Year: 2016

Should stock investors run for their lives?

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Every four years, money and power will have a showdown. October will be a nerve-wrecking month for Americans as the Presidential Election enters into the final leg. There are a lot of uncertainties as to who will be the most powerful person on earth. But regardless the outcome, investors dislike uncertainties. In view of this, should stock investors sell everything and run for their lives?

The US Presidential Election aside, there were already many warning signs of cracks forming in the stock market. In early January 2016, China stock market had two massive melt-downs, leading to forced trading halts by the regulators. Then entered Brexit. Pound experienced free-fall in value and dropped to decades low.

Next on the list may be Deutsche Bank, which has being ordered by US Department of Justice to pay $14 billion for its past practice in mortgage-backed securities that led to the Great Financial Crisis. Many analysts expressed concerns that Deutsche Bank episode could ignite another round of financial crisis but in my opinion, this is unlikely. This is because the German bank is too big to fail and very likely, the EU will bail out the banking giant.

gold

As a wealth builder, it is unproductive to predict when the next economic crisis will arrive because the matter of fact is that no one can predict the future. But we can certainly take concrete actions to future-proof our wealth by diversifying our assets.

In December 2015, the US Fed had announced the first interest rate hikes for many years. Many experts had predicted that there would be at least two more rate hikes this year. In my view, a December rate hike is very likely, given the encouraging employment trend in US for the past year. Many thought that interest rate hikes would cause gold …

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 that lower passenger traffic for SIA would have serious impact on SIAEC’s business. But I beg to differ.

To put things into perspective, the aviation sector is very heavily regulated and this is even more so for aircraft maintenance tasks. So regardless of market conditions, operators like SIA are required to send their aircraft for maintenance checks. Thus, to attribute SIAEC’s decline in business to SIA’s decreasing passenger traffic does not make sense to me.

In fact, if investors bother to analyze the FY15 financial results, actually SIAEC derived only 34% of its revenue from SIA. The bulk of its …

Hellfire from Swiber Bond and Lehman Brothers Minibond

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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 nothing from the forced sale of the underlying collateral. Many investors were angry that they were misled into buying such high risk product. Apparently, many of them were elderly and less-educated individuals.

The minibond saga led to a lawsuit against DBS Bank filed by 204 investors for $17 million in July 2009. They were unhappy with the bank’s settlement offers for the losses arising from the High Notes 5.

Overall, more than 5,500 complaints were lodged against various financial institutions selling Lehman Brothers minibonds. Arising from this, Monetary Authority of Singapore took actions against these institutions and reviewed the regulatory …

OCBC Wing Hang Bank

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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 China has 13 branches and sub-branches, largest among the Singapore banks. With this sort of investment moat, OCBC will continue to be one of the world’s top 5 strongest banks (according to Bloomberg Markets).

For the latest quarterly report, OCBC revealed that 43% of its customer loans came from Singapore while 24% was from China. In years to come, the portion from China market is expected to grow because OCBC will be launching new initiatives that will enable the Group to increase market share in China and deepen their penetration.

1H16 saw OCBC’s net profit down 15% year-on-year due to …

Explosive form of Sheng Siong shares

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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 Sheng Siong continues to demonstrate prudent management and operating efficiency. Expenses were tightly controlled. Increases in staff cost were attributable mainly to the additional headcount required to operate the new stores and a higher provision for bonus as a result of the higher operating profit.

Risks for Sheng Siong

The supermarket business is ultimately a grocery retail business and remains largely a brick and mortar industry in Singapore. This means that revenue growth for Sheng Siong will be limited by its store expansion. As the Group positions itself as a mass market player, it will have to continue to grow …

Is gold a long-term insurance?

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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 wafer.

With effect from 1 September 2016, the list of exemption of gold, silver and platinum coins from Goods and Services Tax (GST) in Singapore has been expanded.

Full official list of Gold Coins qualifying for GST exemption

  • America Buffalo
    (ii) Australia Kangaroo Nugget
    (iii) Australia Lunar
    (iv) Austria Philharmonic
    (v) Canada Maple Leaf
    (vi) China Panda
    (vii) Malaysia Kijang Emas
    (viii) Mexico Libertad
    (ix) Singapore Lion
    (x) United Kingdom Britannia
    (xi) Canada Call of the Wild 3-coin series
    (xii) United Kingdom Lunar
    (xiii) United Kingdom The Queen’s Beasts 10-coin series

Full Official list of Silver Coins qualifying for GST

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 is guaranteed. If you made any mistakes, especially when money is concerned, you may be asked to resign.

In this new economy, knowledge is key to your financial destiny. The market is ever evolving because of changing demands. So what you learned in your college or university may not be relevant to the industry any more. You need to re-invent yourself to stay more relevant and marketable to employers. Picking up new skills in emerging industries like cyber-security and green technology is one way of staying ahead of the competition.

In the past, if you have a post-graduate degree, you …

MediShield Life versus Private Integrated Shield Plan

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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 the majority population’s needs. But then again, with MediShield Life, is there a need to purchase private IP?

Gaps in Medishield Life

In my point of view, private IPs still serve to address a gap in the basic health insurance framework. This is because with MediShield Life, you still need to pay both the deductible and co-insurance. The former is a fixed amount payable per policy year and serves to deter small claims. For those age 80 and below, the amount is $1500 (Class C ward) and $2000 (Class B2 and above).  The co-insurance is a percentage of the claimable …

End of fairytale for OSIM

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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 money to follow would be the Chinese market. Hence, he concentrated OSIM’s firepower in China and opened hundreds of outlets to capture the market share over there. To fend off competition from copycats, OSIM constantly released new innovative products so that its rivals had a hard time catching up.

But his master-stroke was re-inventing OSIM into a lifestyle company instead of being a traditional technology enterprise. To achieve this, it acquired and successfully integrated GNC and TWG Tea brands with OSIM. In addition, Ron Sim was smart in using Asian celebrities to market his products. In doing these, he had …

SingTel’s investment moats

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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% to A$645 million while Telkomsel’s EBITDA was $325.6 million.

Mobile and broadband service continued to be SingTel’s main revenue driver with Australia, India, Thailand, Singapore and Indonesia markets being the major contributors. In years to come, Indonesia will become one of the biggest income drivers for SingTel. The Group enterprise markets for Singtel include mobile, equipment sales, fixed voice and data, managed services, cloud computing, cyber security, IT and professional consulting. This segment generates EBITDA of $329.5 million for first quarter 2016.

Even though SingTel has formidable investment moats, it does not mean that understanding its business model is straightforward. …

Creative Technology won the battle but lost the war

Moomoo Trading Futu

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

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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 in a press release that “Creative is [This is a premium article. The rest of the content is blocked and can be accessible by SG Wealth Builder Members only. To read the full content, please sign up as member.]

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Is it worthwhile to invest in The Hour Glass?

Sembcorp Marine share price S51

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 million according to the latest financial statement. Factoring this property asset into the NCAVPS, The Hour Glass’ true value should be $0.66, which is very near the current trading price of $0.72.

Given that The Hour Glass’ share price is currently fully valued, it may be very tempting to enter this counter. However, investors should realize the kind of headwinds that The Hour Glass is facing. The continuing global economic uncertainty is expected to sour consumer’s buying appetite for luxury watches. So as the company navigate through this storm, expect many choppy tides and rough waves. It is not going …

Raffles Medical shares power ahead

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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 paid out today. The amount is lower than the $0.015 paid out last year, due to the 1-into-3 stock split.

Raffles Medical outlook

There is potential for Raffles Medical shares to rise further because of the various pipeline projects. One of them is the Raffles Holland V, the company’s commercial building at Holland Village which opened for business in June 2016. Level 5 is occupied by the Group’s healthcare services which include family medicine, health screening, dental, traditional Chinese medicine, specialist paediatics, obstetrics and gynaecology, dermatology and radiology services.

As of 25 July 2016, 60% of the space have been …

SGX to revise minimum trading price rule

AEM share price AWX

In one of my previous articles on Singapore Exchange’s minimum trading price (MTP) rule, I questioned whether the MTP framework will actually serve its intent of preventing market manipulations. Following that article, SGX recently proposed changes that will allow stocks with larger market capitalization to avoid the fate of being included in the watch list.

The MTP rule was implemented under SGX’s ex-CEO, Magnus Bocker’s era. Bocker’s tenure in SGX is generally viewed by many as negative because of the many unpopular changes he tried to implement. MTP was one of them, the other being the scrapping of the 90-minute lunch break to allow continuous trading.

Background of MTP

To his credit, Bocker did help to diversify SGX’s revenue stream through the expansion of derivative product offerings. However, he overlooked the importance of continuing to build the capital market portfolio for SGX. In addition, under his leadership, retail investors’ activities waned substantially. Of course it is not fair to put the entire blame on him for the lackluster market participation as economic climate plays a large part as well. But then again, as CEO, he did not implement any note-worthy initiatives to attract retail investors either.

SGX

It also did not help that many retail investors lost a lot of money after dabbling in Blumont, LionGold and Asiasons Capital. The three penny stocks surged to incredible levels within a short period of time and then dived spectacularly, prompting rumours of market manipulations. To prevent this sort of incident from happening again, SGX introduced the MTP in a bid to raise the quality of shares in the SGX.

From my point of view, current SGX CEO Loh Boon Chye needs to have a realistic and calibrated approach on this issue because the MTP rule alone will not magically leads to quality …

Frightening HDB rules

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If you managed to purchase a new HDB flat, especially a Build-To-Order (BTO) flat, you would have made your first pot of gold. This is because new HDB flats are heavily subsidized and after meeting the Minimum Occupation Period, they can be sold to the open market for substantial profits. So congratulations and lucky you! But there are a few frightening HDB rules that Singaporeans must know. Failing to do so may hamper your financial plan or even worse, damage your wealth.

In this article, I will touch on some of the important HDB rules. Note that the information is based on my best understanding of the rules. If there is any factual error, kindly highlight to me.

Eligibility to buy

Most Singaporeans thought that they are entitled to buy new subsidized flats like BTO, Executive Condominium (EC) and Design, Build, Sell Scheme (DBSS) twice. Actually, they are only half-correct. Yes, Singapore citizens are entitled to buy new subsidized property twice in total but not twice per type of property. This means that if you have bought a new BTO flat, subsequently you are not allowed to apply for BTO flat again. You can only apply to purchase new EC or DBSS.

HDB

SG Wealth Builder

The rationale of this policy is probably to ensure an even distribution of the demands for different categories of subsidized HDB flats. Otherwise, there may be excessive demands for BTO, EC or DBSS. But many Singaporeans thought that they are entitled to a BTO for the second time, which is not true due to this policy.

Singaporeans thought that they can make a second pot of gold through buying a second BTO but sorry for pouring cold water, the government only let you strike gold once. So make sure you fully utilize this one golden …

Three tenets of successful investing

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As a wealth builder, I constantly ask myself how I can improve my investing skills in order to make more money.  I view wealth as a journey, rather than a destination point. That is why I chose the name, “SG Wealth Builder” for this blog. Investing is important component of wealth building. So in this article, I will pen down my thoughts on the three tenets of successful investing.

Strategies

In investing, different people have different approaches and styles. Some people like to buy and hold blue chips while there are others who invest solely in Reits for dividend incomes. Then there are value investors who buy stocks at bargain price and sell them for capital appreciation. Growth investors look at companies with potential to grow and thus are willing to pay a premium for stocks that are trading at high price-to-earning ratio. At the end of the day, it does not matter which strategies you adopt as long as it yield positive results over time.

The worst thing in investing is not having a strategy and invest for the sake of investing. Without the clarity of thoughts and a proper framework in mind, the chance of winning the stock market is very slim. This is because having a system or strategy will help you to take the emotions out of investing and mitigate the potential of investment losses. Without a strategy in mind, you would probably be very lost and when you lose money, you feel angry. But thankfully, investment strategies can be learned and trained.

Discipline

Sometimes, the biggest investing mistake is not the lack of strategies but rather the lack of discipline. How often have you deviated from your investment principles in the heat of the moment? Have you bought into hot stocks recommended by financial bloggers …

K1 Ventures announced another capital reduction

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On 3 August 2016, K1 Ventures announced another capital reduction of $0.075 in cash for each ordinary share in the capital of the company. This represents another round of mini-windfall for K1 Ventures investors. The capital reduction was announced at a time when its parent company, Keppel Corp is struggling under the current oil price crisis climate.

K1 Ventures is the investment arm of Keppel Corp specializing in business acquisitions. It invests primarily in the US market and has held stakes in transportation leasing company (Helm Holding), energy (Freeport McMoran Exploration), education (Knowledge Universal Holding, KUH) and financial (Guggenheim). As a venture capitalist, its business model is to acquire companies and turn them around to sell for profits.

K1 Venture

Investments

Helm by Chairman and CEO Steven Jay Green, K1 Ventures’ management has an incredible investment track record. Over the years, the company has divested many assets and consistently delivered huge dividends for shareholders. In fact, since 2005, K1 Ventures announced dividends and capital reductions to reward shareholders.

For the uninitiated, capital reduction basically means reducing the capital of the company and return to shareholders. However, unlike dividends, capital reduction will result in the reduction of the company’s Net Asset Value (NAV) from $207,732,000 to $175,248,000. Nonetheless, from the perspective of a shareholder, capital reduction is no different from dividend because shareholders will still receive cash without any changes to their shareholdings.

Financially, K1 Ventures continued to perform well for its business. Group revenue was $195.1 million for the year ended 30 June 2016 compared to $60.6 million in the prior year driven by investment income from KUH of $174.9 million attributable mainly to the receipt of a cash distributions from the sales of the US and international childcare operations.

Group profit before tax was $144.4 million for the year ended 30 …

Buy gold bullion in Singapore

buy gold Singapore

The current dismal economy outlook and stock market conditions may entice many wealth builders to buy gold and silver bullion. After all, the price of gold has surged by 25% in the first half of this year, making it one of the best performing assets. You can buy gold bullion in Singapore from local bank UOB or various bullion dealers.

According to the latest World Gold Council report, gold continued its red-hot form, with global gold demand reaching 2,335 tons in the first half of 2016, 16% higher than the previous record in H1 2009. During the second quarter, overall gold demand grew to 1,050t, up 15% from the Q2 2015 figure of 910t. The growth was due to considerable investment demand as a result of global economic and political uncertainties.

The Chinese always has a penchant for gold and like to buy gold bullion. So not surprisingly, for the past 10 years, China has become the world’s largest gold producer and importer. The Chinese banks play a key role in making a gold hub in China through a range of gold-related business activities. In fact, more than 50% of investment demand involving sales of gold bars and coins is fulfilled through commercial banks’ network of branches.

Buy gold bullion

Gold Accumulation Plan

Against this backdrop, the first Gold Accumulation Plan (GAP) was launched by World Gold Council and ICBC in 2010, providing efficient and flexible platform for wealth builders to buy gold bullion. Such plan is backed by real physical gold and investors can choose to redeem physical metal at any point of time.

Interestingly, GAP trading volume exceeded 500 tons in 2014 and 2015, indicating that investors in China are using this product to trade for short-term gains. This trend contrasts greatly with those investors buying physical gold bars and coins …

Straco Corp’s latest financial performance

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In my previous article, I wrote about Straco Corp‘s company profile and its acquisition of Singapore Flyer back in 2014. This blog post will analyse Straco Corp’s latest financial performance.

On 10 August 2016, Straco Corp reported a 5.2% decline in Group revenue to $27.86 million for the second quarter ended 30 June 2016 compared to 2Q2015. The decline in revenue was due to lower number of visitors for its two aquariums in China. Interestingly, Singapore Flyer reported higher revenue for 2Q2016 on improved ticket yield. Cumulatively, the Group revenue for 1H2016 decreased marginally by 0.5%. Even though there was increased revenue at Singapore Flyer, this was offset by declines at the China aquariums.

Based on the latest earning report, the slow down in China definitely has an impact on Straco Corp’s earning. Below is the 5 year trend of the company’s revenue.

Straco Corp Revenue

Straco Corp Revenue (in millions)

Dividends per share have been increasing for the last four years. However, there are signs that the growth in dividends has reached a plateau. During the quarter, the company paid out dividends of $21.48 million for the financial year ended 31 December 2015. As at 30 June 2016, the Group’s cash and cash equivalent balance amounted to $124.69 million.

Straco Dividends

Dividends (in dollars)

Straco Corp’s cash flow remains healthy and has been increasing for the past four years. The company managed to generated net cash from operating activities despite the economy slow down in China. The company has a net cash of $56.8 million for the second quarter. Thus, barring unforeseen circumstances, it is unlikely that Straco Corp will encounter any cash flow issues for the foreseeable future.

Straco Operating Cash

Cash flows (in millions)

Investment Risk

Straco Corp’s core assets are concentrated in Asia region, namely Singapore and China. The company operates Shanghai Ocean …

ISOTeam shines in stock market

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On 5 August 2016, ISOTeam announced that it has clinched 13 new private and public sector contracts worth $20.11 million. The listed company is a specialist in the eco-conscious Repairs and Redecoration (“R&R”), Addition and Alteration (“A&A”) and complementary niche services.

ISOTeam contracts

This is a winning streak for ISOTeam as the company has a reputation for securing contracts because of its excellent track record in project delivery and early adopter of green technologies for its projects. As Singapore drives environmental sustainability in the building and construction industry, companies like ISOTeam will continue to thrive and grow.

ISOTeam has also started to build new capabilities in the renewable energy sector. In early 2016, it has installed Grid-Tied Solar Photovoltaic Systems on roofs of 33 blocks at Tampines estate worth approximately $1.8 million. Recently, it has won a $0.20 million contract to install Emergency Fuel Cell Operating Power Systems as back-up power generators for lifts of a number of HDB blocks at Punggol. Wealth builders should note this green initiative because it is likely that this may be implemented in more public housing in Singapore, indicating a potential huge untapped market to penetrate.

ISOTeam shares

Of course, Singapore market is too small and is saturated with many players. Thus, ISOTeam has no choice but to pursue more business opportunities in overseas markets. To this end, it has bagged its first project in Myanmar worth $0.11 million – a painting project for the Yangon City Development Committee Staff Housing. This is a significant milestone and came on the heels of a joint venture with Nippon Paint (Singapore) Company Private Limited (“NPS”). Under the partnership, ISOTeam will be the preferred contractor for painting services in Myanmar, while NPS will supply the paint for the projects they undertake.

The Myanmar project …

Explosive Surge of Silver Price

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Based on data from LBMA, silver price has increased 44.7 percent in the first half of 2016. The explosive surge of silver reflected many investors’ interest in silver in light of the current global market uncertainties. Interestingly, silver has also outperformed all other precious metals as wealth builders accumulated more silver in the first half of 2016.

Following the record demand seen in 2015, investors’ demand for silver bars has weakened some during this period. This is because in 2015, silver was in a bear market and investors seized the opportunity to accumulate silver bars on the cheap, with the view of potential price appreciation. Since then, the price of silver has galloped and this has somewhat dampened the demand for silver bars.

silver

On the other hand, silver coin sales increased by 29% globally, according to GFMS Thomson Reuters Quarterly Coin Sales Survey. Coin sales enjoy double digits increase across all major regions, such as North America, Asia and Europe. Unlike gold bullion coin sales, which fluctuate according to its prices, silver coin sales have remained resilient since 2010.

2015 has been a disastrous year for the commodity as prices fell across almost all the commodity assets. Silver was no exception as it fell below the support level of US$15 per ounce. This has led to many investors rushing to buy into silver as many hope to bargain hunt following silver price collapse. The demand was so strong that silver coin fabrication increased by 24% in 2015 and almost all key mints had to put their silver bullion sales on allocation. The delivery lead times for bullion dealers were also reportedly stretched to 3 to 4 weeks.

The series of events that had rocked the global stock markets in the first half of 2016 ignited the explosive surge of silver …

The story of Straco Corp and Singapore Flyer

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In one of my previous articles, I wrote about the fate of Underwater World Singapore. In response to my article, a reader mentioned about Straco Corp and this prompted me to research on the company.

Listed on SGX mainboard since 2004, Straco Corp was found by local entrepreneur, Wu Hsioh Kwang who is the Vice-President (Singapore Chinese Chamber of Commerce), Vice-Chairman of Tourism & Leisure, Chinese Business Group (Singapore Business Federation) and Vice Chairman of the 4th Standing Committee of Chinese Association of Enterprises with Foreign Investment (China).

Not much else is known about Mr Wu except that he spent 30 years doing tourism-related business in China. In fact, he has two very successful aquariums in China, one is the Shanghai Ocean Aquarium, while the other is Underwater World Xiamen. What prompted Mr Wu to see the potential and subsequently invested in Singapore Flyer is a mystery.

investments

Investments

When Straco Corp splashed out $140 million for the Singapore Flyer back in 2014, the iconic attraction was in a bad shape. The company that ran the flyer was facing financial problems and Straco stepped in to buy over the asset. By then, the number of visitors had declined due to stiff competition from other attractions and tenants were having poor businesses.

It doesn’t help that Singapore Flyer suffered from a series of breakdowns and incidents. Among them was a fire in the wheel control room that resulted in 173 passengers being trapped for 6 hours in 2008. In 2010, a lightning struck one of its electrical cables of the air-con system, causing more than 200 people to be evacuated.

Thus, many analysts didn’t expect Straco Corp to turnaround Singapore Flyer so soon, given the number of issues to resolve in order to draw back the crowd. In view of this, …

OCBC share price sank on release of 2Q16 results

Keppel REIT

OCBC share price dropped from a high of $9.00 to $8.35 upon the release of poor 2Q16 results. Second quarter earnings fell a whopping 15% year-on-year due to lower insurance income from subsidiary Great Eastern Holding (GEH).

For OCBC, the insurance segment, driven by GEH, represents one of the most profitable income sources. Operating profits from insurance segment was $120 million, the third highest among OCBC’s business segments. The earning contributions from GEH fell 66% due to the absence of a $105 million gain from the sale of an asset in 2Q15. However, GEH’s underlying insurance business actually performed well in this quarter, with new sales increased by 23%, led by growth across distribution channels in Singapore and Malaysia. Due to the unrealized mark-to-market losses in GEH’s equity and bond investments, profit from GEH’s life insurance recorded a dismal 19% drop.

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Apart from insurance segment, OCBC also witnessed poor performance in its “bread and butter” segment – corporate loans. Like all commercial banks, OCBC derived its major income from loans made to corporates and public sector. For second quarter, net interest income declined 2% to $1.26 billion from $1.28 billion a year ago. Customer loan balances decreased 2% due to lower trade loans and reduced offshore borrowings from Chinese customers. These offset the increases seen in consumer loans and loans to the construction sector.

The terrible outlook in the oil and gas sector continues to weigh in on OCBC. The non-performing loans (NPL) ratio increased to 1.1% from 1.0% the previous quarter. This is a substantial increase from 0.7% a year ago. Under the current challenging climate, OCBC downgrades a number of corporate accounts in this sector and also restructured their loan repayment terms.

All eyes are on the oil and gas sector now, following Swiber’ shock announcement of liquidation …

Sell everything and exit the stock market?

Sembcorp Marine share price S51

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 …

Haw Par sealed the fate of Underwater World Singapore

Haw Par share price

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.

Haw Par share price

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 …

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

Sembcorp Marine share price S51

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 …

Future-proof your career against retrenchments

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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 …

Raffles Medical Group stable growth

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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 …

OCBC’s billion dollars worth of hidden value

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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 …

Phone scams in Singapore

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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 …