Monday, October 26, 2015

"Unknown"

I remember my friend making this remark many years ago.

"..I believe that the best stocks are those that nobody has written about it..."

At that point, I was looking at Colex and it was trading between 0.150 to 0.155.

That night, I went home and checked if anyone had talk about Colex and I found none, at least nothing recent that point.

The next day, I told my friend that Colex seems to be such a stock. Thus, he got it the next day (I miss it cause I wanted to get it at a lower price..lower than my friend).

Source: Yahoo Finance

Now Colex is at 0.310 and I regretted it badly.

Thus, this emphasize on the point that "Unknown" stocks are not bad stocks. They are just not popular enough for people to talk about it. In value investing, it can also be deem as a ugly stock that nobody want to touch or noone cares. But eventually it will be pick up by value investors.

It should also be noted that we should not invest solely based on the stock is an "Unknown". We should still look at its business model and financials.

Colex is not the only unknown I have encountered. Many others have since also rise in their stock prices.

In short, what is not popular may not be a bad stock, what is popular may not be a good stock.

Sunday, October 25, 2015

Perception of Brands

After reading this article by Value Edge, it made me think about all the lower perceptions brands in Singapore.

While walking along Orchard Road, I came up with a list:

1. Bata (vs Charles & Keith, Pedro)
2. Bossini (vs Giodarno)
3. Giodarno (vs Top Shop)
4. OG (vs Isetan, Takashimaya)
5. City Chain (vs The Hour Glass)
6. Yoshinoya (vs Mcdonalds)
7. Burger King (vs Mcdonalds)

Other than looking at the brands, I believe we should also looked into the products. A mass-market product will definitely be better than a niche market product as their target market is bigger (Burger King vs City Chain) - Read Post.

Next, we should check if the brand has some sort of popularity in Singapore. A lower perceived brand may not mean it has lower sales (Giodarno and Bata). 

If the brand is popular, we should review if these brands have any sort of competitive edge to keep the crowd from coming back (Bata).

Cash sales is also better than instalment plans sales or receivable sales. For receivable sales, such as pre-booking of products, will given clients the opportunity to back out. For instalment plans sales, such as jewellery, clients may want to have some sort of discount or the company may need to provide more fees to the banks, therefore reducing its profit margin. 

Lastly, we should still drill into the financials. Not all lower perceived brands are value stocks.

On the other hand, Singapore is actually a small market and the popularity shown here may not be indicative of their popularity around the world. Most of these brands are also not created in Singapore, thus these brands focus may not be in Singapore (Unlike Charles and Keith). 

In short, other than just looking at lower perceived brands, we should also look at; 
  • Products;
  • Popularity;
  • Competitive Edge;
  • Cash Sales;
  • Financials;
before we can conclude they are value stocks.

At the end of the day, sudden popularity may not last. Creating a legacy is more important.

PS: Most of the brands stated above are not listed companies in SGX.

Saturday, October 24, 2015

Investing will lose money?

Last Wednesday, I overheard a conversation  that the superior was discussing the subordinate that investing will lose money.

When someone that was expected to be respected, pass some "stereotype" information to those that looks up to him, it really makes me boils being an investor and trying my best to spread what I knew.

In my opinion, this was a very wrong way of passing information and it is over-generalization of the stock market.

If you do not know how to invest in the stock market, please do not spread your "knowledge" like this.

Although there are many instances that people were "cheated" and loss a lot of money, but there are also many famous and successful investors around the world and I am not talking about Warren Buffet or George Soros or Charlie Munger.

I am talking about locals such as bloggers like Assi AK, 3Fs, Dividend Warrior and Ken'ichi. All successful in their own ways.

There are also courses by Bigfatpurse or The fifth person that teaches people how to invest in the right way.

In other instances, where people were cheated, were situations when their Greed took over and believe in the "High returns" scams. Those are not investment.

If you intend to do this, I rather you spend the money on 4D or Toto or even soccer betting. The probability of gaining back is higher. In addition, you will be doing "good" as well - Because Singapore Pools/Tote Board still makes regular donations to charities. (You get my point right?) 

Even with my little knowledge in investing, I will not promise you the high returns. (I normally tell people put only money you expect to lose and expect the most, a 10% return).

At the end of the day, please do not spread information like this if you do not know. I prefer/rather you say you do not know and get the person to find out information on their own.

Investing is a long journey. You will need to learn and find out on your own eventually. There are so many information on the net nowsadays. It's only a click away.



Sunday, October 18, 2015

The Value Portfolio - Recent Actions and Views - Post 3

Just Short Update on My Portfolio:

1) ISDN Holding Limited + Post 2
2) Sin Ghee Huat Corporation Limited
3) PNE Industries Limited
4) Chuan Hup Holding Limited
5) LHT Holdings Limited
6) TTJ Holdings Limited
7) Accordia Golf Trust
8) Singapore Telecommunications Limited
9) Sapphire Corporation Limited
10) Macquarie International Infrastructure Fund
11) Suntec Real Estate Inv Trust
12) Oversea-Chinese Banking Corporation
13) CH Offshore Ltd
14) Maxi-Cash Financial Services Corp Ltd
15) ST Engineering Ltd - Sorry, yet to write anything.
16) Bukit Sembawang Estates Ltd + Post 2

Sold SembCorp Industries Ltd - I decided to sell because I am unsure of the progress of the oil industry (although there are news that it may be stabling soon) and from its recent release of results, the impact is greater than expected. The rise in profit of the utilities and waste management business will not be able to cover any drop in profit sustained from the marine side of business in 2016. Eventually the dividend may drop and the share price may follow. Thus, selling this stock may seem to be a right choice now. A re-entry maybe on the cards in future if the stock price drops significantly. A point to note is that I managed to purchase the stock at $3.12 per share to average down.

Bought Bukit Sembawang Estates Ltd - Do read my posts on this stock to understand why I believe this is a good purchase.

Previous Post: The Value Portfolio - Recent Actions and Views - Post 2
Previous Post: The Value Portfolio - Recent Actions and Views

The Effects of Qualifying Certificates Regulation on Bukit Sembawang Estates Limited

Do you know of the Qualifying Certificates Rules set for Developers?

When I purchased Bukit Sembawang Estates Limited (Read my previous post), it didn't occur to me that this was a major thing. I heard about it but my overconfidence "stop" me from finding out more. Thus, this was my mistake.

Nevertheless, over my course of work, I had to research into this topic and realise THIS IS A BIG ISSUE FOR DEVELOPER COMPANIES LISTED ON SGX!

So what is a Qualifying Certificate and its conditions?

Any developers with "foreigner" shareholders are required to have a Qualifying Certificate for its developments. Developers solely with Singaporean Shareholders are exempted. Thus, all listed developers are considered to be developer with foreigners and their developments will require a Qualifying Certificate.

Developers whom purchase the land from Government (a.k.a Government Land Sales) are also exempted. This is most probably to protect developers whom intent to develop ECs - more time is given to them.

Directly as per the source by Rodyk & Davidson LLP:

"The salient conditions of a Qualifying Certificate are as follows:-

(1) The Housing Developer shall within five years from the date of the Qualifying Certificate (or five years from the date of the Collective Sale Order for a collective sale deal approved under the Land Titles (Strata) Act) complete construction of the whole housing development and obtain the Temporary Occupation Permit or Permits (TOP) for the whole housing development.

(2) The Housing Developer shall sell all dwelling units in the housing development within two years of issue of the TOP.

(3) The Housing Developer shall not, at any time, lease or let out any unsold dwelling units in the housing development.

(4) The Housing Developer shall not, without the prior written approval of the Controller, enter into any arrangement to sell, assign, transfer, sublease or dispose of the residential property or any part of it in its vacant or undeveloped state (other than a mortgage or a charge).

(5) The Housing Developer shall not permit or allow any sale, assignment, transfer or disposal of its shares without the prior written approval of the Controller up to and until the date of issue of the TOP for the whole housing development or the date the Housing Developer has sold all dwelling units in the housing development, whichever is the later."

However, a developer can request for an extension but at a huge cost:

- 8% on the purchase price of the unsold unit for the 1st year of extension;
- 16% on the purchase price of the unsold unit for the 2nd year of extension;
- 24% on the purchase price of the unsold unit for the 3rd year of extension.

Do note that the whole article is quite informative - do click on the link above to read about it. If the link is broken, you can get the softcopy from me.

My Opinion

During the time of establishing these regulations of Qualifying Certificates (believe to be 2011), housing prices were sky high.

This was also partly contributed by the developers trying to increase their land bank by putting up en-bloc sale for big older apartments/condos/landed housing around. As the bidding heats up, the cost price of the en-bloc sales increases as well. Thus, when the development start to sell, the company tend to market it as a luxury condo and  sell at a higher price - pushing up the prices around the development as well.

Therefore, I believe Qualify Certificate are used to curb developers demand for land bank and the purchase of en-bloc condos/apartments. With the demand going down, supply of en-bloc sales goes down as well.

In addition, with the implementation of MAS regulations - such as Loan to Value, ABSD and Total Debt Service Ratio - this has curb the demand from the ultimate buyer, the public. This has been very true as the Property Purchase Index has fallen 7 quarters continuously as of Jul 2015 (Read here).

But There Is Still Some Loop Holes...

As of every new regulation, there will be loopholes.

Listed companies can choose to delist (Such as Popular Holdings and SC Global) or sell its unsold units to a parent Singapore Company or a subsidiary (Hiap Hoe) - Read it here.

However, this still requires significant amount of cash and fees. But as of some instances, it maybe cheaper than the cost of extension.

Anyway, if the listed developer will to delist, this will may be a good news for the shareholders. Normally the expected delist share price will be at least 15% higher than the price at that point in time.

The articles here and here spoke of the possibilities that some mid-tier developer such as Ho Bee and Wheellock may be requesting for to delist soon (Note that the articles are during April 2014... it has been over 1 year already).

Bulk sales are also getting popular as big funds, such as Blackstone, see value opportunities in the Singapore Property Market (Read here). Blackstone has specifically bought from Bukit Sembawang Estates Limited - Thank you.

Here is also an article at the start of 2015 by Square Foot Research Pte Ltd on the number of unsold units by various developers.

My Additional Thoughts of Bukit Sembawang Estates Limited 

It was my mistake not to check more carefully on the company. But I stand on my views in the previous post and find it super amazing that a developer of such scale do not have any debt.

Even with the Qualifying Certificates issue, I still hold on to my "biased" view because:

1. Land Bank

(This fact has not been confirmed) Land Bank for Bukit Sembawang Estates Limited seems to be split into 2 sessions - Land from Seletar Hills Area/Sembawang Area and Residential Apartment Sites. This appears in the annual report as per pictures below.

Land from Seletar Hills Area/Sembawang Area

Residential Apartment Sites


For those that don't know, Bukit Sembawang Estates Limited was a rubber plantation company in Singapore and owned huge plots of land.

Company Structure

If you drive along Ang Mo Kio Ave 5, you will be able to catch the scene below - Yes, the place is still a rubber plantation.

Rubber Plantation Scene

Therefore, what I am trying to imply is that, the land from Seletar Hills Area and Sembawang Area seems to be Bukit Sembawang Estates Limited's own land bank from its previous rubber plantations, which was purchase very long time ago and may not be subjected to the Qualifying Certificate regulations (I emailed Bukit Sembawang Estate Limited already for confirmation). The price then will have been very cheap and the margins will be super high. In addition, part of these lands have yet to be developed and still remains as rubber plantations - More opportunities for developments in future!

On the other hand, those Residential Apartment Sites seem to be subject to Qualifying Certificates regulations.

2. Freehold Land

The company seems to hold only 999 year leasehold land or freehold land. This factor will be able to stabilized the price of any units being sold there as buyers will be willingly to pay more for freehold units or 999 year old units. Any discount will not be drastic and profit margins can be kept.

3. Innovative deals

Although the company does not seem like a delist candidate yet, but it has been selling its unsold units in bulk to Blackstone Fund recently at a decent price. Thus, this could be an innovative way the company intent to treats its unsold units. 

In addition, the company could still have the opportunities to sell the unsold units to a parent or subsidiary to "escape" the Qualifying Certificates regulations.

4. "Special" Shareholders

Look closely at the shareholders and you will find very "special" shareholders holding a significant stake in this company - a whooping deem-interest of about 25%.


Top 20 shareholders

Significant Holdings

With these information, I still feel the company is a value stock and do not regret holding them. However, with the recent surge in share prices, I may not add more holdings to my portfolio at this current point.

Thursday, October 15, 2015

What is your plan towards achieving your goal?

Someone reminded me today - That I am supposed to have a plan. A plan to work towards my goal.

He asked me, "What is my 5 year plan?". I was caught dumbfounded. I realised I had none at this point.

As per Benjamin Franklin, If you fail to plan, you are planning to fail!

I remember I used to have plans along with a certain goal:

After university and getting my first job, I had plans to pay off my university tuition fees (despite a significant low pay). - I cleared them in 1.5 years.

After that I had zero saving left. Then I plan to save up for an emergency fund (a low 5 figure sum) and achieved that in the next 2 years.

After that I plan to create a sideline (Read here). Although it was over, but it was a great experience and I was able to survive at least a 2 year run.

After that life started to get complicated and I lost track of my plans or even my goal.

So today, I will set plans to achieve my goals.

It will not be a 5 year plan - too many surprising factors to have to consider for a 5 year plans.

But I will start with planning for my End-2016 goals - An achievable 1.25 year plan.

What about you? What's your plan? What's your goal?

Monday, October 12, 2015

To Teach or Not To Teach?

Recently stocks have risen for almost 1 week and 1 day and STI has exceeded 3000 points. But with the economy still looking weak, any "special" event may disrupt this rising trend. Thus, I am staying on the sidelines for now.

So I have been thinking recently...should I try to teach others on my method of value investing and spread my understanding?

As you know, my blog started because I wanted to spread what I have learnt over the last 10 years.

The establishment of BigFatPurse, The Fifth Person and Value Investing College has also inspired me to try to teach and spread about my way value investing.

Obviously, I may not be as good as them.

But I hope I can still contribute - such as;

1. My understanding of Value Investing.
2. My way of Value Investing
3. The Value Stock Scorecard Explanation
4. Other Qualitative Views

However, I will still be looking for profit - But it will not be a lot.

Thus, after hearing what I say, do you have any comment? If you are interested, do comment. If you have thoughts about the price, do comment too. If you have somehow more that you may like to know and wish to learn, do comment as well.

Saturday, October 10, 2015

The Holy Grail to Unlocking Value in Singapore Stocks

Note 1: This does not only applies for Value Stocks, but also for every other stock in the SGX.
Note 2: Although this is written from a value investor perspective but it is still applicable even if you are a trader.

As a value investor, capital appreciation is always on my mind - What is the "Holy Grail" that will cause a stock price to rise?  When will a stock unlocks its value, especially in the Singapore Stock Market?

Some people may disagree with me, but I think value investing is still not popular in Singapore. 

Unlike the US Stock Market, people do not recognize these value stock as quickly. In addition, US Stock are more popular/well-known as they are advertised/marketed/broadcast more often.

Just imagine - Singapore only has Channel News Asia. 

USA has BBC, CNN, CNBC, ABC, Fox and CBS (Noted that some of them may not be a US channel but I just want to emphasize that how much a US stock will be broadcast to the public).

I cannot imagine them doing a coverage on for example, Chuan Hup Holdings Ltd.

You get my point?


Thus, what can be the "Holy Grail" of the stocks in Singapore?

Here are some of factors that I think can be considered to be the "Holy Grail" (Ranked according to Effectiveness in my Opinion):

6. Share Buyback - "In the olden days", when a company suddenly declared Share BuyBack Mandate, its share will rise. But due to the Muddy Water and Iceberg reports on Noble and Olam, Share Buyback nowadays does not have much effect on stock price. It seems to be a mechanism to hold the stock price stable instead. Read this - S$43 million in Share Buybacks in First Half of July (15 July 2015)

5. Change In Business Model - A construction firm that suddenly decide to enter into property development in Singapore, may result in a rise in share price. However the public will only take action if they deem the change in Business Model as positive. I am still waiting for Sapphire Corporation price to react...zzZZZ...

4. Dividends - A price may rise if a company that never declare dividend before suddenly declare dividend. It can also be a company declaring very high dividend suddenly. However if this high dividend is deem as special, the price reaction may not be huge. Read TTJ,

3. Turnaround Year - If a company has been making losses for a number of years, then when it turn profitable for that year. The price will rise. However if the profit is not due to its business, such as an increase in fair value, the price may reduce subsequently. As per BigFatPurse's post on Fu Yu, "Fu Yu is a clear case of number 1. The earnings finally turned around and improved after 7 years of consecutive losses in their precision tooling and plastic moulding businesses."

2. Delist - If a stock intend to delist, it MUST offer a higher price than what is on the market right? However that may not be the case as to the delisting of MIIF. Normally, companies intending to delist will offer a higher price - Like Eastern Holding.

1. Sudden Investor Interest/New Investor - When a stock suddenly caught the eye of a BB (aka Big Boys) and BB starts to buy the stock, it will push the price up. It will also push the price furthermore when they want to accumulate. Read CH Offshore or Hock Lian Seng.

Note CH Offshore is more of an existing shareholder trying to accumulate more via an offer and Hock Lian Seng is a new investor buying off market purchases. I will prefer the latter as there is no "cap" on how high the price can go and traders will follow and push it even higher. 

Anyway after the price react to the news, it may not stay there for a long time.

As an investor/shareholder of the company, we will need know if we need to take action to sell! - That will be another article for another time.

If you can think of another event that may cause the price to rise, please share with me!

PS: All information above are just my own opinions.  

Wednesday, October 7, 2015

The "Trans-Pacific Partnership" Effect

This will be just a very short write up.

Today (7 Oct) is a green green day as STI recovered more than 2% (In fact it has been rising slowly on 5 Oct and 6 Oct).

I deem this to be the Trans-Pacific Partnership (TPP) effect.

It is good to read more about TPP:

Post 1

Post 2

Post 3

In my opinion, this maybe a short term recovery - it is like a much needed life extension injection to a very ill patient. Nevertheless, I feel this "patient" still has a chance to make full recovery.

PS: I am still reading the 2 new books I bought recently - Show Me The Money Book 1 and 2 by Teh Hooi Ling. There are many new ideas as well as reminders. Will write a post on it after I finish reading.

Saturday, October 3, 2015

Bukit Sembawang Estates Limited - A Debt-Free Developer

I wanted to wait till later to write this post on Bukit Sembawang Estates Limited (BSE) - as it is only a recent addition to my portfolio.

However, after reading the post by Brian's on the developer's ratio and not including BSE in the list, I decided it is my role to update others on the financial health of BSE (Brian, no offence! Just kidding.)

Just a quick note before I start off, when I look at Blue chips as compared to Penny Stock/Small Caps, I do not use the Value Stock Scorecard to do any scoring. After all, to me, I review a blue chip via its profitability, branding, future projects and business models.

Profile in Short

Founded in 1911 and based in Singapore, BSE is a residential property developer. (Yup, that's it. So easy!).

Why So Good?

No Debt - As many of you know, I hate debt laden companies. When I learnt that BSE is debt-free. I am SHOCKED! From my little understanding of developers, I am quite sure many of them hold significant long term debt and are depending a lot on the Sales and margin to pay off the debt. In addition, the rising interest rate environment will significantly reduce the net income by increasing companies' finance cost.

Future Projects - if you look at the annual report or the website of BSE, you will realise there are already many projects in line to be developed.

In Singapore Only - In addition to the point above, if you look carefully on the annual report, you will realise all of BSE developments are in Singapore. Looking at the current troubles in the iskandar region (oversupply) and China developments (empty condos), the respective developers may need to do write off or fire sale to clear these unsold units. This meant that BSE will not have this problem in the next 2 to 3 years. Furthermore, by having projects in Singapore, BSE will not have the risk of foreign exchange losses. Demand and supply in Singapore will also be more predictable. Thus they will be able to time their launch/development/sales better.

Price below Net Current Asset Value - "WHAT!" - a react of astonishment may be across your face now. The price of BSE is about $4.5 to $4.7. But the net current asset value is $5.033. About 10% margin of safety.

Why So Bad?

Branding - Despite being established since 1911, BSE branding still lack behind Capitaland or Far East Group. Investors seem to be more willingly to pump in $ in these groups.

Slowdown In Singapore Property - With the implementation of TDSR (and many other policies) by MAS, Singapore PPI has been on the downtrend for numerous months and quarters. Will future sales be able to cover the costs of development?

No REITs - Since BSE is mainly in residential, it will not be involved in any REITs.

In Short

I believe Singapore Property will recover after 1 or 2 more years. Thus, if BSE has the ability to time the property market to sell during an uptrend, it can significant to their bottom line. In addition, with a strong  balance sheet, BSE can withstand any downturn in the Stock Market.

Thursday, October 1, 2015

My Value Investing Methods

This is a reflection post after reading about their value investing strategy by MyBigFatPurse. This is also for people who want to understand more about my investing methods.

I felt that it is a very very good and long write up on their way of value investing.

Despite always saying that I am a value investor, it is sad to say I am not like them (Not as hardcore as them). I am much more like a hybrid.  

Their Strategy have a very tough stand on Book Value - it must be at a significant discount to the Stock Price - which in my view should really be the main point of value investing.

For me, I cannot stand not having dividend - if you can stand it, you will make a better value investor than I do. In my view, there is always a chance that a stock could become a value trap and the opportunity cost will be huge (spending cash and time holding this value trap instead of a value stock).

Furthermore, my value scorecard requires PE, ROE and ROA, which use earnings to calculate the ratio. In addition, sometimes its too influential on the scorecard too. Nevertheless, in value investing, there is almost no use of earnings. Only Book Value calls the shots.

Finally, some value investors may invest in stocks that with negative earnings and it may continue to go downhill. I have yet to learn to withstand these shocks and I will still panic.

In other words, I feel I still have a long way to go if I intend to be a true blue value investor.

BUT this does not mean I never had any winning stocks (Sold after at least 30% gain and not including any blue chips) before, they are;

ECS (Delist), CDW Holding and E2-Capital. 

Thus, I believe that everyone can have their own ways of investing and still gain from the market. You just need to find your own way and be consistent.