April 2016 - SG Wealth Builder

Month: April 2016

Since the beginning of 2016, gold price had seen a meteoric rise of 21%. It rose from USD1061 to USD1292 per troy ounce at this point of writing, representing an incredible come-back by the yellow precious metal. Is this the start of a bull run for gold?

Traditionally seen as a safe asset class, the surge in gold price is due to the poor economic climate. The combination of oil crisis, China stock market crashes, negative interest rate policy by Bank of Japan and weak global growth currently make gold an attractive commodity for investors to hold. After all, it has been regarded as a safe haven for decades during economic downturns and sky-high inflation.

If you are one of those who think that the current market climate is doing “fairly okay”, then perhaps you have not been following the news or you must be an extremely optimistic person. The matter of fact is that many businesses are finding it challenging to operate under the current climate and the global market is basically waiting for a Black Swan event to implode. By then, it will be too late for you to liquidate your stocks and transfer the fund to gold …

A better tomorrow for Singapore engineers

sgwealthbuilder

April 26, 2016

Career management

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After a trip to California’s Silicon Valley, Singapore Prime Minister Lee Hsien Loong called for better recognition and prospects for Singapore engineers. It was as if the government has just awoke from a deep sleep and suddenly found that local born and bred engineers have been given the raw deal all this while. With a magic wand, PM Lee magically revitalized the outlook for engineers and give this profession a steroid injection, in terms of salaries and career progression.

To be honest, I have been an engineer for 11 years and my starting pay was $2,600. It took me 5 years of working experiences to crawl to the $4,000 level. Now, fresh graduate with no working experience can command $4,000 level. Effectively, given the new salaries regime, fresh graduates have 5 years of head-start than me. The quantum increase is quite a huge jump and I wonder whether SMEs can afford to pay such premium for fresh engineering graduates.

It may be the case that the government is struggling to find local computer engineers with cyber security skills. Or maybe there is a dearth of software engineers to support the growth of local fintech industry. Whatever the real reason it …

Contra trading to be phased out?

sgwealthbuilder

April 25, 2016

Stocks

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On 22 April 2016, Singapore central bank and white-collar police raided 4 local brokerages for possible breaches of securities law. It was reported that one remisier each from OCBC Securities and DBS Vickers were taken for questioning by the authorities. When this news broke, it took the market by storm and left investors wondering which stock counters had been involved.

This latest episode reveals another dark chapter in Singapore stock market following the epic penny stock crashes of Asiasons, Blumont and Liongold in 2013. Back then, the authorities investigated the three companies for possible insider trading or market manipulations after $8 billion dollars were wiped out in two days of trading. The scandal in 2013 led SGX to implement a number of market reforms to safeguard investors’ interests.

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Among the new measures implemented were minimum trading price of $0.20, daily short-selling reporting and new reporting requirement of shares transactions by major shareholders. It was also proposed that by mid-2016, contra trading will be phased out. I personally feel that the removal of contra trading is too draconian because fundamentally, there is nothing wrong with contra trading. This activity, although speculative in nature, allows flexibility and market liquidity. …

Retrenchments in Singapore

sgwealthbuilder

April 24, 2016

Career management

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According to the latest Ministry of Manpower (MOM)’s data on the employment landscape in Singapore, more workers were retrenched in 2015. A total number of 13,440 workers were laid off, the highest since 2008-09, which of course was the Great Financial Crisis period. The spike in retrenchments in Singapore reflected the gloomy economic outlook and challenging times ahead.

As a wealth builder, my mantra is to work hard for money and also ensure that my money works hard for me. Being gainfully employed and having a good income is important in order for me to lay down a strong financial foundation for the family. Henceforth, the data on retrenchment is useful because they provide useful information on the impact of economic downturn and allow Singaporeans to identify which industry sectors are ailing.

The latest data from MOM is indeed worrying and I am thankful that I have a job. Sometimes, in the midst of our busy schedules, we tend to take things for granted and expect every day is Sunday in office. What we don’t realize that Singapore is rapidly losing its competitive edge because of high business costs. Many MNCs realize that the so-called talents in Singapore are not …

OCBC share price skyrocketed

On 7 April 2016, local bank OCBC announced the acquisition of Barclays Asia wealth management business in Singapore and Hong Kong through its private banking arm, Bank of Singapore for $430 million. The transaction is still subject to approval by Singapore’s High Court but is expected to be completed by end of this year. Nevertheless, investors have given their nod of approvals and pushed OCBC share price up by $0.60 within the past week.

Since last year, OCBC share price performance had not been doing well partly because of its loan exposure to the oil and gas industry. The non-performing loan (NPL) has increased to $1.97 billion in FY15 from $1.28 billion the previous year, due to the “classification of a few large corporate accounts associated with the oil and gas services sector”. As a result, the share price had tumbled from $10.89 in 2015 to a low of $7.46 in February 2016. So the recent share performance must have given OCBC investors something to cheer about.

Smart traders who bought OCBC shares at $7.46 this year would be sitting on massive paper gains by now. Personally, I knew a wealth builder who invested $70,000 at that price range. I …

Will Singaporeans pay the banks to deposit their savings?

When the Bank of Japan (BoJ) announced the shock move to implement Negative Interest Rate Policy (NIRP) in January 2016, it took the market by storm. The aggressive step reflected the extent of Japan’s economy difficulties and the scary prospect of deflation. Just what is NIRP all about and why should Singaporeans take note of this development? Will Singaporeans pay the banks to deposit their savings?

NIRP is used by countries to devalue their currencies so that their exports can be cheaper and thus spurring economic growth. Previously, during the era of the Great Financial Crisis in 2008, major economies like USA, Europe, Japan and China all resorted to Quantitative Easing (QE) to encourage spending in the hope of achieving growth in the long-term. However, after a long period of sluggish global growth, policy makers started to panic because they have run out of idea to stimulate growth. In Europe, countries like Denmark, Sweden and Switzerland had already embarked on NIRP. Japan followed suit early this year.

Together, Europe and Japan produce 20% of the global GDP. Thus, they are major players in terms of global trade. By adopting NIRP, they are essentially triggering a global currency war and issuing …

Buy gold to protect your wealth against negative interest rates

In the aftermath of Great Financial Crisis in 2008, policy makers had resorted to financial engineering to restore global economy. Some notable policies were Zero Interest Rates and Quantitative Easing (QE) which aimed to encouraging spending and lending. However, after so many years, these policies were deemed ineffective and so several European countries and Japan had devised the Negative Interest Rate Policy (NIRP) in a bid to revive their ailing economies. What does this mean to you as a wealth builder and how can you protect your wealth against negative interest rates?

Very simply put, for those who live in countries with NIRP, the banks will charge depositors for putting their monies in the bank. Yes, that’s right. Instead of receiving money on your saving deposits, you have to pay the bank money. This may sound strange but the intent of this policy is to prevent wealth builders from hoarding money and also to encourage banks to lend money. The objective of central banks implementing this policy is basically to prevent deflation from eroding the demand side of the market.

It is still early days of NIRP and the long-term effects are unclear. Nevertheless, by resorting to negative interest rates, …

Is ISOTeam an undervalued stock?

ISOTeam is a Catalist listed stock which I have been wanting to cover for a long time but had not done so because I was under the impression that the company is in small player in the building and construction industry. However, I found out recently that I was wrong.

Company background

The company is actually an established player in the building maintenance and estate upgrading industry in Singapore. ISOTeam has over 15 years of Repairs & Redecoration (R&R) and Addition & Alteration (A&A) experience, and has successfully undertaken more than 300 public and private sector R&R and A&A projects involving close to 3,000 buildings. ISOTeam is also the exclusive applicator of paint works for both SKK and Nippon Paint in the public housing sector in Singapore.

I like ISOTeam for its competitive strengths in its strong track record of project completions, early mover in eco-conscious solutions and diversified capabilities in servicing residential, commercial, industrial and institutional segments. All these strengths enabled ISOTeam to repeatedly winning tenders for public sector projects even when they are not the lowest in price.

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Share price performance

ISOTeam launched IPO in July 2013 with 32.2 million shares at 22 cents each. …

Diversify Your Wealth with Investment Precious Metals

When it comes to precious metals like gold and silver, many Singaporean investors are still trying to figure out its status within the world of asset management.

As an emerging asset class, gold is often regarded as money and a form of long term safe-haven during times of financial crises. On the other hand, silver is deemed more as an investment instrument for investors to make money because of its short term price volatility. Whatever the case it may be, it is important for investors to diversify wealth across several asset classes, such as investment precious metals, so that during financial crises, the impact to wealth is mitigated.

In 2012, Singapore government announced that precious metals which qualify as Investment Precious Metals (IPM) will be exempt from GST. The change is to recognize gold and silver bullion as financial assets, and also to grow Singapore into a regional precious metal trading hub. Nonetheless, it is important to note that not all gold and silver bullion are granted the status of IPM. There are basically four criteria to meet:

Gold and Silver Bullion

It is gold of at least 99.5% purity, silver of at least 99.9% purity or platinum of at

…

OSIM increases buy-out offer price from $1.39 to $1.41

And so the saga continues. On 8 April 2016, OSIM increased the buy-out offer price from $1.39 to $1.41. The revised offer price is basically on a cum-dividend basis and will be the final offer price.

To be frank, the revised price is nothing to shout about and is unlikely to sway those dissent shareholders who refused to accept Ron Sim’s offers. Whether maverick entrepreneur Ron Sim can successfully de-list OSIM remains to be seen but it would be interesting to analyse what exactly prompted this shocking corporate move of the year.

Bad times ahead?

One possible reason for Ron Sim to de-list OSIM might be because of a possible global economic downturn. After all, China is slowing down now and OSIM had previously banked on rich Chinese’s spending power. A look at its global network of outlets revealed that the number of outlets in North Asia has been reduced from 365 to 360. Overall, the company is also reducing its GNC and TWG Tea outlets.

As OSIM’s core business is still in selling luxury massage armchair, a global economic crisis will definitely impact its share price negatively. Drawing from the Great Financial Crisis (GFC) in 2008, its share price …

5 Things That Investors Must Know About Contract for Differences (CFDs)

Contract for Differences (CFD), basically allows you to trade in leveraged products without forking out huge capitals upfront. This approach essentially manifests both your potential profits and losses, but with proper risk management, you can ensure asymmetric returns as a trader. To be an all-rounded wealth builder, it is important to have knowledge in different investment instruments and their associated risks. So let’s delve into the 5 most important things that investors must know about CFDs.

(1) What are CFDs?

CFDs are derivatives because they derive their values from underlying assets like gold, shares or currency. This means that investors are not trading the assets. Instead they are actually trading the contracts with the service providers. This is important because investors are not owning or taking physical delivery of the underlying assets. Money is made or lost when the value of the asset moves either in your direction or against you. Thus, with CFDs, investors have the full option of going “long” or “short” the asset.

(2) The power of leveraging

Another attractive feature of CFDs is that it allows you to put down a small investment capital for a much larger market exposure. As leveraged financial products, they are …

Why SGX Gold Kilobar Contract is a Major Flop

I was reading an article written by BullionStar on SGX Kilobar and could not help but agreed with all the points. The blogger has correctly pointed out the major flaws in the product offering from SGX and also compared it to BullionStar’s products.

From a Singapore Inc perspective, of course I hope SGX’s project will be a success as it could have played a major role in fulfilling Singapore’s desire to become a gold trading hub, thus boosting our economy and creating more high-value jobs for fellow Singaporeans. Unfortunately, SGX messed up royally and thus, I foresee that Singapore may miss the golden opportunity to become a trading hub if the situation is not addressed adequately.

Firstly, by setting a 25 x 1 kilo bar of gold contract, SGX has inadvertently made this product exclusive for the big players. Not many retail players can afford to fork out $1.35 million and there are not many gold buyers who are interested in buying 25 kilobars of gold, especially in a small market like Singapore. In this regard, I am quite convinced that SGX has not done much market study on the gold demand before launching this product. If SGX is working …

OSIM’s founder dangles more carrots to shareholders

The Chairman and Chief Executive of OSIM International Ltd (the “Company” or “OSIM”), Mr. Ron Sim Chye Hock, has revised the Offer Price for OSIM shares to S$1.39 per share. The Offer was made through Vision Three Pte. Ltd. (the “Offeror”), a private investment vehicle legally and beneficially owned by Mr. Ron Sim.

There will be no further revisions made to the Final Offer Price. Judging by the size of the increase ($0.07), it seems that Ron Sim is not hell-bent to privatize the company. Nevertheless, the final offer still represent a premium of 40% for three-month periods up to and including 29 February 2016. With this latest development, it remains to be seen what the actual outcome of this saga will be like.

To be fair to the minority shareholder, although the offer made by Ron Sim is reasonable, many of them would have suffered heavy losses if the takeover materialized, especially if they had bought the shares at a high of $2.90 in 2014. They probably would have invested in OSIM based on the strength of its 21 consecutive quarters of profits from 2012 to 2014. That was an amazing feat for a local lifestyle company and many …

Is it worth buying Tat Hong shares now?

Founded in the 1970s in Singapore, Tat Hong is a listed company that provides crane rental services in the construction and offshore marine industry. It now operates 1,500 cranes across the region. By tonnage, it is the seventh largest crane rental company worldwide. Is it worth buying Tat Hong shares now? In this article, I will share my insights on Tat Hong’s investment value.

On 15 March 2016, the company announced in the SGX website that “it has been approached in connection with a potential transaction which may or may not lead to an acquisition of the issued share capital of the Company. Discussions are preliminary and there is no certainty or assurance whatsoever that these discussions will result in any transaction”. The announcement on potential takeover offer led to a massive surge in Tat Hong’s share price the next day. The stock rocketed from 41.5 cents to 63.5 cents.

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Is this a value trap or value buy? Before jumping the gun, investors or traders must put things into perspective and evaluate whether Tat Hong’s shares are worth buying or trading. Since 2007, Tat Hong’s share price has tumbled from a high of $3.36 and is now …

The Explosive Surge of The Hour Glass

The Hour Glass is a listed luxury watch retail group in Asia with headquarter in Singapore. Founded in 1979 by the husband and wife team, Dr. Henry Tay and Dato’ Jannie Tay, the company started operation in Lucky Plaza through a partnership with Metro Holdings. In recent years, the company’s share price has surged from $0.30 in 2009 to almost $2.00 in 2014. Post stock-split of a one-into-three exercise in 2014, the current share price is now trading at $0.74.

What sets apart The Hour Glass from other luxury watch competitors is that it also has a substantial property portfolio. According to its 3Q2016 financial report, the group is holding on to $64 million worth of investment properties. In 2015, it acquired two Australian properties, namely an 11,000 square feet heritage listed retail and commercial property in Sydney and an 8,000 square feet retail property in Brisbane’s prime luxury retail precinct for $6.3 million. Such property investments reflect the listed company’s strategy for growth in the future.

Besides laying the groundwork for future growth, it is also making the effort to grow its core business. Amid the global economy uncertainties, The Hour Glass acquired the Watches of Switzerland in 2015 …

See How I Trade K1 Ventures

Last Friday, I have sold off all my K1 Ventures shares. Overall, I made a profits of $150 after holding the shares for two months. The size of the yield is 0.7% and there is nothing to shout about. I wanted to hold the shares longer until the 3Q results are released in April. But I am consolidating all my funds to purchase an Executive Condominium, so I have decided to divest all my shares (thankfully with some profits).

For the uninitiated, K1 Ventures is the investment arm of Keppel Corporation and was formerly known as Keppel Marine Industries Limited. The investment firm pirimarily invests in education, energy, and transportation leasing companies in the United States. Compared to its parent company, Keppel Corporation, K1 Ventures is of course less well-known and is under the radar of most investors. However, under the guidance of their Chairman and CEO, Mr Steven Green, the company has been consistently giving out good dividends for the past decade. I have made a lot of profits from investing in K1 Ventures over the years. Therefore, I have a lot of confidence in the performance of the company because of the management’s track record in delivering for …