Stocks

As a financial blogger, I received a lot of media invitations from various financial institutes, banks and companies. Most of the times, I declined the invitations because of work commitments. Recently, I was invited to attend the official launch of REIT Association of Singapore (REITAS) on 17 November 2014. I would like to attend this event to find out more about the role of this association but as usual, I am unable to attend because of work schedule conflicts.

It seems to me that the association consists of big players from Keppel, Mapletree, Capitaland, Frasers and ARA Asset Management and their key thrusts are to engage Monetary Authority of Singapore on regulatory issues and to promote the understanding of REITs.

This is a good development because as the industry matures, the association can help to look into areas that can be improved, especially on the structure of REITs. For example, in my previous article on REITs, I don’t understand why is there a need for external manager for REITs. Such requirement only incur more costs which would be eventually passed down to investors.

Most retail investors claim they know about the REIT they invested in but I suspected they are none the wiser than me on the business model.

Thanks for your time and have a great day ahead!

I received the above email from one of my readers a couple of weeks ago. I fully agree with him that to be rich and successful in the stock market, investors should make the effort to note down the gains and losses made in their stock investments.

The principles behind such an endeavor is not really to track the actually amount of gains and losses, but rather, to serve as a form of discipline and instill a sense of purpose to your investments. Such a practice can help a newbie investor avoid many investment traps and empowers him to make better financial decisions in the long run.

When I started investing many years ago, I would record every single gain or loss of my shares investments in a little blue notebook.

In my previous post, return on equity (ROE) was highlighted as an important indicator to measure the management performance of a company. But one of my readers pointed out that earning per share (EPS) is also useful for investors to determine the value of a stock. I totally concur with him and would like to emphasize that both are needed to evaluate the value of a stock.Undeniably, valuing a stock is more difficult than assessing the financial health of a company because the former is a combination of art and science, while the latter can be found most of the time from the annual reports. In this article, I shall attempt to share with my readers how I value a stock, using the well-known OSIM as an example.

Firstly, P/E refers to the price earning ratio, It can be derived by dividing price-per-share over earning-per-share (EPS). For example, OSIM is currently trading at $2.71 a share. Based on the 2013 report, the EPS for 2012 was $0.12 and for 2013, it was $0.14. Given the latest quarterly report, the full year EPS should be about $0.16 for 2014. The P/E ratio had also been decreasing since 2011, from 30% to 20%.

To become rich from your stock investments, you must do your research first before you invest. The following analysis covers one of the listed companies, SMRT, the largest rail operator in Singapore.

In recent years, every time the Singapore railway system broke down, it was like a nail to the counter’s coffin. Due to the service disruptions, SMRT stock price has plummeted at a frightening rate from $1.74 in 2012 to $1.02 in March 2014. Speculators must have lost a lot of money in this counter. This is not surprising because to invest in SMRT, you need to hold a long term investment horizon.

Fundamentally, even though SMRT has a monopoly in the public transport system, its business model is heavily dependent on government policies, and because of this, investing in this company is not so often straight-forward.

On 24 April 2014, SMRT share price rocketed 21% on rumors of CEO Desmond Kwek’s submission of new financing framework to Singapore government for the company’s assets. The increase was the biggest ever one day gain for the stock. I reckon that the CEO had to do something drastic to reverse the destiny of SMRT. In January 2014, the company reported a set of dismal results for the third quarter.

Recently I liquidated my remaining K1 Ventures shares in my CPF Ordinary Account. Total profits, including dividends and capital gains, amounted to $1,400. This represented a total return of 13%  in 3 years. It could have been more if I had not pared down the investments since last year. As of now, I am not vested in any stocks.

The intent of investing my CPF monies was really to divert a portion of my CPF monies from the Ordinary Account before HDB wiped out the monies for settlement of my HDB purchase in 2010. I wanted this investment to be a buffer in case I got retrenched from my job and still need to service my housing loan. With no income, this investment could then be liquidated and used to pay the HDB monthly installments for at least one year. This buffer was important for me as I am the sole breadwinner.

Three years later, I am glad that the nightmare scenario of losing my job did not happen. But nevertheless, I decided to sell off all my K1 Ventures. Firstly, my financial situation has improved substantially due to higher income and advancement in my job. These developments contributed to significant cash savings for me.

Recent market swings for penny stocks would make investors pause and rethink their approach on equities. Quite a number of investors lost their savings investing in risky penny counters. Some retirees even lost a huge chunk of their retirement funds. So the question for most investors is gold or equities?

Whilst I certainly won’t dispute the pros on investing in equities, I do believe in having a portfolio consisting of several investment instruments. And I believe that every investors should hold bullion in their investment portfolio. This is because gold prices often move in opposite direction to equities and currencies. So allocating gold in your portfolio can help to serve as a form of hedge against inflation and enhance your portfolio’s performance.

Investors should hold a long-term view on gold investments and not expect quick returns. They should consider it as a form of diversification to lower risk for their investment portfolio. Very often, I read articles from many writers in The Finance.sg sharing their investment experiences. Many of them pumped in hundred of thousands of dollars on shares, REITs and ETF. Their investment performances were impressive indeed but if the stock market plunged suddenly, large portions of their investment values would be wiped off overnight.

I was reading one of the articles posted in Finance.sg on Haw Par Corp and decided that its timely to provide an update on the company’s performance in Q2 2013. As mentioned in my article in June, Haw Par Corp is a financially strong company. In terms of asset value, it is currently trading at estimate 31% discount. As of 1 Oct 2013, the net asset value is $10.73 but it share price is only $7.40! This is definitely a value stock with good business fundamentals.

Many Singaporeans can probably relate Haw Par Corp as the manufacturer of the famous Tiger Balm but how many investors know that it also owns the famous Underwater World at Sentosa? I like this company because it had been consistently giving out dividends for the past 20 years. The company is cash rich, is financially strong and is trading at below net asset value. However, this counter has risen in value so much for the past two years that it is beyond my entry price, which is $4.00. Looks like I have to wait until the next stock market crash to load up this overlooked stock in SGX.

The original business of manufacturing and distributing through Southeast Asia pharmaceuticals under the Tiger Brand names, the best known of which is ‘Tiger Balm’, was founded at the turn of the century.

Notwithstanding the bullish market, I decided to compile a list of stocks which I would invest in during crisis times. They would become part of my investment portfolio. These are companies with strong cash flow, sustainable revenue and easy-to-understand businesses. Essentially, these are companies which will still be around 10, 20 and 30 years down the road. I am still doing research and will reveal the companies in due time. Nonetheless, I noted that three of the companies (Genting Singapore, Capitaland and Noble Group) are listed in the STI Index.

Boustead Singapore has risen by 45% for the past 12 months. The P/E and P/Cash flow ratio are estimated by S&P Capital to be 12 and 10.8 respectively. These metrics suggested that the stock is currently expensive. The good thing is that net gearing remains at 0%.

Although this counter seems overvalued, fundamental business prospect still looks good. Boustead Singapore is a global engineering specialist in energy, water infrastructure, industrial real estate and geo-spatial solutions.

The main driver for the business is the real estate division, which contribute 24% to its top line in Q1FY14 to SGD101.2 million. Oil and gas division is the second main contributor, reporting revenue growth of 38% year-to-year. Water infrastructure and geo-spatial technology were the weaker divisions, reporting negative revenue growth of 25% and 14% respectively.

I like Boustead because it is financially strong with net current assets of $150 million. The company has consistently paid out dividends to shareholders for the last ten years and it is well-managed with sound corporate strategies. Although Boustead has no formal dividend policy, it has a tradition of paying dividends linked to long-term net profit growth.  Boustead has achieved respectable growth in dividends over the past ten years, with a compounded annual growth rate of 21% over that period.