton Wuxi 君乐大酒店 君乐大酒店
Four Points Hangzhou 金马饭店 金马饭店

We were given one Sheraton hotel to stay in Shanghai for the first night, just to please us I guess.

However, this hotel is not in Shanghai and it is actually in Suzhou. So after we arrived at Pudong International Airport at the easternmost part of Shanghai, we traveled about 1.5 hours west to this hotel in Suzhou to rest & for breakfast. Then we traveled another 1.5 hours back to Shanghai and shortly after lunch we have to travel back to Suzhou. I would rather be given other hotel with more strategic location.

Breakfast were taken at hotels and we were provided lunch and dinner. As expected the meals were so-so with cheap stuff.

       Simple and taste ok

Are there any hidden charges?

Our tour guide said that our bus driver was very tired driving us around and we should not let him carrying our luggage up & down from the bus. So he suggested to pay RMB15 per day per room to hotel staff to help us to move the luggage from the bus to our room, and back to the bus later. No one dared to say no I guess.

In Wuxi Lingshan grand Buddha area, we were suggested to take special vehicle for RMB25 per person to roam the area. As the place is large and we have elderly who couldn't walk too much, it was acceptable.

In one of the hotel buffet breakfast, I was asked to pay RMB48 for each of my children. After complaining to the tour guide and negotiation with hotel manager, finally I still needed to pay for one of them.

So these were the unexpected extra charges in this tour, and they are not too much actually.

       Wuxi: Lingshan Grand Buddha

In summary, as we rarely travel abroad, it was still a great experience for us. As you can expect, it was quite rush and we were not able spend more time in places we like. The number of places that we went were also limited due to time wasted at shopping stations & traveling on the bus.

I can feel that the main aim of the local tour guides are not bringing us to see the beautiful places in their cities, but only to guide and persuade you to spend in those shopping stations.

So, if you can afford to pay for better quality trip, go for a trip without shopping stations but it will surely cost much more than this. 

If you want to save money, I think this type of groupon travel deal is still worth a try.

       Shanghai: HuangPu Jiang 

The groupon looks cheap at RM1738 for 2 adults, or RM869 per person. 

How much did I spend for 4 adults & 2 children in this particular tour?
  • Groupon x 2 = RM3476
  • Air tickets & tour fees for 2 children = RM1576
  • Airasia manage booking fees = RM759
  • Compulsory "recommended" tour = RM1160
  • Tippings & extra fees in China = RM605
  • Visas & travel insurance & passports = RM1184
  • Transport between Penang & KLIA2 = RM605

Total = RM9365, or RM1561 per person. (excluding shopping in China)

Compared to RM3000 per person to Taiwan I estimated earlier, it is a 50% saving.

Wednesday, 11 June 2014

Good Debts Bad Debts

In term of investment, I think I am more like a high-risk taker.

You may not agree with me as looking at my stock investment portfolio and transaction, you can hardly see spectacular punting and call warrants.

But, my cash ratio is close to zero. I'm throwing everything into it.

Because of the aggressive investment since year 2009, I am debt-ridden at the moment.

At any point of time, I have approximately 10 groups of debts which include credit card, property, car, personal & family loan.

Financial adviser will definitely advise us to restrict our monthly committed loan repayment to not more than 50% of our monthly net income. Ideally it should be less than 30%.

However, for my property & car loans combined, I have already exceeded 50% to quite a great extent. If including other smaller debts from credit cards & personal loans, I almost use up all of my monthly take-home pay.

If there are special big sum expenses in a month, my cash flow will be negative and I need to sell shares or unit trusts.

Currently Malaysian are talking about the high possibility of interest rate hike after Bank Negara's next meeting in 10th of July 2014. 

It is widely believed that BNM will act now by increasing the OPR (Overnight Policy Rate) by 25 points. This means that the OPR will increase from current level of 3.0% (since May 2011) to 3.25%. It is possible that the rate may rise further to 3.5% at the end of 2014.

Thus, BLR (Base Lending Rate) may also increase from current 6.60% to 6.85%, though BLR will be replaced by a new system later.

This is no good news for me because this means that the interest of my property loans will increase as well. It is said that a 0.25% increase in BLR will result in 7% extra interest repayment for a house loan of RM500,000 with 30 years tenure.

I bought my first property in year 2009 and after that there were a few upward adjustment in BLR. However, I can't really feel the difference may be the property was still in construction stage. 

I am not too sure how will the BLR hike affect me this time. Seems like it is still manageable, and hopefully so.

Loans with fixed interest rate like hire purchase and personal loan will not be affected though.

For those with low debts or without debts, then they will be least affected at the moment and can enjoy higher savings and fixed deposit interest rate.

However, if they wish to get any loan in the future, they have to face the higher interest rate as well.


Actually I don't think my debts are bad debts, so I'm not too worry.

First, my credit cards debts are only short term as I will settle the bills each month.

For property loans, I am actually glad to have bought them early without much hesitation as I will not be able to buy them now. They are for own occupation and investment purpose.

For car loan, I have actually saved quite a lot as I decided to give a miss to my "dream car" that costs RM120k and went for a cheaper alternative that costs RM80k. I need a more reliable car as I travel quite a lot on the road.

I have a few personal loans. One of them is for buying shares. I didn't use margin account as I still don't understand it completely and I am not comfortable with it as well. This personal loan interest is 5.9% per annum for 12 months and I am glad that I put most of it into Inari.

Another personal loan with interest rate 7.9% is for full settlement of my wife's PTPTN loan. My wife's PTPTN loan has been dragged for more than 10 years. Previously repayment was made sporadically but it ends up that she still owed more than RM12,000. As there was a 20% rebate for full settlement last year, I took the opportunity to remove this never-ending thorn from my household balance sheet.

Do I manage my money correctly? I'm not sure. Everything looks fine at the moment mainly because our economy and stock market are sailing nicely since 2009.

Starting from now, I think I should seriously build up my cash reserve.