Sunday, 28 December 2014

Review of 2014 Goals

Year 2014 is going to end soon. Generally it is a great year for me.

At this time last year, I have actually written down my goals in this blog. However, I didn't publish it. I can still find the draft in this blog.

I divided my goals to short term (1 year), mid-term (2-5 years) & long-term (>5 years).

I don't have too many goals for 2014, similar to Liverpool FC in the second half of 2014.

I have only 3 specific short-term goals to achieve this year, which are family trip abroad, house renovation & having my third child. Thankfully all have been accomplished.

The best gift of the year will be undoubtedly my baby born in December :)

Financially it is another money out more than money in year, after year 2012. 

While house renovation takes up a big chunk of spending, having a baby does not come "cheap" either.

For those future father & mother, here are some expenses to anticipate in the first 30 days:
  • Normal delivery at private hospital (general room) - RM2400
  • Confinement fee (at home) - RM3700
  • Traditional massage - RM950
  • Traditional medicine & items in confinement - RM1500
  • Full moon package & vouchers - RM1000

So, it is approximately RM10,000 extra spending in the first month after having a baby!

Anyway, this will differ between every person. If the baby is born in government hospital, or your mother can do the confinement for you, then you will save a lot of money.

For the renovation part, RM30,000 was "sacrificed" as planned. However, there was another RM8,000 unexpected extra renovation job...

Family trip to China earlier in mid-2014 has eaten up another RM10,000.

Do not think the this amount of money is small case for me, it actually hurts my net worth significantly.

I need to sell quite a lot of shares in the end of this year to pay for these expenses, and the timing is bad.

As the market drops tremendously during this time, what should I sell and when should I sell? This really gave me some headache.

Not only I missed out again the chance to buy cheap shares, I need to sell the shares cheap.

I think I should keep enough cash.

However, after selling some shares, I even think of buying some other shares, and I nearly do it!

How many times have I said that I want to keep cash?

As for my shares portfolio, even though the return has dropped tremendously in the last 3 months, I guess YTD result still manage to stay in the positive territory (I hope so).

I will only calculate the investment result in the end of month, but surely it will not achieve my target of 30% annual return (please don't shoot me for having such ambitious target).

Saturday, 20 December 2014

Brief Notes On Current Economy Situation

Investors are told by experts to read more investment books and financial news in newspaper.

Do I read a lot? Actually not.

I only read a few books on investment for the past 3-4 years, which includes the 2 books by "Cold Eye", one on basic accounting and another 2 books on stock market investment.

I never read a single book about Warren Buffet and other famous investors, or other famous investment books such as Millionaire Next Door etc.

I do read one book from the Rich Dad's series though. That was long time ago.

I read newspapers almost everyday, but ONLY the Sports column. I find that I'm actually not too interested to read financial news. This is bad, I know.

I may flip through financial news on newspapers a few times a week, but I mainly read local financial news only.

I am still new to those financial jargon & the law of economy. You don't expect me to read something that I don't understand, right?

I get the financial & business news mainly online from i3investor and The Edge, but I only choose a few to read, as I'm not able to get online frequently now.

To force myself to read more, I started to subscribe to Busy Weekly in Nov14 when they were doing the offer. Til now there are a few editions that I didn't even read a single page.

So do not always agree with me. I still have many things to learn.

In order to become a better investor, I know that I need to force myself to swallow more world financial & economy news. It's not easy frankly.

I will write down my own view on current world economy in this blog so that it can serve as reference in the future.

Before Oct 2014, I thought that there was no reason for a bear market in 2015. The impression I get from financial news was that US & Europe were in the process of recovery.

The only concern might be China, who may face a slow down in growth.

Now with the unexpected drastic drop in crude oil price, the whole picture seems to change.

In order to eliminate competition from high-cost shale oil producers in North America, OPEC decided not to reduce their oil production.

As a result, crude oil price continue to drop.

Those net crude oil exporting countries are feeling the heat, including OPEC members.

Russia's situation is scary, with a double blow from the drop of crude oil price plus the effect of economy sanction by the West.

Its currency Ruble has crashed from 1 USD:35 RUB to over 70+RUB at one point in just a few months time.

It is a 100% drop. Just imagine if USD/MYR suddenly depreciates from RM3.20 to RM6.00...

To check the continuous depreciation of Ruble against USD, Russia central bank recently raised its interest rate from 10.5% to 17.0% overnight!

If this happens in Malaysia, I think many Malaysian with high debts including me will "mampus".

If Russia goes bankrupt, will it drag the whole world into recession? 

I remember few years back when a few small countries in Europe faced the similar threat, it seems like everyone is panic and the whole world will be seriously affected.

However, I read some reports saying that Russia's collapse will not affect the world much as it mainly exports energy which can be substituted by other countries.

So is Greece more important than Russia? I don't know.

One local economy & financial expert with PhD title writes a series of articles regarding current & future economy outlook. He predicts that the next 2 years will be really really bad for Malaysia. 

After reading those articles which seem to make sense, I feel like I should dump all my shares and hold cash for the next 1-2 years.

Anyway, no one can predict the market accurately, and sometimes theory is just a theory.

Ringgit has depreciated almost 10% in 3 months time to RM3.50. It will benefit USD-based exporters and burden the importers and those companies with debts denominated in USD.

How will it affect the whole country in general?

With the fall in crude oil price, Malaysia as a net exporter is expected to suffer due to its "not-so-healthy" financial situation. 

Petronas will cut its capex by 15-20% next year and hence government income from Petronas will also go down. 

Its CEO told reporters in the end of Nov14 that payment to government could be 37% lower if oil stays around USD75 per barrel.

Petronas contributes about half of Malaysia government's revenue, and now the oil price is even lower at around USD60. It may still go lower.

However, the fuel subsidy has been abolished since Dec14 and GST will kick in from Apr15. No one can be sure whether the government can sail through the low crude oil price environment peacefully.

If the government has difficulty to cope, then a lot of major projects have to be put on hold I guess. It will affect a lot of sectors.

Thus, foreign investors started to flee Malaysia. KLCI slumped and Malaysia Ringgit depreciated, while most other regional stock markets gain.

US and Euro markets are busy breaking new highs. Why KLCI does not follow US anymore? When US economy is good, other countries' economy can be bad?

Actually US did not suffer much during Asian Financial Crisis in 1997-98. 

       Dow Jones Index since 1985

In the end of Oct14, US just ended its 5-year quantitative easing programme (QE) as its economy has improved.

At the same time, Japan announced that it will further expand its own QE in response to an ailing economy. This makes many people planning a Japan holiday trip next year as Yen has depreciated quite a lot against MYR now.

China surprised everyone by cutting its lending interest rate for the first time in 2 years to 5.6% in order to tackle sluggish growth.

Eurozone is also hinting to implement a large scale QE to give a push to its slow recovery.

Because of the reasons above, aided by low crude oil price, stock markets of those economy powerhouse such as US, Euro, China & Japan are expected to advance next year!

Besides, US Fed is also highly anticipated to raise the country's interest rate in 2015 for the first time since 2006. Its current rate is only at 0.25% for quite a number of years already.

       US Historical Interest Rate

Raised interest rate in US is said to further strengthen USD, and may give further pressure to other countries' currencies.

Low interest rate environment means lower cost of living. People can buy houses, cars etc more easily with low borrowing cost.

Sooner or later this will lead to inflation when demand is more than supply. This is when interest rate hike comes in.

I get an impression from certain articles that US rate hike will have negative impact to Malaysia & KLCI. Will it happen suddenly in 2015, or gradually over many years? 

It is just a start of interest hike, should we need to worry now?

As Ringgit is cheap now, isn't it attractive for foreign investors to invest in Malaysia? Of course Malaysia need to be in a good shape to attract foreign investment.

For the past one year, it is obvious that crude oil, crude palm oil & KLCI all retreats from its recent peak in mid-2014.

Brent crude oil price started to drop from its peak in July14, which coincided with KLCI. However, CPO price started to trend downward earlier since Mac14.

For the past 10 years, during the bear market in 2008, all three reached their peaks in early 2008 before the massive slump which found their bottom at the turn of year 2009.

After that, both CO & CPO rebounded and reached their peaks in early 2011.

From there, crude oil fluctuated around USD110 for 3 years+ until the sudden fall recently, whereas CPO price was in a gradual downtrend.

Nevertheless, KLCI did not follow this time. It only experienced a major correction in 2011 but kept on breaking new high after this.

I think it is the same for almost all major stock markets around the world.

So now, crude oil at USD60 is very close to its lowest level during 2008 crisis at around USD50. CPO at RM2100 now from its peak of RM3800 is also quite close to RM1600 in 2008.

Despite a drop of 10% from its peak in July14, KLCI at 1700 now is still far away from lowest point of 800+ in year 2008.

As economy has largely improved, I think it is unlikely to touch that level again in the next bear market.

Anyway, during the period of 1997-2000, KLCI and CPO price actually moved in different direction.

It seems like rosy outlook suddenly turns sour towards the end of 2014. This is how fast things (or emotion?) can change.

As an investor, I think it is important to learn from experience and do not forget our initial investment strategy.

If you have got a few sleepless nights or near heart attacks for the past few days, then you might need to review and change your strategy to one that suits you better.

When we step into the year of 2015, will things turn better or worse?

If it becomes better, then it's nice.

If it becomes worse, then it's opportunity.

But you need to have enough CASH of course.

Thursday, 18 December 2014

Scientex: Lower Margin In Packaging

Scientex FY15Q1 Financial Result

Revenue 431.1 415.4 426.8 383.5 364.8
PBT 40.2 56.0 48.1 44.4 37.8
PBT% 9.3 13.5 11.3 11.6 10.4
PATAMI 30.3 48.8 37.2 33.9 29.3

Manu Rev 320.3 297.3 317.2 288.5 289.2
Manu OP 14.7 18.8 16.4 15.9 17.7
Prop Rev 110.8 118.1 109.6 95.0 75.6
Prop OP 32.0 36.9 32.5 29.3 22.2

Total Equity 769.8 712.7 686.2 649.9 635.9
Total Assets 1475.8 1400.4 1333.2 1304.4 1263.1
Trade Receivables 303.2 243.5 274.8 251.7 209.7
Inventories 83.7 109.0 82.1 76.3 86.0
Cash 102.9 83.8 56.4 89.3 91.2
Prop Dev Cost 104.0 104.6 71.8 74.4 57.5

Total Liabilities 664.7 665.0 624.9 633.3 606.8
Trade Payables 246.6 272.1 238.9 214.2 229.4
ST Borrowings 297.9 262.9 179.1 205.8 167.9
LT Borrowings 66.6 77.5 156.2 163.7 164.3

Net Cash Flow 19.1 -68.4 -95.8 -62.9 -61.0
Operation 1.5 153.5 89.5 30.9 13.5
Investment 13.2 -149.2 -106.7 -67.0 -54.1
Financing 4.5 -72.7 -78.6 -26.8 -20.4

EPS 13.69 22.09 16.43 15.34 13.27
NAS 3.47 3.22 3.10 2.94 2.88
D/E Ratio 0.34 0.36 0.41 0.43 0.38

Scientex's FY15Q1 result is a bit disappointing to me. Though quarterly revenue hit all-time high at RM431.1mil, PBT margin drops significantly from 13.5% to 9.3% thus causing its PATAMI to fall 38% QoQ to RM30.3mil.

The fall in margin is mainly due to products mix in its manufacturing segment.

However, there is a provision for forex loss of RM5mil in this quarter from USD borrowings. If it is added back to PBT, its PBT margin will be 10.5%.

From analysts report, it is said that Scientex revised the pricing in its packaging arm to increase market penetration in Southeast Asia to fully utilize its new capacity.

Balance sheet does not change much with net debt/equity ratio drops slightly to 0.34.

Free cash flow in the next 2 years might not be that great as it plans to spend RM240mil for capex. The RM40mil share subscription by Futamura has already been included in the cash flow this quarter.

It will be a challenge for Scientex to break its FY14 profit record in FY15 as property sector is expected to slow down next year. 

Scientex's property division contributes as much as 68% to its operating profit in FY15Q1, and 64% in FY14.

I'm not sure how was its property sales in FY15Q1 and I can't find its latest unbilled sales as well.

It is expected to launch RM550-600mil worth of new properties in FY15.

Anyway, while I expect its property segment to be flat in FY15, what makes Scientex interesting is its expansion plan in its packaging business.

Scientex has just completed capacity expansion for its blown film, which includes the latest 9 layers barrier films.

Its Cast Polopropylene (CPP) film plant with expanded capacity of 12,000MT per annum should be able to commence operation by the end of 2015.

In the second half of year 2016, its new BOPP film plant should also be up and running. It will increase its BOPP film capacity 10x from 6,000MT to 60,000MT per year.

While it is acceptable to lower its margin to penetrate more markets, I do hope that its revenue will increase significantly to offset the damage caused by lower margin.

As Scientex used to have better second half, I will keep my target price at RM7.75 first.

Scientex is the only stock in my current portfolio that I am confident to hold for more than 10 years.

Friday, 12 December 2014

Tambun: Disaster Or Opportunity?

I'm sure that many Tambun Indah's investors are wondering what the hell is going on with its stock price, which has dived from RM2.60 to RM1.56 in less than 3 months time.

It is a massive 40% drop from its peak.

Similar to almost all property stocks, it is likely due to guarded outlook for property sector next year, coincides with overall bearish market.

Then why does Tambun drop more than other property stocks? I think may be it's because the more it went up, the more it will go down.

My paper gain for Tambun has gone down from 240% at peak to 100% at the moment.

Am I a fool for still holding on to Tambun?

       Rain Tree Park 1

Since last year, I have decided to adopt "Cold Eye's" philosophy in stock market investment, in which I will treat buying shares in a company like doing the business with the company.

As long as the company can keep on generating consistent profit or even better, growth, and giving good & consistent dividends, I will keep its shares for longer term unless it is way too overvalued.

With expected softer property market in 2015, Tambun might not be able to sustain its outstanding growth shown in the last 2 years.

However, with ample cash on hand, it is able to acquire new development land.

In a cautious property market when most people will only buy property for own occupation, buyers will certainly concentrate more on affordability & landed property, apart from strategic location.

Tambun will only work on its Pearl City for new launches next year, until it can find another piece(s) of land.

Recently called-off land deal is also within Pearl City which is not expected to be developed in the next 2-3 years.

Tambun still has over 450 acres of undeveloped land left in Pearl City with approximately RM2.6bil GDV which can last for at least 4-5 years.

For me it is better if Tambun can acquire new land elsewhere as diversification. So the termination of land deal was not totally negative for me.

Closed at RM1.56 today, Tambun is trading at forward FY14 PE of 6.5x, with an estimated dividend yield of 6%.

I think Tambun is currently trading at a very attractive price but bear in mind that anything can happen in a bear market. It may still go lower.

I have relegated Tambun from my core portfolio in Sep14. However, my plan was just half-executed as I still haven't reduce its shares to my desired level to hold for long term.

This is due to greed as I was waiting to sell at higher share price. My latest disposal was done at its peak of RM2.60. So naturally I was waiting to dispose again above that level.

When the share price started to drop from RM2.40 in early Nov14, I was still waiting for a rebound.

Now we know that the rebound does not actually happen for the past one and a half month.

This shows that I'm still an inexperience investor. I should not be too greedy.

Anyway, my investment strategy still remain the same.

I think I should not dispose at current level, as it should be a level to collect.

What do you think?

Tuesday, 9 December 2014

Baby Horse vs Baby Bear

Bear is arriving? Let it be.

No more money to shop in the stock market? Let it be.

My 3rd baby has arrived. That's what matters most :)

I just want you to be happy and healthy.

Monday, 8 December 2014

IOI Wants 101

If I am a major owner of IOI, I will dream of buying Taipei 101, just because of its name.

If I am a minor shareholder of IOI, I will definitely welcome the idea of buying Taipei 101, as long as the deal is fair.

IOI Properties is going to buy 37.1% of the skyscraper from Ting Hsin Int Corp for RM2.74bil or NT25.14bil, subject to Taiwan authority's approval.

IOI Properties will have second largest stake in Taipei 101 after Taiwan government-invested ventures at 44.35%.

Ting Hsin is involved in several food safety scandals in Taiwan and was somehow forced to sell its stake in Taipei 101 due to its negative image on the landmark building.

Ting Hsin bought its stake about 5 years ago for just about NT8bil. Now it is going to sell at NT25bil. The rich just gets richer.

Taipei 101 has a net book value of NT39.6bil as at 31 Dec 2013. It is 96% occupied and its gross rental yield is reported to be >5%.

Is it a good deal? Is IOI paying too much? I'm not sure.

Anyway, owning world's famous landmark building is always a good idea for me.

Thursday, 4 December 2014

A "Healthy" Year Ahead?

Two companies related to healthcare industry are queuing to be listed next year.

  • Asian Healthcare Group (AHG) - listed as Special Purpose Acquisition Company (SPAC), targeting secondary & tertiary healthcare
  • Qualitas Healthcare Corp (QHC) - mainly targeting primary healthcare

AHG will offer 1.5 bil shares (80%) at 50sen each to the public out of its enlarged 1.875 bil shares, together with one free warrant for each share, with exercise price of 50sen.

It will raise RM750mil to acquire qualified medical center(s) or hospital(s) with 100-500 beds in Malaysia.

If AHG fails to acquire anything in 3 years after listed, it will be liquidated and investors will get back less than what they have invested earlier as money will be spent on various listing fees and administration expenses except for directors remuneration.

The eye-catching point in AHG's listing is about the names behind it.

The directorships of AHG are led by:
  • Datuk Yvonne Chia, Malaysia's first female commercial bank ex-CEO at RHB & HLB
  • Datuk Chevy Beh, ex-director at BP Healthcare Group
  • Tan Sri Dato Sri Abdul Aziz, director of Affin & Affin Islamic Bank
  • Mahadzir bin Azizan, director of Syarikat Takaful Malaysia & ECM Libra
  • Dato Voon Tin Yow, director of SP Setia
  • Jamaludin bin Elis
  • Dr Lawrence Chan Hon Wah, cardiologist

So many bankers, future money not a problem?

The warrants will raise another RM937.5mil if all are converted into AHG shares after successful acquisition of assets.

I think all the SPACs listed in Malaysia do not do so well. Is AHG worth to invest in?

Meanwhile, QHC also plans to list in the main board in 2015. The detail of the IPO is still pending.

QHC is mainly a primary care providers which is expanding fast recently through acquisition.

It started in 1997 by acquiring stakes in general practitioner (GP) clinics and medical imaging centers. It was listed in Catalist Board SGX-ST in 2008 but was taken private in 2011.

It is a regional player which has business in Malaysia, Singapore, India, Australia & New Zealand. 

The main services provided by QHC include primary care service, medical diagnostic service and dental service.

Currently in Malaysia it has:
  • 94 owned GPs
  • 23 affiliate GPs
  • 110 associate GPs
  • 4 dental clinics
  • 4 medical imaging centers
  • 1 pathology lab
  • 1 fertility center

QHC's financial report shows that its revenue doubles in 2 years from 2011 to 2013. However, net profit does not follow as expenses are growing at a higher rate.

Net profit actually fell from RM16.5mil in 2011 to RM14.1mil in 2013.

Anyway, gross profit is impressive at more than 50%.

Healthcare industry is considered as a relatively "safe" sector to invest in, as no matter how the market and economy behave, people are still getting sick.

Actually when the market is bad, more people will get sick isn't it?

With fast increasing medical insurance coverage, people tend to go to hospital more frequently, and doctors tend to do more tests on patients.

In the end, healthcare providers will earn more.

Nevertheless, healthcare is also a very competitive business. Those weak players will be eliminated sooner or later.

Perhaps more healthcare-related companies to be listed next year?

Monday, 1 December 2014

My Portfolio Nov14

Summary For November 2014

Numbers of stocks 9
Cash/Share ratio 0
Share Bought None
Share Sold None

Overall 2014
Portfolio Return Nov14 -5.0%
KLCI Return Nov14 -1.85%
Portfolio Return YTD14 52.6%
KLCI Return YTD14 -2.47%

Stock Portfolio @ End of Nov14

Core Portfolio
Stocks Average Latest G/L (%)

Satellite Portfolio
Stocks Average Latest G/L (%)
GTRONIC 2.43 4.52 86.1
HHGROUP 0.475 0.455 -4.2
HUAYANG 2.32 2.17 -6.5
INARI 0.73 2.86 291.8
LATITUD 2.09 3.70 77.0
MATRIX 2.09 2.90 38.8
SCIENTEX 5.47 7.55 38.0
TAMBUN 0.77 2.18 183.1
YOCB 0.69 1.02 47.8


  • Portfolio underperformed KLCI in November, mainly due to the fall of Tambun.
  • No transaction in Nov14.
  • Overall YTD return falls 8% in one month to 52.6%. 
  • From today's market, it looks like it will be a real challenge to get positive return in Dec14.

  • Try to accumulate cash.