SG Wealth Builder

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.