Friday, October 30, 2009

Cacola Update

Cacola has brought forward the hearing of the winding up against subsidiary to 19th December 2009.
SGX Reference

Thursday, October 29, 2009

Comparing STI ETF

Benchmarking with STI ETF is good because
a) it is diversified
b) if you do worse than the index, you can switch to it easily since it is traded like stock

There are currently 2 listed STI ETF available, so you still need to choose. They are:


DBS Singapore STI ETF,

Advantage
* Smaller lot of 100
* Lower expense ratio, based on the values on the website.

Disadvantage
* Less liquidity

streetTRACKS® Straits Times Index Fund
Advantages and disadvantages are the opposite of DBS's ETF.

SGX also provides a link to track only the STI ETF. Open the link.

I feel the lot number isn't that important, since the biggest cost is the minimum brokerage cost of $25. The less liquidity might be overcome if DBS managed to get enough of its funds to buy into its own ETF. Regardless, at this stage, I will prefer to look at streetTRACKS ETF rather than DBS if I am ever going to buy the STI ETF.

Tuesday, October 27, 2009

Bought Iconic (537)

Bought some Iconic with separate orders of @ $0.165
30 lots, 3 lots and 19 lots = 52 lots

Expected Profit Margin if selling from open market : 2.3%

If not, it will be higher but will take longer. Should probably had put in an order of 10 lots @ $0.16 instead of just 56 lots of $0.16 at the start of the days. Regardless, if the combining works, I should only be charged for the brokerage once.

Monday, October 26, 2009

Delisting Company: Iconic Holding (537)

Another company, Iconic Holding delisting soon. I did not look into its business or logo because it does not have any core business anymore. It is delisting since it has no core business.

Profit Margin


Buy 56 lots @ $0.16 and Sell @ $0.17 = 5.51%

I am going to queue up my order. Also, might try buying less lots that might incur more charges. Wish to try if POEMS will only combine all the buy orders in a day and charge only 1 time based on overall trade for that day rather than each trade. My friend OCBC account allows that option, therefore people get queue multiple 1 lots rather than buying in bulk. If the minimum $25 charges is levied on each trade, then it will not be worthwhile.

Again, just to warn, the offer may fail, or the exact date to get the amount is not known. Therefore, trade at your own risks.

(edit: POEMS have the ability to combine too, and it is automatic based on the POEMS FAQ. It is called "Amalgamate", combining trade of similar action, same day and same stock.

References:

  1. SGX - Iconic Holding Delisting

Holding Review on October 2009

Except for the selling of Sihuan through accepting the cash offer, there are no changes. Earn $160+ using $9,600 for Sihuan in a couple of months. However, did not beat the STI ETF during the period of holding.




Investment SecuritiesPurchase DateAnnualised ReturnSharesBuy Price
Powerplus15-Jan-2008-40.55%32,0000.215
STI ETF*15-Jan-2008-11.85%1,9833.47
Cacola17-Oct-2008-27.51%11,0000.095
STI ETF*17-Oct-200828.15%5022.08
ASA Group28-Sep-200997.15%33,0000.055
STI ETF*28-Sep-200918.90%6802.67


No plan to invest in risky asset since I might need cash soon. Keeping them in Philips Money Market Fund till I got better plans.

Thursday, October 22, 2009

Investing from Data Mining


Business intelligence, data mining, etc are techniques that make use of the computation power of computers, and algorithm from human research to find meaning out of data. From a statistician point of view, the goal of investing is easy. The goal is to find the stock that will give you the capital return since the best dividend return cannot achieve more than the best capital return.

Approach:

Given the goal, with Reuters data, you can just zoom into 1 label/data which is price per share. Ignoring all data set, I did a quick run through finding which data correlates closely to price per share without even cleaning the data. The best was Gross Dividend, Total Revenue and Cash from Operating Activities each with correlation ratio of around 0.5 to 0.6. A positive 0.6 ratio means that given Gross Dividend rises by 1, price should rises by 0.6. From a statistician point of view and without any knowledge of the data, it means if a companies has more dividend, total revenue and cash from operating activities, the prices is very likely to rises too.

Since dividend seems to have a huge impact to price, I did an additional step to find which companies had no given any dividend and is the most probably to give one based on the financial statements. Again using data mining, I found that Swiber is the most likely to give dividend. However, the company seems to be leveraging more currently than paying to its shareholder.

Limitations of Approach:
Past Performance Is Not An Indicator Of Future Results. Like how many unit trusts advertised in small print, "Past Performance Is Not An Indicator Of Future Results", this approach assumed that you can use past data to predict the future.

Data cleaning. Typically, in data mining, we need to clean the data to remove outliers, which are supposed to be data that is extraordinary and skew the accuracy. However, I didn't do that since I don't have much prior knowledge and statistics can be easily manipulated to improve accuracy of result. Also, the result can probably be improved by normalized some data like converting revenue, operating cashflow, etc to the per share unit. Nevertheless, I am assuming that I have no knowledge of data and is only interested to get the stock that will maximize capital gain. Besides, I only did a simple analysis just for interests.

I also been looking at stock prices only Monday weekly. Mostly for making more efficient use of time and also not being myopic. Sometimes, when you look too closely, you are ignorant of the big changes. I will slowly try to switch to looking only monthly, and hopefully only yearly. Warren Buffett once mentions about having one good idea each year. With less choice, you will filter out the weaker choices hopefully and only buy the best one. I still keep updated on certain keywords in SGX and also news of holding I am buying. But there are mostly "push" based, so I only act if there are news rather than watching news for something interesting.

Tuesday, October 20, 2009

Memstar RMB500m Investment for 55.8% stake in SWG (5MS)


Company Info:

Memstar Technology Ltd. specializes in the research and development, manufacture and application of polyvinylidene fluoride (PVDF) hollow fiber membrane and membrane products. Its membrane products are used in both industrial and domestic/commercial applications. The industrial applications are the pressurized membrane modules and submerged membrane modules that are used in water/wastewater treatment, water reclamation, seawater desalination, food, pharmaceutical, chemical, power generation, petroleum, bio-separation and other separation processes. The domestic/commercial applications include membrane water purifiers or integrated water purifying systems for households, commercial buildings, small businesses, hotels, schools and hospitals. Its subsidiaries include Memstar Pte. Ltd., Memstar (Guangzhou) Co., Ltd and Memstar (Mianyang) Co., Ltd.

The deal is with the Shenyang Municipal Government with the following details
• To set up an entity, targeted to be a major membrane technology based water player in North China.
• Water and wastewater treatment assets of combined capacity of more than 730,000 m3/day will be injected into the entity by SWG in the initial phase (which is equivalent to approximately 50% of Singapore’s entire daily water or
wastewater treatment capacity).
• Potential to upgrade existing facilities using Memstar’s PVDF membrane products and technology.

What interested me to research future was the phrase "SWG will guarantee a return on investment 12% per annum, which is approximately RMB55.8m for the Company's effective interest" and a government involvement.



I tried to find the IPO details for competitors since I don't know much about the competitive water membrane industry except for Hyflux and United Envirotech. However, I realised it had changed names several times. From the homepage of Memstar
The Company was incorporated on 12 June 1979 as Form Pte Ltd. On 14 August 1997, it was converted to a public limited company, at which time the name of the Company was changed to Form Holdings Ltd. It then changed to MediaStream Limited in May 2000. The Company changed its name from MediaStream Limited to Memstar Technology Ltd (“Memstar”) on 12 September 2007 upon the successful completion of the acquisition of Memstar Group.


Form Holdings was a producer of music album for various industry. Totally unrelated to the current business, so I decided not to not look further.

Investment tips:

Why not?
  • The document states it is only a head of agreement (not binding I think)
  • No dates of when the plan will start
  • Harder to find/get information since the place is in China. I like China outlook but hate to search in Chinese...
  • No knowledge of competitive edge of Memstar. I know nothing of water membrane technology and how much better is Memstar vs. competitor in Singapore, or even other countries. I do know Memstar is pretty cash rich currently.
  • 39.3% of the market capitalization will be in this deal. So any failure/natural disasters, etc will impact the company severely.


I considered for quite a while and decided to just watch and wait for more further development about it. I might regret if the stock price rises and lose the opportunity but nevertheless, I cannot think of a exit strategy so I decided not to take any action.

References:

  1. SGX - Memstar announcement of deal
  2. Wikipedia - Shenyang
  3. Memstar Technology

Monday, October 19, 2009

Returns from Sihuan

I got my $9750 from Sihuan on the 14th Oct when I checked my POSB account. I was hoping they could send a letter telling me they sent the money over instead of me being surprised. Nevertheless, I transfered the amount to POEM for the Philips MMF. (edit: I received the mail from SGX about the transfer on 19th October, 5 days after the actual transfer)


StockPurchase DateAnnualized ReturnBuying PriceSelling Price
Sihuan25-Aug-200912.65%0.9550.975
STI ETF*25-Aug-200927.74%2.652.77


Sadly, I did only half as good as the STI ETF benchmark even though I got around 12% annualized returns. I did include the charge for stamp for Sihuan and the usual brokerage charges for the STI ETF, but still the market breakout made STI ETF returns increase greatly.

However, Sihuan was a good experience. I learn that there are no charges for accepting cash offer except for and stamp. But, it still puzzles me is when does the payment after accepting the cash offer occur. I will be happy to hear someone to enlighten me about it since there is still a China Precision and Chartered Semiconductor cash offer. I am not sure if the payment is after the offer become unconditional, or even earlier.

Thursday, October 15, 2009

Cacola, Lorenzo and ASA Group Updates

General news update on some of my holding and related companies.

Cacola
SGX Reference
At last, some news about the winding up petition and not surprisingly, it has been adjourned to 13 January 2010.

Lorenzo
SGX Reference
Lorenzo boosts production capacity and enhances PRC presence with new S$14 million production capacity. A look at their latest balance sheet show that they have around S$10 million in cash and deposits and S$7 million in receivable. Most probably, they will take a long term loan to finance the acquisition.


ASA Group
SGX Reference
More details information about how Shanghai Jinming will manage ASA Group is released. Shanghai Chaoyue Trading (SCT), an associate of Shanghai Jinming Investment Group entered an agency and distributorship agreement (A&D). SCT will act as an exclusive agent to sell polished, cermaic and rustic tiles under ASA brand to the retail public and also special construction projects. ASA can leverage on the sales network that Shanghai Jinming Real Estate have. However, ASA is going to sell the tiles at a discounted price, and not sure how much is the discount.

iPhone and Starhub


Recently, Starhub had lost the rights to the English Premier League to Singtel. Then, M1 inked a deal with iPhone to begin selling it at the end of the year.

When talking with a friend, there was a way Starhub could anti-competitively deal with the iPhone. Typically in Singapore, handphone are subsidized and telecom companies earn the money mostly through the subscription contract. Therefore, Starhub could snap up the iPhones available with the cheapest plan and don't use any data. However, this is assuming iPhone users typically exceed data usage and contribute a lot of revenue to Singtel or M1.

Monday, October 12, 2009

Companies and Brands

Buying companies you know can reduce some risks since you are updated with their news. For people who don't know much companies, you can try by looking through the items you use and buy. Who are their competitor/alternatives and what competitive edge do they have that made you bought them? There are big companies like SPH, SMRT, etc but also other consumer goods that you might have bought but not realized. Therefore, I tried to list some brands that you might had bought but not realized they are related to a listed company. You may want to guess the company by not scrolling too fast beyond the image. The listed company name is below the image.


Brands (Chicken Essence, etc)

Cerebos Pacific

Harvey Norman

Pertama Holdings

G2000

Wing Tai

Dian Xiao Er

Soup Restaurant

Cold Storage, Giant, Shop n Save, 7 Eleven, etc

Dairy Farm International Holdings

Tiger Balm

Haw Par


Of course, there are more companies like the sushi companies like Apex-Pal and Japan Food. Nevertheless, it can be a good start to find something you know about.

Thursday, October 8, 2009

Delisted Companies: Evergo, Asia Dekor and Konami

More delisted companies in the SGX, Asia Dekor and Konami, although there isn't any opportunties with these already. However, I do not want to have survivorship bias, meaning analyzing only companies that 'survive' and remain on SGX, which typically are the good one left.



KONAMI CORPORATION (Konami) develops, publishes, markets and distributes video game software products globally for stationary consoles, such as Sony PlayStation, PlayStation 2, PLAYSTATION 3, Nintendo Wii, and Microsoft Xbox 360, and for portable consoles, such as Sony PlayStation Portable and Nintendo DS, as well as for use on personal computers. The Company operates in three segments: Digital Entertainment, Health & Fitness and Gaming & System. The Company plans, produces, operates and distributes entertainment content for mobile phone online games. Konami produces gaming machines for casinos in the United States, Australia and other overseas jurisdictions, in addition to video games and token-operated games installed in amusement arcades and other entertainment venues in Japan. The Company produces card games, character goods, toys and hobbies, publications, compact discs (CDs) and digital versatile discs (DVDs) and other merchandize products.
They are quite big in games, however I didn't know they was even listed in the first place. They just delisted without any offer. Not sure why, perhaps they own all the shareholding.



Asia Dekor's principal activities are manufacturing and selling laminated flooring and related products, particleboards, high density fireboards and medium density fireboards, providing administrative services to Group companies, and investment holding. Its main products include strengthened wooden flooring, melamine laminated flooring, painted paper and other building decoration materials. The Group's operations are carried out in Singapore, PRC (excluding Hong Kong) and exported to North America, Asia, Europe, Oceania.
Asia Dekor is being bought over, and offer $0.268, 48.9% premium over last closing price on 14th Novemeber 2007. The stock price never hit the offer price, only as high as $0.24. Buying at 38 lots at $0.24, selling at $0.268 implies 10.89% profit margin. Not sure why there is sure a huge premium, but this is a good example where company did not hit the offer price. I should probably checked how long did it takes for the shareholder to get their price, because 10% is very attractive, compared to the measly 1+ % I am getting from Sihuan. There are some dividend and capital reduction that I did not have time to read about. Not sure of the impact to the final price of the offer.


Evergro Properties Limited is a investment holding company. The Company’s subsidiaries are mainly engaged in investment holding, marketing agency, property development, sale of properties in the People’s Republic of China (PRC), construction and operation of golf courses and sale of golf memberships in PRC. The Company’s businesses are grouped into three divisions: Property trading, golf club operations and others. The major subsidiaries include Dragon Link Investment Pte Ltd, Second Dragon Development Pte Ltd, Third Dragon Holdings Pte Ltd, Sixth Dragon Development Pte Ltd, Dragonland Technology Pte Ltd, Eighth Dragon Development Pte Ltd and Ninth Dragon Development Pte Ltd.
They got bought over by Keppel Land, with the price of $0.29, 16% premium over last closing price. However, there is a Share Offer, exchanging for shares in Keppel Land that is a 21.1% premium. The stock price went as high as $0.405, probably due to a higher stock price in Keppel Land too.

Monday, October 5, 2009

Irony of Buffett

If someone wants to buy $20 of your stuff with only $10, will you sell it? Probably not unless you don't feel it is worth $20, or you need the money urgently.

Yet that is how Warren Buffett, a rich person, earn his money. How?


He does it by buying company that are undervalued or discount. He is well-known for fact so when he wants to buy a stake in your company, he is probably buying it at a cheap rate. He also buy them but does not manage them at all. So why will someone sell something he knows is more valuable to someone at a discount? Furthermore, the buyer don't even 'care' or manage the company then.

So why will a owner of a company offer his company to Buffett then? Probably, they are desperate for huge amount cash or financing that banks are not going to give. Buffett should have a hoard of cash available for opportunity.

Another reason is that the owner wish to sell or spark his stock price. People will be aware when Buffett buys a company and will wish to buy a stake too. This may spark the price and the owner can sell it then.

Just feel that it is an irony that with his huge reputation, he can still pick cheap companies.

Friday, October 2, 2009

Accepting Sihuan Pharma (BL5) Offer

Yesterday on 1st October 2009, the Sihuan Pharma Offer has became unconditional with more than 90% of votes. Since a offer can only be invalid if 10% of people vote against it or the conditions are not met, it meant basically the shareholders have all agreed to it. Therefore, I decide to fill up the form and accept the offer. Not sure when the payment will be received. I shall just wait for it then.

Thursday, October 1, 2009

Lessons from Previous Investment

My initial 2 investment are still in 'buy-and-pray' mode. I did not know about 'buy-and-pray' till I read around recently. Nevertheless, the earlier you learn your mistake, the cheaper the cost of the lessons. It is good to reflect lessons gained to previous making them again.

Lessons learned:



Try not to read analyst reports if you are easily influenced. Analyst reports are not totally bad. I like them because they organize news related to the companies. My biggest problem is most of the time, you will find reports with BUY rather than HOLD or SELL. It is very easy to be induced to buying every stock they mention and set your target price based on their report. I bought China Powerplus when reading a couple of those reports and other research. Nowaday, I only read reports if I am sure I will not buy the company and have no clue about the sector. Also, try to verify the content of the report too or you just live to regret when it is too late.

My stock will not drop anymore if it hits the 52 weeks low. Again, I believe I bought China Powerplus close to its 52 weeks low. I just ignore 52 weeks high, low nowaday.

Company is in Forbes Asia's 200 Best Under A Billion. Cacola was in the Forbes list at 2008 (check reference for link). However, I did buy Cacola for its rich cash position too but the Forbes list made my buying decision easier. There are a couple of companies too this year, like Ezra and others. Do your research and not just because they are in the list.

No Exit Strategy. Still not sure about what metrics should be used, definitely not price but maybe revenue or something else. It will be better than my current 'buy-and-hold'(if prices rises) or 'buy-and-pray'(if prices drops).

Staying invested. During the lows of STI ETF, I have been avoiding the market because I never felt
a) stock market was not low enough,
b) the recovery was not going to be rapid so I should have some time.
c) I don't have time to research and feel comfortable about any company

Therefore, I missed the recovery, although it is not certain if it is sustainable. I should had listened to my friend sensible advice of buying in the STI ETF and using dollar cost averaging to reduce my market risk.

Overall, I still like investing individual company and gaining more knowledge. However, in the next couple articles, I will probably be discussing more on my personal finance and retirement since
a) personal finance and retirement is more predictable than stock market.
b) I haven't beat the STI ETF yet
c) you are never too young to think about retirement/finanical freedom
d) I probably need my money soon to repay my education loan so I cannot commit in long-term investment unless I find a constant cashflow or defer the payment

References:

  1. Asia's 200 Best Under A Billion: Cacola Furniture International - Forbes.com