Marco Polo Marine: The CEO speaks and the technicals.

I came across a recent interview with the CEO of Marco Polo Marine, Mr. Sean Lee. Although many things he said are not really news to me, it is still good to hear his statements. There are a few things he said which gave me a greater understanding of the company's competitive advantage and why they are well positioned to do better over time.

Of course, we know that the Indonesian Cabotage Law contributes to Marco Polo Marine's strong economic moat. This coupled with a shortage of OSVs in the country has put Marco Polo Marine in a strongly favourable position. This shortage is likely to persist with the Indonesian offshore oil and gas exploration growing at a faster clip as the government plans to have domestic oil production catch up with domestic consumption.

“As demand continues to grow, the industry can also be expected to move towards more complicated offshore exploration activities and to deeper eastern waters. This implies that there will be a sustained demand for rigs and as a result, more OSVs, indicating strong growth potential for our ship chartering business in the Indonesian offshore market over the mid to long term,” Mr Lee anticipates.

“However, the supply of OSVs in the Indonesian market has been limited due to the Cabotage rules which are stringently enforced. Currently, the Indonesian authorities allow only Indonesian-flagged vessels to operate in Indonesian waters. Among other regulations required of the company such as having to own a 5,000 ton gross registered tonnage vessel within its fleet, for vessels to be Indonesian-flagged, it has to be majority owned, i.e. 51 percent, by Indonesians. This thus creates a high entry barrier for foreign OSV operators,” he added.

The other engine of high margin growth for Marco Polo Marine is in ship repair, outfitting and maintenance. People may well wonder how come Marco Polo Marine's shipyard enjoys such a high utilisation rate and why they can do so well?

“About 90 percent of our ship repair, outfitting and maintenance works are performed for third parties. We see a very sustainable business for ship repairs in the longer term given the strategic location of the shipyard at Batam, which is less than an hour from Singapore, where hundreds of vessels pass through every day. As such repair and maintenance works are knowledge intensive as well as time and location sensitive, the Group can command better margins being shielded from low-cost competitors. Targeting medium-sized vessels have also helped us to differentiate itself from bigger players in the market. All the above factors have provided support to MPM’s financial performance despite the lull in shipbuilding.”

Credit is given to Ong Qiuying of Shares Investment for the interview with Mr. Sean Lee. To read the full article, see: Marco Polo Marine: Generating Growth Through Offshore Oil & Gas Exposure And Publicly-Listed Indonesian Subsidiary (22 Feb 2013).

Although Marco Polo Marine is fundamentally sound, the stock's technicals give me cause for concern as a negative divergence has clearly formed. Share price has been rising while volume has been reducing. Volume is the fuel that drives rallies. Without volume, the sustainability of any upward movement in price should be questioned. Lower highs on the MACD confirms a weakening of positive momentum.

I have sounded this cautionary note before, regular readers will remember. So, bearing the less encouraging technicals in mind, even as we stay positive on Marco Polo Marine's fundamentals, we must remind ourselves that there could be a chance to accumulate at lower prices. If I were to initiate a long position in Marco Polo Marine now, it would be a hedge. I wouldn't throw in everything including the kitchen sink.

Related posts:
1. Marco Polo Marine: Indonesian Cabotage Law (Part 2)
2. Marco Polo Marine: Insider buying continues.

Donate a book to the needy.

Some might remember that I was an Amazon affiliate. In fact, I mentioned it a few times before in my blogs as well. 

I decided to remove it. It is not as if people come to my blog to buy books, right? Also, it seemed like a lot of work to make a little bit of money which is not my blog's objective anyway.

Now, I am an affiliate of BetterWorldBooks which is a social enterprise. We have the option to buy pre-owned books which could otherwise end up in landfills or incinerators. 

We are helping BetterWorldBooks with programs to train teachers and build schools and libraries.

We are helping them to improve literacy amongst the underpriviledged.

I told a friend all these earlier when she giggled at the fact that for every book sold for $10.00 through ASSI, I get $0.50. So little, she said. 

Of course, some other companies might pay more commission but I like the idea that encouraging readers to buy from BetterWorldBooks is doing some good for other people who need a helping hand in life.

I was sent an email a few days ago to inform me that for every book that is purchased from BetterWorldBooks, a book will be donated to the underpriviledged. 

For every book we buy, pre-owned or new, some less fortunate child will be given a book. 

I really like this idea.

So, if you are thinking of shopping for books for yourself, family or friends, visit BetterWorldBooks to see if they have what you want and you will be doing good at the same time.

Related post:
Recommended books for FA and TA.

Sound Global: Full divestment.

Although its latest quarterly report does not inspire much confidence, fundamentally, this should be a sound business in the longer run.

China is bent on improving its infrastructure, including the improving of sanitation and increasing the availability of clean water supply. Sound Global is a logical beneficiary.

In the shorter term, however, it would be reasonable to expect margin squeeze and higher finance cost which would be a drag on performance. The rather sudden departure of its CFO is also a possible red flag.

Technically, momentum oscillators continue to trend downwards. The breaking of the rising 50d MA to the downside in yesterday's session was a bearish signal. Today, that signal was confirmed as a doji was formed below the 50d MA.

With momentum weakening and signs of distribution, we could see a lowering share price over time and the longer term 100d and 200d MAs tested for support. These are at 58c and 57c respectively.

There could be a better time to invest in Sound Global again some time in the future.

Related post:
Sound Global: Would I buy now?

Young Engineers Academy.

I was never much good at Physics. I didn't understand my teacher in school and I concluded that it just didn't interest me much. I was a F9 student. My teacher even told me I could drop the subject.

However, I was lucky enough to discover a TV series that made Physics interesting for me! I cannot remember the name of the program by now but there was this short elderly Caucasian man with frizzy grey hair who would teach Physics through demonstrations!

Although I found it impossible to understand what my Physics teacher was saying in class, I could understand that man on TV! Then, I also discovered something called "10 Year Series Model Answers". It was so easy to understand compared to that horrible tombe of a textbook by someone called Abbott which was used by my school.

My grades gradually improved and I managed a B3 for my "O" Levels. Did I improve because of my class teacher or because the prescribed textbook became intelligible? No. I improved because I found a teacher and a "textbook" I could understand.

If you have a child who is having trouble with Science, don't immediately think the child is uninterested or slow, it could be that a different approach is required.

A fellow blogger, LP, the blog master of Bully the Bear, whom I know to be a very intelligent and humble person is offering an innovative approach to teaching Science using LEGO bricks. Yes, LEGO bricks!

Young Engineers Academy is the first and only MOE registered school in Singapore that does such a thing. The program is imported from Israel, one of the world's top patent producers. MOE even bought the Excellence 2000 program from Israel for use in our gifted education programs.

Using LEGO to teach children Science offers a non-threatening and fun environment for them to explore and learn through play. This is the philosophy of edutainment! It gets children motivated and enthusiastic about learning!

 

The ideal outcome is for the children to have so much fun playing with the LEGO models that they do not even realise that they are learning!

If this excites you and if you would like to find out more, there is a preview lesson offered at $50. However, readers of ASSI get to attend for free.

Just contact Young Engineers Academy and tell them "AK blogged about this".

Website: www.youngengineers.edu.sg

Facebook: www.fb.com/youngengineers.sg

There is also a 2 day holiday workshop in March. Early birds get a 10% discount (ends 8th March). Tell them "AK blogged about this" and get 15% discount instead.

 

Have fun while learning. I like this!

Hock Lian Seng: Dividend of 1.8c per share.

Hock Lian Seng announced a dividend per share of 1.8c. With EPS for the full year 2012 at 4.9c, we are looking at a payout ratio of 36.7%.

Although dividend is lower compared to the preceding year's 2.0 c per share, the payout ratio has actually gone up. This is because EPS is down some 20%, year on year, compared to the previous year which saw EPS improving 15.1%.

The numbers are not fantastic, for sure.

I did not expect the company to go into industrial and residential property development but they have done so. They are probably somewhat late as after seven rounds of property cooling measures by the government, it could be harder to find buyers even for industrial properties. This could be a drag on its performance.

However, with the Singapore government planning to spend some really big money on the MRT network through 2030, it is unimaginable that Hock Lian Seng would not participate in nor benefit from the exercise. So, it is probably a good idea to stay invested for this reason.

Mr. Chua Leong Hai, the Chairman and CEO, said that they are excited about the prospects for the entire local construction industry with the government's plans to improve Singapore's infrastructure.

Being a Grade A1 contractor in the Building and Construction Authority of Singapore’s (BCA) civil engineering category, it is more than likely that Hock Lian Seng would be successful in capturing their fair share of new contracts.

With share price at 30c, PER is approximately 6x. By this measure, Hock Lian Seng's stock does not look expensive. However, the technical picture hints at ongoing distribution activity. Immediate support is at 29c.

For anyone thinking of buying in, bear in mind that the company's performance could be lacklustre in the near term. Therefore, we cannot rule out the possibility of being able to buy the stock cheaper in the next 12 months.

See press release: here.

Related post:
Hock Lian Seng: 2c dividend per share.

Yongnam: Declared 1.0c dividend per share.

EPS tumbled by more than 30% and yet Yongnam's share price stayed resilient today.

2.17c (2007)
2.79c (2008)
3.27c (2009)

4.38c (2010)
5.06c (2011)
3.45c (2012)

Buying in when I did at 24.5c a share in February 2012 a year ago, it was at a PER of 3.7x, using EPS of 5.06c from the year 2011. A PER of 3.7x is pretty cheap.

Paying 24.5c a share was also approximately at a P/BV ratio of 1.04x. Yongnam's assets are a strong reason why it has a durable competitive advantage. To amass the volume and type of productive assets like Yongnam's is not an easy feat. So, paying slightly more than book value is, I believe, more than reasonable.

Although in the longer term, Yongnam is likely to benefit from Singapore government's commitment to build a more extensive MRT network through 2030, its near term performance could be lacklustre. This might or might not be reflected in its share price.

At 28c a share, PER is now 8.12x. Although not expensive, it is not cheap either.

Anyone buying into Yongnam now is buying into a strong belief that much better days are ahead for the company. Indeed, with its strong track record over the years, there is no reason to believe otherwise.

Technically, however, it is obvious that 29.5c is the immediate resistance and the selling pressure could be quite strong if it should be tested again.

"Outlook for the construction industry both in Singapore and the region remains positive as governments step up on infrastructural spending for projects like roads, railways and airports.

"Yongnam’s strong competitive advantage in the Structural Steelworks and Specialist Civil Engineering infrastructural works is expected to support the Group’s active pursuit of approximately S$1.3 billion worth of new projects in Singapore, Hong Kong, Malaysia, India, Indonesia and the Middle East."

See slide presentation: here.

See news release: here.

Related post:
Yongnam: Broke resistance! 29.5c tested.

Cooling measures for cars!

Some readers might remember my blog post on getting a new car some two years ago. I might not have revealed then but I did not take a loan for that purchase. It was the first time that I bought a car without the help of a loan and this is the way I like it. So, my car is an asset, a depreciating asset but still an asset.

Some asked me why I did not take a loan since interest rates are so low and I could invest my money for higher returns? This is a dangerous way to think, in my opinion. The returns from my investments lack certainty but the required monthly repayments to the lender are dead certain.

Borrowing in order to finance personal consumption is not a good idea, is it? A car is for personal consumption, is it not? Well, sometimes, we really need a car for various reasons and what if we could not avoid borrowing to finance the purchase?

Prior to buying my current car, I would make sure to take a loan of no more than $20,000 to be repaid over 3 years. That worked out to a monthly repayment of some $600 per month which was comfortable for me. So, for example, if the price tag of a car was $80,000, I would make sure I had at least $60,000 which would be made up of the trade in value of my old car and cash.

I do know of people who would borrow 100% against the value of a car and some would take 10 years to repay the loan. I cannot imagine why anyone would want to do that.

So, to protect potential buyers lacking in financial prudence, I believe the government's new measures are in the right direction:

Singapore’s central bank said the tenures of motor vehicle loans will be capped at five years, with the maximum motor vehicle loan amount pegged to 50 or 60 per cent of the vehicle’s purchase price, depending on the Open Market Value.

Some banks here had offered financing of up to 100 per cent of the purchase price for new cars, with tenures lasting up to 10 years. (Source: TODAY online)

Think carefully. If we need to borrow heavily in order to buy a car, can we really afford it?

Earlier this morning, I read an article which reported that the lower and middle income groups may be priced out by the new measures. It is understandable that car dealers are upset as their business could be negatively affected.

Eddie Loo, managing director of CarTimes Automobile, said: "We have a mixture of customers —— those who come and buy (with) cash, but there are definitely people who want a hundred percent loan.

"So it’s almost like 50—50 kind of market that people come into. So to penalise those who need a car and have to fork out 50 per cent of the loan amount, I think, the timing is not very correct.

Do I sense some sympathy from Mr. Loo towards people who need a 100% car loan to buy a car? What do you think? Mr. Loo thinks that "the timing is not very correct". When is a correct time for encouraging financial prudence?

Why not hear what buyers have to say?

John Molina, a prospective car buyer, said: "I want to buy a car, but because of this, I mean it’s impossible for me, or it’s almost near—impossible."

Another prospective car buyer, Mark Lim, said: "For those people who are really very rich, to them there’s no effect —— today I want to buy a Ferrari, for example, I don’t even care about how much is the downpayment."

Mr. Molina wants to buy a car. Well, if he had the money to do so, he could satisfy the want. However, since he finds it "impossible" to do so with the new measures in place, he probably is and was a poor candidate for car ownership.

As for Mr. Lim, since it dawned upon him that he could buy a car without a care for how much is the downpayment if he was "really very rich", why not concentrate on getting rich first?

Read article:
Middle & lower—income groups may be priced out of car market: dealers

Related posts:
1. Bought a new car.
2. If we are not rich, don't act rich.
3. Good debt is always good?
4. Slaving to stay in a condominium.
5. The very first step to becoming richer.

From rich to broke?

Added (1 Feb 2017):


Over the best part of two decades, Johnny Depp has been spending US$2m a month, according to TMG, which is suing the star for an unpaid loan.

The actor is alleged to have forked out US$75 million on 14 homes, including a 45-acre (18-hectare) French castle, a chain of Bahaman islands, several Hollywood homes, penthouse lofts in downtown LA and a horse farm in Kentucky.

Since 2000, the actor has spent US$18 million on a yacht, bought 45 luxury cars and shelled out almost US$700,000 a month on wine, private planes and a staff of 40 people, according to the lawsuit.

TMG says Depp has accrued more than 200 artworks by Warhol, Klimt and other masters, 70 collectible guitars and a Hollywood memorabilia collection so extensive it is stored in 12 locations.

"... when Depp's bank demanded repayment of a multimillion-dollar loan and Depp didn't have the money, the company loaned it to him so that he would avoid a humiliating financial crisis." TMG attorney said in a statement.

Source: CNA





---------------------------------------------------
I have shared this story many times before but I might not have blogged about it and that is how someone I know who was making >$15k a month at work became broke.

This person was quite a few years younger than me but he was very successful in his career and by the time I got to know him a few years ago, I know he was definitely making >$15k a month. 

It could have been >$20k a month but he wouldn't say.

Home was a 3 bedroom condominium in D10 which he bought a few months before getting married. 

He had a Mercedes Benz S something. He was always well dressed and each of his watches (yes, he had more than one watch) would probably have cost me a few months' salary. 

He and his wife would go on annual holidays to Italy, France, Switzerland etc. 

Although he was making a very nice salary, to have been able to have all that he had, he must have been heavy on credit.




When the Global Financial Crisis happened, he lost his job and everything unravelled. 

Of course, at that time, it was hard to sell any piece of real estate for a good price. 

The car would definitely be sold at a hefty loss. 

Pre-owned big name watches would be worth very much less as well.


For him, it was a swift descend from heaven to hell. 

Everyone who knew about it was shocked because he always appeared so confident and so wealthy.

What can we take away from this?





1. Everyone needs to learn financial management skills. 

The younger we learn the importance of financial prudence, the better. 

At its simplest, everyone should learn how to save and grow our hard earned money.



2. Everyone wants a higher standard of living. 

So, often, people end up buying expensive cars, expensive homes and expensive everything. 

However, what this also means is that we have higher costs of living. 

Can we not have a higher standard of living without a much higher cost of living?






3. Everyone needs to think of all the bad things that could happen to them. 

I know it can be depressing but it is necessary. 

How long can we continue in our current lifestyle if we were to lose our jobs? 

What if we or our dependents were to need long term medical care?

Stress test our finances. 

If we cannot pass these tests, we better do something to set our houses in order.






Of course, a very good question to ask would be: "Was he ever rich?"

All of us might have friends or family members who are living beyond their means. 

Of course, sometimes, people need to suffer a fall before they are aware of their financial mortality but I feel that it is our responsibility to at least talk some sense into them, if we could. 

It is as much for their own good as it is for ours.




-------------------------------------------
Johnny Depp's story makes my friend's story sounds like a walk in the park? 

Sorry. 

To me, there is no difference. 

To me, broke is broke.

Related posts:
1. A common piece of advice on savings.
2. Wage slaves should be fearful.
3. "How to tell if you are rich" by Alexander Green.

Tea with Skipper: How much do we need to retire on?

Some time back, Skipper very graciously made me a promise to do a guest blog to share his thoughts on his retirement and what he thinks is sufficient for him in terms of money needed. True to his word, here is the blog:

First some caveats :
 

• What is written should not be construed as advice but merely the planning and thoughts of an individual who has stopped full time employment.
• To stop full time employment, you must not have any outstanding debts such as mortgages for your dwelling or any other item you cannot pay off immediately should the need arise.
• You do not have any dependants or children who are not earning their own living.
• You are of reasonably good health without any major dependency on long term expensive medical treatment.
• You own the dwelling you are living in.
• Circumstances will vary from individual to individual and the list is by no means exhaustive.

 

Now that the assumptions are out of the way, we can seriously look at the expenses you would incur when you don’t have a monthly salary. Before we look at the day to day expenses, some important and in fact necessary expenditure must be in place. In terms of importance, they are as follows :

Insurance

The most important are the H&S policies like MediShield. I cover my wife and me with the Enhanced IncomeShield with Riders. Better still if you can go for one that covers private hospitalisation as well. This is often one of the neglected areas, which will become very obvious when we fall sick and worse still if it is chronic.

Travel insurance if you make occasional trips abroad. Get an annual coverage if you travel often. We cover ourselves with an annual policy at $650 / year per person.

I intend to cancel all my WholeLife policies this year as we do not have any dependants. One policy which I have been faithfully paying for the past 20 years for a $75k coverage will return $38k. For TPD, I will buy a Personal Accident policy.

Annual Expenses

These would include Property Tax, Car Road Tax and Insurance and any other expenses which are particular to each of us.

Monthly and Daily Expenses

These would include conservancy charges, newspapers, PUB, telephone, internet, cable TV, petrol, parking charges, membership dues etc. List your own and tally the total amount.

Contingencies

Household maintenance/repair charges, replacement of appliances, dental treatments, car maintenance/repairs.

Leisure

Travelling expenses, course fees for leisure activities or classes. Set aside a certain amount for these activities. 

For my wife and I, we would need about $5,000 a month without the Leisure activities. We have put a sum of $20k for the leisure activities. So, it would all add up to $80k per year.

To be on the safe side, I have planned for a passive income of at least $100k per year but would prefer it to be $120k to cater for inflation in future. The additional sum can be reinvested for more income to cover inflation.

The $5,000 figure works for me but I am sure many would be able to do with lesser. One of the ways would be to cook at home more and eat out less. It is not only cheaper but also healthier as you can control what you put into the food you are eating. 

Please work out your own figures and add whatever buffers you feel comfortable with.

Skipper, thank you very much for sharing. :)

Read another guest blog:
Tea with EY: Money talk, money laugh.

Related post:
Why a wealthy nation cannot afford to retire?

Stock picking: Spotlight on Marco Polo Marine.

I received a very well written email from a reader with some very good questions. I have a gut feeling that the questions and my reply could be of interest to other readers and decided to publish our emails:

 

Hey AK,

I have been quite an avid reader of your blog since I chanced upon it last year. Your blog has taught me a lot about investing, in particular, fundamental analysis (I was a complete klutz on this before). I believed more in technical analysis back then, but your blog has shown that a good investor has to accord time and effort to both technical and fundamental analysis, in order to make rational decisions. So, just wanna say a word of thanks for showing me the ropes and helping me be a better investor.

I find your analysis very objective and illuminating, and truly I am learning something new with every post you publish. But above all, I am struck by your humbleness and willingness to help other budding investors out with tips to aid our financial journey. I dare say, precious few who are blessed with such good grasp of the market as you are, will be willing to share this with other people.

If you don't mind, I like to ask you a question on fundamental analysis, as I concede I am really terrible at it. Take for instance, Marco Polo Marine, where you have astutely highlighted out its sound fundamentals and strong economic moat. Can I just enquire what made Marco Polo stand out as an outstanding stock to you in the first place i.e. how did it get on your radar? I read that you noticed the high insider trades... is monitoring of insider trades a first requisite step to identifying strong fundamental plays? I'm asking because, there are so many companies out there, and one cannot possibly research everything, so I was wondering what aspect of their fundamentals you will notice first, before it gets on your "monitoring list" for further research? (Btw, I have taken your advice, and taken a closer look at MPM and am now vested in it too - so really wanna shoutout a word of thanks)

Secondly, and still on MPM, I understand that a great portion of the moat comes from the cabotage law. Would you say that actually this makes MPM rather vulnerable to policy uncertainities in Indonesia? For instance, if Indonesian authorities face strong appeals from the Indonesian oil and gas lobby and then decides to rescind the cabotage law - then surely MPM could be, pardon the pun, be left high and dry, its moat all gone. Additionally, is reflagging one's vessels under Indonesian colours a substantial barriers to entry? If not, then we could see supply (in terms of reflagged vessels) coming back into play, eroding any advtg MPM had. Of course, I do still have my eye on the attractive P/E of MPM at 6 vis a vis its peers e.g. Jaya, ASL. But in your opinion, if not for the Cabotage Law, would the P/E of 6 be sufficient reason for you to purchase MPM?

Keen to hear your thoughts on the matter, and once again, thanks for all your insights.

Cheers,
T..

 

 

My reply to T..:

 

Hi T..,

First off, I don't give advice. I am not allowed to. My blog is a place where I talk to myself and I cannot help it if people overhear what I say (as I talk rather loudly). If overhearing me talking to myself has helped you on your own journey, I am happy. ;)

Regarding Marco Polo Marine, yes, it was the continual insider buying that prompted me to dig into the stock. Insiders could sell their stakes for myriad reasons but to increase their stakes and by large amounts, it could only mean that they think the stock is undervalued.

Keeping a tab on insider buying activities is one way we could possibly find undervalued stocks since insiders know their businesses best. Of course, it should not be the only thing we look out for. We would still have to look into the numbers from reports and look at analyses by research houses if they are available.

As for how to generate a "monitoring list", I try to read as much as possible. I like to get a feel of macro economic trends which are helpful in telling us about the health and prospects of different sectors and countries. This is, of course, a top down approach.

This should be followed by a bottom up approach as we look at different companies with businesses in the sectors and countries which are likely to do well. Of course, this is where we examine the income statements, the balance sheets and the cash flow statements. Then, there are all the different ratios.

Having done all these, I would look at the charts as I believe technical analysis provides a window into the collective pyschology of market participants. In a bearish situation, cheap could get cheaper. In a bullish situation, dear could get dearer.

Then, make a decision. Of course, decision making is based on the best knowledge we have at any point in time. That best knowledge must also include the risks involved from a fundamental as well as a technical perspective.

The most important knowledge of all is self knowledge. Can we accept the risks involved? Don't just think of the possible gains. In the event that we should suffer a paper loss, how would we probably react? I always say that a peace of mind is priceless.

Now, all these might make me sound like I am infallible. I am not.

Sometimes, I get lazy. Sometimes, I make mistakes. Sometimes, I get in too early. Sometimes, I miss the boat.

Before I digress further, on your concern that Marco Polo Marine's moat might dry up, I would say it is a pertinent question.

I cannot make any representation as to how probable a change to the cabotage law in Indonesia is going to be. However, if we take the cue from Mr. Lee Wan Tang who probably knows the sentiments of the Indonesian government better than us, then, it is a reasonable risk that we are accepting as investors, isn't it?

Foreign competitors could reflag their vessels if they are willing to take a minority stake in a potential Indonesian counterpart. Whether they are willing to do this, I don't know.

Would Jaya be willing to go into a joint venture with an Indonesian company, taking a minority stake, so that 3 of their OSVs (in a fleet of almost 30) could get back into Indonesian waters? Your guess is as good as mine.

Marco Polo Marine was able to react very swiftly and decisively to the cabotage law because the Lee family are Indonesians and the Indonesian company that Marco Polo Marine took a 49% stake in was their own. Indonesia is Marco Polo Marine's own turf, so to speak.

To answer your last question, although the cabotage law has been fortuitous for the company, without it, Marco Polo Marine's much cheaper valuation against its peers in the sector would be compelling reason enough for me to buy its stock as sector fundamentals suggest that positives are on the horizon.

I hope that I have addressed all your concerns.

Best wishes,
AK

 

Related posts:

1. Recommended books for FA and TA.

2. 5 rules for successful stock investing.

3. Little book of value investing.

4. Be comfortable with being invested.

5. Risks, risks and risks.
6. Marco Polo Marine: Insider buying continues.

New coins for Singapore!

The new $1 coin is beautiful! Actually, all the coins look beautiful!

I don't know about you but just by looking at them evokes a feeling of pride in me. I feel proud to be a Singaporean.

I think the MAS has done a good job here and I can't wait to see the physicals when they start circulating in a few months from now.

"Coins reflect the events, persons or symbols significant to a nation. The new series coins depict local icons and landmarks that are familiar to Singaporeans and reflect various aspects of Singapore's progress as a nation," said Ravi Menon, Managing Director of the Monetary Authority of Singapore (MAS).

Read full article: here.

Asia's 50 Best Restaurants!

Want to know which are Asia's 50 Best Restaurants?

A list of top 50 hottest new restaurants in the region is the result of careful selection by over 900 leading chefs, food journalists and gourmands around the world.

Find out more at: Asia's 50 Best Restaurants!

The Official Financial Services Sponsor for the awards is Diners Club International (DCI).

Over 400 invited guests will attend the event in Singapore including many of the top 50 nominated chefs, the media, VIP guests as well as sponsors.

Why a wealthy nation cannot afford to retire?

CNBC just published an article titled "A Wealthy Nation That Can't Afford to Retire" a few hours ago. Instead of cutting and pasting the entire article which some have done, I would like to pick out a few paragraphs and make some comments.

"According to a latest study by HSBC, the citizens of this country, which has one of the highest per capita incomes in the world, face the grim prospect of running out of their savings almost halfway through retirement as the high cost of living and increased life expectancy eats into their nest egg."

It was not stated how HSBC measured "nest egg". Was it just money in our CPF accounts?

Now, I believe that anyone who is preparing to retire with just money from his CPF accounts need to be shaken by the shoulders (quite firmly). Of course, the money wouldn't be enough.

"More than half of the 1,000 Singaporeans interviewed for the survey said that either they were not adequately prepared or not prepared at all for retirement as they expected to continue working beyond the age of 65 to be able to afford their desired lifestyle."







So, more than 50% were not adequately prepared or not prepared for retirement. The rest were adequately prepared? This was just a measurement of sentiments on the street, wasn't it?

What people feel is one thing. What is the reality? How many are actually adequately prepared for retirement? How do we measure this?

Further on in the article, I believe there was a chance to do something more constructive when they interviewed a Mdm Janice Tan. However, it didn't happen. Let me try here:

"Tan and her husband are currently paying for the education of their two children, including a 21-year-old daughter studying in Perth, Australia. While Tan, an administration professional, hopes to retire soon, she says she knows it might be another 10 years before that happens."

Mdm Tan, if you hope to retire earlier, why did you send your 21 year old daughter to Perth to study? I do not know which course your daughter is doing but a quick check revealed that the annual tuition fee for Economics is A$22,500 in Murdoch University. Over a three year period, if fees stay constant, you would have spent A$67,500 on school fees alone for her!

Would it be too much to assume that a three years stay in Australia for your daughter could cost some S$160,000 to S$200,000 in total? That is a significant amount of money. (A$1.00 = S$1.28)







"With retirement savings drying up at a time when Singaporeans are most vulnerable to health problems, funding medical bills could become a big burden, HSBC said. Tan backed that sentiment, saying that medical bills from a motorcycle accident that her husband was involved in last year have been a drain on their finances."

Mdm Tan, did you and your husband get a good H&S insurance policy with a rider? I hope you have policies that pay out in case of critical illnesses. I also hope that you have policies that protect your earned incomes too as you seem to need them still.

Articles such as this one from CNBC do little other than to sensationalise issues. Unfortunately, few would bother to ask the questions which matter. Some would instead use such articles to fan the fear and resentment on the ground.







Yes, costs are rising and this is not about to change. Is complaining about rising costs going to change anything?  Is fearing rising costs going to change anything?

We should, instead, ask if we are doing enough to prepare for retirement in the face of such challenges.

I would suggest a critical look at our lives and to examine ways to increase income and reduce expenses. While we are at it, look into getting good insurance policies to safeguard our earned incomes (if we still need them) and to take care of expenses related to H&S as well as critical illnesses.

Related posts:
1. Millionaire or not, plan for retirement.
2. Enhanced incomeshield for my mom.

Read CNBC article: here.

Marco Polo Marine: Insider buying continues.

Mr. Lee Wan Tang, Chairman of Marco Polo Marine, purchased 1,000,000 shares at a price of 42c per share yesterday. This was disclosed in an announcement today.

Mr. Lee's direct and deemed interest in Marco Polo Marine increased to 59.52% (202,811,374 shares) with this latest purchase. He has, in slightly more than a year, since December 2011, increased his interest in the company by about 9,000,000 shares.

Conventional wisdom tells us that a high level of insider ownership suggests that the management's interests are aligned with shareholders'. When there is a meaningful increase in insider buying activity, shareholders should be more than just interested.

Insider buying at 42c a share could explain why those of us who have been waiting to collect at 41.5c or lower have not been able to get our orders filled. Technically, immediate resistance is at 43c, the last high.

Nobody wants to buy at resistance and this is probably why volume has reduced which suggests an overall picture of caution.

Insiders probably don't care much for technicals and using insider buying activities as a guide for short term share price performance is probably not a good idea. However, using the same in our longer term investment decisions could prove to be more fruitful and for those of us who bought some at 42c a piece, we could take comfort from knowing that Mr. Lee did so too.

Conservatively, I value Marco Polo Marine at 50.5c a share which is 8x PER based on the EPS of last year. They are likely to see higher earnings this year. So, keeping 8x PER as a guide to a fair valuation, 50.5c could turn out to be an understatement.

See announcement: here.

Related posts:
1. Marco Polo Marine: Indonesian Cabotage Law (Part 2).
2. Marco Polo Marine: Still cheap.

Soup Restaurant: Special dividend declared.

When Dian Xiao Er became independent of Soup Restaurant last year, the expectation was that Soup Restaurant's earnings would be hit badly. If we look at the year 2011, 42% of Soup Restaurant's profit was contributed by Dian Xiao Er.

In 2012, although profit from continuing operations, net of tax, jumped 126.9% year on year, removing the contribution by Dian Xiao Er reveals a more modest increase of 59%. Even so, we should take note that the performance of Soup Restaurant was boosted by a one time gain from the divestment of Dian Xiao Er to the tune of $3.4m.

If we examine my initial motivation to invest in Soup Restaurant last year, a big part of it was because I thought the probability of a special dividend being declared was quite good. Of course, since I like Soup Restaurant's food and would patronise their restaurants monthly, there is the benefit of getting a discount as a shareholder during my visits too.

Well, the special dividend did not happen then as the management decided to plough the money back into the business. However, since then, I have received dividends twice and this would be my third round of dividends.

Total declared this round:
Interim dividend: 0.35c
Special dividend: 0.8c
Final dividend: 0.35c

As some would say "third time lucky" and a special dividend has been included this time round. A total dividend payout of 1.5c translates into a dividend yield of 10.95% based on the high of 13.7c per share touched this morning. Without the special dividend, dividend yield would be a less exciting 5.1% but still not too shabby.

See financial statement: here.

Related posts:
1. Soup Restaurant: Special dividend?
2. Soup Restaurant's S-card.

Oz The Great and Powerful!

I have always enjoyed movies by Disney. I guess I am still a little boy at heart. ;-p

Well, a new Disney movie is coming to town!

“Oz The Great and Powerful!”

When a small-time circus magician was transported from dusty Kansas to the vibrant Land of Oz, he thought he had hit the jackpot until he met the three witches who were not convinced he was the great wizard everyone had been expecting!

I have always enjoyed the messages embedded in Disney's movies. This movie is probably no exception as the magician transformed himself not only into a great and powerful wizard but into a better man too!

“Oz The Great and Powerful” screens in Singapore on the 7th of March 2013.

Visit the official website and you could also take part in a contest to win exclusive movie premiums at:
Disney's "Oz The Great and Powerful!

Yongnam: Broke resistance! 29.5c tested.

On 14 February, in a reply to a reader regarding my take on Yongnam, I wrote:

"My view? Technically, positive momentum is very strong and there is a chance that resistance could be taken out if this keeps up."

Hot on the heels of that statement, the share price broke resistance at 28c today on the back of heavy volume to touch a high of 29.5c. Spooky!

Of course, based on my observation that Yongnam's share price seems to move in bands of 1.5c, 29.5c is the new resistance to watch. 28c is the new immediate support.

On 15 February, in another reply, I wrote:

"Although I don't have a working crystal ball, I am almost sure that Yongnam would hit 31c a share in the next 12 months. There, I know I shouldn't say things like this but I am not WB. So, indulge me."

Now, if 31c were to be reached this week, it would really be spooky!

Related post:
Yongnam: Partial divestment at 27.5c.
(See the comments section.)

China Minzhong: Sharply up! Going higher?

Mr. Market certainly likes the news that Indofood has become a substantial shareholder of China Minzhong. Like a child on a sugar high, its share price rushed upwards today.

I did another partial divestment as share price closed the gap at $1.20. This tranche which was divested had shares which were purchased in June last year at 55.5c a piece. So, the ROI is pretty high.

Together with the tranche of shares I divested last month, I have in total sold about 60% of my investment in China Minzhong. With the gains from these divestments, it also means that my remaining investment in China Minzhong is "free".

Will China Minzhong's share price continue to rise tomorrow? Only Mr. Market has the answer.

If share price should progress higher, watch those golden ratios.

138.2% is at $1.30.

150% is at $1.37.

161.8% is at $1.435.

Related posts:
1. China Minzhong: Indofood is a new substantial shareholder.
2. China Minzhong: 2Q FY2013 stellar results.

SIM Open House 2013.

Thinking of pursuing a Diploma, a Bachelor’s or a Master’s Degree?

You might want to consider going to SIM Open House 2013 and learn more about what SIM Global Education (SIM GE) has to offer.

Partnering 11 international universities that include the University of London, RMIT University, University of Manchester and University of Birmingham, SIM GE offers more than 50 full-time and part-time programmes.

Also, find out more about the scholarships available!

Be entertained and inspired as current students put on an exclusive showcase of music, dance and martial arts. Go on a campus tour of SIM Headquarters and hostel facilities!

Help is also at hand to assist parents who want to learn how to guide their child in making an informed education choice.

Start by visiting online:
SIM Open House 2013.

A banker's advice on retirement income strategy.

This is from the blog of a reputable bank providing advice to retirees:

... Start by figuring out how much spending money you will need from your portfolio over the next five years. Let's say you are using a 4% portfolio withdrawal rate, which means you plan to spend a sum equal to roughly 20% of your portfolio's current value over the next five years.

You might take that 20% and stash it in conservative holdings like savings accounts, certificates of deposit and short-term bonds, so you know that you have the next five years of anticipated spending covered, no matter what happens to the rest of your portfolio.

You can then invest the other 80% of your nest egg for total return using an appropriate mix of riskier bonds, U.S. stocks and foreign shares. You will want to consider carefully what combination of stocks, bonds and other asset classes to buy, because each has its own unique benefits and risks, and also how to diversify within each of these asset classes.

In years when the markets are kind, you might cash in some of your gains and use it to replenish your pot of spending money, so it once again holds enough to cover five years' worth of portfolio withdrawals. What if the markets aren't so kind? You could sit tight and see if the markets recover. Thanks to your five years of spending money in more conservative holdings, you should be able to go that length of time without touching the 80% of your portfolio that's invested for total return.



AK71 says,
"Sailing into the sunset should not be sailing into the dark."

Basically, it is advising retirees to take out what they need in spending money over the next five years and invest the rest in a mix of riskier bonds (junk bonds?) and equities. In case Mr. Market is not kind over the next five years, these retirees are still OK because they would have already put aside enough spending money for that period of time.

I want to draw attention to the words I have underlined. These are basically the ideas I have problems with.

Is securing five years of spending money without taking into account average inflation enough to provide a peace of mind for retirees? What is an appropriate mix of riskier bonds etc. and are riskier bonds even appropriate? Sit tight and see if the markets recover if things don't go well? That sounds like plenty of hope analysis to me.

I am most uncomfortable that retirees should be mostly invested and 80% in this case. What if the markets should go into a protracted downturn? Being retirees, these people are less likely to have the ability to fill up another war chest with earned income. Shouldn't they have a war chest ready just in case Mr. Market suffers from a bout of manic depression?

I don't have a Degree in banking or wealth management. I am just another retail investor sharing his concerns using what he feels is common sense.

Please forgive my ignorance.

Related posts:
1. Be cautious even as we accept higher risk.
2. A letter from a 66 year old retiree.
3. If we want peace, be prepared for war!

Marco Polo Marine: Indonesian Cabotage Law (Part 2).

Some of the best kind of information we can collect regarding a company's prospects is from revelations by other companies in the same industry. I would like to share something I came across in NextInsight on Jaya Holdings which was published on 12 February 2013.

It was revealed that Jaya Holdings, from chartering its vessels to the O&G industry, "reaped US$7.8 million net profit compared to the paltry US$0.4 m in the same quarter a year ago."

"The jump in chartering net profit came from Jaya's charter fleet enjoying an 80% utilisation rate in 2Q2013 versus 62% a year earlier.

"The higher demand came with higher averge daily charter rates: US$12,685 versus US$9,222.

"The seas, however, have turned choppy. Jaya is expecting its fleet utilisation rate to sink somewhat in the current 3Q2012.

"A key reason is the implementation of (long-deferred) cabotage rules by Indonesia effective 1 Jan this year, which has led to the cancellation of charters for 3 Jaya vessels in Indonesian waters. That's 3 out of 28 vessels in Jaya's fleet."

CEO Venkatraman Sheshashayee revealed that chartering vessels in Indonesia was providing a decent rate of return on investment. However, now, "the rates there are probably climbing upward because now there is a serious shortage of vessels there."

Jaya's revelations bolster my strong believe that Marco Polo Marine's economic moat has strengthened and that it is positioned to benefit from higher charter rates in Indonesia this year.

The writing is on the wall and early investors in Marco Polo Marine will benefit.

To read the full article, visit NextInsight:
JAYA HOLDINGS: Strong Chartering Profit in 2Q

Related post:
Marco Polo Marine: Indonesian Cabotage Law.

China Minzhong: Indofood is a new substantial shareholder.

The reason for China Minzhong's trading halt in the last session has been published.

Indofood is paying 91.5c per share to take up a 14.95% stake in China Minzhong. Indofood is, of course, a leading food producer in Indonesia and some of us are familiar with their instant noodles in Singapore.

This surprise development is strongly positive for China Minzhong as they receive funds for further expansion of industrial farming facilities which will raise productivity and lower costs, making them more competitive. Industrial farming also means greater accountability and ease of audit which in turn should raise investor confidence.

There is also expected synergies between Indofood and China Minzhong, both established food companies in their respective countries of Indonesia and China which have huge populations which, of course, have to be fed.

However, before we send in the lion dancers and drums, Indofood is buying into China Minzhong through the purchase of new shares to be issued. So, unlike what happened in December last year when Olympus Capital Holdings sold its 10.3% stake for 80c a piece to various institutional funds and HNWIs, Indofood's buying into China Minzhong is dilutive for current shareholders.

The new shares which are being issued at a discount of about 10% from market price will water down the valuation of China Minzhong's shares by about 13%. On a per share basis, everything else remaining constant, we would see a lower EPS and a higher PER, for instance.

So, from a valuation perspective, if Mr. Market should go into protest mode on Monday and sell China Minzhong's shares at 90c a piece next week, it is actually not any cheaper than buying the shares at $1.03 this week.

If Mr. Market should go into a buying frenzy because of this development and push the share price to gap close at $1.20 per share, we should note that $1.20 is actually the old $1.38 from a valuation perspective. So, if we had a target price of $1.38 to sell, we should sell at the gap close of $1.20.

Of course, if we believe that this tie up will add fuel to the growth trajectory of China Minzhong, then, a higher PER becomes more acceptable. If Mr. Market believes this, it will be reflected in a much higher share price.

Unfortunately, there is no way to tell in which direction and by how much share price would move. We can only tell what this latest development means for the valuation of the stock.

See press release: here.

Related post:
China Minzhong: 2Q FY2013 stellar results.