Investing in Raffles Medical Group.

I revealed earlier in the year that I have a few hundred drafts in my blogging account, these are blogs which I started and did not finish.

It is terrible, I know.

There were always so many things going on in my mind and I am sure they contributed to my sleeping problem in the past.

Things have improved for me on the mental health front as I try not to think too much these days.

Anyway, this blog on Raffles Medical Group (RMG) was one of those drafts. 

It was more than a year ago when I started this.

OK, enough rambling.

When I looked at RMG together with Healthway Medical many years ago at around the time of  the Global Financial Crisis, RMG's historical PE ratio was 21x.

That provided a guide for me as to what might be a fair price to pay for a stake in RMG today if there has not been any major changes to its business.

With a PE ratio of about 33x in early 2017, I decided that RMG definitely wasn't cheap.





I thought if its share price should decline by a third, we would see a price movement approximately to its mean.

At the time in early 2017, RMG was trading at about $1.50 a share.

So, a one third decline in share price would give me a target buy price of $1.

Pay $1.50 a share?

Not for me.





Investors who invested in RMG at a PE ratio of 30x or higher had to expect RMG to register phenomenal growth in earnings year after year.

Otherwise, why would they value RMG so highly?

Personally, I could not see phenomenal growth in RMG's earnings happening especially with all the capital expenditure (CAPEX) and also the expected increase in operational expenditure (OPEX).





As RMG's share price plunged over time, I received emails from some readers who asked me to talk to myself but I declined.

They should talk to themselves and ask why did they invest in RMG at higher prices?

Were they investing for growth or were they speculating?





Believing that RMG would deliver phenomenal growth in earnings and accepting a very high PE ratio, they should understand that if growth should falter, Mr. Market could go into a depression.

This is a key risk factor when paying prices which reflect high expectations for growth and this is usually represented by a high PE ratio.

Of course, Mr. Market's optimism could create opportunities for investors of the more patient variety who prefer getting more value for money.

After all, the swing from optimism to pessimism could be quite dramatic and we really should be buying when Mr. Market is feeling pessimistic.





Don't blame the analysts, professional or amateur (including bloggers).

Good or bad, they probably had their plans.

Ask what is our plan?

The truth is RMG is facing some challenges.





With medical tourism in Singapore facing stiff regional competition and ongoing CAPEX with attending start up costs to be seen in their new Chinese hospitals through 2018 and even 2019, earnings at RMG would probably take not one but several hits.

It would, therefore, be a good idea to demand a bigger margin of safety which, of course, means demanding a lower entry price, everything else remaining equal.





Although RMG has a good track record of growing value for shareholders over the years, if we want a better outcome for our investment, it would make sense to pay a more reasonable price.

What is a more reasonable price?

Regular readers know that one method I use is to compare with crisis valuation to help determine if a stock is cheap.





RMG's lowest PE ratio was about 14x. This was during the GFC (2009). So, assuming earnings bottom at 4c a share, at about 56c a share, RMG would hit crisis valuation.

Not expecting another GFC, I decided that paying anything below its historical mean (21x) is probably a bargain.

So, paying anything below 84c a share should provide me with a good starting point.





In September 2017, when RMG hit $1.03 a share, I thought it was still expensive. 

Assuming an EPS of 4c, PE ratio was almost 26x.

Of course, Mr. Market didn't care what I thought and RMG saw its share price recovered.





I decided then that perhaps I should not wait for 84c and that I could nibble if it should ever touch $1 a share (i.e. PE ratio of 25x)

A PE ratio of 25x is significantly lower than 33x but, to be honest, I would still be buying into the expectation that RMG's Chinese investments would do well and lift earnings in a spectacular fashion in future.

If nothing goes terribly wrong, perhaps, the year 2020 is when earnings would improve more meaningfully for RMG.





So, investing in RMG now is to invest in growth but expectations should be realistic.

At $1 a share, dividend yield is about 2%.

So, it probably wouldn't appeal to the purist income investor. 





I got my foot in the door by paying $1 a share but unless the price goes lower from here, I am keeping my investment relatively small.

Related post:
Investing philosophy is timeless.

A $71,000 lesson or a haunting experience?

This is a follow up to an earlier blog (see related post at the end of this blog) and there is a simple but important message in this.

All of us make mistakes, some bigger than others.

However, it is important to remember that there is nothing bigger than life itself.

We are always learning in life.

Life must go on and in a good way too.







Reader says...

I am so sad to fall into such greed and indeed lessons learned not to be greedy at all. 

I wonder how many people in your blog had experienced the same and can offer some encouragement and empathy.







I really feel so stupid for not checking your blog in 2014, and feel even stupider for doing more due diligence check. 

I feel so sorry for those who were in the same boat as us because I saw herds of people joining those conference in hotels giving free food and dinners.






"Crying my heart out" and those who pocketed our investors money must be laughing at us for being so stupid.

I do have feelings of burning down some buildings and at least slapping someone if killing is too much??

Where is the money?

AK says...

I do feel sympathetic.

However, it could be better for you to treat the money as gone and not think about it too much.





I have been in situations where I lost money in investments and a lot of money too and it was horrible.

However, I had to get over it and I told myself to take it as a learning experience and not to make the same mistake in future.





It will take time. 

Cry but let it go after crying. OK? :)

I would rather treat this as a $71,000 lesson than to let it haunt me forever.

Related post:
$71,000 bogus investment?

Should I sell my home and downsize or downgrade?

This is a reply to Ruby, a long time reader of ASSI, but it turned out to be quite lengthy.

So, I decided to publish it as a proper blog instead.






Ruby's comment and questions:

My reply:

Hi Ruby,

Of course, the property agent would want you to sell your home and buy a new one (probably from him too). ;p

Ask do you need to sell or do you want to sell your home?





Your home is a freehold property and does not suffer from lease decay.

This is a fact.

Aging freehold property?

I don't understand why is that an issue.





From the perspective of your home holding its value over time, what's wrong with that?

Now, if you need more money for retirement and if selling your home is the only way to achieve this, then, you have to do it.

Then, you can choose to either downsize (rightsize) or downgrade.





You could get another freehold private apartment but one with a smaller footprint if you care about your home holding its value and often people care about this because they want to leave their home as a legacy for their future generations.

I think a one bedroom 500 sq ft apartment should be good enough for a married couple if the space is used efficiently.






If you need the same amount of space as your current home, if you want to stay in Singapore, then, downgrading to a public (HDB) flat is the only way to go and, with the current rules, resale flats are your only option.

As retirees, I guess you don't have to be located in mature HDB estates.

It is a fact that flats in non-mature HDB estates would cost less and this option would leave more money in your pocket.





Also, as seniors, if this is the route you choose, you don't have to be so particular about shorter remaining leases of resale HDB flats as long as the price is right because HDB flats are for staying in and not meant to be a store of value for legacy planning.

You might also want to read the related post at the end of this blog which is about another reader who was thinking of downsizing.

Wishing you good health and good luck!

Related post:
Downsizing our home for better?

Pay for memberships that benefit (who) financially?

Reader says...

I have been following your blog since last year.

As a middle age self employed who’s asset rich and cash poor, I have been enlightened by your simple strategies on how to save money.

Thank you for the kind sharing!





The matter that I need advice :-

As someone who’s very good at spurring the economy I sometimes buy without much thinking.

So recently I paid a small amount (of money) to join a certain membership. Lazy by nature I thought it will be nice to follow someone whose good at what he’s doing.





So there after again I paid some more money to get another set of stock picks mainly the reits.

Last couple of weeks again they tried to sell another membership which members will get access to the CEO’s portfolio which has been widely publicised cos he’s putting his own money in.






Now this membership will cost much more than the earlier ones and as someone lazy by nature I’m thinking if I should join in and just follow what he’s buying.

But this time amount is big ($1999 for one year or $2999 for 2 years), I wonder if you could share with me your view?

AK says...

All I will say is that I have never paid any money to join any such membership.

The one membership which I like which gives me lots of benefits and which is FREE is my CPF membership.





I know.

Bad AK! Bad AK!

Good luck. ;)





Maybe, AK should do that too. 

Each reader pays me $1,000 to know what I buy and sell in the stock market. 

Then, I would have a lot more money to invest with! 

Wah! Mai Tu Liao! 

Related post:
Financial security in Singapore.

When would I invest in ESR-REIT again?

Reader says...
This is my first email to you although been following your blog for about 3 years.

You are an inspiration to me cause although you are 1 year younger than me but you have already achieve financial freedom long ago.






Understand that you have been blogging about not comfortable with ESR and VIva REIT but you also mention before an investment also depends on the price.

So I would like to find out from you at what level will you consider investing in ESR REIT.

Vanishing in less than 15 years.

AK says...
Absolutely no interest.

The whole deal is a godsend or a lifeline for VIVA (which is a ticking time bomb) but rubbish for ESR-REIT.

Yes, I think ESR-REIT got the shorter end of the stick and the shareholders paid for this and will continue to pay for it.






A big chunk of VIVA's portfolio have land leases which will expire within the next 15 to 20 years (see related post #2 at the end of this blog).

Another big chunk of their assets would see a drop in income as they convert from master leases to multi tenanted buildings.

Income support for UE Bizhub East is set to expire later this year.






ESR-REIT will be taking over this horror of a baby.

It would haunt them (mostly the common shareholders of ESR-REIT) later.

Of course, having said this, if there should be a big crash in price, maybe, then, I might take a look. ;p






Related posts:
1. Merger of ESR-REIT and VIVA.
2. VIVA more attractive with 9% yield?

Singapore Savings Bond short term still more rewarding.

I blogged about the Singapore Savings Bond (SSB) earlier this year and shared how it made sense for me to park some of my spare cash in it.

It is considered near money (with no penalty for early withdrawal) but still not as near as money in a savings account or stored in a moon cake tin at home.

Who stores money in a moon cake tin at home, you asked?

Alamak, if you asked that, you must be new to my blog.

OK, I know.

Bad AK! Bad AK!

Easy to apply with internet banking.

Anyway, I did not put in the max $100,000 which each Singaporean is allowed to have in the SSB earlier in the year because I suspected that with interest rates rising, the coupon could be higher later on.

It was 1.55%.

Now, 6 months later, it is 1.72%.






After receiving a chunk of change from reducing my investment in ComfortDelgro, I want to lock up some of the gains in my war chest.

So, I will be putting some money in the SSB again.

With this, still, I would not be maxing out the allowance of $100,000 per Singaporean.

The closing date for application is 26 June 2018.

Plenty of time.






For more on why I like the Singapore Savings Bond now, read the related post below.

Related post:
Singapore Savings Bond (Jan 2018).

Investing in ComfortDelgro and locking in gains.

I was accumulating at close to and under $2.00 a share amidst very bearish sentiments, having decided that ComfortDelgro's balance sheet was robust and that its dividend was sustainable even if the entire taxi business was shut down.


The last time I bought more at under $2.00 a share was in 1Q 2018.






It should be quite clear that my decision to invest in ComfortDelgro was mainly for income but, of course, I am not averse to doing a bit of trading either.



So, if I were to sell some of my investment in ComfortDelgro, what prices would I sell at?

Ideally, we want to sell at prices we would not buy at and not at any price Mr. Market threw at us because we did not have a choice.

When I shared my incomplete analysis of ComfortDelgro many months ago (see related post at the end of this blog), I said that a 13x PE ratio would bring us close to crisis valuation and that when Mr. Market was feeling more optimistic, the company was valued at about a PE ratio of 20x.

So, we would not be wrong to think that somewhere in the middle we would find ComfortDelgro's approximate fair value.






Off the top of my head, using EPS of 15c, we get the prices of $1.95 (13x PE) and $3.00 (20x PE) a share.

Therefore, down the middle, at around $2.47 is what should be a pretty fair price, using these assumptions.

Remember that I also used an EPS of 14c which I estimated in a scenario in which the taxi business remained challenged.

With this, we get the prices of $1.82 and $2.80 a share which gives us a middle or fair price of $2.31.







So, depending on what we believe to be the case, selling ComfortDelgro at between $2.31 to $2.47 a share looks to be a reasonable decision.

Of course, then, selling any higher than $2.47 a share would be sweet.

As the share price rose, the MACD, a momentum oscillator in charting (i.e. TA) struggled and churned but did not form a higher high.

Another momentum oscillator, the RSI, tangoed with the overbought line.







So, although the share price rose, the momentum oscillators suggested that Mr. Market was hesitant to buy at higher prices.

This contributed to my decision to take some money off the table.






I reduced my exposure to ComfortDelgro by almost half at $2.47 a share and locked in approximately a 25% gain.

It has been a while since the last time I traded in stocks.

Yes, I have been pretty lazy as a trader in my retirement.






I will most likely hold on to my remaining investment in ComfortDelgro for income unless Mr. Market becomes even more bullish.

If Mr. Market should go into a depression again, reducing my investment in ComfortDelgro, I will have more funds to take advantage of such a situation.








ComfortDelgro is no longer the undervalued proposition that it was when I was accumulating.

Related posts:
1. Analysis of ComfortDelgro.
2. Massive shorting of ComfortDelgro.

Averaging down and don't invest in this stock!

Reader says...
... Singtel, average down from entry at $3.62 till $3.33, average cost is about 3.44.

I only started buying stock about 6 months ago, and having using this approach.






I decided an entry price, normally at 52 weeks low so I got a margin of safety, then average down if the stock keep dropping and stop when the stock moving up.

What is your opinion of this average down approach?






One down side I learnt so far is if the stock run up after my entry price, then I will not be able to accumulate much as only nibble small amount (3k-4k) at the start.

It happened with my ST Engineering, Sheng Siong and First Reit.

The stock took off after my entry and have no chance to buy since then as I tried to chase.






Also, what do you think about stock with low transaction volume?

Should we avoid those as it might not be easy to sell with low daily volume ?

AK says...

If the price on a good investment goes lower, it is better value. ;)

As for less liquid counters, I don't see a problem if we are investing for income. :)






See what a CFA and investment guru told me about Old Chang Kee when I blogged about investing in it in 2011?

"I love eating Old Chang Kee. However, the stock is quite illiquid and has very little volume. One look at the bid ask spread tells me a lot about the counter.

"So as much as I love Old Chang Kee, it is somewhat considered close to a penny stock to me. Therefore I can't invest in it."

See full comment and also my reply in the comments section of:
http://singaporeanstocksinvestor.blogspot.sg/2011/10/old-chang-kee-initiated-long-position.html






Have a plan.

Everything remaining equal, stick to the plan.

Ignore the noise. :)

$71,000 alternative or bogus investment?

Reader says...

I have been very sad and disappointed with these alternative investments that we had ventured with stupidity.

Like the Chinese sayings goes, for really good deals, "there is no such golden duck jumping around on the street". In other words, there is no such good deals.





If that is the case, why is our government still not educating people well about alternative investment, seeing a lot of them got their fingers burned due to such dodgy business.

We invested into alternative investment by XXXXXXX Holdings and got engaged with an agent from XXXXXX Solution Management Pte Ltd, a vendor of XXXXXXX Holdings contracted to do sales and marketing for their alternative investments products.





In total I have $71K invested.

We only received $10K and no payout since Nov 2016.

I wanted to report to the police many times, wanted to engage a lawyer to sue them for breach of contractual agreement and not paying up per contract.

But I was advised against this by the agent saying that law suit cases will delay the process to get back some money from these investments.





I had requested from the agent to share with us the list of investors that had been affected and maybe we can write some letters to MAS, the newspapers or to the police to warn the public regarding such scams and cheats, but the agent refuse to provide.

She said it was not a scam or fraud, just bad investments.





Sometimes I believe we need some authorities to know and take action on our behalf or at least for general public to be aware of such companies and be cautious about investing their monies with them.

Appreciate your advise and anyone who can enlighten my worries.

AK says...

I believe I blogged about XXXXXXX before.

Unfortunately, there isn't much you can do apart from seeking legal advice and let the law take its course for whatever it is worth.





I believe there is little MAS can do to help you either because these "investments" are not regulated.

I feel your sadness and I hope you will be able to recover some capital.

Read related post at the end of this blog and know what questions to ask when offered such "investments". Read its comments section too.





Related post:
Invest $10,000 and get 24% yield!

FRS by 35 and $1 million in CPF account.

Reader says...
I have been an avid reader of your blog and inspired by your way of handling the cpf monies.

I have followed certain methods and have done my own research on the cpf system.





I am 33 yr old now and have drafted a goal of hitting the current frs on my special account by 35.

There is a shortfall of 50k to frs and it shld be done in the next 2 years.

I have max out my ma.





I live a simple life and dun demand for luxuries.

And if i can be gainfully employed till age 55. I hope to also hit above 1mio for my cpf acct.






My concerns are as i am somewhere further away from retirement age, my risk of cpf policy changes are higher compare to urs.

AK says...
Welcome to my blog. :)

If there should be changes to the CPF system and there have been changes over the years, if they are reasonable, I welcome them.

We have to believe that the government have the interests of Singaporeans at heart and that they are competent.

If we don't believe this, then, shun the CPF.





As for your plan to take full advantage of your CPF membership, it sounds like a good one.

Keep at it and you would have a cornerstone in retirement funding in your golden years. :)





However, remember that the Top Up to your SA (allowed till age 55 and as long as it is lower than the prevailing FRS) will enjoy income tax relief only for the first $7K per calendar year.

As it sounds like you are topping up more than $7K per year in the next 2 years to hit the prevailing FRS, you want to be aware of this especially if income tax relief is important to you (i.e. you are in a high tax bracket).

Gambatte!





Related posts:
1. $1 million in CPF by age 65?
2. A cornerstone in retirement funding.

Timing the market and getting best prices?

Reader says...
Is has been awhile since my last email.

I wasn't dare to take the big move to go ahead into investment.





I know very little about Mr.Market. which I decided to be so call "safe" to put majorly of all cash in bank.

Which I know I know, is very wrong.

I monitor Mr.Market for awhile and didn't act on it. facepalm.





I started to look into low risk investment such as REIT.

I am still get lost when i try to follow your blog from the start.





I know is a lot to ask but could you advice me information/link I can look into.

Maybe can share with me how to see a good entry price, any index I could by buy monthly?

AK says...
Unfortunately, I am not allowed to give specific advice and, so, I won't.

I am not very good at timing the market and getting in at the best prices myself.





Read more, learn about valuation and you should have an idea of what are fairly good prices to pay for investments but remember we cannot always get it right.

It is a lifelong learning process.





You can start by reading the books I have listed in my blog's right side bar under "Food for thought".

You might want to read this too:
http://singaporeanstocksinvestor.blogspot.sg/2013/10/3-points-in-stock-investing.html

Which type of insurance for parents and why?

Reader says...
What do you think of the idea of getting insurance for own parents who are in their late 50s and still healthy?

My parents do not have insurance coverage.

I'm planning to get for them a hospitalization insurance + term life w/ critical illness.






I view it as a protection against my financials should anything happen to them.

Because at the end of the day i'm probably be the one who is footing the bill should any mishap happens.






Thinking along that line, i'm thinking if i should actually profit from the demise of my parents. As a form of investment from the lump sum payout from term plan =X

What would you do?

AK says...
Life insurance are for people with dependents.

If your parents do not have dependents anymore, they only need Medishield Life (H&S) or a private shield plan if they can afford it.





If they are Singaporeans, they should already be covered by Medishield Life.

If C or B2 wards in government hospitals are acceptable, they do not need a private shield plan.

As for critical illness (CI) coverage, it is to provide us with a sum of money for our living expenses in case we are hit with an illness that prevents us from working and making a living.

H&S expenses should be covered by a H&S plan mostly and not by a CI plan.






If we no longer depend on income from employment and are able to retire comfortably, I don't see the need for a CI plan (especially when they are so expensive for seniors).

Please read related posts too.





Related posts:
1. Insurance weakened a family's balance sheet.
2. Do your parents have enough insurance?
3. Why do we need critical illness coverage?