No free lunch but what about breakfast?

Today is National Breakfast Day and I went to McDonald's to receive a free Egg McMuffin!

There were ushers at the door who directed me to join a queue which was rather fast moving. Within 5 minutes, I received my free breakfast!

Yummy!

Learn more about the event: here.

Know what is good for us (UPDATED).

I was reading the weekend edition of The Business Times and read an article which mentioned a survey done by the Monetary Authority of Singapore more than a year ago on banks and insurance companies. 

It was found that:

1. 50% of investors were not asked about their financial objectives or risk tolerance.

2. 48% of investors were not informed of fees and charges.

3. 40% of investors were not asked about their investment experience.

4. 30% of products recommended to investors were not suitable for them.


Have things changed? 

I very much doubt it.







Why do I say this? 

I still receive cold calls from insurance companies and tele-marketers, representing banks, promoting insurance and investment products. 

Usually, these callers would launch right into why a product had good features, good potential returns and was good value for money.





A call I just received last week from an insurance agent whom I don't know from Adam was a good example of this. 

The caller did not even make an effort to understand me as a client. 

He simply made certain assumptions. 






Although I was unusually patient with him, I finally told him that I would tell him what I was looking for in a product and if he had anything which met my requirements, let me know.

To his credit, before he put down the phone, he honestly told me that he put his own money in REITs. 

I guess he realised that there wasn't a chance that I would buy any of the products he proposed to me. 

Revelation!





Before we buy anything, we have to make sure that it is good for us and how do we know if it is good for us? 

We have to ask the right questions because we cannot depend purely on the goodness of others to do this for us.






Related posts:
1. Inflation adjusted retirement income plan.
2. Why a wealthy nation cannot afford to retire?

Do not love unless it is worth the loving.

We often hear that we should not fall in love with stocks.

What does this mean?

"The most important thing to realise is simple: The stock doesn't know you own it. All those marvelous things or those terrible things that you feel about a stock, or a list of stocks... are unreciprocated by the stock or the group of stocks." - Adam Smith

Basically, don't love things which can't love us in return. However, I am only human and cannot avoid loving and hating unappreciative things. 

I have no doubt that I made many decisions before based partially on my emotions. Could I continue to make emotional decisions? As long as I remain human, I could, of course.

Recognizing that we are all emotive is an important step in becoming better investors. The challenge is in how to be more rational in our decision making process.

Remembering that we should not fall in love with our investments, a friend sold his entire investment in an S-REIT which he feared he was falling in love with only to see its unit price rising higher. Now, what can we say about this? There are probably many people out there who love this S-REIT even more. This brings to mind another saying and that is we do not know we have a good thing until we lose it.

Although there is definitely wisdom in saying that we should not fall in love with our investments, I think that it would be less misunderstood if we say we should not blindly love our investments. Being blindly in love with our investments could see us holding on even when there is a deterioration in fundamentals.

Regular readers know that I have reduced my exposure to Singapore real estate by selling my properties. Readers would also know that I cautioned against being too optimistic about real estate and S-REITs as prices have appreciated a lot, yields have compressed significantly and the low interest rate environment is unlikely to last for many more years.

Then, why do I still have significant investments in certain S-REITs? Am I in love with these S-REITs? Perhaps, I am. However, I like to think that I am not blindly in love with them. I like to think that they are still worth loving.

So, what makes them worth loving?

They are still worth loving if they provide me with good recurring income. They are still worth loving if they take care of their health. They are still worth loving if they are growing stronger, day by day. In short, they are still worth loving if they give me joy and not angst.

Here are links to some of my past blog posts on S-REITs which show the way I think:
1. First REIT: This one is for keeps.
2. AIMS AMP Capital Industrial REIT: Making money.
3. Saizen REIT: Why did I buy and would I buy more?
4. LMIR: Divested 42.5% at 52.5c.
5. LMIR: Too cheap to sell.

Want to teach yourself Fundamental and Technical Analyses to be a better investor?
See: Recommended books for FA and TA.

Health screening in a polyclinic.

I have been hearing about people in my age group suddenly dying from strokes and heart attacks. Also, in recent weeks, I heard of people younger than me who were diagnosed with heart problems. 

The last straw that broke the camel's back was learning that a friend who is several years younger than me and physically fitter being diagnosed with some worrying health issues very recently.







I will be 42 this year and, perhaps, it is time that I exercise my privilege as a Singaporean to receive subsidised healthcare! I searched for Singapore polyclinics online and found this:

Our patients are offered the Opportunistic Health Screening (OHS) Service if they are aged 40 years and above, have no known personal history of diabetes, hypertension or dyslipidemia (high blood cholesterol), and have not been screened for these conditions in the past 12 months.

OHS screens for conditions such as obesity and major coronary disease risk factors. Supported by a computer-based health screening system, patients obtain their health screening reports and are counselled in the same session. 

More information: here.







Yesterday, I called the hotline and was impressed with how easy it was to make an appointment.

Today, I went to the polyclinic at the appointed time and I was impressed!

The interior was bright, well ventilated and clean. It didn't feel like a clinic or a hospital at all. I thought it felt like a resort in Bintan.

I scanned my IC and was given a number which was called within 5 minutes at the registration counter. Then, I was asked to go one level up where I was attended to within 5 minutes too.

The whole experience was very pleasant and the price tag did not cause me a heart attack. How much did it cost? Only S$12.00.






I encourage all Singaporean readers who are eligible to take advantage of this value for money service offered by the polyclinics. I am glad I did.

Related post:
Enhanced Incomeshield (H&S) for my mom.

Tea with Matt: Customer service quality of two insurance companies.

This is the second article contributed by a reader, Matt, who used to be the owner of an SME.

As many of us probably have whole life insurance policies, Matt's recent experience is of interest to us. Well, it is definitely of interest to me since I have one policy from AIA and one from Prudential. The former was bought some 16 years ago while the latter was bought some 25 years ago. There will come a day when I will have to surrender them.

As Matt did not reveal the names of the two companies, we can only wonder at their true identities. Go ahead and read about his experience and, perhaps, try guessing which two companies he visited.

Recently, I terminated two Whole Life Insurance policies after having paid the premiums for 20 years. As is the same for most of us, the original agent who serviced me then was no longer in the business and it was practically left to me to speak and deal directly with the companies. That was when the level of customer service I received was a revelation. Let’s just name the companies A and B.

Company A

I called up the agent who was listed as the agent servicing me to enquire how I should go about terminating the policy. The disinterest was felt from the way the answers were given. Of course she probably did not receive any commission from my policy after 20 years but to her credit, she sent the form to me a week later. I asked whether I should send the forms back to her and she encouraged me to go to the office directly so as to get the money faster.

Fine, I did that and submitted the form with the original policy at the concierge counter. A lady at the counter took the form and original policy from me after looking through. I enquired how long it would take to process the documents. "Oh, we will call you" was all that she answered. I thought, "They are an MNC. Surely, they will call me."

Ten days later, there was still no phone call from the company and I thought it was strange to take so long to process the documents. So I went back to the company and asked for an update. I was given a queue number and directed to see a CSO. She checked my IC and told me that I had missed out submitting a form. She printed the letter and showed it to me.

 

The letter was dated one day after I submitted the document. I told her I did not receive the letter. The initial response was, maybe, it was the postal service’s mistake. She promptly printed another set of forms and got me to sign them.

 

My signature was compared to the one I had used in the original policy. She told me that there was a slight difference in my signatures. Of course there was, signatures could have changed in 20 years, whaaat (Singlish)!

 

She asked me to try and sign as similarly to the original as possible or else the auditors might question them on the discrepancy. Huh? Anyway, not wanting to give her a hard time, I tried my best to reproduce my signature used 20 years ago.

Then, I was told that the cheque should be ready the next day. Not wanting to take a second chance of not receiving the cheque, I told her that I will personally collect the cheque two days later. The very next day, lo and behold, the letter which was supposedly sent to me was in my mailbox, a full 2 weeks from the date it was supposed to have been sent.

Not wanting to jump to conclusion, when I went to collect the cheque, I took the letter and asked the CSO who served me earlier and asked her whether she initiated the sending of the letter after I told her I had not received the letter. She said that she did not. So it was not the postal service’s fault after all!

This episode set me thinking on the deficiencies of the customer service in this company :

• When forms are handed in, no acknowledgement or reference number was given to confirm that documents were received. I did not think of this earlier but after going back home after submitting the documents, my wife asked me whether I had asked them for an acknowledgement. I told her that they are a MNC and should have a system. She looked at me incredulously and told me that I should always ask for an acknowledgement, MNC or SME, especially when handing over original documents.

 

• Why did the letter that I was supposed to received the next day after handing over the documents reach me 2 weeks later? Compounding the effect was the fact that the agent did not send me the form and the concierge did not spot it as well when she checked my documents at the point of submission. Come to think of it, their premium due notices also reached me after the due date. I told the CSO that there must be something wrong with the way and timing of the company’s letters being sent out.

 

• Only the cheque was given without any other documentation such as a copy of the termination submission form.

 

Company B

On the day I went to seek an update on the status of the termination at company A, I also went to company B to submit a termination notice. I was all prepared to demand that they handle my submission properly and promptly as well. What a surprise and a refreshing reception I received when I was at the front desk.

Within 2 minutes, I was sitting in front of a CSO who went through the details with me and explained what the process entails. She filled up my forms and got me to sign the documents. I asked her whether my signature is different from the original policy. Her answer was that it did not matter. She had prepared a form for me to sign that declares that my signature is as the current one.

 

Next, she offered to deposit the cheque for me into my bank account so that it would be banked in as soon as the cheque was issued that afternoon. All I had to do was just to sign a form confirming my bank and account number.

 

She also offered to send me a copy of the documents once the cheque was out. That afternoon, the cheque was deposited into my bank account and the very next day, I received a mailed copy of the documents as well as a copy of the cheque and deposit slip!

Two days later when I went to collect the cheque from company A, my wife came along and we went over to company B to enquire on her policy. The front staff checked her IC and told her on the spot what the surrender value was without having to even see a CSO and it took less than 1 minute. My wife was impressed, especially after the service I had received at company A.

Was it a coincidence that company B’s policy performed a lot better than company A, monetarily wise, at least as far as my policies were concerned? I am comparing apple to apple here since both policies had the same insurance coverage face value and were bought within one month of each other twenty years ago.

Needless to say, I filled up a customer service form and gave the CSO an excellent rating. I normally would decline to fill up such forms.

 

Related post:

Inflation adjusted retirement income plan.

Are public housing prices crashing?

We would remember a recent newspaper headline which announced that the government was looking at how to reduce BTO flats' prices by 30%. Wah! 30%?!

What would happen to all the people who bought their BTO flats recently? Should potential flat buyers wait to buy cheaper flats in future? Are we going to see public housing prices crashing?

I just read Minister Khaw's blog on the matter and he said:

"...if we offer such a low-cost housing option, it must come with restrictions to differentiate it from the existing BTO flats...

" Obviously, if we offer such an option, these restrictions of a longer minimum occupation period, or shorter lease or no resale in the open market will only apply to the new buyers, and will not apply to existing flat owners..."

I personally feel that a tier of meaningfully less expensive public housing is a good idea. People would have a choice of whether to buy a cheaper flat which they could not sell in the open market for a profit or a more expensive flat which they could possibly make money from in future.

The motivation for having less expensive public housing made available should be to meet the housing needs of certain groups of Singaporeans. I agree that these flats should not become money making tools for their owners.

Read Minister Khaw's blog:
Sleepless over possible HDB price reduction.

Inflation adjusted retirement income plan.

I like easy-to-understand financial products. I am not very good with numbers and I got flummoxed by complicated structured deposits offered by the banks before. 

Totally confusing.

I also get very confused by complex insurance products. My insurance agents know not to offer me anything that is too complicated. 

I usually tell them not to call me and that if I need something, I will call them.





I have bought products from AIA, Prudential, Great Eastern Life, NTUC Income, Aviva and AXA before and many are still in force. There was UOB Life as well but it was bought over by Prudential.

Today, I came across a product by AXA which claims to be an inflation adjusted retirement income plan. 

Sounds good, doesn't it? 

Intrigued, I decided to have a look see.

However, one look and the initial good feeling is gone:

OK, if you think I am going to start on how we can get better returns by doing our own investment, that is not what I am going to do. I am just going to share an observation which is I just don't think that the product lives up to its claim of being inflation adjusted.

In the example, the product says that there is a 3.5% increase in guaranteed annual income payout year after year from age 65 to 80 but does it provide us with inflation adjusted returns on our capital? 

This is my first impression when someone tells me that a plan is inflation adjusted.

In the example above, a total of $285,300 was contributed over 15 years or $19,020 per year. 

Then, there is a waiting period of 5 years (accumulation period) before a yearly payout over the next 15 years kicks in.

Almost 47% of the payout is non-guaranteed. The guaranteed portion amounts to S$463,500.





Assuming that inflation is lower than 3.5% per annum and that it is a more normalised 3% per annum, that $19,020 paid at age 45 would have to be $34,352.22 to keep its purchasing power intact at age 65. 

In the example, age 65 is when the first guaranteed annual income is received. Instead of $34,352.22, it is only S$ 24,000!

Each payment from age 65 to 80 would have to be at least $34,352.22 in order not to lose any purchasing power, year on year.

The nice chart with the lengthening bars over the next 15 years hides the fact that from age 65 to 75, the purchasing power of the payouts in those years are much reduced. 

Only at age 76 would the guaranteed annual income exceed $34,352.22. 

So, the first 10 years of guaranteed annual income are not able to compensate for inflation!





I don't need the annual payout to grow 3.5%. To me, that is a gimmick to give an appearance that the payouts are inflation adjusted. Just give me $34,352.22 every year as this would truly be inflation adjusted, assuming a 3% inflation rate per annum.

The total guaranteed annual income over a 15 year period should, therefore, be $34,352.22 x 15 or $515,283.33 to make the offer palatable. 

This is 11.17% more than what is guaranteed by the insurer.





Of course, they can say that there is a non-guaranteed component of $407,260 which could be paid out at age 80. 

Well, not only is 80 a long way to go, we need greater certainty at retirement and non-guaranteed just doesn't cut it.

This product is a no go for me.

Related posts:
1. Will I retire happy?
2. Good wife worries...

Ambassadors of financial freedom.

There is this section in The Business Times called "Young Investors' Forum". This is sponsored by Citibank and is targetted at young adults and tertiary students. However, I wonder how many young people read The Business Times?

Now that I have asked this question, I also wonder what is the proportion of young adults and tertiary students in ASSI's readership profile?






We all know that the earlier we start our journey to financial freedom the better it is. Also, there is really nothing smooth about the journey. It is, in fact, rather bumpy as we fall and pick ourselves up again (and again). It also entails sacrifices, many sacrifices.

Everytime I hear a story of some young person who is ruined financially, I would wonder if it was something avoidable. Very often, it was avoidable. If we could help people be more prudent financially, we would be doing good and these people would be better off.






"Today, i counted my life saving."

Today, The Business Times has an article which has some interesting numbers but what proportion of its target audience did it reach? Although ASSI's readership numbers are a small pool compared to The Business Times', I will do my bit.

This is taken from the article:

Saving does not simply help one to accumulate money; it signifies the beginning of one's financial journey.

Realities today further drive home the need for young Singaporeans to save and spend wisely.

A diploma holder earns a starting pay of about $2,000 while a university graduate earns about $2,800 on average.

Using current interest rates for paying a 30 year housing loan and a 5 year car loan, owning a $300,000 4 room HDB flat and a $130,000 Corolla would require a monthly instalment payment of about $2,400!








In such a climate of high housing and car costs, raising a child becomes an even tougher financial decision to make. TheAsianParent last year estimated the cost of raising a child from infancy to 21 years of age to be at least $340,000, not considering inflation.


Although I have blogged about savings and its importance many times before, these numbers are a reality check for anyone who is starting life as a working adult and planning to start a family together with all the attendant expenses. However, how many people who should read the article would have read it?

If we are thinking of buying a property, a car and having children, we should look more carefully at our income and expenses. If we are not saving yet, start saving. If we are already saving, check to see if we are saving enough. What is enough? This would depend on what we want now and in the future. There is, therefore, no one size fits all answer.

The difficult thing for ASSI to do is to reach out to people who have not even started to think about the journey to financial freedom. How do we reach out to these people?







Financial freedom is not a competition. Everyone who achieves financial freedom is a winner. No one is a loser on this journey. There is no fear that having more people on the journey would lower the chances of success for everyone. In fact, the opposite is true.

So, my message to readers is to be ambassadors of financial freedom. Even if the horse would not drink, at least try our best to bring the horse to water. 

We could be saving more than one life if the horse eventually drinks.

Related posts:
1. The very first step to becoming richer.
2. Retiring a millionaire is not a dream.
3. Rich Dad, Poor Dad: 2 are better than 1.

Make more money, do good and pay less income tax.

I filed my income tax return for the Year of Assessment 2013 (YA 2013) online.

Although I received more income last year, I will be paying less income tax for YA 2013 compared to the year before. Incredulous? How could this be? Could it be true?

Regular readers would know that a large portion of my income is passive and non-taxable. So, to pay less income tax for YA 2013 compared to the year before, did my earned income from employment decline? Nope, it remained more or less the same as the year before although the probability that it could decline in future exists.

The lower than expected estimated income tax for YA 2013 is because of donations I made to 6 charitable organisations last year which enjoy 2.5x tax deduction and the 30% personal income tax rebate I am eligible for from the government.

Of course, I am pleased to be paying less tax but I am happier still that I am doing good with my donations to several recognised charities in Singapore.

If we can afford it, let us be charitable and donate to the less privileged. We will also pay less income tax in the process. Everybody wins. Sounds good, doesn't it?

If you are wondering about the personal income tax rebate, the following table is taken from IRAS:

Age as at 31 Dec 2012	Personal Income Tax Rebate for the Year of Assessment 2013
Below 60 years	30% of tax payable, subject to a cap of $1,500
60 years and above	50% of tax payable, subject to a cap of $1,500

What I have also been doing every year is to contribute to my SRS account to the maximum amount allowed. This has been a big help in reducing the amount of income tax payable. I would encourage anyone who is currently paying income tax and who does not have an SRS account to consider starting one.

So, is it possible to pay less income tax while making more money and doing good? Yes, of course!

If you tell your family and friends about this and they don't believe you, share or like this page and tell them that if AK71 can do it, so can you! Believe in yourself.

Related posts:
1. Counting our blessings.
2. SRS: A brief analysis.
3. 2012 full year passive income from S-REITs.

Marco Polo Marine: Shipyard and Indonesia.

Why did Marco Polo Marine start a shipyard in 2005?

CEO: The shipyard is a support business with ship repair, conversion and maintenance... As we continue to grow..., we require more vessels... hence the natural progression into shipbuilding.

... the shipyard will remain focused on ship repair and conversions... the ship repair business is one that is seasonal but non-cyclical. If you own a ship, you are required to conduct mandatory servicing and maintenance.

Keppel Corp and Sembcorp Marine focus on shipbuilding and ship repairing of the larger vessels. We on the other hand target the medium and smaller vessels that take up most of the population of the ships around this region.

What are the prospects for Marco Polo Marine's core business, tug and barge operations, in Indonesia?

CEO: Indonesia produces over 200 million tonnes of coal every year... 36 new plants are currently being built in Indonesia and they have the combined capacity to generate over 20,000 megawatt of electricity.

... there are over 100 independent power plants in Indonesia, 80 to 90 additional tons of coal will be needed domestically in the near future.

How are you going to move the coal to the power plants? We need more tugs and barges because large vessels cannot manoeuvre around the rivers of the Indonesian mine sites... the demand for Indonesian flagged vessels will remain strong at least for the next five to six years.

Source: Marine Money Offshore.

Related post:
Marco Polo Marine: The CEO speaks.

Tea with AK71: Cute snack from Japan.

Cute packaging:

Strawberry flavoured chocolate snack. Cute!

From where? Japan.

Now, it is in my tummy. Burp.

Tea with Matt: Career path.

This article is contributed by a reader, Matt, who used to be the owner of an SME. Older readers might find themselves nodding their heads as they read the article while much younger readers might be somewhat incredulous. The article is as much an observation about life as it is a piece of good advice to anyone still in school or about to join the workforce. 

For most people, pursuing their passion is a luxury and if at the same time they can make a living out of it would truly be rare indeed. In our younger days, when we did not have to worry about earning a living, we were mostly idealistic. Many would project what they would be doing and earning when they graduate.

Reality sets in when we secure our first job and have to go through the grind day in and day out. Many begin to wonder what happened to all the good life graduates are entitled to after studying for so many years. Aren’t graduates supposed to be doing better than the average Joe ? Welcome to the real world where opportunities do not distinguish between the level of education you have gone through. Otherwise, the Forbes list of richest people in the world would all have Ph Ds.

 

Life is straight forward. If you cannot get the job that you love, then you better learn to love the job that you have. Otherwise, you will go through life miserably if you have to do the job for years to come. Learn more about the job and how you can do it better. Improve your skills so that you can move higher in the hierarchy and hopefully be paid more.

 

Meeting up twenty years later with my cohort from university showed a diversity of careers and success stories. The ones with better results, First Class Honours, were mostly in the academic field as most went for their Ph Ds. The surprising lot were those who were very active in ECAs and most had general passes but still graduated and are doing well in business. These were the bunch the rest of the class thought were wasting their time doing everything else except study. Looking at them now, their time spent in ECA did a lot of good in helping them to build up their skills in networking as well as to organise activities and developing their people skills.

 

During my time, we worked hard and proved that we could perform before the company paid us more. But increasingly, the attitude is pay me more, then I will work harder. In times of labour shortage, it may work. To compete, you have to show why you are better than the next person who is vying for the same job. It is only going to get more difficult with competition coming from all over. You would need to distinguish yourself from the crowd. Make yourself indispensable to your company. Make sure they feel a vacuum when you are not around. I can almost hear someone say, “Ya, right, easier said then done.” If it is that easy, then it would have been done by everyone and would not be special anymore. But how to do it?

 

Analyse your work environment. Volunteer to take up more responsibilities. Get to know the company’s operations and look for weaknesses and how to improve them. Network with peers in the same industry. Get yourself known by them. You have to be outstanding to be noticed, be it technical skills, organizational skills, knowledge of the industry etc. The ways are endless. You would need to tailor it to your own situation.

Read other guest blogs:

1. Tea with EY: Money talk, money laugh!
2. Tea with Skipper: How much is sufficient to stop full time employment?

Cooling measures for cars spurned.

Today, a report by Channel NewsAsia revealed that people are falling into debt because of the high cost of car ownership in Singapore. So, the measures by the MAS limiting car loans to 60% of the purchase price and imposing a maximum duration of 5 years in repayment period are good to have.

In fact, MAS should do more to educate the general public and to encourage financial prudence.

However, in the same report, it was revealed that "some credit companies that do not fall under MAS regulations are continuing to offer car loans of up to 90 per cent of the purchase price, although at interest rates of up to 3.88 per cent, up from an average of about 1.88 per cent before the new rules kicked in last week."

How is it that some companies do not fall under MAS regulations? Shouldn't the authorities plug the loophole? Good measures are only good if they can be 100% enforced.

With interest rate more than doubled from 1.88% to 3.88%, the cost of borrowing has become much weightier. I hope car buyers thinking of exploiting this loophole think and think again.

Take for example a 1.6 litre Japanese make with a price tag of $120,000. A 90% loan would mean a principal sum of $108,000. This is definitely not loose change.

A 1.88% interest rate over a 10 year period would mean paying $20,304 in interest. With interest rate at 3.88%, the same car loan would carry an interest payment of $41,904!

The interest payment over a 10 year period is equal to the annual earned income of some junior executives! Of course, we have yet to consider the running costs of a car.

Also, consider this. At the end of the 10 year period, the 1.6 litre Japanese car probably has a residual value of less than $10,000 (assuming an OMV of less than $20,000). This means that the car would have depreciated by more than 90%.

Total loss over 10 years: $151,904.

This is almost enough to pay for a brand new BTO 3 room flat in some parts of Singapore.

Related post:
Cooling measures for cars.

Sound Global: Lost 17.2% in a day.

Sound Global's chart looks bad and this is probably an understatement.

The black candle formed today is probably the ugliest I have seen in a long time. Gapping down and breaking through all the MAs, it was a headlong plunge.

Could we see share price sinking even lower from here? It looks like it could happen with the MACD diving steeply into negative territory and if it should happen, the next level of support is at 49c.

Fundamentally, I am concerned about the higher finance costs but they are not so destructive as to sink the company. It is still a very profitable company.

My estimate is that EPS could reduce some 20 to 25% this year, everything else remaining equal. If Mr. Market is unhappy with this, he could send share price back to test the low of May 2012 at 45c a share. With the estimated reduced EPS in mind, at 45c, we would be looking at a PER of 9x.

See Sound Global's financial statements: here.

Related post:
Sound Global: Full divestment.

Following comments in ASSI.

In the last few months, I received quite a number of emails asking me how could readers be notified when new comments are posted in ASSI. This is because, quite often, I would provide more information simply by commenting in certain blog posts.

For readers who visit my blog daily, the easiest way is to check the sidebar in the section labelled "RECENT COMMENTS".

For readers who only want to visit when there are new comments, go to the top of my blog and you will see, on the right, two small orange color boxes. These are RSS buttons. You could subscribe to all "Comments" and "Posts" by clicking on these.

For readers who only want to be updated when comments are made in specific blog posts, go to the blog posts, scroll down and you will see "Subscribe to: Post Comments (Atom)". Alternatively, if you click on "Post a Comment", you will come to a screen where you could post a comment and tick in a little box below "Email follow-up comments to XXXXXX".

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.