Sell everything and exit the stock market?

Brexit happened just a month ago but already it seems like an eternity for many investors. Since then, a series of unfortunate events had happened in Singapore stock market.

SGX market disruption

First, on 14th July 2016, the local stock market experienced a major disruption that resulted in ceased trading at 1138 hours and remained closed for the rest of the day. Some investors and traders received duplicated confirmation messages while some did not receive any confirmation messages after their trade were done. Investigation found that the disruption was due to a disk failure and SGX had moved to rectify the problem.

The market disruption had made a serious dent on Singapore’s reputation as a major Asia financial trading hub. Such an incident impacts the livelihood of traders, especially short-sellers who have to cover their positions by certain timing. For Singapore to sell itself as a so-called trading hub of Asia, it is a given that SGX trading engine have a high level of reliability. Otherwise, there will be no confidence level from investors and traders on the local stock market.

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DBS investigated by MAS

Nevertheless, even if one down-plays the SGX market disruption, an even more sinister development awaited Singapore investors. A week later, Singaporeans woke up to a shocking news that local bank DBS was investigated by the Monetary Authority of Singapore (MAS) for possible lapses in anti-laundering processes. DBS is expected to face regulatory actions for the deficiencies.

Considered as one of the most corruption-free cities in the world, this episode is an embarrassing stain on Singapore’s reputation. It also left the Singapore government red-faced and prompted MAS to set up new enforcement unit to tackle money-laundering activities in Singapore.

Doomsday for Swiber investors

Then on 28 July, local listed oil and gas company, Swiber, filed …

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Haw Par sealed the fate of Underwater World Singapore

Many Singaporeans may recognize “Tiger Balm” as the world leading brand for topical analgesics. Some may even know that the Haw Par Corp, a company listed in SGX, is the owner of this renowned healthcare brand.

However, not many people know that Underwater World Singapore (UWS) was owned by Haw Par Corp.

1) Haw Par and Underwater World Singapore

When Haw Par sealed the fate of Underwater World Singapore (UWS) on 26 June 2016, many Singaporeans were taken by surprise. Being a forgotten icon of Singapore tourist attraction, many of us have overlooked the fact that UWS has being around for 25 years already. Within this period of time, the landscape has changed and not surprising, there are stiff competition from new and existing attractions.

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UWS holds special memories for me because this is one of the local attractions that my wife and I visited when we were dating. That was more than 7 years ago. The week before UWS closed shop, my family visited UWS for the very last time.

We were surprised that the place remained largely the same and there were not many notable upgrades for the facilities. In fact, the new S.E.A Aquarium of Resort World Sentosa would appear to be more refreshing to tourists than the UWS.

Nonetheless, in the corporate world, sentiments count for nothing. For Haw Par Corp, UWS is just one of the two aquariums that it owned under its Leisure segment. The other aquarium is in Thailand, Pattaya.

The number of visitors for both aquariums had declined by 16% since last year due to weaker tourist sentiments and stiff competitions from other attractions. As a result, revenue dropped to $12.7 million compared to $15.6 million in the previous year. Underwater World Singapore even incurred impairment charge of $4.6 million on its …

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OCBC’s multi-billion dollars stake in Great Eastern Holding

In a month when DBS and SMRT hog the limelight, OCBC Bank quietly increased its multi-billion dollars stake in Great Eastern Holding. On 1st July 2016, OCBC made a filing in SGX to declare that it bought 611,800 shares of Great Eastern at $20.59 per share, effectively increasing its share in the insurer to 87.73% from 87.60%. OCBC’s multi-billion dollar stake in Great Eastern is actually one of its “hidden treasures”.

Great Eastern is the oldest life insurance group in Singapore and Malaysia, with over $60 billion in assets and 4.7 million policyholders. Being a subsidiary of OCBC, the life insurance group’s partnership is formidable. This is because Great Eastern’s life insurance products can be distributed through OCBC’s banking network. This type of partnership creates synergy and allows both companies to gain better customer’s insights and investment needs.

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Being the pioneer in bancassurance in 1992, OCBC is the only Singapore bank to have substantial stake in a life insurance company. UOB’s bancassurance partner is Prudential, while DBS’ bancassurance partner is Manulife. The fact that Great Eastern is a subsidiary of OCBC gives the bank the competitive edge because the business interests will have to be aligned. In fact, several OCBC’s management actually sit in Great Eastern ‘s board of directors.

Rated by Bloomberg Markets for being among the world’s five strongest banks for five consecutive years since the ranking’s inception in 2011, OCBC Bank is respected by many for its strong financial strength. Having an insurance company as one of its prized assets certainly strengthen OCBC’s investment moats and helps the bank to fend off competition from its rivals.

To put things in perspective, the entry barrier for establishing an insurance company in Singapore is extremely high due to the regulatory requirements, small market and stiff competition from the big …

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Future-proof your career against retrenchments

For the 1st quarter of 2016, Ministry of Manpower (MOM) revealed a record number of retrenchments since 2009. A total 4090 workers were retrenched as Singapore economy slows down and undergo major restructuring. Is your company downsizing and are you on the retrenchment hit list? If not, have you started to future-proof your career?

For many years, Singapore refused to develop policies to ensure safety nets for the unemployed. The fear is that in creating such a social safety net, there will be moral hazards as those who lose their jobs may not be motivated to re-enter the labour market again. This is happening in today’s Europe whereby the unemployment benefits are so generous that the workers would rather remain unemployed in order to enjoy the benefits.

However, the labour landscape in Singapore has changed drastically over the last few years. There are acute shortage of talents in certain job segments like cyber security and digital marketing. While on the other hand, white-collar professionals working in sectors like banking and finance are unable to find work for months and years after being let go by their employers. This phenomenon is known as structural unemployment.

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The rising costs of doing business have also put off many companies. Sun-set industries like the electronics and shipping have already seen many companies shifting bases to other countries with lower costs. While the government may be trying their best to mitigate the situation, one should evaluate whether his skill-sets and knowledge are still relevant in this new economy.

If you are not careful, structural unemployment can happen to you. Most people only start to upskill themselves after losing their jobs. Most common reasons are the lack of time due to work and family commitments. Indeed, climbing up the corporate ladder and putting food on …

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Raffles Medical Group stable growth

For first quarterly results of 2016, Raffles Medical Group (RMG) had a stable growth. Profits for the period increased 1% to $15.2 million year-on-year. Revenue actually grew by 23.0% from $95.0 million in Q1 2015 to $116.9 million in Q1 2016. The increase in revenue was driven by higher business volume arising increased patient load.

During this period, the management of RMG did not manage to rein in lease expenses and staff costs. This has resulted in higher revenue being offset by higher expenses. However, the Group’s net cash position increased from $53.8 million as at 31 December 2015 to $78.4 million as at 31 March 2016. This was due to strong operating cash flows generated from increased business operations.

Apart from having a strong cash-flow, RMG has a strong balance sheet as well. Current assets grew from $170 million as at 31 December 2015 to $216 million as at 31 March 2016. Correspondingly, the total liabilities also increased from $192 million to $226 million. The increased liabilities was due to increased payable arising from acquisition of subsidiaries during the financial year 2015.

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The long-term debt is manageable, currently at only $20.8 million. Given RMG’s cash pile of $110 million, the non-current loans and borrowings are not a concern for the company. In fact, to grow the company, RMG may even need to tap its cash holding or borrow more to fund more acquisitions. This will help to position itself well for the future.

All attention on RMG is now focused on the Raffles Holland V, which RMG expected to receive the Temporary Occupation Permit in March 2016. Raffles Holland V is a lifestyle mall with food and beverage and retail services. Level 5 of the mall will be occupied by RMG and house several specialist clinics. This development is …

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OCBC’s billion dollars worth of hidden value

One of the reasons why Singaporean investors love to invest in OCBC shares is because the bank has billion dollars worth of hidden value. Last month, local bank OCBC placed a pair of freehold shophouses on sale for around $20 million. These two conservation shophouses are located at Bukit Pasoh, which is near the Outram MRT Station.

Apparently, OCBC has held the properties for more than 81 years and had refurbished them in 2012. Combined together, the shophouses have a total land area of 2926 sq ft for commercial use. If successful, the sale could help to unlock value for OCBC.

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It should be noted that the two units are not part of the 38 properties that OCBC had put up for sale in April last year. The asset sales were estimated to be worth $150 to 200 million and some of the properties has since been sold. Both the two units at Bukit Pasoh and the 38 units are not mortgagee sales.

Value investors like to invest in companies with hidden value and OCBC is probably one of such companies. In the latest financial results, OCBC revealed $6.64 billion worth of unrealized valuation surplus for its investment properties and equity stakes in subsidiaries. To be specific, valuation surplus represents the difference between the carrying value in these properties and investments in the subsidiaries, and the market values of those properties and investments in the subsidiaries.

Many investors would know that OCBC has a substantial stake in Great Eastern Holding, one of the big four insurers in Singapore. For equity securities, the valuation surplus is $2,734 million, a huge drop from $4,758 million of last year March. The decline in the surplus could be due to the drop in market value of Great Eastern Holding’ share price, thus reflecting the …

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Phone scams in Singapore

Times are bad and conmen are out in full force. Be aware of phone scams in Singapore. In a recent media report, a couple in Singapore lost $70,000 to a phone scam.

Apparently, the conmen posed as policemen and called the wife to inform that her credit card had been used for criminal activities in China. She was led into giving her online banking PIN number to facilitate investigation works. Subsequently, both husband and wife realized they had been conned and their savings had been wiped out within hours.

The speed at which the criminals stole their life savings left the couple in a state of shock. Within a day, they had lost everything and even had to borrow from friend for family expenses. Complete disaster.

One thing to note is that such a tragedy can happen to everyone. The common misconception is that only the elderly or less educated people are susceptible to falling prey to scams. This incident vindicated that when it comes to scams, everyone can be fooled. We must all stay vigilant and must never reveal our personal bank details and PIN number to anyone, not even to the authorities or enforcement officers.

For the young couple, this will be a painful lesson for them as they are likely to need the money to move into their new home. With a baby, they also need money for daily expenses. Thus, I can imagine how traumatized it would be to lose their entire savings.

For many wealth builders, it may not be a good idea to park all the cash in the bank accounts. This is because there is a likelihood of losing your entire savings to scams. With money on hand, you are also likely to spend it away. Thus, it is important to diversify our …

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ISOTeam

I have previously written an article on ISOTeam, a facilities maintenance company based in Singapore. This article is to provide an update on the latest developments of ISOTeam.

On 31 May 2016, the company announced the securing of private and public sector contracts worth $26.32 million. The contracts will have a positive impact on the earnings per share and net tangible assets per share for the current financial year ending 30 June 2016.

Company’s profile

ISOTeam’s capabilities lie predominately in the property maintenance and property upgrading and restoration. The entry barrier for this industry is not high, therefore in order to differentiate itself from their competitors, ISOTeam’s niche is in providing eco-conscious solutions.

In recent years, the company has secured a lot of public works and has established good track record with town councils, statutory boards, main contractors and developers. Due to this, ISOTeam is able to repeatedly win tenders for public projects even though their offers are not the lowest in price.

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Strategies for growth

Going forward, ISOTeam’s growth strategies are to develop more green solution offerings, expand through acquisitions and reach out their services to other untapped private and public sectors. These strategies make sense as Singapore government plan to green mark 80% of the building in Singapore. Thus, there are a lot of opportunities for ISOTeam to grow if it pursues the green technology path.

Between February to April 2016, ISOTeam has filed in SGX a series of shares buy-back at price between $0.305 to $0.310. By 1 April 2016, the total number of accumulated shares from acquisitions amounted to 3,680,000. Normally when a company buy-back its shares, it may be the case that the management feel that the shares are undervalued. But is it really the case? Let’s review the financials of ISOTeam.

Financial performance

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TalkMed Group Ltd

In the context of Singapore’s ageing demographic trend, healthcare and medical services companies are expected to continue to grow in the coming years because of the increasing demands for specialized medical treatments and growing affluence in South-East Asia countries. Riding on this wave, Singapore’s TalkMed Group Ltd may be a trail-blazer in medical tourism.

Business Profile

TalkMed was listed in Catalist on 30 January 2014 and has since established itself as one of the market leaders in medical tourism in Singapore, with more than 60% of its patients from foreign countries for the past few years. The company has three subsidiaries, namely Singapore Cancer Centre Pte Ltd (SCC), TalkMed Vietnam Pte Ltd and Stem Med Pte Ltd. With 13 doctors in their arm, TalkMed’s niche businesses are in medical oncology services and palliative care services.

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Business Potential

I like TalkMed’s business model because it is a scalable business which revolves around the provision of medical consultancy services and stem cell processing services. Through SCC, TalkMed doctors provide stem cell transplant and palliative care to the oncology patients. Its overseas investments include partnership with Thu Cuc International General Hospital to set up a medical centre providing medical oncology services in Hanoi. Arising from this collaboration effort, TalkMed Vietnam was established in March 2014.

In June 2015, TalkMed used part of its IPO proceeds to invest US$8.4 million for 30% stake in Hong Kong Integrated Oncology Centre Holdings Limited. This is a strategic move as the investment is a stepping stone for TalkMed into the China market. So for the long-term, the Hong Kong unit is likely to contribute positively to the bottom-line of the Group.

TalkMed derives its revenues mainly from medical consultancy services and stem cell processing services. Both services are regulated by Ministry of Health and thus this represents …

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Is SingPost a value trap?

This post has been amended on 11 July 2016 to address errors made in the last sentences of the second and eighth paragraph.

Being the national postal service provider for the past 150 years, SingPost has transformed into a mail and e-Commerce technology giant within Singapore in recent years. Throughout the years, SingPost had consistently received numerous awards for its branding, innovation and business excellence. Its largest shareholders include SingTel and AliBaba Group. With such an impressive background, the past few months must have been a nightmare for SingPost, at least for its investors.

Crisis brewing for SingPost

Following a special audit in early May 2016, the Accounting and Corporate Regulatory Authority (Acra) is investigating SingPost for potential breaches of the Companies Act. The special audit was undertaken to look into the disclosure of a board member’s interest in the firm that advised on SingPost’s recent acquisitions.

One of the most damaging findings in the 52 page summary report was the lack of “prescribed policy, process or procedure for the evaluation and approval of Merger and Acquisitions transactions”. For an institution that won two ASEAN corporate governance awards in 2015, this is indeed an embarrassing audit finding. It exposes the weak corporate governance on disclosure by its board of directors.

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Investments

In light of this incident, the composition of the board committees was changed. Major shareholder, SingTel also stepped in and replaced SingPost chairman Mr Lim Ho Kee, with Mr Simon Israel. At this moment, SingPost is still looking for suitable candidate to replace group CEO Dr Wolfgang Baier, who resigned in December 2015. Its COO, Dr Sascha Hower also announced resignation on 21 June 2016. Amid the current mess the company is facing, will SingPost rise from the ashes?

Financial Performance

Despite the troubles, SingPost appears to be in …

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Gold and silver on fire

In the aftermath of Brexit, investors scramble for safe haven assets and set gold and silver on fire. The precious metals have climbed to new highs in recent weeks as investors realize that even a stable currency like Sterling pound can drop in value over-night.

As investors pile into gold, the price of the yellow metal surged by 28%, making it one of the best performing assets to hold. At the rate it is climbing, gold may hit the level of US$1,400 per ounce. This is a remarkable turn-around as previously, gold price has declined to a low of US$1050 per ounce in December 2015.

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Precious metals bull-run

The current market sentiments seem to suggest that gold may be at the start of a bull-run. The sustainability of the bull-run will depend whether there are further market shocks that trigger investors to flee for safety. For 2016, shell-shocked investors have already witnessed the Chinese stock market carnage, plunging oil prices and then Brexit. These events have fuelled the surge in gold and silver prices.

While gold has been attracting investors’ attention, silver price has also stormed to record level. At US$20.16 per ounce, spot silver rose by 47% since December 2015. Traditionally seen as more volatile as compared to gold, silver is a favourite asset among traders because of its low-cost. Silver has not reached the record level of US$43 per ounce seen in 2011 yet. But given the amount of uncertainties in the market now, there is sufficient leg room for silver to rise much further.

Interest rates

Market analysts are optimistic that US will not raise interest rates this year. A low interest rate environment is good for gold and silver because it will reduce the opportunity cost of holding physical precious metals as gold and silver bullion …

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Is SIA Engineering Company a value trap?

SIA Engineering Company announced on 30 June 2016 the divestments of its 10% stake in Hong Kong Aero Engine Services Ltd (HAESL) to Rolls-Royce Overseas Holding Ltd. At the same time HAESL will divest its 20% stake in Singapore Aero Engine Services Pte Ltd (SAESL). The divestments will result in a net gain of $178 million for the SIAEC Group, representing a windfall for SIA Engineering Company (SIAEC).

The move to divest SIAEC’s stakes in several joint ventures is long overdue as its network of joint ventures (JV), associates and subsidiaries have become so complex that it affects the company’s ability to compete for the aircraft aftermarket business. To a certain extent, some of its JV may even be competing against each other for maintenance, repair and overhaul (MRO) business. So this streamlining operation may bode well for the company going forward.

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Investments

Business Challenges

Unlike its parent, SIA, the MRO business is more stable and predictable as compared to airline operations. This is because aircraft are required to be maintained at certain interval in order to be deemed as airworthy. Thus, the business model of SIAEC is recurring. However, the emergence of new composite aircraft like B787 and A350 changed the game for big MRO players like SIAEC and ST Aerospace.

The next generation aircraft require less maintenance works and longer interval of inspections and maintenance because of better materials and advanced technologies used in the design of the aircraft. While this trend is good for airlines like SIA, it presents a challenge for SIAEC, in terms of lesser work.

To mitigate the impact of technology advanced fleets, SIAEC went into recent partnerships with aircraft manufacturer like Boeing and Airbus. These strategic moves are needed in order for SIAEC to gain bigger market and increased competitiveness.

Shares buy-back

SIAEC …

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Gold price to surge to USD65,000 per ounce in 5 years?

Before Brexit took the world by storm last month, BullionStar boldly predicted that gold price will surge to USD65,000 per ounce in 5 years in one of their articles. To be frank, even though I am bullish on the long-term prospect of gold, it is difficult to envisage that gold price will reach such stratospheric level.

If gold really do reach USD65,000 per ounce, it would be approximately 48.5 times the present level. Those who have bought just one piece of the 1kg PAMP Gold Bar would become an instant millionaire. But then again, under such circumstances, inflation would probably be ultra-high, hence that one or two millions worth of fiat currencies would probably have limited purchasing value.

One important lesson that I have learnt from my years of financial blogging is that it does not matter whether BullionStar’s prediction is accurate or not. It only matters if you are prepared to build wealth with gold bullion. No analysts or economists can predict the future and there will always be endless debates who is right or wrong. At the end of the day, you have to ask yourself what actions have you taken in the course of your wealth journey to succeed financially.

If you are reading this article, you may be a high net worth individual who is busy with your business. You may even be a highly qualified professional (e.g. lawyer or dentist) earning high incomes. If so, you probably have limited time to research or study the stock market. If that is the case, then you need to start thinking how to protect your hard-earned wealth and assets.

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The matter of fact is that selecting the right stocks to invest is not easy and requires much effort and various strategies to achieve success. Even though technically …

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CSE Global Limited

CSE is a global integrator for software services specializing in the automation, telecommunications and environment sectors. CSE started life as a subsidiary of ST Group but after a successful management buy-out in 1997, CSE became a public listed company in 1999. After a series of acquisitions, CSE Global Limited evolved into an international technology firm with more than 30 offices across the globe.

Performance

For the first quarter of 2016, the group achieved $5.5 million profit after tax, a decrease of 20.9% year-on-year. This performance reflected the challenging weak economic sentiments in the industry sectors that the Group is operating in.

CSE is a key player in the offshore oil and gas sector, providing system services such as Supervisory Control and Data Acquisition (SCADA), process control and safety shutdown systems. Thus, the current down-turn in this sector has a significant impact on the Group’s business.

Business outlook is challenging as many of CSE’s client are cutting costs. As a result, CSE has a reduction of 23.8% new orders from continuing operations. The number of outstanding orders from continuing operations has also reduced by 28.9%.

In light of the challenging operating environment, CSE has managed to rein in operating expenses, which were 6.4% lower at $17.8 million as compared to previous year. In addition, the Group’s effort on cost cutting measures had yielded some positive results. Year-on-year overhead bases saw a reduction of 16% and management had committed to stay vigilant in managing cost and working capital.

To grow the company, CSE has acquired CC America and Mobile Masters for $10.4 million. Impressively, the Group achieved net cash of $57.3 million, higher than $54.2 million as at 31 December 2015. For this quarter, cash flow operating activities is $19.6 million. Hence, the company’s financial health is strong and resilient enough to …

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