30 May 2014

SingPost joins hand with Alibaba and the 40 thieves

In an older post (Stock: SingPost), I noted the progression of SingPost from postal services to logistics. SingPost's traditional postal business is surely on a downhill slide and will remain so.

Well, have yet to see the 40 thieves, and hopefully wouldn't see any. But, latest news abound on the announcement of the partnership with Alibaba with the later taking up a 10%+ stake in SingPost. Interestingly, this is happening even as Alibaba itself is preparing for its IPO. With SingPost increasingly looking like an e-commerce company, this partnership offers interesting prospects for growth for SingPost. It looks like SingPost as a dividend yielding stock will remain sustainable.


Softbank (Japan) owns a slice of Alibaba (China) while the later owns a slice of SingPost (Singapore). Interesting. Perhaps time to take a closer look at Softbank as well?

Stock: SingPost
SingPost Investor Centre

27 May 2014

Journey through the ages - is 20% good?

It has been a fascinating, and at times exciting, journey. Initially, I had only invested in insurance-based schemes. Be it whole-life endowment plans or investment-linked policies (ILP). Work, work, work was otherwise all I focused on. Making ends meet from the salary I earned and saving money into the bank were pretty much the game plan otherwise. Marriage, housing, post-graduate studies and kids pretty much took up everything else I had.

Had it not been for the early years buying into the various ILPs, I wouldn't have much of an investment to speak of. Interestingly, I had the fortune of having taken up ILPs in the era post Asian Financial Crisis and it had generated quite a tidy sum. It came in handy when I needed the money to complement my CPF to buy my first home.

Then I discovered Fundsupermart. A small sum in its cash fund gave me confidence to take the next step - i.e. to invest into various unit trusts funds. As I read more and gained a better understanding of the concept of diversification, stocks and bonds, the unit trust funds I invested into became more systematically managed.
Then I discovered the tax benefits of the Supplementary Retirement Scheme (SRS). Voila! Max'ed out my SRS, minimise the tax I have to pay, and invest the SRS into unit trust funds at Fundsupermart. It's all too easy!

At the depth of the Global Financial meltdown, I saw my unit trust funds sink miserably. And I mean miserably. But I stayed faithful to the diversification plan with the confidence that the market will generally recover in the long run.  It has not disappointed.

In 2009, I assessed that there were many opportunities to pick up stocks. I must say I had a confirmation bias when I saw a video interview with Warren Buffet where he suggested that he was on the look out for things to buy. So started my stock picking journey.


After 5 years investing into the stock market, I did an analysis recently to see how I've faired. Turned out, not bad. Not bad at all. Using Excel's XIRR function, the internal rate of return showed 20.6% over the 5 year period investing in stocks. The stock portfolio, both from valuation uptick and from cash additions to the investment fund, has grown in leaps and bounds, from zero to hundreds of thousands in that 5 years.

Significantly, as I analysed the individual stock's performance, it is also clear that the dividends have been significant. Soon, the dividends alone would generate $1,000 per month of income. Of late, as companies try to preserve their capital, several have started offering Scrip Dividends (also known as Dividend Reinvestment) options which I have opted to subscribe to, and thereby increasing the number of shares that I owned of those companies.  I'm doing so with the assessment that these stocks are not going the way of the dodo bird over the next 5-10 years.

In many cases, the dividend yields have gone way beyond 4% compared to the original cost of the shares as many of these companies have consistently raised their dividends year on year. It sure feels *shiok* to see a stock that cost $1,000 generating an annual dividend of $100 per year and growing. Must say though, that there aren't as many SGX companies that behave like that compared to US stocks on the NYSE. The later have many more companies with a long history and consistent track records. Unfortunately, that also comes along with the 30% withholding tax.

Happy investing!

Where Lies the Portal to Wealth?
Pattern of Behaviour - A review of 2013

Travelers to the US on visa waiver programme - Electronic System for Travel Authorisation (ESTA)

Travelers from countries that are on the US visa waiver programme need to submit applications via ESTA for prior approval. An online search will throw up many websites apparently offering this service for a tidy fee. At worst, some are con jobs. At best some provide an actual flow-through application service with little value add.

Seems the official US government website is at: https://esta.cbp.dhs.gov/esta/.  One can certainly save a couple of dollars by applying online directly instead.  Self help?

Crowd Funding and Peer to Peer Loans

Crowd Funding

Crowd sourcing has developed into crowd funding in recent times. These have provided avenues for new business opportunities and innovations to thrive.


Peer to Peer Loans

Another interesting trend has been the appearance of Peer-to-Peer Loan services, allowing the retail investors to became a banker, providing micro-financing. There are several such services in the US and UK. Such loans are not without risk for the lender, and some bad loans are only to be expected.


When will we see such innovations become possible in Singapore?

19 May 2014

VICOM - what's there not to like about this company?

Car ownership such a problem in land scarce Singapore.  Especially in recent years with the high price of the infamous Certificate of Entertainment (COE).  With the stroke of a pen (or a paper) and one foots out tens of thousands of dollars before even talking about the cost of the car itself.  And thereafter, there's the cost of road tax, insurance, fuel and maintenance.  Not to forget, the car is a rapidly depreciating asset of 10 years. It's a real money sucker.  So, don't invest in the car.  Invest in something that benefits from car ownership. Who else then but VICOM?

Vicom Inspection Centre (Kaki Bukit)

What's there not to like about this company? Every car needs to have its periodic car inspection. It's regulated. That's a guaranteed business.

Are people going to move away from car ownership?  Naw.  Not even if the MRT lines work well and taxi drivers decide to drive under all weather, all hours.

Is VICOM well run?  A visit to VICOM would show just how few workers they need to transact each car through its inspection process.  The process is well oiled and highly automated. Keeps churning away.

DPS (SGD) 0.1180 0.1290 0.1440 0.1500 0.1610
EPS (SGD) 0.2333 0.2559 0.2865 0.2989 0.3215
[Source: POEMS]

Given the above, we can see that it has very good margins, and absolutely no debts!  

Its dividend payout has been great - currently at 2.72% and deceivingly lower, but would usually be much higher by the end of each FY.  Its dividends has been consistently climbing up from 0.118 (FY09) to 0.161 (FY13).  DPS has also maintained below EPS throughout the past 5 years. Hard to find such companies on the SGX.  Tell me if you know of others with such a characteristic.  I consider this to be one of the high yield and dividend paying stock.  

There's probably not much room for significant growth though, so don't expect heart-stopping growth. But it should remain steady.  Does anybody actually check how much they pay for each car inspection? I'm guessing probably not. Just pay! And in fact, with more than just a sense of gratitude to get a pass so that you can continue to use the car without needing further work. I could hear the expletives from the truck driver in the next lane whose car didn't.

P/E ratio perhaps a bit high right now.  But what's there not to like about this stock?  Really.

[Disclaimer: This is a not a call to buy or sell.  Merely a record of why I invested in this stock.]

Breadtalk - a case of over-expanded yeast?

Breadtalk doesn't really need much of an introduction.  BreadTalk, Toastbox, Din Tai Fung are places I patronise and these businesses are buzzing. The rest like RamenPlay, The Icing Room and such don't excite me as much. Food Republic is reasonably well patronised, dependent on locations, but operates in a very commoditised space.

The figures below show just how much it has moved over the past year alone.  It was hence time to re-examine the company

Its debt level is horrendous at almost 180%.  The company is heavily leveraged as it seeks to expand.

Its gross margin is high at 53.01% and is reflective of its branding.  However, its net profit margin is very low at 3.01%.  Its businesses require significant material and manpower.  The later is an especially difficult problem in manpower scarce Singapore.  Given the low margin, scale probably matters to reap maximum economy of scale, and hence its drive to expand rapidly.

My sense is that it is likely over-priced right now at a P/E ratio of 29 and P/B of 4.21.  Dividend yield isn't great right now either at 1.28%.

A company with a brand name that I can recognise, but for now possibly over-priced.  Time to exercise caution.

Breadtalk Group Gunning for Growth [Singapore Stock Market News]
Breadtalk AGM 2014 by Rusmin Ang [Next Insight]

[Disclaimer. This is not a call to buy or sell. It is only a record for myself on why I bought this company and am maintaining a cautious outlook by selling down to a minimal holding at this time.]

13 May 2014

Positive cash flow without putting any cash at risk! Too good to be true?

Saw an online video clip on YouTube recently by this lady who was selling her concept of developing wealth. She was schooled in the art of "Rich Dad, Poor Dad".  I've no grouse with the general idea of "positive cash flow" though I guess some of the concepts may run contrary to accounting practices in the way assets and liabilities are normally tagged.

She gave an example of a Singapore property and asked the audience if they would invest in it.  Essentially it had a negative cash flow due to the high loan payments compared to the rental income.  The obvious answer was no.  But she postulated, what if she had a way to turn this into positive cash flow?  I was intrigued to say the least.

The concept?

Idea #1.  Secure an interest-only loan payment.  The argument being that since this is for the purpose of generating income from rental and not for capital appreciation, taking this approach helps to reduce the loan payment and hence shifts the cash flow equation to the positive.  Not bad.

Idea #2.  Obtain a capital refinancing.  She made it clear to differentiate between refinancing a loan (which I understood) versus capital refinancing (which I had no clue about).  It sort of work like this.  Suppose you could obtain a loan of 80% against a $1,000,000 property - i.e. $800,000.  So you had to put down $200,000 as the upfront down-payment. 5 years later, the value of the property has appreciated to $1,200,000.  Recall Idea #1?  So, the loan principal has remained at $1,000,000.  But since the value of the property has now appreciated to $1,200,000, the capital refinancing would offer a revised loan at 80% giving $1,000,000.  You would therefore have extracted the $200,000 you had put down earlier!  Of course, the loan repayment would have increased.  But she argued that the rental income would likely have similarly increased as well.  Amazing isn't it?  Over 5 years, you have effectively put no cash into the investment and would still generate a positive cash flow from the rental income!  I also want!

What's the catch?

Catch #1.  Notice how the assumption in Idea #2 contradicted Idea #1.  She said we should not invest for capital appreciation but to achieve positive cash flow.  But what was the assumption in Idea #2?  Capital appreciation!

Catch #2.  What happens if the value of the property drop?  The bank is going to come calling for a cash top up!  Do you have the cash reserves to respond when that happens?  Are you still cash flow positive? Companies can die when they don't manage their cash flow properly from month to month.  For the individual, it could mean bankruptcy and a miserable rest-of-the-life.

Catch #3.  Does the economy remain healthy always and you can be assured of the rental income?  More often than not, when things are getting bad, it just gets worse. The very scenario in Catch #2 is also likely to be accompanied by a poor economy. What happens?  Your rental would also go up in smoke.  Now the ability to service the loan has just been compounded by an amount equal to the lost rental income!  Double whammy!

Speaking of which, got a call from a friend (person A) recently, asking for the number of another guy I know (person B).  A was trying to get in touch with B over his investment.  Seems A had invested in some gold-related scheme with B.  I happened to know B had been scammed by his business partner (absconded!) and was desperately trying to get his life back.  B was now driving a taxi to make ends meet.  I guess friend A has to kiss his investment goodbye.  Sad.

12 May 2014

Saving more for tomorrow

This video from TED talk provides an interesting elaboration of behavioural finance:
Saving for Tomorrow (TED Talks).

Instant Gratification:
Take the banana or the chocolate?

Opt out or opt in? Which gives you a better outcome? Depends on what you wanted in the first place! Both give you the sense that you have a choice. But with very different outcomes.

Loss aversion:
Give a monkey an apple and he's happy. Give a monkey two apples and then you take one away, he's pretty upset.

Watch the video to understand the above examples.

How a penny made me feel like a millionaire

What's a penny worth?

Feels like a millionaire in some circumstances. It's such a contrast when our upbringings gave us such contrasting experiences.

What does it take to make us feel the sense of "satisfaction"? Between the $5 cup of gourmet coffee and the $1 cuppa at the friendly neighbourhood coffeeshop, is there sufficient marginal utility to want pay that $4 difference? Not to mention the difference of 300+ calories (kcal) involved!

Sometimes, there is.  To each his own. Enjoy your cuppa! *slurp*