Stocks

One of the largest local banks in Singapore, OCBC stock price closed at $7.77, a six-year low. The last time OCBC shares traded below $5.00 was during the Great Financial Recession, recording a low of $4.14 on 6 March 2009.

OCBC will be releasing its full year financial results on 17 February 2016. However, based on its 3Q results in October last year, the Net Asset Value for each OCBC stock price was $7.78, slightly above today’s closing price. It is still premature to assess whether OCBC stock price is undervalued because the latest data has not been released. But given the current weak market sentiments, OCBC stock price is expected to slide further.

The non-performing assets (NPAs) were S$1.93 billion as at 30 September 2015, up 41% from S$1.37 billion a year ago. The year-on-year increase in NPAs was largely attributed to [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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Many investment bloggers can quote Warren Buffett’s famous saying “Price is what you pay, value is what you get”. But how many of them can actually truly understand what he means?

One of the greatest cardinal sins made by investors is to fall in love with the stocks they have invested in. In doing so, they suffer from investment blind spots and subsequently sustain heavy losses when market turns sour. It is as though they go to sit in for an examination without studying for the subject and then expecting to obtain an ace for it.

Many investors don’t determine the value of the stocks and don’t set entry/exit levels. Most of them buy stocks based on prices. The key reason for this folly is because most investors cannot differentiate between price and value.

A classic example would be Singapore Exchange Limited (SGX), Singapore’s stock market operator. The counter surged to a high of $15.90 in 2007 and then dropped to today’s $6.82. Die-hard fans who bought the counter in 2007 at such price would be staring at massive losses now.

Even though the company has been consistently paying good dividends, the amount of losses would have wiped off the dividend gains accumulated throughout the years.

The current stock market mayhem may represent a perfect opportunity for investors to enter the market but then again, it is important to refrain from timing the market. You never know whether the correction is the start of a long term bear trend or just a short term flip. In this regard, Osim is riding the storm finely.

Regardless the situation, it is important to set an entry or exit point in your stock investments. Apart from this, wealth builders must understand the importance of allocating wealth across different asset classes like gold bullion.

One of my favourite stocks that I have been monitoring is Osim, a Singapore-based company with substantial overseas market reach, especially in China. The current China’s slowdown is expected to have significant impact on Osim but under the leadership of its founder, the company is likely to ride the storm.

Osim was founded by local entrepreneur, Ron Sim Chye Hock. The company is well known for its luxury massage armchair and over the years, Ron Sim has transformed Osim to a powerhouse lifestyle company with more than 1,100 outlets in over 360 cities across 28 countries. What is more impressive is that Ron has single-handedly established a strong Singapore brand name, similar to successes enjoyed by global companies like Starbucks and Apple.

According to a report, the Strait Times Index (STI) fared the worst in South East Asia last year, declining 14.3% of its value. As a result, many Singapore investors and investment bloggers suffered heavy losses in their stock investments. Although not technically a bear market, investors should be aware of the risks in stock investing and equip themselves the knowledge on how to value a stock before surrendering their hard-earned money to the market. Fundamentally at the point of buying the stock, the investor must not be making losses. Easier said than done, but it can be achieved. In this article, lets delve into how to avoid making losses in SGX stocks.

Generally there are two ways to measure the value of a stock. The first is using the Price/Earning (P/E) method, which actually divides the price per stock by the earning of the company in that year. Essentially, this simple metric uses the earning performance of a stock to determine if a stock is over or under value. So if the earning, which is a denominator, decreases, the P/E will increase. Personally I find this method highly inaccurate as past performances would not guarantee future performances and furthermore, prices can be very subjective to everyone.

One of the largest Warren Buffett’s investments to date is Coca-Cola, which is one of the world’s largest F&B companies. Buffett’s affinity to Coca-Cola dated way back to his childhood when he started his entrepreneurship journey selling cokes. Years later, he would become a major shareholder of Coca-Cola. It is a well-known fact that what attracted Warren Buffett to Coca-Cola was its simple and understandable business model – selling soft drinks to consumers, supermarkets and restaurants. This trait of Coca-Cola turned out to be one of its investment moats.

Even though Warren Buffett has built his fortune from his investments in Coca-Cola, does it means that the Food & Beverage (F&B) industry should be in your investment menu? Let’s delve into some of the common myths and check out whether it’s worthwhile to invest in Singapore F&B stocks.

Myth 1: F&B stocks are simple and easy to understand

While Warren Buffett may have struck gold with Coca-Cola, it would be a sweeping statement to say that investing in an F&B stock is straightforward and simple. This is because no two F&B companies are created alike.

For example, an F&B brand that does well in Singapore may not be palatable at the global stage.

During this festive season, I have thought deeply on my investment style and track records so far in 2015. While I did not make any major investment moves for the past three years, my personal finance is certainly in a better shape now as compared to 2010, the year I started this blog. Along the way, there were several intriguing investment ideas, new philosophies and key lessons that I have picked up from the various people that I have met. In view of this, I thought it is important to pen down my thoughts for more clarity.

Have you wondered why some people just keep winning in their stock investments while others lost huge sum of monies in stocks or fallen prey to silly gold scams which they never should have in the first place? Is it true that “the rich will become richer and the poor will become poorer”? I have come to realize that those who keep making money from the stock market are those who know how to read the game. In other words, they have the available tools and data that enable them to make informed decisions, thus allowing them to get ahead from the rest of the people.

In November 2015, Singapore Airlines (SIA) made an offer to acquire the remaining 44.23% stake in Tiger Airways for SGD450 million. The takeover, if materialized, would mark a sorry end to the listed company, which has seen its stock price plummeted from $1.50 at initial public offering (IPO) in 2010 to a low of $0.245. SIA is offering to buy out the remaining shares at $0.41.

Investors who remain faithful with Tiger Airways since its initial listing must have lost a lot of money. Suffice to say, the offer by SIA is definitely not attractive enough but then again, the offer of $0.41 represents a premium to the price range it was trading ($0.29 to $0.40) prior to SIA’s offer. So investors who bought during the IPO high of $1.50 need to ask themselves whether is it realistic for Tiger Airways to turn around its fortune and increase its stock price.

Being a budget airline, Tiger Airways has been battling stiff competition within the region against formidable rivals like Jetstar Asia and Air Asia. In 2008-09, the company lost almost $50 million but things got better after it got listed in SGX, with the company clocking in profits of $28 million in 2010 and $40 million in 2011.

Perhaps one of the most overlooked dividend stocks by wealth builders in Singapore, K1 Ventures announced capital distribution of 1.5 cents per share in October 2015 to reward shareholders. The objective of the proposed capital reduction is the maximisation of value, through the distribution of surplus cash to shareholders because the company will not be making any new investments and instead will focus on managing current portfolio. This is the second capital reduction for K1 Ventures since Dec 2007 and for each of the past 10 years, the company had announced dividends. 

In announcing the capital distribution, K1 Ventures also released a fantastic 1Q 2016, which saw a net profit of $87 million. Revenue was $89.3 million for the first quarter ended 30 September 2015 compared to $2.9 million in the prior year period driven by an increase in investment income from KUH, attributable to the receipt of a cash distribution of approximately $85.6 million. The balance sheet is also in great shape because net current assets is $144 million and there is no outstanding borrowing. After the disposal of Helm, K1 Ventures had finally become more “asset-lite” and not burden by the heavy borrowings. Cash-flow is also good, with the operating activities at $84 million and cash and equivalents at $135 million.

It has been sometimes since I reviewed the performance of Tat Hong and I was shocked to find out that the stock had plummeted to almost a five year low. The stock is currently trading at $0.52, barely above the $0.49 recorded in September 2015.

For a company that prides itself as the largest crane company in Asia Pacific and seventh worldwide, its recent stock price indicates that all is not well for Tat Hong.

In the 2015 annual report, the revenue declined 11%  to S$608.6 million whilst operating profit (excluding impairment charges) remained flat at S$35.7 million comparable to the net profit achieved in FY2014. Profit after tax and minority interests (PATMI) dipped 85% to S$4.9 million due to non-cash goodwill and asset impairment charges of S$30.8 million taken by the Group’s Australian subsidiaries. One reason for Tat Hong’s terrible performance could be that its business is too concentrated in Australia and Singapore markets, which together accounted for 60% of the Group’s business. Thus, any headwind in these markets can spell big trouble for the company.

Perhaps another tell-tale signs that a company is not doing well is that it is selling its assets. In 2015, Tat Hong disposed its properties in Australia, equipment as well as selling off several “non-core subsidiaries”, Hup Hin Transport and Tat Hong Flo-Line, and an associate, Kian Ho Bearings. 

On 11 August 2015, Haw Par delivered a good set of 2Q 2015 performance. Profits for the period was $115.877 million and the 6 month period was S$129.33 million, representing an increase of 88% and 75% increase compared to 2014 results. On the surface, this might seem like an impressive showing by Haw Par. However, upon closer scrutiny, the profits was actually bolstered by the S$55.8 million gain arising from the partial disposal and reclassification of one of its assets, Hua Han.

In terms of operating cash flow, the 2nd quarter saw a healthy cash flow of $48.3 million due to the investment income of $38.6 million. As I have touched in my previous article on Haw Par, the company has substantial investments, consisting mainly of strategic holdings in United Overseas Bank Limited, UOL Group Limited and United Industrial Corporation Limited. This investment portfolio provides a stable source of funding – through recurring dividend income – and financial strength – at marked-to-market valuations – over the years.

Is Haw Par an undervalued stock and thus merits investment from wealth builders? After all, it is currently trading at $8.240, well below its Net Asset Value of $12.93. However, it should be noted that the company currently holds about S$2 billion worth of shares in UOB, UOL and UIC.

In July 2015, one of the stocks I am tracking, Sheng Siong Group, delivered another stellar set of results. The company is one of the largest supermarket chains in Singapore and recently declared an interim dividend of 1.75 cent per share on the back of a 23.1% year-on-year increase in net profit to $13.6 million for the 3 months ended 30 June 2015.

Notably, the revenue increased because of the increased sales from the four new stores. According to Mr Lim Hock Chee, the Group’s Chief Executive Officer, “We are pleased to open four new stores since the start of the year, bringing our total retail area to 426,000 square feet. This represents a 5.4% growth in our retail area, compared with a retail square footage of 404,000 square feet as at December 31, 2014. We remain committed to our store expansion plans, particularly in locations where we do not have a presence, so as to reach out to our customers. At the same time, we will continue to nurture the growth of both our new and old stores, improve the sales mix and work towards reducing input costs by capitalising on our Mandai distribution centre.”

One of the factors I like about Sheng Siong Group is that the balance sheet is pretty strong and that the company had no borrowings as at 30 June 2015 and 31 December 2014 respectively. 

Singapore Press Holdings (SPH), Singapore Exchange (SGX) and FTSE Russell announced on 3 September 2015 that UOL Group, Yangzijiang Shipbuilding Holdings and SATS will replace Jardine Matheson Holdings, Jardine Strategic Holdings and Olam International as constituents of the Straits Times Index (STI) following the conclusion of the semi-annual review.

The STI is widely followed by investors as the benchmark for the Singapore market and is used as the basis for a range of financial products including Exchange Traded Funds (ETFs), futures, warrants and other derivatives.

SATS Ltd provides gateway services and food solutions in Singapore, Japan, and internationally. The company’s gateway services comprise airfreight, baggage, ramp handling, passenger, aviation security, cargo, warehousing, perishables and cruise handling, and terminal management services, as well as ground handling and in-flight catering services.

Its food solutions include airline catering, food distribution and logistics, and industrial catering services, as well as chilled and frozen food manufacturing, and linen and laundry services.

The company also provides apron, flight operation and load control, aviation security, aircraft interior and exterior cleaning, and cruise center operation and management services. It serves airline, hospitality, healthcare, food, and airfreight and logistics industries, as well as the government.

On 17 August 2015, SATS Ltd.

When investors have some monies in hand, one of the most difficult decisions to make is how to use the fund efficiently and effectively. Should you use the money to pay off your outstanding housing loan or car loan? Or should you top up your CPF accounts? Is it a better option to use the money to invest in shares than generate better returns than saving deposits? Or should you invest in a second property to produce a fixed income for your retirement?

In any case, there is no right or wrong answer. But my personal strategy is to maintain a healthy cash flow and I don’t like to pay off all my loans and be debt-free. Having some amount of money in hand allows me to invest in appropriate instruments when the opportunity arises and also cover needs during emergency times. But I always make it a point to clear all my credit card bills on time to avoid incurring late payment charges and interest fees.

But just what is cash flow and why is it important to manage it? From an equity investor’s point of view, free cash flow within a company is the balance of money remaining after the operating expenses are deducted.

Singapore, 25 February 2015 – Sheng Siong Group Ltd. (“Sheng Siong”, together with its subsidiaries, the “Group” or “昇菘集团”), one of the largest supermarket chains in Singapore, reported a 22.3% year-on-year (“yoy”) increase in net profit to S$47.6 million for the full year ended 31 December 2014 (“FY2014”), mainly because of higher turnover and improved gross margin.

Revenue increased by 5.6% yoy in FY2014 of which 2.3% was contributed by the new stores which were opened in 2012, and 3.3% from comparable same store sales for the old stores. The increase in revenue was driven mainly by growth in the new stores, longer operating hours, marketing initiatives and renovation to some of the old stores. Most of the new stores, which are now in their third year of operation, continued to grow within expectations. Revenue contraction in the Bedok and Tekka stores appeared to have bottomed out in 4Q2014, despite growth remaining negative for the full year, though of a lesser magnitude compared with FY2013.

Gross margins increased to 24.2% in FY2014 compared with 23.0% in FY2013, driven mainly by lower input costs derived from the distribution centre, better sales mix, and stable selling prices.

Administrative expenses increased by S$6.4 million in FY2014 compared with FY2013, mainly because of the increase in staff costs.

One of the golden rules in investing is never to catch a falling knife. Yet when it really does occur on one, most of the time, most investors would enter into self-denial mode and refrain from exiting their investments or cut losses early.

You can term it as a classic investor’s symptom or attribute it to ego, greed and fear of cashing out too early. Whatever the case it is, catching a falling is a very painful experience and investors must not confuse it with the technique of dollar-cost-averaging. In my early days of investing, I made this folly in one of my investments – China Enersave.

About 10 years ago, the renewable energy sector was seen as a hot prospect because of the sky-high fuel prices and the Clean Development Mechanism (CDM) under the 1997 Kyoto Protocol. Many companies were engaged in various alternative fuel solutions and one of them was China Enersave, a Singapore company which operated biomass power plants in China. When I came across the profile of the company, like many novice investors, I was intrigued by the business model and therefore invested in the stock. In my excitement, I threw all caution to the wind and ignored the early warning signs – poor management execution, lack of company’s track record and the high risks of doing business in China.

Singapore Telecommunications Limited reported group earnings results for the third quarter and nine months ended December 31, 2014. For the quarter, the company reported group revenue of SGD 4,427 million compared to SGD 4,263 million a year ago.

EBITDA was SGD 1,229 million compared to SGD 1,264 million a year ago. Underlying net profit was SGD 970 million compared to SGD 910 million a year ago. Net profit was SGD 970 million compared to SGD 872 million a year ago.

Free cash flow was SGD 669 million compared to SGD 569 million a year ago. Profit before EI and tax was SGD 1,285 million compared to SGD 1,236 million a year ago. Net profit rose 11.2% boosted by higher mobile data revenue and bigger contributions from its mobile partners in Australia and elsewhere.

The company delivered a solid third-quarter performance and successfully increased mobile data revenues with better networks, technology, content and service. Post-tax profit of its associates rose 29% to SGD 458 million, led by Telkomsel in Indonesia and Bharti Airtel.

For the nine months period, the company reported group revenue of SGD 12,884 million compared to SGD 12,720 million a year ago. EBITDA was SGD 3,817 million compared to SGD 3,858 million a year ago.

Nowadays, I am extremely fed up with M1 network services. No matter where I go, the 3G network coverage is terribly poor for my mobile phone. As a result, sometimes I could not receive messages from my loved ones and friends.

I suspect the drop in the network quality may be because I cancelled M1 4G subscription recently – previously it was offered to me free-of-charge when I renewed my subscription plan but M1 stated that it would charge me $10 extra from January 2015 onward. If not for the fact that I have to pay hefty penalty for cancelling my subscription plan contract, I would have terminated my line long ago.

From the consumer’s point of view, if I am not satisfied with a company’s services or products, I would not invest in their shares. For a knowledge-driven economy, internet data access is critical in Singapore and if M1 is unable to provide reasonable network service level, it don’t deserve any investment merits. Notwithstanding the dividend track records, if M1 is unable to retain customers, its economic moat will only erode over the long run.

The saturated Singapore market and the fierce competition among the three telecommunication companies (SingTel, M1 and Starhub) reinforce the importance of economic moats in this sector.

Below article is adapted from SGX website and permission was sought to publish it.

According to a year-end BCG report, there are currently almost 7 billion mobile phone subscriptions globally, or one for every person on Earth.

Last year, listed mobile phone providers – Singtel, Starhub and M1 averaged a 10.1% total return and have generated a 1.7% return in the year thus far.

These stocks all distributed dividends last year, which might have helped offset mobile phone subscription plans. For instance, an investment of S$7,320 in Singtel shares last year would have generated enough dividend income to pay the minimum annual fee of Singtel’s Combo 1 plan.

According to Boston Consulting Group (BCG), there are currently almost 7 billion mobile phone subscriptions globally, or one for every person on Earth. The recent report BCG noted several factors are fuelling subscription growth, including greater access, increasingly sophisticated mobile-device functionality, fast-rising device sales, an ever-increasing range of devices and device types, and sharply falling prices. Another factor that was noted included more reliable data connections that enable increasingly data-intensive activities – moreover approximately 60% of the world’s population is covered by 3G connectivity.

Singapore’s three listed mobile providers are Singtel, Starhub and M1.