February 2017

Divested my physical gold

February 24, 2017 sgwealthbuilder 3 Views 3 Comments

Recently, I partially divested my physical gold for 10% yield amid the rally in gold price. The reason for selling my gold is not because I lost faith in it but solely to consolidate my funds to prepare for the impending Temporary Occupation Period (TOP) for my Executive Condominium.

The average annual yield from my physical gold investment is about 3.33%. Although the return is nothing to shout about, it is still above the prevailing bank interest rates. It is also above the average inflation rate in Singapore for the past three years.

Interestingly, the inflation rate in Singapore has dropped drastically from a high of nearly 6% in 2012 to negative 1% in the middle of last year. Is negative inflation good for Singapore? Absolutely not the case. If negative inflation persists, it may lead to deflation and causes the economy to spiral out of control. Japan’s economy is a classic example. The country has been struggling with deflation for the past 20 years and has to implement Negative Interest Rate Policy (NIRP) to revive the economy.

The slide in inflation rate coincided with a corresponding decline in gold price, which peaked in 2012 and suffered a slump till 2016. The geopolitical risks arising from Brexit and Trump election subsequently led to an unexpected price recovery for gold in 2016. This is because gold has always been viewed by investors as a safe haven during times of uncertainty.

My mantra in investment has always been to buy low and sell high. Thus, I sold my gold due to short-term needs. Nonetheless, I still believe in gold’s long term prospect and its role in wealth diversification. In Singapore, many investors still do not regard gold as a mainstream asset to hold as part of their wealth portfolio. But in recent …

personal finance

Three things about growing wealth

February 22, 2017November 1, 2017 sgwealthbuilder 4 Views 0 Comments

This will be a short post to capture my thoughts about growing wealth in Singapore. In light of the recent Budget announcements, water prices will hike by 30% in two phases over two years. Thus, it is not matter of choice for Singaporeans to consider growing their wealth to beat the cost of living. All Singaporeans must start the journey as early as possible.

Stop tracking expenses

Early on in my wealth journey, I confess that I did track my monthly expenses and personal income religiously without fail. But I had stopped doing so after three years because I noticed there were no significant improvements in my personal cash-flow. Instead of enhancing my wealth, the quality of life inadvertently dropped as I suffered from guilt pangs whenever there were unexpected expenses incurred from friends’ outings or wedding dinner red packets.

After a while, I began to realize that my life should not be controlled by a spreadsheet. I need to be larger than life and start living a life. After all, we only live once. We are born into this world to enjoy, not suffer. With the change in mindset, I started to empower myself by focusing on how to grow wealth through enhancing my earning ability.

What happened next was beyond my comprehension. Like many people, I initially thought that my life would definitely spiral out of control once I stopped tracking my expenses. However, the opposite actually happened to me and to be honest, I struggled to explain what went so right for me in the following years. But I firmly believe that in tracking my expenses, my mindset prohibited me to become a better person in the sense that it encouraged me to be very risk averse.

Start tracking your income

Instead of tracking my expenses, I …

Stocks

Research report on SIA Engineering Company

February 21, 2017October 19, 2019 sgwealthbuilder 10 Views 1 Comment

On 3^rd February 2017, SIA Engineering Company announced 3Q results for 2016/17. It wasn’t exactly an impressive set of results but the data certainly reveals some interesting aspects of the company’s performance against the backdrop of a challenging operating environment for the maintenance, repair and overhaul (MRO) sector. This will be another research report on SIA Engineering Company (SIAEC).

Traditionally, SIAEC has a solid business model because it provides maintenance, repair and overhaul (MRO) of aircraft, engines and related components and offers the complete MRO suite of services. The business is recurring and with its vast network of joint ventures, the MRO stalwart managed to build an impressive investment moat in Singapore, rivalled only by local competitor, Singapore Technologies Aerospace.

However, the emergence of new generation aircraft with high reliability looks set to disrupt SIAEC’s business model because of the decline in demand due to extended maintenance intervals and lesser work-scope. In light of this, the management has started to position itself for the future through several initiatives.

Given that its joint ventures contribute a substantial amount of profits consistently to SIAEC, the management rationalized its portfolio of joint ventures periodically to extract value for shareholders. Some of these initiatives include restructuring and merger of associated entities and development of capabilities to support new generation aircraft.

During the first quarter, the Group [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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Stocks

Will Ezra sink OCBC share price?

February 16, 2017March 13, 2019 sgwealthbuilder 7 Views 1 Comment

On 14 February 2017, OCBC reported a net profit after tax of S$3.47 billion for the financial year ended 31 December 2016, a decline of 11% compared to last year. Not surprisingly, the decline in earnings was due to an increase in net allowances for loans, mainly in the ailing Oil and Gas (O&G) sector. The bank has $15.8 billion exposure to this sector and Non Performing Loan (NPL) has crept to $1.3 billion. Will Ezra sink OCBC share price?

Ezra is an offshore contractor and provider of integrated offshore solutions to the global O&G industry. The Group has three main business divisions, namely Subsea Services (“EMAS AMC”), Offshore Support and Production Services, and Marine Services offering a full range of seabed-to-surface engineering, construction, marine and production services globally.

The struggling Ezra recorded a net current liability position of US$887,220,000 for the financial year ended 31 August 2016. It seems that Ezra has miscalculated the business risks and this led to various obligations owed to financial lenders and trade creditors. The troubled company recently flagged that it could possibly write down $170 million worth of investment due to problems with one of its joint ventures, EMAS Chiyoda Subsea.

Amid all these troubles, Ezra announced that it is undergoing a restructuring exercise to “preserve value for the Group”. If the initiative is unsuccessful, Ezra will be faced with a going concern issue.

As a result of the problems, investors dumped the shares and led to Ezra share price reaching a new low of $0.021 as at 15 February 2017. Even during the dark days of the Great Financial Crisis, the share price has not sunk so low. Thus, investors can imagine the severity of the crisis Ezra is facing. Even if investors of Ezra were to cut loss now and sell …

Trading

Why Currency Values Drop After Political Change

February 14, 2017October 19, 2019 sgwealthbuilder 8 Views 0 Comments

Whenever there is political change, there is currency value change. Whether such political change is for the better or worse is often a matter of opinion, but almost every time currency values seem to drop after such a change. Most recently the US dollar has experienced its worst start to a year in decades, mainly due to President Trump taking residence in the White House. There are many reasons why political changes usually lead to a fall in the nation’s currency value.

Elections and Volatility

In the run-up to any election, currency values always fall. This is because traders view it as a time of political instability, with a greater chance of the currency falling leading to a sell-off by many traders. There will likely be different financial policies from all those up for the election, meaning investors and traders will be uncertain about what the future for a currency will hold until the outcome of the election is revealed. Trade can also slow down during elections, further weakening a currency.

Changing Monetary Policies

When a new leader or political party takes charge, there is often a fresh monetary approach. This is a strong driver of a nation’s currency and can direct it in a new way. Even though in the long run this could be successful, the uncertainty such a change brings about is usually harmful and will see the currency value fall. However, a currency’s value can receive a boost if the party elected is viewed by traders as one focusing on economic growth first and foremost.

The Effect on Exchange Rates

Currencies are traded in pairs across the world. When there is political change and elections in one country then this offers a great opportunity for forex trading with City Index. Selling the currency of …

Gold; portfolio management

Buy gold bullion now?

February 11, 2017February 14, 2017 sgwealthbuilder 4 Views 6 Comments

In 2016, Brexit set fire on gold and ignited a rally in gold price. In 2017, it was newly elected US President, Donald Trump who ignited an unexpected gold price rally with his controversial policies. Should wealth builders buy gold bullion now?

In my own opinion, every leader is entitled to defend his country’s national interests. Whether Donald Trump’s policies, which have been viewed by many critics as being protectionism, will lead to a stronger United States is subject to debate.

But Trump’s actions certainly create a lot of market uncertainty. And one of the things that investors hate most is uncertainty. Due to this, investors flee for safety and buy gold bullion. Since Donald Trump took office, gold price has rallied to USD1233 per ounce. On the current form, gold price is certainly very bullish and looks to rise further in the short-term.

Based on data released by World Gold Council, gold has a mixed performance in 2016. While the price has recovered from a low of USD1067 per ounce since end 2015, demand for gold bar and coin has dropped by 2% year-on-year. This is because many investors has been put off by the high price of gold in 2016.

The big players, namely the central banks, have also bought fewer gold bullion in 2016. Demand fell by 33% to 384t for the year. Despite this, 2016 was the seventh consecutive year of net purchases by central banks.

In my point of view, it is unlikely that the current gold price rally is sustainable in the long run because the Trump effect will likely to fade in a couple of months. The interest rate hikes by US Federal Reserve should have a more influential effect on the direction of the global stock markets and gold price. Typically, interest …

Self improvement Trading

Loss aversion

February 8, 2017October 19, 2019 sgwealthbuilder 0 Views 0 Comments

For many wealth builders, winning $1000 in the stock market is very different from losing $1000 in share investments. In fact, many research studies have demonstrated that the impact arising from losses is twice as powerful as gains. This strange phenomenon is known as loss aversion.

Coined by Amos Tversky and Daniel Kahneman, loss aversion explains why most people prefer avoiding losses to making gains. Understanding this form of economic behavior may help us become better investors because it can shed some light on why people make irrational decisions consistently.

Our brains are geared to hold on to what we own because in ancient times, our ancestors survived by holding on to resources. As a result of such human evolution, our instinct tells us to avoid making losses at all costs. But what we don’t realize is that in doing so, we often make flawed decisions and end up being financially hurt. This is because times have changed and modern day economics have become much more complex, so we cannot afford to apply the same loss aversion mentality when managing money issues in today’s context.

Most stock investors hate cutting losses because most of us has a tendency to be emotionally attached to what we own as compared to what we do not own. Due to this psychological effect, most of us tend to hold on to losers for too long and miss out the opportunities of investing in winning stocks.

Throughout my wealth journey, I was inspired by many smart and intelligent people who are willing to share with me their investment adventures. Through them, I realize that those successful investors who are able to build up their wealth are those who have strong “Financial Quotient (FQ)”. These are the people who keep making mistakes in their stock selections …

Stocks

Analysis on Suntec REIT

February 5, 2017October 19, 2019 sgwealthbuilder 4 Views 2 Comments

The rationale for this stock research arises from my recent decision to invest in a reputable REIT with a consistent track record of cash distribution per unit (DPU). Another factor of consideration is the quality of the management in strategizing growth for the company. Suntec REIT seems to fit the bill and hence, this shall be my first analysis on this venerable SGX stock.

New chapter for Suntec REIT

Listed on 9 December 2004 on Singapore Exchange mainboard, Suntec REIT is the first composite REIT in Singapore, owning income-producing real estate that is primarily used for retail and/or office purposes. 2016 had been an eventful year as the company expanded its footprint in Australia and navigated through the soft retail market reasonably well. For 2017, the change of CEO of the Manager will herald a new chapter for Suntec REIT.

On 2 December 2016, it was announced that Mr Yeo See Kiat would retire as CEO with effect from 31 December 2016. Mr Yeo has been CEO of the Manager of Suntec REIT for 10 years and has steered the company through significant milestone events through the decade. Some of his notable achievements include overseeing the $410 million asset enhancement of Suntec City, divestment of Park Mall for $411 million and Suntec REIT’s foray into Australia.

On hindsight, the appointment of the new CEO, Mr Chan Kong Leong should be part of Suntec REIT’ succession planning. Prior to the promotion, Mr Chan was appointed as Chief Operating Officer on 1 June 2016. Mr. Chan was the Senior Vice President and Head of Regional Investment, Asset & Fund Management at CapitaLand Limited and was with the company since 2010. Prior to that, Mr. Chan was the Head of Corporate Finance, Investor Relations & Corporate Communications at GuocoLand Limited. He has held …

Stocks

Analysis of SingPost

February 1, 2017October 19, 2019 sgwealthbuilder 4 Views 5 Comments

On 29 December 2016, SingPost finally unveiled a new Chief Executive Officer (CEO) through appointment of Mr Paul William Coutts who was previously from Toll Global Forwarding, one of the five divisions in the Toll Group. On the basis of the 2Q2016 financial performance, the new CEO will have his work cut out for him. This article contains my analysis of SingPost.

Suffice to say, the business model has been disrupted by digital technologies, which led to declining traditional letter mail volumes in recent years. 2Q2016 financial results revealed that SingPost is a company still “work-in-progress”. Underlying net profit for Q2 fell 27.9% which the company attributed to “transformational investments and challenges”. Total expenses increased by 23.7% due to higher expenses in the eCommerce business and costs related to the new Regional eCommerce Logistics Hub.

As the management embarks on its business transformation journey, the incoming CEO has an unenviable task of leading an institution that has faltered in recent years. While the company is still making profits, operating profits across all its business units declined by doubt digits compared to last year. Its eCommerce unit lost $6.8 million and $10.3 million in Q2 and H1.

The eCommerce unit will likely to continue burning cash as SingPost seeks to enhance the eCommerce logistics capabilities to better serve the region growing online retail markets. A lot will also depend on whether the management is able to integrate and extract synergies from acquisitions made over the past few years.

Notably, there was an increase in short-term borrowings, which led to a net current liability position of S$239.1 million, compared to S$133.2 million as at 31 March 2016. The cash and short-term funds were largely utilised for residual expenditure on committed capex for construction of the SPC retail mall and Regional eCommerce Logistics …