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Showing posts from January, 2011

China - the market to tap on

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China - the new growth market in Asia, the country that led the global economy out of doldrums in 2008, driven by the stimulus packaged offered by the local government

Why is it attractive?

1. One of the world most populous nation
2. Largest internet market users in the world
3. High demand for coal, iron ore and minerals - inbound & outbound
4. Infrastructure growth, production and development of raw materials
5. The need for clean water and proper sanitation facilities
6. Growing affluence of the Chinese to spend on luxury goods
7. Property - under-developed 2nd and 3rd tier cities into mega-malls/business hubs
8. Widespread need for quality health care services

The list goes on and on...

I am keen to enter into the China market via paper assets such as equities, mainly into shares. There are, of course, other options such as bonds, ETFs and other asset classes/instruments to consider. Please consult your Financial Adviser :)

Let's focus on shares. 3 ways to gain exposure:

(a) Buy in…

GRP Ltd

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Company background at a brief:
The Group's main activities can be categorised into 4 main operations: hose & marine specilaists, measuring instruments/metrology, uPVC pipes & fittings, and industrial property. The customer base is predominantly oil and gas related, both on and offshore.

Why it is attractive:
- Average of 9% yield
- Positive free cash flow over the years
- Net cash position
- Historically, on average, stable dividend payout over the past 3 years

Summary of disadvantages:
- Limited and boring growth prospects
- Margins may be indirectly affected through the industries via their customer base
- A case of too much cash being idle, waiting for acquisition which may not materialize?
- Lack of substantial interest - a case of not being noticed? undervalued?

Dividend table - 2006 to 2010
Source: ShareInvestor



Financial snapshot
Source: ShareInvestor



For growing my passive income via dividends, my first investment foray into GRP Ltd starts in Jan 2011. Remain vested.

My investment philosophies & personality

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My 10 investment philosophies:

1) Buy into companies that have future growth potential – Growth Investing
2) I do not like short-selling/contra (I tried before - such financial game is not for me)
3) Know your companies – preferably circle of competence
4) Believe in Cycle & Trend Investing – Properties: buy at down-trough, sell at peak
5) Averaging down to slowly accumulate more shares
6) Do not get influenced by Mr. Market, Fund Managers & Analysts.
7) Solid management with clear vision help make better informed investment decisions
8) Never invest based on emotions or be a total price slave!
9) Never believe in being too overly too diversified. Be focused on key areas (e.g. properties)
10) Believe in Joseph cycle – 7 years bear & bull

My investment personality:

P = patience
D = discipline
C = commitment

Patience to wait for greater returns, discipline to my personal investment framework (cycle/trend, capitalize on growth etc..) and committed to reach my investment goals.

Out of t…

Why we spend on common goods

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Interestingly, we spend our money for a variety of reasons. It can be a gift for our loved ones, a get-together meal with family members, a round of drinks with closed friends or an item to pamper ourselves/make our lives better.

Whatever the reasons, there is always a time to spend. If spending adds value to us, then the cost of returns back, as perceived by us, will be worth the investment. However, if spending has always been a hasty decision or if you are a total spending freak, then you may want to evaluate the reasons behind it. To do this, take into the shoes of the Retailers.

So before we take out a wad of dollar bills, ask yourself - what has Retailers done to us? There are a number of gimmicks, promotions and packages to win your consumer dollar. They could financially rob your wealth if you are not disciplined and do not take total control.

Here are 3 common tactics used:

1. The magic word - FREE

Do you like FREE? For me, of course! This goes without saying. Buy 2, get 1 FREE.…

Getting into the false financial belief

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If you happen to take a walk down ION Orchard during the weekends, chances is that you will see long queues at high-end clothing boutiques such as Prada or Louis Vuitton. You will notice at Takashimaya - Louis Vuitton.

Take a closer look and you will be surprised - young female teenagers form part of the crowd, decked in short skirts, powdered make-up and high silhouette heels.

My wife and me like the Prada designs. It gives a classier and elegant outlook. So we join in the queue. Also, we will like to observe the spending power of the young.



The doors are opened and voila! We enter the Prada boutique. Right in front of us, flanked by 4 parameters are young people (assuming they are local polytechnic students) happily browsing through the latest designs. Their looks give me the indication that they are about 18-23 years of age (of course, looks are deceiving but then not their youthful vibrancy right? - some young girls carry Hermes bag on one hand) And they don't just scan around…

My Dividend Portfolio

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Reits

AIMS AMP
- Industrial
- Average of 9.2% yield
- Quarterly payout

Mapletree Industrial Trust
- Industrial
- Average of 7.3% yield
- Quarterly payout
- Strong sponsor (Temasek-owned)

First Reit
- Healthcare
- Average of 8.4% yield
- Quarterly payout
- Demand of quality healthcare services in Indonesia - room for growth



Businesses

GRP
- 4 business units, mainly into industrial rubber hoses and fittings
- Average of 9% yield
- Positive free cash flow over the years
- Net cash position
- Historically, on average, stable payout over the past 3 years


Potential Watchlist

Starhub
- Yield of about 7%
- Quarterly payout
- "Government-backed" entity

*Updated as of 2011 - will change if there is any addition or omission

I will be holding on to the businesses for long term dividend payout. Of course if situation changes, sudden turn of direction from the management or too much rights issue without valid consideration, I will then have to re-consider my purchases in my dividend portfolio. At the current m…

My 8 guidelines for selecting dividend stocks

The 8 pointers:

1. Steady dividend payout over the years, possibly a good 3-5 years record
2. If possible, steady, quarterly payout per calender year
3. Does not pursue overly aggressive growth and not in a volatile business
4. Yield "locked in" to the price purchased - at least 7% and more
4. Reits - DPU (Distribution Per Unit) to increase on quarterly basis (minus rights issue)
5. Robust management whom takes into the interests of shareholders for dividend payout
6. Where possible, double digit free cash flow (FCF) is the icing on the cake
7. Dividend pay off - cash flow from ops/retained earnings and not from past year/borrowings
8. Substantial shareholders/fund houses/management buy up the shares - add business confidence

* Above is just my personal framework for choosing dividend yielding shares
* Objective is to increase my monthly passive income
* As of now, dividends add up to about 99% of my monthly passive income

ICBC - Industrial and Commercial Bank of China

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Recently, ICBC (Industrial and Commercial Bank of China) has been in the news due to their expansion mode. I have taken some snippets of it:

ICBC to double Europe Presence
(source: WSJ online):
http://online.wsj.com/article/SB10001424052748703551604576085682740756822.html

(a) ICBC will open branches in Paris, Brussels, Amsterdam and Milan this week, and Madrid the week after, a spokesman for the bank said in response to questions from The Wall Street Journal

(b) The bank already has a presence in London, Moscow, Luxembourg and Frankfurt. The spokesman said the new branches will offer retail and commercial-banking services.

(c) The banks' expansion is starting to pick up pace, with ICBC entering Vietnam, Malaysia, Thailand and Canada last year

(d) In recent years, it has taken over small retail banks in Indonesia and Thailand, re branding both with ICBC's name. That has given it a network of fewer than 20 branches in each country, adding to the small network it set up on its own…

Saving too much - over thrifty

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During my informal chats with people, I realized there are various groups that define savings differently. Perhaps it may be due to individual circumstances, mentality, personal challenges and the income streams. Some save 10%, some 15%, some 30%. For me, I save 40% of my net earned salary (minus away CPF). To me, it's sufficient upon my calculation at the current moment. Yet, I understand there are others whom is able to save 90-95% (exclude CPF) by squeezing every dollar.

Initially, I was amazed! Slowly, I figure that there is always a price to pay, the price to sacrifice to make this work. Maybe I am right or maybe I am wrong. Anyway, the price to pay can be discounting off expenses which are deemed unnecessary to the individual but may add value to one's life. Of course, the word "value" is subjective. For instance, the "value" can be overseas trips with your loved ones. Intangible. Unforgettable. On the contrary, to some, it's a waste of money. Th…

Growth Prospects - 3 key areas

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I am reading some financial news from my iphone and an article pops up talking about a newly listed company that's going to IPO soon. And to package it, they state that the company is moving towards exciting growth prospects.

So what is growth prospects?

Most times, we, as investors, say we look at the growth prospects. My question is this - how do you define growth prospects?



Suddenly, there are many answers popping up and some of them come from established sources. Any answers are fine as long as it sounds logical to the person putting the money into where he feels the prospects are. After all, it's "subjective"? No one can predict the future.

Because there is no one outcome, neither a solid right answer. Just guidelines. But it may be useful to understand a few pointers.

To my opinion, I feel we could be looking at 3 key areas from a company view:

1. Future earnings potential

Any company in business looks at profitability. While historic data might not be a good ind…

10 points to look out for - Analysts Reports

1) Change in recommendation and targets - well, Analysts do this, don't they?
2) Trends in revenue and earnings, including forecast growth
3) Any significant change in financial figures as pointed out
4) Compare this report with your own knowledge to fill in the gaps (hey, you still need to do your homework by reading the annual reports and getting other intelligence)
5) Who is the Analyst? Position held? Experienced? Name constantly appeared in the reports?
6) Check other research reports if similar content appears. If not, does it differs too much?
7) Ask Broker on his/her opinion of the Analyst report (hope your Broker is friendly)
8) Email the direct source, the company for clarification and quote your sources from there
9) Qualitative overview - does it make sense to you? Can you visualize what will happen next?
10) Does the reports clearly state the anticipated challenges and risks?

For me, I do used the Analyst reports as a benchmarking tools. After all, they help me in my seconda…

10 things to look out for - reading IPO prospectus

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In the year of 2010, we have seen a sizable number of IPOs (Initial Public Offerings), especially the launch of the most talked about company: GLP - Global Logistics Properties.

Let me share with you a story. I was in the lift with my wife. Joining me was 2 old uncles. One of them told his old pal that the market was recovering. Hence, he had decided to subscribe to GLP IPO. Another main reason - the backing of GIC (Government Investment Corporation Singapore). His friend remained stunned but after composing himself within seconds, he said "Well, xxx, since you were going for it and I am your friend for more than 20 years, ok I would join you. What are friends for?" Maybe the uncles were retirees and flushed with cash/CPF money.

This led me to think that:

(a) the IPO may be oversubscribed (true indeed!)
(b) a good opportunity for IPO Wannabes to go in and out fast!
(c) the awareness ramped up so high that even lift uncles talked about it!
(d) without due diligence and because …

Boustead - worth your consideration

Boustead in 4 main divisions:

(a) Energy related engineering – provides vital process technologies for oil & gas/petrochemical industries, solid waste energy recovery, utilizing attentive fuels

(b) Water & wastewater engineering – for industrial and municipal plants

(c) Real estate solutions – provide designs and build engineering expertise on industrial parks & facilities, as well as new townships

(d) Geo-spatial technology – location intelligence solutions

Let’s segment Boustead to some key qualitative areas:

1) Value preposition:
Branding & trust
Recognition & reputation
Low cost to imitation (e.g. Geo Spatial)
Global presence

2) Market segment:
Cater to specialized groups of companies as their clientele – segment marketing approach

3) Core competencies:
Delivery of quality results with trust and credibility built over the past 180 years, using asset-light strategy with a focus on low debt position and an emphasis on net cash/free cash flow

Strong management with FF Wong s…

Brief SWOT analysis for C&O Pharma

SWOT Analysis - A Qualitative Overview

Strengths:

1. Extensive distribution network of 2,000 distributors and over 300,000 clinics, pharmacies and hospitals across all parts of China

2. Core focus on R&D capabilities such as drugs for ageing adults, anti infection and gastrointestinal, with more than 100 in-house researchers

3. Management - 3 Japanese Executive Directors to replace C&O Board of Directors after Sumitomo purchases 29% stake in C&O Pharma

What does this mean?

(a) Wider B2B channel presence to increase sales and build trust amongst their clientele

(b) Chance to develop new proprietary drugs and hence increase reputation points as a “new company to incorporate a medical milestone”. Focus not diversified to other business functions; relatively robust research team on medical innovation

(c) Having a varied management structure, the Japanese is able to make strategic plans – that is to explore markets out of China; the SE Asia.

A promising plan ahead – “Intend to double …