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Month: September 2016

Is it worth investing in SIAEC shares now?

SIA Engineering

Currently trading at $3.73, SIA Engineering Company (SIAEC) shares have not reached the 5-year low of $3.35. But it does not mean that the company is doing fantastic either. SIAEC shares had been sliding from a record level of $5.29 since 2013 and many investors wonder whether it would be worth investing in SIAEC shares now.

For 1Q16, SIAEC announced profits amounting to $199.8 million as compared to $41.7 million in 2015. The explosive increase was due to $141.6 million gain from the divestment of its 10% stake in Hong Kong Aero Engine Services Ltd (“HAESL”) to Rolls-Royce Overseas Holdings Limited (“RROH”) and Hong Kong Aircraft Engineering Company Limited (“HAECO”).

In addition, the Group received a special dividend of $36.4 million from HAESL following the divestment of HAESL’s 20% stake in Singapore Aero Engine Services Limited (“SAESL”) to Rolls-Royce Singapore Pte Ltd (“RRS”), bringing the overall gain from the divestment to $178.0 million.

SIAEC

SIAEC financial performance

Apart from the one-off divestment, there are few bright spots for SIAEC. Revenue has declined for the past two years and for 1Q16, SIAEC registered a decline of revenue to $271.6 million from $277.3 million in 2015. Some analysts predicted in the news lately …

Hellfire from Swiber Bond and Lehman Brothers Minibond

swiber

Sometimes, life is stranger than fiction. The recent implosion of Swiber junk bond brings back memories of Lehman Brothers Minibond saga in 2008. About 10,000 retail investors in Singapore lost their investments totaling more than $500 million in products linked to Lehman Brothers. The similarity between the hellfire from Swiber Bond and Lehman Brothers Minibond is that DBS was one of the financial institutions distributing these high risk investment products.

In the world of investing, there are many factors why things can go wrong. Even government can sometimes make dubious investment decisions. The most infamous example is the fiasco concerning eight town councils run by People’s Action Party (PAP) which had $16 million invested in the various Lehman Brothers-linked products. Many analysts were shocked and disturbed that town councils had invested in such structured product using tax payer’s fund. After all, the mandate of town council is different from sovereign wealth funds like Temasek Holding.

swiber

Lehman Brothers Minibond Saga

Notwithstanding the loss suffered by PAP town councils, the collapse of Lehman Brothers triggered one of the most intriguing financial hellfire in Singapore. Investors who had bought High Notes 5 from DBS Bank were shell-shocked to learn that they could get …

OCBC Wing Hang Bank

Stock market

On 18 July 2016, OCBC announced the merger of its two banking subsidiaries in China – OCBC Bank (China) Limited and Wing Hang Bank (China) Limited) – to become OCBC Wing Hang Bank (China) Limited (“OCBC Wing Hang China”). After acquiring Wing Hang Bank in 2014, OCBC wasted no time in building its investment moat in China.

OCBC in China

China is a strategic core market for OCBC, given its sheer market size. OCBC Bank first established its presence in China in 1925 with the opening of its Xiamen branch and incorporated OCBC Bank (China) Limited, headquartered in Shanghai, on 1 August 2007. Thus, the merger of its Hong Kong Wing Hang Bank with the China’s unit makes sense because of the synergy in value.

Headquartered in Shanghai, the unified platform allows OCBC to be well-positioned to serve its clients better in the Greater China. OCBC Wing Hang China has 32 branches and subbranches span 14 major cities across both Northern and Southern China – Shanghai, Beijing, Shenzhen, Guangzhou, Zhuhai, Foshan, Huizhou, Xiamen, Tianjin, Chengdu, Chongqing, Qingdao, Shaoxing and Suzhou.

In the Pearl River Delta region in China, one of the country’s main hubs of economic growth, OCBC Wing Hang …

Explosive form of Sheng Siong shares

SGX stocks

Since my previous review in May 2016, Sheng Siong shares had an explosive form. The supermarket operator’s share price surged from $0.89 to the $1.00 support level. This is an impressive run and effectively, Sheng Siong had shed the “penny stock” tag.

Once again, Sheng Siong delivered a quarterly performance that are within expectations. Revenue continued to grow, recording an increase of 5.5% at $188.8 million compared to 2015. The addition of three new stores had contributed to the net growth in revenue.

Sheng Siong Competitive Edge

Besides store expansion, Sheng Siong’s growth was supported by higher margins. Gross margin increased to 26.1% in 2Q2016 compared with 25.2% in 2Q2015 mainly because of suppliers’ rebates and reduction in input cost derived mainly from bulk handling, which was facilitated by continuous improvements from the central warehouse at Mandai.

Profits for the period was $15.2 million, an increase of 11.3% compared to 2015. Cash flow from operating activities remained healthy at $26.5 million for current quarter but cash and cash equivalents decreased by $75.0 million to $50.8 million. The big drop was due to payment of final dividend for FY2015.

On the basis of the latest financial report, the management of …

Is gold a long-term insurance?

buy gold Singapore

Many wealth builders view gold as a long-term insurance. This is because gold offers safe-haven qualities that serve to hedge against inflation and economic uncertainties.  In Singapore, the government encourages the locals to buy and sell gold, with a view of making Singapore a precious metal trading hub.

One of the policies that incentivize Singaporeans to buy gold is the exemption of GST for Investment Precious Metals (“IPM”).  Since October 2012, precious metals in the form of a bar, ingot, wafer and coin which meet certain criteria can qualify as IPM and are exempted from GST.

buy gold Singapore

To qualify as IPM, the precious metal must meet 4 criteria:

  • It is gold of at least 99.5% purity, silver of at least 99.9% purity or platinum of at least 99% purity.
  • A precious metal bar, ingot or wafer refined by a refiner with the following accreditation/ endorsement is regarded as meeting this criterion:

For gold and silver, a refiner in the current or former ‘Good Delivery’ list of the London Bullion Market Association (LBMA);

  • It bears a mark or characteristic that is internationally accepted as guaranteeing its quality.
  • It is not a decorative bar, ingot or wafer or a collector’s bar, ingot or

Safeguard your financial destiny

financial destiny

The latest labor market report released by Ministry of Manpower is discouraging for many job-seekers. Employment growth has slowed down and unemployment and redundancies have risen in the second quarter of 2016. In this uncertain market condition, it may not be wise to switch career or even quit without a job. However, regardless the case, you do not leave your financial destiny in the hands of your employer.

In today’s context, it is not realistic for Singapore employees to trust that they will never be made redundant. The rapid changes in technology inevitably led to unexpected transformation in various industries, resulting in massive restructuring in our economy. This means that many jobs have become obsoleted and when affected employees are laid off, their positions disappeared as well.

financial destiny

Thus, if you are not careful, you may find yourself in the frightening prospect of being retrenched. Even in the civil service sector, which is well-known in Singapore for being an iron-rice bowl employer, contract jobs have become prevalent. Being a contract worker, you may be let go after your employment contract expired. Even if you are a permanent staff working in the civil service, it does not mean that your career longevity …

MediShield Life versus Private Integrated Shield Plan

overseas properties

MediShield Life was rolled out in November 2015 to replace the MediShield. Unlike its predecessor, MediShield Life is a mandatory basic health care insurance designed to provide better coverage for Class B2 and C wards in public hospitals. There is also no need for Singaporeans to apply for MediShield Life. Given that MediShield Life provides enhanced coverage, it is important to review the merits of MediShield Life versus Private Integrated Shield Plan (IP).

Features of Medishield Life

Before we look at IP, there is a need to consider the key features of MediShield Life. Firstly, MediShield Life provides lifetime coverage and even those pre-existing conditions can be covered. The lifetime claim limit has been removed and the maximum claim limit has been increased to $100,000 per policy year. Thus, with the improved benefits, most Singaporeans will fork out less cash amount for hospital bills.

Medishield Life

As a result of these enhancements, the premiums for MediShield Life have also increased. However, the premiums for MediShield Life can be fully paid using CPF’s Medisave account. To offset the premium increases, the government is also providing subsidies. Clearly, the policy intention is to provide an affordable health care insurance that is able to meet …

End of fairytale for OSIM

stock market

On 29 August 2016, OSIM ended one of the most incredible fairytales in the corporate world and was de-listed from the SGX market. OSIM’s turn-around story reflected the resilient and determination of founder, Ron Sim in coming back from adverse conditions. After all, successful turn-around cases are so rare in Singapore.

One of the most admirable traits of Ron Sim is his business acumen and never-say-die mentality. In 2009, he made the difficult decision of writing off OSIM investment in US retailer, Brookstone, after it registered a loss of almost $100 million the previous year. Many investors lost faith in the management abilities and at the lowest point, many dumped the stock, sending it crashing to $0.05 per share.

Instead of viewing the whole episode negatively, Ron deemed it an “enriching” experience because of the lesson learned on the US market. Not many business leaders can overcome the sort of setback that Ron Sim encountered. At that point of time, with the onset of the Great Financial Crisis, it certainly seemed like the massage armchair company was doomed.

stock market

But what he managed to achieve the following years was simply unbelievable. Following the Great Financial Crisis, he correctly predicted that the …

SingTel’s investment moats

SGX stocks

The recent announcement of the prospect of a 4th telecommunication player entering the market has caused SingTel, Starhub and M1 shares to fall.  Whilst it is too premature to make a judgement on the impact to the three telecommunication players, SingTel should be the least affected. Most investors are probably unaware of SingTel’s investment moats

Unlike the rest of the existing players, SingTel differentiates itself from the rest of the league by positioning itself as a regional player with more than 610 million in Asia Pacific and Africa. In Singapore, it holds the number 1 market share with 4.1 million mobile customers. Granted that the new entrant will eat into SingTel’s market share in Singapore, it should be noted that the major bulk of SingTel’s earnings are derived from overseas. In addition, SingTel has a very diversified revenue base. Hence, the risk is very much mitigated for this giant.

SingTel

Investments

In its 100% owned Australia unit, Optus, SingTel has the number 2 market share with 9.3 million mobile customers. SingTel also holds the number 1 market share in India, Thailand and Indonesia. Both Optus and Indonesia’s Telkomsel are SingTel’s champion income drivers. For first quarter 2016, Optus’ EBITDA grew 0.7% …

Creative Technology won the battle but lost the war

Genting Group

Singapore’s Sim Wong Hoo, was famous for building Creative Technology (CT) from scratch. In the 80s and 90s, the SoundBlaster audio cards produced by CT was selling like hotcakes and propelled Sim from a struggling entrepreneur to Singapore’s youngest billionaire.

In March 2000, CT’s shares was even trading at record high of $58. Now, the share price is languishing at $1.00. Has Creative Technologies won the battle but lost the war?

As a Singaporean engineer, obviously I hope Sim can do well and make Singapore world-famous again. His SoundBlaster audio cards had put Singapore on the global map and proved to the rest of the world that Singapore is capable of creating world-class innovative engineering products as well.

But it is pity that IT is a very fast-paced and ruthless industry. The rapid evolution in the technology development led to cheaper, more powerful and better integrated computer audio systems than CT’s SoundBlaster. This gradually marked the start of the decline for Creative Technology.

Stock Market

SG Wealth Builder

In 2006, Sim Wong Hoo made Singapore world-famous again by winning a legal dispute against Apple, which agreed to compensate Creative Technology $100 million over patent infringement. Back then, Apple’s CEO Steve Jobs claimed …

Is it worthwhile to invest in The Hour Glass?

SG Wealth Builder Membership

On 12 August 2016, luxury watch retailer, The Hour Glass, delivered a set of poor financial results for 1Q2017. Year-on-year, revenue dropped a whopping 7% to $149 million and profits after tax declined 23% to $8.3 million for the first quarter of FY2017. At the back of many investors’ mind should be the question of whether is it worthwhile to invest in The Hour Glass now?

To be fair to the management, The Hour Glass has one of the strongest balance sheets for a listed SGX stock. The current assets amounted to $426 million, while cash and cash equivalents stood at $80.6 million. The current assets could more than offset the current and long term liabilities easily.

The Net Current Asset Value Per Share (NCAVPS) was $0.568 per share. This means that if The Hour Glass is to be liquidated, this will be the amount of tangible value per share after paying off the short term and long term debts. Net Asset Value (NAV) per ordinary share was $0.63.

SGX stocks

For The Hour Glass, my estimation for the intrinsic value of each share is $0.66. This is because the Group holds a substantial amount of investment properties valued at $64 …

Raffles Medical shares power ahead

SGX stocks

Fresh from the stock split exercise in May 2016, Raffles Medical shares power ahead amid the sluggish stock market condition. On 26 July 2016, the healthcare provider announced another set of solid performance.

Financial Performance

Revenue for second quarter surged 19.8% to $119 million as compared to last year. However, increased in staff costs led to profits of $16.1 million after tax, a marginal increase of only 0.7% as compared to 2015.  The rate of increase for staff costs was higher than the growth in revenue because of more specialist consultants and staff as well as increased staff arising from acquisitions in 2015.

Raffles Medical continued to have strong cash position, with net cash increased from $53.8 million as at 31 December 2015 to S$92.8 million as at 30 June 2016. This was attributed mainly to strong operating cash flows generated by the Group from its increased business operations. Net cash from operating activities was $23.8 million in 2Q16. Cash and cash equivalents increased by $13.0 million from $110.6 million as at 31 March 2016 to S$123.6 million as at 30 June 2016.

Raffles Medical shares

Investments

Notwithstanding the good performance, Raffles Medical has announced interim dividend of $0.005 per share, to be …

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