Thursday, August 23, 2012

Asia Enterprises Holdings

This is a post to establish the value of Asia Enterprises Holdings.



































Year Dividend Growth(%)
2012 0.011 -25%
2011 0.014 17%
2010 0.012 9%
2009 0.011 -61%
2008 0.029 28%
2007 0.022 26%
2006 0.018

I have given above this the dividend payment of Asia Enterprises over the last six odd years.

They have developed from a small distributor to become a major Singapore-based distributor supplying a wide range of steel products and providing value-added steel processing services to industrial end-users in Singapore and the Asia-Pacific region.

Looking at the dividend distribution pattern as well as the book value growth, they are worth at current dates between 16 to 17 cents a share.

The share price is currently around 23 cents a share.

That is roughly around 40% over-priced.

I would recommend that you keep this on your watch-list and include it into your portfolio, if and when it drops to below 15 cents a share for a long-term position.

If you are looking for a trading idea, it will drop to around 20 cents a share in November or thereabouts.

Look to enter  around 20 cents and exit around 27 to 29 cents a share, which it will normally hit before it goes ex-dividend in May.

Here is a link to the company

http://asiaenterprises.listedcompany.com/







































Tuesday, August 21, 2012

F J Benjamin - Follow Up Post on Estimate

I had written a post on F J Benjamin earlier in May

A link to F J Benjamin's web-site is below


Prediction
 
I had estimated that FJB will earn around 2.61 cents per share for the year FY 2011 /2012.
 
Actual
 
FJB earned 2.44 cents per share for the year i.e. the prediction was 93% accurate.
 
Prediction

Based on past track record, they will announce a dividend of 2 cents per share, payable in November.
 
Actual
 
FJB announced a dividend of 1 cents per share, the prediction was only 50% accurate
 
Their closing price yesterday was around 35 cents per share.

If you had bought at 32 cents, you can exit today at 34.5 cents per share. The return is around 7.8% for your capital. With friction of trading costs, it should be around 7%, 0.4% either way.

Future till November 2012

Since the dividend is lower at 1 cents, the yield is only 2.89%, chances are the share price will drift lower.

From the report,
"While the global economic outlook and operating environment remains challenging, the
Group will continue to scale up businesses in the region by pursuing organic growth and
investing in new brands. The Group plans to open a net total of 7 new stores in Singapore
and Malaysia, and 8 new stores in Indonesia in the next twelve months, bringing its retail
footprint to 206 stores.
The Group continues to be prudent in managing business risks and costs and will invest in
technologies to further enhance productivity."

In a very extreme scenario, the share price can drift to as low as 23 cents.

In a pessimistic scenario, it can go to 30 cents, especially in December 2012, after it goes ex-dividend.
 
Full Disclosure : I am long F J Benjamin and will look to add to my position below 30 cents.

Wing Tai - Estimate of Earnings

This is a post aimed at estimating the earnings of Wing Tai in the financial year 2011 to 2012.

A link to Wing Tai's web-site is below

http://www.wingtaiasia.com.sg/index2.html

By my estimates, Wing Tai will earn around 18.33 cents per share for the year FY 2011 to 2012.

This is based on the current earnings for the first three quarters of their year as well as an assessment of what could be the earnings for their last quarter.

Based on past track record, they will announce a dividend of 6 cents per share, payable in November.

Their closing price yesterday was around 1.42 cents per share.

At that price, the expected yield is 4.22%.

In the last two years the price has hit a bottom of around 92 cents.

The peak has been 183 cents which was just before it went ex-dividend in November 2010.

The NAV estimate is 2.59 SGD per share when it announces its results.

At the very least, it will likely spike to around 1.55 per share after results, (60% discount to NAV).

Optimistically, it may hit 1.81 per share (70% discount to NAV).

In case the dividend is higher, this will help in achieving these share prices.

However, if the dividend is lower, the converse is true and the share price will react.

Full Disclosure : I am long Wing Tai

Wednesday, August 15, 2012

Genting


When analyzing Genting, P/E ratios, book values, and net income growth don't matter a bit when you're trying to value it.

Genting has built a massive, expensive casino, which is essentially a money tree.

The value of the the tree is how fast the money falls.

Other things don't matter.

This is why we need to use EBITDA, or earnings before interest, taxes, depreciation, and amortization, as a proxy for how much money Genting is throwing off.

The second most important number is enterprise value, which, in this case, is the value of securities all owners in a casino hold.

Since debtholders are essentially owners, we have taken out interest costs above, and that's the portion of EBITDA paid to these owners.

Equity owners get to keep the rest

Add the market value of the stock to the book value of the debt, and I subtract cash, on the assumption that this could be used to pay off debt. This calculation results in the value of the entire company, or enterprise value.

When you compare enterprise value to EBITDA you get a ratio -- not dissimilar to the P/E ratio, but more relevant in the case of casino companies. 

This ratio is at the heart of valuing these companies.

Caesar’s Entertainment trades at a EV/EBITDA of 10.4, Melco Crown, Wynn Resorts, and Las Vegas Sands all traded with EB/EBITDA multiples of 10 to 11.

Genting is currently at 11, although projecting into the rest of 2012 it is at 12.

So, in that sense Genting is still slightly overvalued and has another 10% to fall.

Full Disclosure : I am neither long nor short Genting at this moment.

Sunday, August 12, 2012

Datapulse

You would recollect my previous post on Datapulse.
 
Here is a link to the company page.

http://www.datapulse.com.sg

Last year, they paid a dividend of 1.8 cents for the year.

Here is a look at the share price performance last year


The trading idea is this.

Datapulse is currently trading at 19 cents a share.

They are not likely to post a loss for the 2H of 2012 (From their 9 month report).

I expect Datapulse to declare a dividend of 1.8 cents for the year.

Once the results is announced, or leading up to the announcement, the share price will appreciate to around 22.5 cents.

You can buy in at 19 cents and get out around 22.5 cents to generate a return of 18% for a three month holding period.

Now, what is the likely risk, the risk is that they may not declare a dividend, in which case the price will collapse to around 10-12 cents.

Since it is an illiquid share, there is likely to be trading costs of around 5-6%, so, all in you can still gain around 10-12%.

Full Disclosure : I am neither long nor short Datapulse

Monday, August 6, 2012

Isetan

This is a post to highlight the amazing jump in price of Isetan over the last one month.

Here is a look below at the price of Isetan in the last one month.


The stock is on a tear, gaining, a whopping 46% in the last one month.

Here is a look below at the price of Isetan last year.




In the corresponding period last year, it lost 7%.

This is a company with low levels of trading.

The company got a SGX query and its reply is below

Question 1:  Are you aware of any information not previously announced concerning you (the issuer), your
subsidiaries or associated companies which, if known, might explain the trading?
- If yes, the information must be announced immediately.
The Company’s Response:
The Company is not aware of any information not previously announced concerning the Company, its
subsidiaries or associated companies which may explain for the trading activity.
However, the Company is in negotiations for the leasing of space with a view to the opening of a new store.
There is no assurance that the negotiations will be successfully concluded.
Question 2: Are you aware of any other possible explanation for the trading?
The Company’s Response:
The Company is not aware of any other possible explanation.
Question 3: Can you confirm your compliance with the listing rules and, in particular, listing rule 703?
The Company’s Response:
The Company confirms that it is in compliance with the listing rules in the Listing Manual, in particular,
listing rule 703.

So, from the outside, it seems like that the company is looking at opening a new store and hence the share gained 46%.

I do not have any positions in Isetan.

I noticed the jump and thought it warranted a post

Here is a link to isetan.

https://www.isetan.com.sg/


Wednesday, August 1, 2012

Predicting the Prices in August 2013

This is a post aimed as an exercise at improving predicting skills.

I have put together a table of the predicted prices for some of the stocks which are among the top 20 in terms of value trading in Singapore as on date.

The prices are as of the moment of writing this post.

Stock Price
Aug 1 2012
Predicted Price Aug 1 2013
Singtel 3.52 3.09
GLP 2.33 2.14
Capitaland 3.03 2.97
Golden Agri 0.73 0.73
Keppel Corp 11.21 11.16
Genting 1.29 1.45
OCBC 9.58 9.79
DBS 14.78 15.16
UOB 19.86 20.33
Noble Group 1.075 1.54
Wilmar 3.26 4.71
F&N 8.18 6.46
SembMar 4.92 5.27
Olam 1.865 2.39

I will review this next year to see two things

a) Out of the 14 predictions, how many are correct ? (Within 2%)
b) In how many predictions was the direction right ?

If you have a strong point of view on why this prediction will not be correct, do let me know in the comments below


Tuesday, July 31, 2012

Venture Corporation

This is a post to highlight a typical pattern which Venture Corporation exhibits in the period August to Dec. If you buy into the idea, look for the suggested entry and exit points at the end.

This first picture is the share price of Venture Corporation in 2008.


The drop was a brutal 60% off value from August 1 till End Dec. Now, cast your eye below for a look at 2009.



In 2009, when every stock and its grandfather was soaring away, Venture Corporation managed to lose 2%.


In 2010, Venture managed an outstanding 4% increase in share price, as seen above.

In 2011, as seen above, the ides of August, claimed venture , showing a 21% drop.

Looking at even older years, there were drops in 2004 and 2005 as well.

2006 was the year this bucked the trend of a drop with a nice hefty 21% gain, a rarity for Venture in the last seven years.

The average gain (Loss in this case) is around 11%.

Venture is trading at 7.41 at the time of this post.

If you are an optimist, you can buy it now and hope the market treats 2012 like 2006 and sell Venture when it hits 8.94, actually, leave a bit on the table and sell at 8.88.

If you are terribly pessimistic and feel this is like 2008 all over again, then buy it when it reaches 3, actually, aim for 3.1-3.2. The predicted chart value is 3.

My guess for what it is worth is that it will trade down to around 6.6-6.81 by December.

I would want to buy Venture any time it trades below 6.81.

Now, that is a good attractive entry point for me.

In terms of exit point, look for an exit around 8.4 to 8.6 between April to June of next year.

In terms of ROC, that is around 23% ROC in a time frame of between 9 to 11 months.

Full Disclosure : I am neither long nor short Venture at this time


Monday, July 30, 2012

SATS

This post is to review the trading idea on SATS posted on May 14.


The price at the time of writing in May 14 was 2.61.

That was the sell price, so let us say you bought it then at 2.61.

The reason for the trading idea was the belief that there will be a special dividend.

That turned out to be true and the total dividend declared was 21 cents against the 12 cents the previous year.

So, we can award me 1 point for guessing that there was a special dividend.

The estimated price it would reach was 2.96.

In actually, SATS hit 2.88 in between, not 2.96 though.

That is a 2.8% difference. So, only 0.9 points for that.

The trading idea was to buy at 2.61 and sell at 2.87

It did hit 2.88, so you would have been able to exit at 2.87.

All in all, if you had followed the idea, you would have made 10%.


Sunday, July 29, 2012

K-Green Trust


This is a link to the trust


http://www.kgreentrust.com/



From the web-site, K-GREEN TRUST is a business trust with an investment focus on "green" infrastructure assets in Singapore, as well as Asia, Europe and the Middle East. 


The Trust aims to provide long-term, regular and predictable distributions to its Unitholders.


It is a bit early to look at the long term picture.

However, i have made an attempt to see its value.

The annual dividend is 7.44 to 7.82 cents over a year over the last two years.

The trust is trading at 97.5 cents.

Largely, some of this is due to the pay out from the NAV.

I have projected that the NAV will decline by anywhere between 1.9% to 3.6% over the next twenty years.

The DPU has been projected to grow by 5% per year.

These two combine to give a value of 1.49 for the trust.

At 80 cents, it is a screaming buy, at $1, it is so-so buy. (Because i have bought around $1).

Full disclosure: I am long this stock

The Perfect Stock Search


Every investor would love to stumble upon the perfect stock. But will you ever really find a stock that provides everything you could possibly want?
One thing's for sure: You'll never discover truly great investments unless you actively look for them. Let's discuss the ideal qualities of a perfect stock,
The quest for perfection
Stocks that look great based on one factor may prove horrible elsewhere, making due diligence a crucial part of your investing research. The best stocks excel in many different areas, including these important factors:
· Growth. Expanding businesses show healthy revenue growth. While past growth is no guarantee that revenue will keep rising, it's certainly a better sign than a stagnant top line.
· Margins. Higher sales mean nothing if a company can't produce profits from them. Strong margins ensure that company can turn revenue into profit.
· Balance sheet. At debt-laden companies, banks and bondholders compete with shareholders for management's attention. Companies with strong balance sheets don't have to worry about the distraction of debt.
·  Money-making opportunities. Return on equity helps measure how well a company is finding opportunities to turn its resources into profitable business endeavors.
· Valuation. You can't afford to pay too much for even the best companies. By using normalized figures, you can see how a stock's simple earnings multiple fits into a longer-term context.
· Dividends. For tangible proof of profits, a check to shareholders every three months can't be beat. Companies with solid dividends and strong commitments to increasing payouts treat shareholders well.
Factor
What We Want to See
Your Stock
Growth
5-Year Annual Revenue Growth > 15%


1-Year Revenue Growth > 12%

Margins
Gross Margin > 35%


Net Margin > 15%

Balance Sheet
Debt to Equity < 50%


Current Ratio > 1.3

Opportunities
Return on Equity > 15%

Valuation
Normalized P/E < 20

Dividends
Current Yield > 2%


5-Year Dividend Growth > 10%





Total Score



If your stock gets a ten on ten, you are almost guaranteed to have the perfect stock.

This link below gives you a link to Motley fool, from which this article is copied.

http://www.fool.com/investing/high-growth/2012/07/27/has-pricelinecom-become-the-perfect-stock.aspx?source=ihasithla0000001


Thursday, July 26, 2012

Dividend Stocks and REITS are not a substitute for Bonds

With interest rates being so low,  investors are not getting the interest income they need from their fixed income portfolio.


As a result, the advice of experts is to turn to riskier REITS and other  assets, such as high-dividend stocks.



While these investments may look attractive, historically they haven't been a good solution.

The main role of fixed-income assets in a portfolio should be to reduce portfolio risk to the level appropriate for the investor's unique circumstances. 

Jared Kizer has done a study on this.

His findings confirm that  these strategies tend to dramatically under perform high-quality fixed income assets when market risks show up. 

Simply put, there's considerable risk involved when replacing high-quality bonds with higher-yielding strategies

Stretching for yield -- whether in the form of dividends from common stocks or  interest on junk bonds or REITS-- is a bad idea. 

The historical evidence demonstrates that these risks haven't been well-rewarded, and their returns haven't mixed well with stocks in a portfolio

Monday, July 23, 2012

Ascendas REIT

There is a lot of interest in REITs among investors.

This is also fanned by articles in the newspaper highlighting that REITs have delivered a higher return for investors over the last decade or so.

As an intelligent investor, you would imagine by now where I am heading.

By and large, any trend which is worth highlighting in a newspaper is almost sure to be a dying or dead trend.

I have nothing against REITs per se, just saying.

As an academic exercise, i pulled out the numbers for Ascendas REIT over the last five years and examined it carefully for its value.

As on date of writing, it is being sold at SGD 2.19 per unit.

The intrinsic value for Ascendas REIT is between $1.46 to $1.93.

As you can see, the current price is higher than intrinsic value. So, if you were buying now for the yield of 6% or so, that it seems to offer, my word of caution is that you are overpaying and be careful.

Wednesday, July 4, 2012

Rotary Engineering - Estimating Value

There are two potential approaches to estimating the value of Rotary Engineering.

One is to take a look at its potential income over the next 20 years and the other is to look at its income to me as a shareholder over the next twenty years.


Parameter 2011 2010 2009 2008 2007
Net Income 42.6 81.9 65.3 69.8 71.5
Depreciation 14.5 12.8 10.7 6.9 5.6
Changes in Working Capital -108.4 -84.1 -95.7 -6.1 15.2
Capital Expenditures -16.1 -15.7 -25.5 -25.4 -11.1
FCF -67.4 -5.1 -45.2 45.2 81.2
Total Current Liabilities 374.46 427.81 232.75 237.81 237.06
Total Equity 286.99 283.12 246.98 204.48 168.21
Total Liabilities 413.35 456.41 250.47 251.66 245.9
Common Shares Outstanding 567.85 567.85 567.84 567.84 567.84
Capital Employed 325.88 311.72 264.7 218.33 177.05


This is Rotary Engineering, reduced to numbers and cents, above.

An estimate of its value derived from owner earnings, indicates that one share is worth 58 cents.

The current share price is 53 cents.

The other approach is its dividend payout.


Year Dividend Growth(%)
2012 0.03 0%
2011 0.03 -40%
2010 0.05 25%
2009 0.04 100%
2008 0.02 -67%
2007 0.06


This provides a value to the share of 48.5 cents per share.

One last look, which is a very optimistic view of it is to project a longer term ROE.

This provides a value of 99 cents per share as on date.

So, there you have it, Rotary is worth anywhere between 48 cents to 99 cents per share.

I would be a definite buyer at current prices of 53 cents per share.

Monday, July 2, 2012

Wilmar

This post is on Wilmar.

I have just added on to my position on Wilmar.

The entry price after commissions is 3.69.

The expectation is that this will deliver a 30% return by the same time next year.

I will review this after six months to see whether this was a right move.

Tuesday, June 26, 2012

Tele Choice

This is a post on Telechoice.

You would recollect that I posted about this stock in March 2012.

http://www.blogger.com/blogger.g?blogID=565556176830777518#editor/target=post;postID=2425234921650824779

Here is a link back to that post.

In terms of year to date performance from that date, the stock has lost 8.5%.

Below is the share performance chart


I had recommended that the approach to do would be to wait for the stock to trough to 18 cents and pick it up at that level, with a get out target of 25 cents.

So far, the price is performing as expected, so, in a couple of months, it should be ripe for picking i.e. in either July or August.

I will do a follow up post on this after I enter and exit the stock as planned.



Monday, June 25, 2012

Keppel Corporation


This is Keppel Corp in terms of its stock performance from 24th June to 19th December 2011. Essentially a drop of 17%.

In contrast in 2010, the share increased by 21%.


In 2009, it was up 19%



In 2007, it was a 7% increase.






Now, i know some of you will say, okay, so what ?


That is good history knowledge, but not actionable.



The key is of course, now, what will it be like for 2012?

For what it is worth, my guess is that we will be up 14% to 11.4 by End Dec 2012.

As always, I will review this in December 2012 more like January 2013 to see how accurate this prediction is



Monday, June 18, 2012

A study in Patience

A brokerage had put together a very well written piece arguing for investments in the following stocks citing their dividend yields.


Looking back on this a year and 3 months later


Company Price (March 24, 2011) Price (June 18, 2012) Return
(S$)
Armstrong Industrial 0.4 0.27 -32.50%
Adampak Ltd 0.34 0.41 20.59%
Chip Eng Seng 0.47 0.4 -14.89%
DBS Group 14.24 13.63 -4.28%
*Elec & Eltek 3.36 2.7 -19.64%
Hock Lian Seng 0.29 0.25 -13.79%
InnoTek 0.6 0.39 -35.00%
Memtech 0.14 0.08 -42.86%
M1 Ltd 2.4 2.49 3.75%
Mun Siong Engrg 0.21 0.1 -52.38%
Rotary Engineering 0.91 0.49 -46.15%
SembCorp Marine 5.69 4.58 -19.51%
StarHub Ltd 2.68 3.3 23.13%
ST Engineering 3.15 2.96 -6.03%
Straco Corp Ltd 0.16 0.19 18.75%
Tiong Seng Holdings 0.24 0.21 -12.50%
UOB 18.32 18.3 -0.11%
UMS Holdings 0.58 0.4 -31.03%
Venture Corp 9.09 7.8 -14.19%
Largely, the portfolio would have lost money with the exception of Starhub, Adampak and Straco.

The learning is that the obvious idea will not work.

Tuesday, June 12, 2012

NSL Ltd - Dividend King

NSL is the stock i have looked at for this post.

Here is a link to the company page.


The latest dividend they paid out is 10 cents for the year.

They have a reasonably long track record of paying out dividends, at least for the last ten years.

Year Dividend
2011 0.1
2010 0.1
2009 0.1
2008 0.2
2007 0.1
2006 0.1
2005 0.29

These are companies, that pay a dividend through thick and thin.

Here, the trick is to value the company for dividend growth or reduction over a suitably long period.

Also, one needs to have a sufficiently long period of dividends from which one can determine the variability of the dividends.

NSL fits the bill.

Of course, the big assumption is that the company will survive for 20 years.

Plugging this into my model and using a discounting rate of SGS Yield with Inflation + a slight increase to compensate for low liquidity for the risk premium, i estimate the fair value of NSL to be 117 cents.

The share is currently trading at 132.5 cents.