Should I invest my CPF monies?

Wednesday, 25 July 2018 20:38
Posted by owq 1 comments
I've been thinking whether it's worth it to invest my CPF-SA monies. It's quite hard to beat the CPF-SA interest rate, assuming the rate stays at 4%.

Over 30 years: ((1.04^30)-1)/30 = 7.478% CAGR
Over 20 years: ((1.04^20)-1)/20 = 5.956% CAGR

For CPF-SA, we can practically invest only into unit trusts with crazy expense ratios. And only balanced funds. No pure equity funds. For example, I put some into First State Bridge with expense ratio of about 1.43%. The expected return could be around 5-6%.

Given the risk, is it worth it? I'm not so sure. CPF-SA is practically risk-free, but there is a policy risk. We can't assume that the rate will stay at 4% forever. Hopefully we get more lower expense ratio funds, like the new LionGlobal All Seasons funds. I'm planning to invest into that new fund for the CPF-OA, instead of the STI ETF, once I hit my 35% limit for common stocks.

DBS Group Holdings' crazy rise in price

Monday, 22 January 2018 20:27
Posted by owq 1 comments
It wasn't too long ago that there was fear in the market and DBS was selling at below book value. Now the price has almost doubled from those days and according to ycharts, is at around 1.5 price to book value, a 5-year high. Fear or greed? Certainly book value may not be the best indicator of value but I would think that 1.5 is a bit too high.

If banks are flourishing but their prices are too high, one proxy to consider is companies that provide software services to banks.

Alternative to Google Finance portfolios

20:19
Posted by owq 0 comments
Google Finance will retire their portfolios feature soon. I have been using it for a few years and even built an application to import from them to calculate dividends and rate of returns. I had a few requirements: easy to enter transactions, especially for SGX stocks and must be able to export to an open standard in case service halts. Indeed the export feature became useful as they really decided to stop service.

I tried a few alternatives and finally decided on KMyMoney. My focus is really on portability and ease of use, and although KMyMoney has a few quirks, it is reasonably easy to use. One con that I have to deal with is that I have to enter the stock name and details manually (at least for the first time). Updating of prices is also not in real-time but rather on demand but actually that turns out to be an advantage. It is no longer as easy to track prices in real-time which means I can focus more on the company itself, and also fundamentals, rather than fluctuating prices. The profit gains for each investments is also less obvious hence there is less of an anchor on past prices. I can focus more on current value. I believe this will help in long-term investing. Even though this is a desktop application, the data file can be easily put on the cloud. (For the IT inclined, the data is saved in an XML file which is easily deciphered. Hurray for open standards!)

Farewell Croesus Retail Trust

Friday, 7 July 2017 21:59
Posted by owq 2 comments
Yet another of my stock bites the dust. Fourth delisting! Not so long after internalization of the manager, someone decides to buy over the whole thing. It was around 20% premium to NAV, which I thought to be quite reasonable, so I sold it immediately at offer price. I'm fine with forfeiting the dividends as time is money. I'm left with a grand total of 1 share from DRP. Don't worry guys, I'll vote no to help with the headcount condition (lol)



I actually wanted to put the proceeds into Dasin Retail Trust, another business trust holding retail assets. With the latest acquisition of Shiqi Metro Mall at a huge discount to market value, the pro-forma NAV blows up to around $1.48, giving us a PB ratio of about 0.54! Even without the income support, the yield might be worth it. Then I thought, the shares were too illiquid and I don't really know how Zhongshan will develop... I still don't understand why the sponsor sold the property at such a big discount? I'll bank on my domestic bias and buy Capitaland Mall Trust instead. I have been wanting to buy it for a while but it was always too pricey. Seldom buy REITs at price above book but I really like their properties...

Farewell ARA Asset Management

Thursday, 23 March 2017 19:52
Posted by owq 0 comments
Yet another delisting of a quality company from SGX. This is my third delisting since I started investing in September 2014.

First was Select Group which I only managed to hold for 3 months before it got taken over.

Second was China Merchant Pacific Holdings which I only managed to hold for 10 months before it got taken over.

And now ARA which I managed to hold for 1 years 4 months and even subscribed for their rights issue.

Wonder who's next?

Diversification of risk: marriage, property

Sunday, 26 February 2017 19:53
Posted by owq 0 comments
Inspired by http://www.my15hourworkweek.com/2017/02/14/thank-you-my-mrs/

He was talking about how marriage is like putting all his resources into one egg... It's true. You put a lot of your time, emotions and money into one person. Usually the guy puts in more, because let's face it, even though there's supposed to be gender equality, guys are still expected to take most of the risks and girls actually end up with more power now. But I digress. I'm not here to rally against marriage or girls but rather to encourage a more rational look at relationships in general. I'll talk about this from the viewpoint of a guy but the other side is somewhat similar.

A long-term relationship is not as costly as a marriage but the terms are similar. You're expected to invest emotionally and sexually in only one person as doing otherwise is considered cheating. Sure you may have your own life and your own friends but in general you'll end up spending most of your resources on this person, because if not then what is the relationship for? So something to consider is the risk of putting everything in one egg. You have spent all your time and resources on this girl. What if she leaves you? What if she becomes a liability? "Someone to take care of you" is a double-edged sword. Love conquers all? In sickness or in health? Sure... But girls change their mind and they are notoriously more so than guys. No guy married a girl thinking that she'll leave him! Same for the girl! But it happens, and girls initiate the divorces more often than guys. So the risk is there. At my company we have a 60% divorce rate already (this is just for fun as sample size is too small). Anyway what I'm saying that we need to consider the downsides as well. The possibility of your spouse leaving you amicably, leaving you with a host of lawyer debts and stolen stuff, getting sick, or even treating you badly. If you're in a marriage, never take it for granted. Anything could happen, and I'm not trying to scare you. And when you're in "love", you never think that your loved one could treat you so badly. So we need some adjustment for the "in love" state.

Now, usually, marriage comes with property, in typical Singaporean fashion. And chances are, you get a flat quite early on with debt. A FLAT IS NOT A SURE WIN THING. It can be a good deal, but don't forget the debt. Usually debt is required in some way as couples don't earn enough to pay in full. And that means most of your assets is stuck in ONE property. With corresponding liabilities to boot.

So now you have all your emotional needs invested in ONE person and your financial assets in ONE property. How is that not risky? You tell me.

Sino Grandness Rights Issue

Sunday, 8 January 2017 12:03
Posted by owq 0 comments
I sold my Sino Grandness shares at 0.37 when they first announced a rights issue. I was planning to hold the cash to buy some shares back after the rights issue but my hands got itchy after waiting for so long without any news, I decided to buy some at 0.33. A week after they announced the amendment of the rights issue with some ridiculous terms and the price dropped all the way to 0.21 which is the new rights issue offer price.

I am still holding. This is a stock which I have been buying since I started investing and I've seen it go from 0.50 to 0.23, and to 0.79. I've always maintained a core position because I believe it was undervalued. Well, there are a lot of red flags but I feel that it's worth the risk. At least I'm not gambling with more than 10% of my money.

Now, the first time they announced the rights issue it was underwritten by UOB at a commission of around 6%. Huang also undertook to subscribe for his whole allotment. This time there's NO underwritting, and Huang will subscribe for a variable amount of shares subject to the amount of uptake. I'm not an expert, but this is really disgusting. What are they thinking? If they really need the money, how will these terms ensure they get what they need? There seems to be some cashflow problems at the company. I am getting mixed feelings about this counter.

ARA Asset Management takeover by Scheme of Arrangement

Sunday, 1 January 2017 11:52
Posted by owq 0 comments
And yet another stock is being taken over by private equity. I have only invested for 2 years and a lot of my stocks are being delisted. First, Saizen, then China Merchants Pacific, and Select Group.

I'm not selling ARA yet and I will definitely vote no. This is because the offer is by scheme of arrangement, where number of investor count also plays a part. So there's a good fighting chance for the minority investors. I would probably have sold if it was a general offer. Anyway the price is around 1.70 right now. It is about a 4.7% at the takeover price, which is worth the wait anyway even if the deal passes. It is likely that the deal will pass by at least June 2017. So close to 9.4% p.a. return.

Furthermore, the company has good prospects and I'm unwilling to sell it cheap. Especially after they announced such a good set of results and increased their AUM by so much. The PE right now is at least less than 20x. And in 2007, they IPOed at 43.6x. Granted PE might not be the best way but if we look at the AUM I definitely feel that the company is worth more.

There is no other comparable company on SGX that has a business model like ARA. So if ARA really gets delisted it'll be hard to find a replacement. For now I bought Frasers Centrepoint (FCL) as a pseudo replacement in case ARA is sold. I like the recurring cashflows of FCL even though it is not as asset-light as ARA.

Irrational behaviour: being happy when stock prices rise

Friday, 15 July 2016 23:03
Posted by owq 0 comments
As observed on HardwareZone SSI. Why are people so happy when stocks are getting more expensive? In a bear market, you're going to earn more money! As you reinvest more dividends or other income, you compound your capital at a cheaper rate. Of course it's a different story if you urgently need to liquidate. Then you shouldn't be buying stocks?!

In a bear market, usually pessimism will cause stock prices to depress more than their fundamentals deserve. I mean, a couple of quarters of 20% reduction in earnings simply shouldn't deserve a >20% reduction in price! After all, you're paying for the cash flows of the company in the long term.

So stay invested and don't market time, because eventually reversion to the mean will occur, and you don't know when it will occur.

Value stock vs growth stock: are they really different?

Monday, 11 July 2016 09:48
Posted by owq 0 comments

From Investopedia:
"A value stock is a security trading at a lower price than how the company’s performance may otherwise indicate."
"A growth stock is a share in a company whose earnings are expected to grow at an above-average rate relative to the market."
 I have always thought that "value stock" and "growth stock" don't really mean anything. All I am concerned with is that I'm paying less for the value that I get. If I'm paying less for the expected growth of a company, then it is a value stock. Of course, it's hard to predict the future, so it's good to be conservative in case you're wrong.

Price is what you pay, value is what you get. And value is a function of all the cash flows the company will give in the future, and that is affected by growth. However, it is important to see things on a per-share basis, as earnings may shrink on a company level but increase on a share level. So rather than look at growth on a company level, we should look at growth on a share level.

In the end, it is really just buy low and sell high. A simple concept, but yet hard to act on due to our human biases.

China Merchant Pacific Holdings takeover

Sunday, 29 May 2016 17:59
Posted by owq 0 comments
Yet another one of my stocks getting delisted. Unfortunately the offer is at a discount to my cost. I suppose this is why buying at a good discount to NAV is prudent for stocks like these. I bought it at NAV last year, and it dropped due to acquisitions. Well, at least I managed to sell it at $1.03 somehow, $0.01 above the offer price. I find the offer a bit undervalued, but at least it's not as bad as the Indiabulls saga. That one is really super lowball.

Anyway, with this unlocking of capital, I put my money on Silverlake Axis. The share price dropped to a reasonable level. I think around 13-15 PE is quite reasonable for such a company. Their track record with acquisitions seem to be quite okay, and I look forward to see what they can do with Sungard Ambit.

Select Group takeover

Friday, 25 March 2016 12:52
Posted by owq 0 comments
I bought Select at around the beginning of the year, hoping to enjoy its wonderful cash flows for years down the road. Alas, it was not to be. Out of the blue, a trading halt was called, leaving me wondering whether it was going to be good or bad news. Soon the cash offer came. $0.525 a share.

It is close to a 30% gain on my cost, but I'm not sure whether to be happy or sad. At $0.525, the trailing FY15 PE is 5.25/5.02 = 10.46. Of course, this takes into account the government grants, but I still think the business is worth more than that. It is quite a high ROE business with room for growth. I would say that the PE firm got it for quite a bargain. Of course they would only highlight that 0.525 gives a high premium over the tangible assets.

Anyway, as a minority investor I can only look, suck thumb and just sell. Don't think there's any good alternative to Select in SGX. I have been looking at Neo Group for a long time, but don't think it's value for money right now. So for the time being, I put some of the proceeds into Design Studio. The rest I'm thinking of using for my REIT allocation. Looking at First REIT (which I sold earlier) as well as Frasers Comm Trust.

Is SGX really a monopoly?

Friday, 18 March 2016 21:09
Posted by owq 0 comments
I have seen people talking about buying SGX because it's a monopoly. Is it really? Sure, if we're talking about flotation in Singapore only. The market is so much bigger than that. SGX is competing against the world for listings and derivatives. And companies have many other ways to raise capital. Local companies can choose to list in other countries, a popular destination being ASX.

However, is it a good company? I haven't done much research on it, but it definitely has awesome operating metrics with high ROE and margins. Is it selling at a good price? That I'm not so sure. I think there are better alternatives at the moment.

Free lunch in investing

Tuesday, 23 February 2016 20:13
Posted by owq 0 comments
Recently a reader of AK's blog complained to him:
Straight to the point. I am very disappointed in you.  
I have been following your blog for more than a year and followed some of your calls, most of them bad. Now you go MIA.

http://singaporeanstocksinvestor.blogspot.sg/2016/02/reader-is-disappointed-and-ak-tries-to.html 
I don't know whether to laugh or cry. The reader expects a free lunch in investing? Furthermore he only invested for about a year or so, judging by his comments. In a bear market, obviously stocks will drop. And investing with a 1 year horizon? Don't expect to make money, buddy.

People who don't understand stocks shouldn't buy stocks.

The great 2016 sale

Sunday, 10 January 2016 18:12
Posted by owq 0 comments
I look forward to prolonged depressed share prices, as I will be a net buyer of stocks. One thing I realised recently is that market prices tend to overreact (in both ways). Unless earnings get hit by 10% permanently, the share price shouldn't drop by 10% (assuming it was at intrinsic value).

For example Keppel Corp. It is interesting how some people expect it to drop to $4 or even $3. While not impossible, it is highly unlikely. At that price, Keppel Corp will be worth less than what it paid Keppel Land for (which IMO, was not a big premium).

Anyway, I recently bought First REIT and M1, which are finally at levels that I find attractive. Actually I was queuing for Select, Starburst and Accordia, but bid-ask spread for Select and Starburst is so high that I gave up. I think other than the counterparty/delisting risk of First REIT, it is pretty much a no brainer at this price... The leases are very attractively structured and priced.

Do US indices affect STI?

Saturday, 2 January 2016 13:42
Posted by owq 0 comments
Well, it's a popular notion on HWZ forums that STI follows the US stock market, and people like to predict the STI movement based on the last closing of the US indices. So I tested that with data from Yahoo Finance ranging from Dec 2010 to Dec 2015, using Spearman's correlation between ES3 and a number of indices.

Name Symbol Spearman Correlation
Lyxor AsiaIT US$ NF4.SI 0.948438693
Lyxor World US$ H1P.SI 0.922792769
LYXOR Asia EX US$ G1K.SI 0.914623755
Lyxor AsiaCS US$ NF6.SI 0.902705567
Lyxor HSI US$ A9B.SI 0.879719834
Lyxor USDJIA US$ JC6.SI 0.870809236
Lyxor Asia US$ P60.SI 0.846190831
Lyxor Japan US$ CW4.SI 0.836158667
Lyxor Nasdaq US$ H1Q.SI 0.787960823
Lyxor Europe US$ JC5.SI 0.762374024
Lyxor AsiaRE US$ MT7.SI 0.75007067
Lyxor Taiwan US$ A9A.SI 0.733011747
Lyxor ThaiSET US$ P2P.SI 0.638932037
Lyxor MSIndia US$ G1N.SI 0.605130262
Lyxor ChinaH US$ P58.SI 0.528158153
Lyxor MAL US$ G1M.SI 0.487952323
Lyxor Korea US$ AO9.SI 0.418580403
Lyxor EM Mkt US$ H1N.SI 0.27739576
Lyxor Indonesia US$ P2Q.SI 0.232005556
Lyxor LATAM US$ H1O.SI -0.450758975
Lyxor Russia US$ JC7.SI -0.547590704
Lyxor Cmdty US$ A0W.SI -0.657178453
Lyxor CRBxEny US$ G1O.SI -0.665450671

So seems that the correlation with Nasdaq is 0.788, which is pretty high. Note some limitations: 1. no adjustments for currency, 2. Lyxor ETFs are not that liquid here, 3. Short timeframe.

Rights: Croesus Retail Trust, ARA Asset Management

Friday, 11 December 2015 23:25
Posted by owq 0 comments
I've only started investing recently and I already kanna 2 rights issue.

Croesus

The new acquisition is barely yield accretive  but I like the fact that it has potential for AEI. Japan interest rate is likely to remain low and although they devalued their currency recently, I believe it will get stronger. Not counting on rental reversions too much unlike the China retail trusts though.

ARA

A surprise rights issue, probably to strengthen balance sheet and fund their acquisitions in China and Down Under. Didn't really count, but they probably reached their 2B per year goal for this year. Will they reach their 40B goal soon? We'll see... Hoping to get my excess rights and especially, please help me round off my odd lots. Haha.

My first and last contra

Thursday, 12 November 2015 20:20
Posted by owq 0 comments
Since I was on leave on Jumbo IPO day, I decided to contra for the fun of it. Before opening, I actually put the bid around 20% above IPO, thinking there was a margin of safety and I could pay even if it dropped 10%. But alas it rose much more and so I bidded at a higher price. But DBSV didn't accept the order, saying the bid was too far away from last price. I was trying to input order and as the bid and ask soared I put in higher prices without realising it had gone significantly above my margin of safety. It got filled at 0.39! Then prices settled at around 0.365 and I knew I was screwed. I had made a big mistake because I was in an emotional state and fortunately I decided to cut loss quickly, resulting in about 1.4k loss.

On SCB side my lower bid got through and I got around $70 profit, enough to offset one of the commission from DBSV.

Well it could have been worse and I guess this is one of the mistakes that you must experience before you really learn. It was pretty painful as the leveraged position was quite big for me. Even after reading about how much people got burned by leverage, you don't fully feel it until you are on the receiving end...

Facing my first correction

Tuesday, 8 September 2015 22:28
Posted by owq 0 comments
It's been about a year or so since I started punting the stock market. I've heard horror stories about the great financial crisis. Bear markets. Corrections. This is my first test and I'm glad to say that I've passed it. I took the chance to rebalance my portfolio and sell some stocks to see whether I can hit the sell button in a market that's going down. I finally sold the STI ETF, which is a big chunk of my portfolio and one of my maiden acquisitions, to buy UOB which took a big hit and is now almost book value.

I think reading many books about value investing helped. As the stocks fell, the stocks just became so much attractive that it was hard not to buy them. Dividend yields rocketed. The margin of safety became wider. And I wished I had more cash to buy stuff.

There were people on the forums calling a bear market and expecting the fall to continue, extrapolating the down trend. People were asking if they should sell now and buy lower. I was not unaffected, for I decided to sell my Keppel Corp. In the end, it became an anxious game to try to sell it lower that I ended up buying it back at a big of a higher price.

Still, I think I survived. I don't know how I will feel if the market goes down even further, but I think I'll continue to buy.

Recent actions: Silverlake, UOB, Keppel, NeraTel

Tuesday, 1 September 2015 12:39
Posted by owq 0 comments
Been trying to market time lately, selling Keppel, NeraTel, Mapletree GCC, Saizen REIT, STI ETF, before the market tanked further. Failed with Keppel and ended up selling low and buying high. I think it's not worth the trouble... It's so much easier to go long. I think I'll focus more on long term speculation rather than trying to predict short term ups and downs.

Silverlake Axis: Due to the short seller report recently, I managed to get this at half price. Don't know who panic sold right after the counter resumed trading. I was so surprised when my lowball offer got through. Anyway, until I see customers fleeing from this company, I'll keep this counter. It's a small position so I think the risk tradeoff is worth it. Some of the points in the short sellers report are a bit suspect, although they seem to make sense at first glance. For example, I really don't believe that they have no version control. Maybe I'll go for an interview and grill them about it if I ever have to job hop.

Datuk Yvonne Chia seems to be a fan of the shares and has been buying them on dips. Goh Peng Ooi's daughter has also recently became a director. There are many positive signs but the related party transactions could still remain a vulnerability.

UOB: I was planning to buy OCBC but the UOB dip made it very attractive as the price is close to book value. NPL could still be a problem, especially in China region, but the exposure is not that big. This is more of a rebalance from the STI ETF. I bought the STI ETF when I first started because of a lack of capital for diversification, but now I can afford to buy the constituents themselves. There are many companies in the STI that I don't feel comfortable holding or are overvalued. For example, commodities companies which have low profit margins. Or SIA. I don't believe in airlines, because the barriers to entry are low and regulation is very strict.

Keppel: I'm mainly buying this for Keppel Land. I don't really like the O&M sector because of high capex and long dated receivables. But I do think their shipyards have a competitive advantage. They are also going to acquire another shipyard in China from Titan (subject to restructuring finalisation). If you can't beat the China shipyards, join them.

NeraTel: I was considering either SingTel or this but I prefer small caps because the growth rate could be higher.