NeraTel: A very good investment.

There has been much said about how the recent surge in NeraTel's share price could be due to expectations that they could be the only Singapore company to benefit from the Telco licences awarded by the Myanmar government. Although it is not ironclad, NeraTel's expertise in the microwave radio transmission segment gives the company a high chance of winning the tenders.

What is more certain, however, is that, by early 2014, NeraTel will be able to move into its own engineering business and develop its own products and this change will improve the company's profit margins. In the meantime, the successful acquisition of Nera Malaysia recently will result in a one time profit of about $7 million.

Samuel Ang, NeraTel's president and CEO has this to say to investors:

"When you look at NeraTel as a company, you need to look at the whole year because we are in a market that involves a lot of capital expenditure. We cannot recognise revenue at one go, we need to look at the work progress, and there may be some delays with some customers"

Therefore, it is more important to note the order intake which represents the health of the business.

OSK-DMG believes that there could be an interim dividend this year and that the current dividend payout of 4c a year is also sustainable.

Reference:
Pages 12 and 13 in The EDGE, July 15, 2013 issue.
AK says: "An excellent write up in The EDGE and if you are interested in NeraTel, go get a copy."

Related post:
NeraTel: Is there no telling how high it could go?

Tea with Mark Mobius: Focus on long term goals.

Mark Mobius, chairman of Templeton Emerging Markets, says as the Fed tapers QE and eventually raises rates, volatility will probably increase, but investors should keep focused on long term goals instead of trying to time the market.

"We are telling our investors to sit back, relax and ride it out."

Templeton is also a substantial shareholder of China Minzhong with a stake in excess of 11%.

Related posts:
1. Be comfortable with being invested.
2. China Minzhong: Looking into the TA crystal ball.

China Minzhong: Looking into the TA crystal ball.

I like China Minzhong's business and I like its prospects. I still have about a third of my original investment in the company which I paid about 58c a share for, having sold the rest for rather attractive capital gains.

In May this year, I increased slightly my exposure to the stock as its share price pulled back to $1.025 and $0.97 per share. The positive divergence between price and MACD has played out and the downtrend has been broken. Currently, the stock trades at $1.12 per share.

Based on Fibo lines, there is resistance at $1.13 and there needs to be a big push up on the back of higher volume to break this barrier. Otherwise, a pulling back to $1.05 or even $0.99 would not surprise me.

I am wondering if we could see the formation of a reverse head and shoulders pattern here which could be part of a bigger bowl formation. Ok, perhaps a saucer formation.

This could pan out to be a very nice trading opportunity. Pardon the pun.

Related post:
China Minzhong: Long black candle on good results.

Vard Holdings: Mr. Market is reacting calmly.

This is a short blog post on my observation that Mr. Market seems to be accepting the bad news regarding Vard Holdings' performance in 2Q 2013 rather calmly. Please refer to the comments section of my blog post on the company yesterday for discussion on its results.

Vard Holding's share price is at 84.5c, down 2.9% or 2.5c as of now. The decline is rather muted, I feel, to what is really a very bad quarterly report card. There seems to be quite a bit of support from buyers, actually. The news might refer to this as "bargain hunting".

It would seem as if Mr. Market feels that the current price level of the stock, for whatever reason, is a fair one at this point in time.

If Vard Holdings' share price should form a lower low, look out for a higher low in the MACD. I am not saying that it will happen but if it should happen, that could be a buy signal.

Related post:
Vard Holdings: Initiating coverage.

Interview with Matthew Seah (Part 2): Value Investing.

I prefer to have a more direct control over my money rather than letting a third party invest for me which usually results in subpar to market returns after fees are paid anyway.

So, although I invest in ETFs, I only invest in passive ETFs like S&P500 ETF and STI ETF where the returns are very similar to returns of the S&P500 and STI, respectively.

My investment approach when it comes to stocks is to pay attention to 3 Rs:

Right model
Right management
Right value

Investing in businesses which have all the 3 Rs has been very rewarding for me.

If you have guessed that I am a value investor, you are right.

Value Investing has been proven to be the best investing method, as can be seen with the phenomenal growth of Berkshire Hathaway, Warren Buffett's company.

Many people buy stocks after hearing good news about the stocks. They are just buying something which is selling at a higher price in the hope of selling it later at an even higher price, which doesn't make sense to me.




Value Investing is like shopping for stocks on sale. It would be more logical to buy stocks when they are at a discount and not when they have become pricier. This is about buying something at a price lower than its intrinsic value.

Another thing which is important to remember is to invest in companies which have some kind of competitive advantage over their peers. These companies tend to have a larger market share, and are more profitable in the long run. Therefore, they are likely to continue growing in years to come.

For someone who is new to investing, I would suggest being more cautious. What do I mean?

I tested some strategies through paper trading prior to real investing. When I started paper trading, I was more emotional and often closed my trades too early. Now, I hold on to my investments for a much longer period which has proven to be more profitable than short term trading.

Being stronger financially now also means that I am able to weather larger drawdowns to my investment portfolio without feeling too emotional. 

I will end by sharing this quotation:

"Your goal as an investor should simply be to purchase, at a rational price, a part interest in an easily-understandable business whose earnings are virtually certain to be materially higher five, ten and twenty years from now." Warren Buffett

Related posts:
1. Warren Buffett: The greatest money maker.
2. Getting started in investing and trading.
3. Interview with Matthew Seah (Part 1): Financial Freedom.

Vard Holdings: Initiating coverage.

I have always liked the sound of the phrase "initiating coverage". It reminds me of some movies I watched before where a person in a war room would be standing ready to press a red color button while announcing "initiating launch sequence now". Quite exciting.

Well, talking about Vard Holdings might not create the same kind of excitement for some readers especially for those who have bought the stock at much higher prices. For sure, there is no paucity of BUY calls from analysts on Vard Holdings.

I remember replying to a reader a couple of months ago that we could see a rebound because of a positive divergence but with the downtrend intact, share price could go lower.

In yesterday's session, Vard Holdings' share price hit a new 12 months low of 83c. So, is share price at the start of a recovery today? This is a question I do not have the answer to. However, technically, there is no reversal signal. So, if share price should trend lower, it would not surprise me.

If it should trend lower, a critical support would be at 79c, the low formed in October 2011. Remember, this is what I see in the chart and it does not mean that it will happen.

Of course, there is always a possibility of a sharp rebound in which case, we could see a gap covering at 96c or a test of gap resistance at 99.5c.

Fundamentally, it is quite easy to see why there are so many BUY calls.

Doing a quick valuation exercise, at 83c a share, Vard Holdings does not seem expensive. In fact, it seems quite cheap now. I went through the numbers and its 1Q FY13 EPS works out to be 3.37c. Annualising this and using a PER of 7x will give us a value of 94.5c while a PER of 8x will give us a value of $1.08.  Why 7x or 8x? Well, that is the kind of PERs we are looking at with smaller yards like ASL Marine and Marco Polo Marine. 

So, at 83c, Vard Holdings is actually trading at an even lower valuation compared to smaller yards? Yes, that would seem to be the case from a price earnings perspective.

If we believe that the demand for OSVs is on the rise, then, Vard Holdings should be a logical beneficiary. However, we should bear in mind that although the stock might seem like a compelling buy, share price could weaken further. So, unless we are mentally prepared for such a possibility, it might be better to wait for clearer signs of a reversal.

After all, Vard Holdings did issue a profit warning due to higher than expected cost overruns at its Niteroi yard as well as higher than expected start-up costs at its new yard, Promar, which was what sent its share price diving.

Related post:
Marco Polo Marine: 1H FY2013.

Note:

Vard Holdings Limited ("VARD") will release its financial results for the second quarter and half year ended 30 June 2013 after market closes on Thursday 11 July 2013.

Interview with Matthew Seah (Part 1): Financial Freedom.

I learned from Robert Kiyosaki that in order to gain financial freedom, we have to be free of debt, able to provide for ourselves and to prepare for a future without having to work for money. 

Many people always find themselves short of cash at the end of each month and it is difficult for them to save any money.

To avoid this problem, I pay myself first by saving a portion of my income before spending any money. At the end of the month, if there is any spending money left, it will add to my savings.

Being prudent with money is something I strongly believe in since young as my mother always advocates the virtues of saving money. My Edusave bursaries and scholarships during my school days all went into my savings account.

Now, I have several accounts and not just one. They are:

Account 1: Emergency fund.

This is money which can support my current lifestyle for at least a year in case something untoward should happen.

Account 2: Opportunity fund.

This is money to take advantage of any investment opportunities in a market crisis.

Account 3: Investment fund.

This is money available to invest on a regular basis. To reduce commission and fees as a percentage of a transaction, I tend to invest only after accumulating more than $9,000 in the investment fund.

Account 4: Gifting fund.

This is money set aside for buying gifts, donating to charities and making offerings.

Account 5: Excitement fund.

This is money put aside for holidays.

As passive income from my investments increases, I will be able to set aside more of my total income for investments. One day, when my investments are able to generate the desired level of passive income, I will set aside 90% for charitable causes, keeping only 10% for my own expenses. This is my goal.

So, how should young people go about increasing our wealth to reach the goal of financial freedom?

We need to seek the right financial education or get a mentor who has walked the path with good results since financial education is not available in school.

If young people have a low level of financial literacy, there is a good chance that their families do too. Therefore, they should not seek financial advice from their family members. Actually, it is not uncommon to meet people who think that investing in stocks is synonymous with gambling. This is due to a low level of financial literacy.

Investing in stocks is like being in partnerships with businessmen. Instead of starting our own businesses and hoping to succeed, we can shorten the time to success by being partners with successful entrepreneurs at the helm and stand to share the profits from their success.

Time is the most valuable resource that any person has in investing because wealth from investing grows by compounding. So, young people have a distinct advantage. Start young.

Related posts:
1. Robert Kiyosaki: 2 are better than 1.
2. Teaching young children financial literacy.
3. Interview with Matthew Seah (Part 2): Value Investing.

Multiple Streams of Income.

In the comments section of an earlier blog post regarding buying properties with little or no money down, a reader, SC, highly recommended the following books by Robert G. Allen:


Click image to buy.
Free shipping.


Click image to buy.
Free shipping.
Allen researched hundreds of income-producing opportunities and narrowed them down to ten surefire moneymakers anyone can profit from. This revised edition includes a new chapter on a cutting-edge investing technique.

Show more

Show less

Apparently, Robert G. Allen, whether directly or indirectly, is the guru of all the gurus out there and it is said that he charges US$10k to US$25k for personalised coaching.

I am not willing to pay US$10k to US$25k but what about buying both books for less? I enjoy a bargain and I enjoy reading. So, what to do? ;)

Related post:
Be a real estate owner the easy way (3).

Bought another book from BetterWorldBooks.

I have blogged about BetterWorldBooks a few times before and the good that they are doing. Everytime we buy a book from them, we are helping to do good for the environment and helping the needy.

Recently, I learned from a good friend how to do screen captures. Hey, don't laugh. Regular readers should know that I am not the most IT savvy person on the island.

Anyway, I bought a book from BetterWorldBooks just now and here is the screen capture:

Click to enlarge picture.

 

If you are thinking of buying a book or two, consider making the purchase from BetterWorldBooks. Buy used books, enjoy lower prices and help the environment!

"Your purchases also help fund non-profit organizations changing the world through education and literacy."

Your purchases will also enjoy free shipping worldwide.



Click on image to visit BetterWorldBooks.

Thank you.

Related post:
Donate a book to the needy!

Returns of 15% per year invested!

This is taken from an email sent to me this morning:

 

Invest into one of the hottest investment sectors in London's city centre, without buying a unit outright from just $62,850 (£41,308)*. Our Secure Exit Strategy™ allows you to invest into exclusive pre-construction projects, for up to maximum of just 5 years, with complete protection of funds and no ownership commitment.

Invest early into this exclusive central London Hotel project with maximum 5 year exit strategy and contractual returns of 15% per year invested.

Urban Villa - Aldgate, London is a renovation hotel project in the heart of the capital. Due to its superb location, Urban Villa Aldgate is already proving to be one of our most popular projects in the UK to date.

 

Too good to be true? Any thoughts?

Tea with AK71: Laughter is the best medicine again.

Absolutely wicked!



I fell off my chair AND rolled on the floor laughing, thanks to Matthew Seah!

Related post:
Laughter is the best medicine.

Have money must also have a heart.

This is a snippet taken from a chat I had over at Bully the Bear this evening:

Have money must also have a heart.

Related posts:
1. Count our blessings.
2. Make more money and do good.
"The people who receive love are the ones who are just pouring it out all the time." Warren Buffett.

A university degree in 10 days!

I saw an advertisement on Facebook that promised a university degree in 10 days. It was in the sponsored section.




Like that also can. Facebook must hide face.
The shady site: quickdegreesnow.com

That Facebook does not screen advertisers (aka sponsors) unsettles me.

SingHaiyi: The next big thing?

I received a message from a 25 year old reader, asking for my opinion on SingHaiyi. I thought it would be interesting to share his message here (with his permission) to see if we could gather the opinions of readers on the matter. Here is his message:

I have read your website on fundamental analysis some time ago. I must say I am still quite a newbie in stock markets and have less than a year of experience

I did learn a few things from your website which I am thankful for, like how to determine the health of a company judging from the balance sheet. I managed to pull off a few positive short-term investments (Interra Res) all thanks to your clear and precise explanation of the ratios.

I did make a few bad investments too, such as in Noble Group. But by the time I realised, the only choice was to 'average down' or eventually cut losses.

The purpose of sending you this message is to seek your opinion on SingHaiyi. I have thoroughly looked through this company's financials. The unaudited statistics seem promising, except for the Debt/Equity ratio, which is > 1. I understand that this company is another penny stock, and undergone major restructuring in recent times. Then again, I have used much effort in researching the history of the key directors in this company (Gordon Tang, Chan, Neil Bush) and they do have impressive records of running their businesses. The only thing I am concerned about, is whether they will be able to pull SingHaiyi off as the 'next big thing'.

All comments are appreciated.

Related post:
The Balance Sheet.

Read:
SingHaiyi Group in final negotiations on US real estate projects.
This will be for the purchase of an existing office building and a residential development site.

Invest in Japanese real estate: Saizen REIT and Croesus Retail Trust.

Over the weekend, I spoke with a friend who told me that his uncle is interested in investing in properties in Japan. Actually, he is not the first person to talk to me about the subject. Two other people spoke with me in the last 3 or 4 weeks expressing the same interest.

Ever since Prime Minister Shinzo Abe launched "Abenomics" in order to break the country out of vicious deflation which has lasted some 20 years, there has been renewed optimism that Japan could finally grow its economy once more. Although some might claim that Japan has joined USA and Europe in devaluing currencies, Japan has claimed that it is only bringing its currency down from an over valued position to a value that is more in sync with the current value of the US$.

Against the S$, the JPY has come down more than 20%. So, not only is Japan once again a less expensive destination for holiday seekers from Singapore, together with early signs of economic growth, it has also become a more attractive investment proposition.

Therefore, it should come as no surprise that some in Singapore should be looking at investing in Japanese real estate now. Indeed, anecdotal evidence shows that American and Chinese investors have already started doing so.

However, unless we have a lot of money and we have someone whom we can absolutely trust in Japan, I would caution against investing directly in Japanese real estate. It is complicated for foreigners to actually own a piece of real estate in Japan and we also do not have access to housing loans in the country. So, 100% cash down is required.

If we are really interested in investing in Japanese real estate, be it for rental income or possible capital appreciation, there are options right here in Singapore. Regular readers would have guessed the answer.

Off the top of my head, Saizen REIT is currently trading at about 20% discount to NAV even after the JPY has weakened so much against the S$. Gearing level has increased to 39%. At 18.7c a unit and a more conservative estimate of a 1c annual DPU due to the much weaker JPY, we are looking at a distribution yield of 5.35%. 

I do not think we can do better than this by directly buying an apartment in Japan without any leverage. The theoretical non-leveraged yield of Saizen REIT is about 3.85% and it is truly passive income compared to being a landlord of an apartment.

What about Croesus Retail Trust? It is now 96c a piece. Before the launch of "Abenomics", I was pessimistic about the retail sector and, consequently, shopping malls in Japan. In its 2011 report, Starhill Global REIT's  management said as much although not in the same words.

However, anecdotal evidence shows a revival in the Japanese retail sector since the launch of "Abenomics". As inflation returns to the Japanese economy, the people no longer defer purchases in the hope of lower prices in a deflationary environment. Consequently, this means brighter prospects for Japanese shopping malls.

At its IPO price of 93c a piece, it projected a distribution yield of 8%. However, the Trust's gearing level of 48% based on the appraised value of its properties is much higher than Saizen REIT's current gearing. Of course, gearing will magnify gains. Nonetheless, the theoretical non-leveraged yield of Croesus Retail Trust is 5.41%.

With a brighter outlook for the Japanese economy and retail sector, Croesus Retail Trust is beginning to look attractive as an investment for income.

In conclusion, with Japan's fortunes seemingly turning up, there will be an increasing level of interest in investing in Japan and real estate will be a natural consideration. We don't have to look too far to benefit from the improving fortunes of the country.

Related posts:
1. Croesus Retail Trust
2. Saizen REIT: Refinancing.

"REITs that buy apartments benefited from a shortage of new supply and a stable number of tenants in a nation where less than half of Japanese under the age of 40 own their own home. Japan has accelerated efforts under Prime Minister Shinzo Abe to end deflation and boost the world’s third-largest economy, including measures to revive the property industry, which has been struggling since an asset bubble burst two decades ago. The government has a target to increase assets owned by REITs by 40 percent by 2020. "
(Source: Japan Apartment Real Estate Proving Best: Riskless Return)

Tough times ahead for F&B industry.

The rapid influx of foreign workers up till the last General Election caused strains in our society in many ways and the PAP government learned the hard way that Singaporeans were unhappy.

Singaporeans "dealing with the strain on infrastructure resulting from the influx of foreign workers, had signalled that they were prepared to trade off a bit of growth in return for a reduction in immigration.

"Any elected government has to, at the end of the day, take into account and work according to the wishes of the people," Mr Shanmugam, Minister for Foreign Affairs and Law, said.

"... some of the service sectors, like restaurants, are feeling the pinch... "

(Source: The Business Times Weekend, July 6-7, 2013)

There could be pockets of relative strength in the F&B industry in Singapore and I believe Old Chang Kee is one such company.

Companies which run restaurants requiring big floor areas for diners, teams of waiters and waitresses, cooks and washing staff will face stronger headwinds over time.

Related posts:
1. Old Chang Kee: Almost 70c a share.
2. Soup Restaurant: Almost fully divested.

"In the financial year ended March 31, 2013, Tung Lok sunk deeper into the red with a net loss of $3.17 million... "

(Source: Tung Lok plans 2 for 5 rights issue, The Business Times Weekend, July 6-7, 2013)

You have to watch this! Photoshop Live!

This is really good! I was smiling throughout!

You have to watch this:





Related post:
How to get free bus rides any time, any day?

Sunday brunch.

It has been a while since I got to wake up late at 9am on a Sunday. So, no breakfast for me!

I had brunch instead today:

Porridge.

 +

 

Anchovies and peanuts.

 =

 

One of my favourite combinations. Bon appetit.

A fresh grad and $100K by 30. (A fast track to wealth building!)

I have been spending more time on Facebook lately. It requires less work than blogging and with real time people to people interaction, it is somewhat addictive. 

For someone who does not go out much to meet people, Facebook is appealing to me. I think I have discovered another time guzzler.






Well, this morning, my Facebook wall (Is that what it is called?) was abuzz with comments on an article in papers. 

It is an article on how it is possible for a fresh graduate to have more than $100k in net worth by age 30.

See the chart:

Click on chart to enlarge.

Anyway, judging by the amount of activity this article has generated in Facebook, this is an interesting topic for many people. 

It is about money and how to make big money from money. $100k is no loose change. So, I am not surprised.






There is a fair bit of scepticism as to how it is possible to do something like this. Well, read the 
assumptions. 

If the stars align the way they should, then, wonderful things would happen.

In Economics, when we say "ceteris paribus" which means "everything else remaining equal", it shows how changing a variable will affect results. So, for certain arguments to hold water, certain assumptions must be made.

So, how useful then is such an article? Is the article realistic?

Personally, I have suffered scepticism at the hands of others in my almost 4 years of blogging about personal finance and investment as well. So, I am not surprised by some of the reactions to the article.

What I want to say is that it is doable but it might not be easy. All of us have different circumstances and it is harder for some than others to save (and not for want of trying). Some might be luckier than others. 

Yes, we have to be honest here. Luck plays a part.






I will look at the article as something to inspire young working adults on what is possibly achievable if we are willing to give it a go and not cling on to every word (and number) in the article in an attempt to ridicule or discredit. 

Be inspired and I have no doubt that we will all become richer for it.

Source:

Is it possible to have $100k by 30?

The Straits Times.

Related posts:
1. Retiring a millionaire is not a dream.
2. Wage slaves should be fearful.
3. Wealthy nation cannot afford to retire?

REITs: For those who have paid higher prices.

Investing in REITs is as close to investing in real estate as is possible for small retail investors. We might not own whole buildings or entire units in a building, nonetheless, we have to employ a real estate investor's mentality when investing in REITs.

Like any other investments, could we see values plummeting to zero in real estate? Some people would say no. However, I would say, theoretically, yes. 

When would that happen? Simply, when there is no demand for real estate. Now, realistically, will that happen in Singapore?

If the answer is "no", then, there will always be value in real estate here.

Some friends and readers are worried because the unit prices of S-REITs have retreated some 20% from their highs. 

Well, for anyone who bought at the highs, there must be some feeling of anxiety especially if they invested more money than they should have. However, panicking and selling when prices plunge to a low isn't going to help make things better, or is it?

A fellow blogger said that, on hindsight, we should have sold at the highs and bought back at the lows. Hindsight is a wonderful thing. It is always right, isn't it? 

Some might say that hindsight is practically useless. I would say that it is how we look at it.

We always say that we should learn from experience. Now, isn't experience in the past and isn't looking at experience hindsight? 

So, hindsight is not useless if we learn from it.

I will say that the current distribution yields of S-REITs are still more attractive than any income investments I can think of that has a similar level of risk. 

Of course, the biggest risk in any investor's mind is the risk of capital loss and with rising interest rates in future, everything else remaining equal, S-REITs' unit prices could come under pressure.

It is difficult, if at all possible, to find an investor in this world who has not lost any money in investing. 

If we have not used any money that we cannot afford to lose in our investments, then, we can be more philosophical about the losses. 

However, if we cannot be or do not want to be philosophical, we have to think of our options.

Option 1
We could cut our losses. This would mean believing that either the income producing investment is no longer able to produce the income that it has been producing. (It could also mean believing that the market price of the investment is going to decline even more significantly in future.)

Option 2
Stay invested. This would mean believing that the income producing investment is still able to produce the income that it has been producing or even more. (It could also mean believing that the market price of the investment has stabilised or could even appreciate.)

For people who have not overpaid for their investments, of course, option 1 would be more a question of protecting any capital gains. For pure income investors, this entire blog post could possibly be just an academic exercise.

I thought long and hard on how to write this blog post in as neutral a tone as possible but at the same time making sure it is not a useless fence sitter. I can only hope that I have succeeded.

Related posts:
1. S-REITs: Are we asking the right questions?
2. Be cautious while climbing the S-REIT tree.
3. Never lose money in real estate and REITs?
4. 2012 full year passive income from S-REITs.

Low budget (and healthy) dinner.

This was what I had for dinner just now:

Home cooked. Healthy for the body. Healthy for the wallet. Delicious too.

Related post:
AK71 bought healthy lunch!

Old Chang Kee: Almost 70c a share.

On 30 May, I mentioned that Old Chang Kee's shares at 56c a piece were not expensive and that with a PER of 11.29x, I thought Old Chang Kee fairly valued.

Today, Old Chang Kee's shares hit a high of 69c before closing at 67.5c. It is now 20.5% higher than where it was on 30 May and 160% higher than my entry price.

At 69c, PER is 13.9x. This does not sound cheap to me. However, chatting with someone who is vested in Breadtalk recently led me to wonder if I have been too conservative in my valuation of Old Chang Kee's stock.

Breadtalk's full year EPS in 2012 was 4.263c. At 90c a share, its PER is more than 21x! Even though its EPS improved some 14.8% in 1Q 2013, annualised, we could still be looking at a PER of more than 18x. If we were to compare with Breadtalk, Old Chang Kee seems relatively cheap.

Assuming that Old Chang Kee's EPS stagnates, to reach a PER of 18x, its stock would have to trade at 89c per share. Is that going to happen? Your guess is as good as mine.

Related post:
Old Chang Kee: More free curry puffs on the way.

NeraTel: Is there no telling how high it could go?

The share price of NeraTel broke 65c resistance yesterday and it has been rocketing up since. A friend told me that I have done it again! Honestly, I think Lady Luck's the one who is working hard here. I am just lucky.

Last month, I increased my investment in NeraTel by about 10x, recognising its strong numbers and also its attractive dividend yield. At 60c, a 4c dividend represents a yield of some 6.67% which is pretty decent. Even at 63c, 4c gives us a yield of some 6.35%.

Technically, it is quite easy to see from the chart why I accumulated at 60c to 63c. The counter seemed to be basing in that range.

The new found strength in NeraTel's share price probably has a Myanmar connection. Two of NeraTel's customers, Telenor and Ooredoo, won contracts in Myanmar and have 9 months to commence operations. They will have to open up project tenders soon and NeraTel has a good chance of winning the tenders. OSK DMG has a target price of 79c for the counter.

What is my plan now?

I really have to examine my motivation for investing in NeraTel. When I first bought in at 40.5c, it was primarily for the attractive dividend. Recently, I increased my exposure to the counter with a slightly better understanding of the company, still liking the numbers and the attractive dividend.

Even if its share price should hit 79c, dividend yield is still a reasonably attractive 5.06%.

However, I suspect that Mr. Market is now pushing up the share price of NeraTel based on expectations. So, although I do not think NeraTel's shares are expensive even now, things could get bubbly if this continues. Traders chasing the breakout must do so knowing the risks.

Breaking a many times tested resistance at 69c on the back of high volume is very bullish. However, parabolic movements in prices are usually unsustainable and we could see a pull back as price tries to find support.

69c could be the resistance turned support and, for anyone who is thinking of buying on weakness, that is probably a price to watch out for.

In the meantime, to all fellow NeraTel shareholders, if we would like to divest partially (or fully) to lock in gains, there is certainly nothing wrong with taking profit. However, I would ask that we look once more at our motivations for being vested in the counter to be sure. In any case, congratulations!

Related post:
Which stocks have I been accumulating in June 2013?

Fish and chips, good and cheap!

I saw my colleague having fish and chips a few days ago and it looked really good. I gave in to temptation and had a very good lunch of fish and chips today too!

 

Bought from the canteen. $5.50 only! Good value for money. I like.

Tea with Matthew Seah: OCBC Blue Chip Investment Plan.

I am constantly looking for people who are good writers and who have a savvy for investments. 

Some of you might remember reading an article about a young investor in the most recent issue of The Sunday Times. 

Matthew Seah is only 25 but what he has achieved is far more than what I did at his age.

I discovered the following Monday that I had actually been chatting with him for a few days already and that he is also a regular reader of my blog, having commented in a few of my blog posts before as well. 

I could not reconcile the Matthew who commented in my blog posts with this Matthew whom I have just started chatting with recently because I always thought he would be much older.

Well, I always say that I am a frog in a well. 

I just discovered (again) how small my well is.

I asked Matthew if he would like to do a blog post for ASSI and he kindly obliged, choosing to write a piece on OCBC Blue Chip Investment Plan. 

This blog post shows how logical he is in his approach and how sound he is in his ideas. 

I certainly hope that this is the first of many blog posts in ASSI to be penned by Matthew.





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The Business Times reported on 25 Jun 2013 that,

“OCBC Bank announced today the launch of the OCBC Blue Chip Investment Plan ("the Plan"), a regular investment plan that allows retail investors to purchase Straits Times Index (STI) stocks for as little as S$100 a month.

Investors can use cash or, funds from Central Provident Fund (CPF) or Supplementary Retirement Scheme (SRS) accounts to invest in one or more stocks from a selection of 19 Mainboard STI stocks and one STI Exchange Traded Fund (ETF).

OCBC Bank also saves first-time investors the hassle of opening securities trading and Central Depository (CDP) accounts by buying the stocks on their behalf on a pre-determined date every month.

The 19 stocks were selected as they are included in the CPF Investment Scheme (CPFIS) from the entire portfolio of 30 blue chip stocks in the STI.”

For more details, see: OCBC Blue Chip Investment Plan

This investment plan is targeted at young working adults who do not have a lot of cash to buy one lot (1,000 shares) of blue chip. One lot of blue chips can cost somewhere between $600 (Golden Agri) to $43,000 (Jardine C&C). OCBC has kindly left out those STI components that are fairly affordable, stocks valued less than $1, as they cost less than $1,000 per lot to purchase.

This investment plan employs the Dollar Cost Averaging technique where you invest a fix amount each month, regardless of the share price.  Dollar Cost Averaging allows you to buy more when the price is lower, and consequently less when the price is higher.

Investopedia does a good job of explaining this technique: Dollar Cost Average.

What should a young working adult buy?

I am assuming the a young working adult to be enthusiastic, ambitious , full of drive. Thus, he/she would not have much time to do any due diligence when it comes to investing. He/she would not want to add more stress to his life by trying to beat the market. Trying to beat the market requires lots of control over your emotions, which might not be easy for a young investor who has not experienced the greed associated with rising prices, nor the fear associated with falling prices.

As such, I recommend investing only in the Nikko AM STI ETF. Investing in Nikko AM STI ETF would allow you to own all 30 STI components at once, hence eliminating the hassle of choosing the individual counter. Investing in the ETF also allows sufficient diversification to weather financial shocks to some extent.

The components of STI are reviewed semi-annually by FTSE Group to ensure that non-performing companies are replaced. E.g. NOL was removed from STI and replaced by IHH on 13 Sep last year. By investing in Nikko AM STI ETF, you can be sure that you are investing in the best 30 companies (or perhaps the 30 better than average companies) listed on the Singapore Stock Exchange.

While the Investment plan may be good, you should also consider the charges involved.

The charges involved are as follows: 

Click on pic to enlarge.

So the charges involved for investing each month is 0.30% or $5 per counter, whichever is higher. It might seem difficult to understand, but here’s a chart to help you.

Click on pic to enlarge.

As you can see, the fees are pretty high, at 5% when you invest $100 per month ($5 is higher than the 0.3%, thus the fee incurred in this case is $5). However, the costs involved is greatly reduced to an optimal 0.30% when you invest $1666.67 per month (In this instance, 0.3% is also $5) or more.

What this would mean is before you can even make any money, you will need to pay OCBC a fee of up to 5%. Whatever that is left will need to grow by 5.3% before any profit can be made (after paying 5% fees, you have $95 left. In order to get back to $100 using $95, the returns needs to be 5.3%). This kind of charges are the same when you open any other trading accounts, but the fees incurred may vary.
 

I feel that any fee below 1% of your invested capital is manageable as long as you are really holding for the long term. Hence please invest at least $500 per month if you are taking up the OCBC Blue Chip Investment Plan, and invest only in Nikko AM STI ETF for sufficient diversification.

See also:
1. POSB Invest-Saver Account.
2. Dollar Cost Averaging and expected returns.

Visit Matthew's blog:
Compounding for a better future.

Related post:
Inflation adjusted retirement income plan.

The secret to avoiding financial ruin.

We hear these two lines all the time:

"It is so easy to spend money."

AND

"It is hard to make money."

Perhaps, we should also remember these two lines:

"If we are not careful, it is easy to get into debt."

AND

"It might be really hard to get out of debt."






So, what is the secret here? Don't get into debt!

When I was a secondary school boy almost 30 years ago, $1m was a lot of money and during a class discussion, I asked how was it possible to spend all that money? The teacher looked at me like I was some alien and my classmates laughed at me.

Well, a HDB 3 room flat in D4 in those days cost only S$50,000 or so. Cars were much cheaper too. Of course, prices have shot through the roof by now. However, back then, I seriously could not think of how anyone could spend all that money with ease.

I remember always tracking the interest rates offered by the banks on our savings in those days and how I would shift my savings from one bank account to another to get the highest interest rates possible. 

Now, when I look back, my efforts were pitiful since my savings were so little but an extra S$50.00 a year in interest collected mattered so much to me then. Those were hard times.





Some will again say that I have a peasant mentality to wealth building, but I know myself and I rather be a happy peasant.

Increase our income, reduce our expenses and don't get into debt. 

Do all these and we might not become filthy rich, of course. Do the opposite, however, and we are in for financial ruin.




Related posts:
1. To be a happy peasant.
2. From rich to broke?
3. If we are not rich, don't act rich.
4. Today's millionaires.
5. Not enough money to be married.

AK71's Facebook.

There are great artists in this world and there are great IT brains too.

I am really slow when it comes to IT stuff and I know bloggers like Drizzt (InvestmentMoats) and LP (Bully the Bear) who have kindly tried to influence me to become more IT savvy at one time or another have probably given up on me. Friends and colleagues too have found out what a dinosaur I am.

Which one is AK?

Blogging is something I do for fun and I don't want to feel any pressure to learn new stuff. Otherwise, blogging becomes stressful and when something becomes stressful, it is no longer fun.

Anyway, I think I might have moved up the IT ladder today as I have included a "Follow AK on Facebook" button in my blog's left sidebar. This is after receiving questions from readers on whether I have a Facebook account.

I do have a Facebook account. I started one a few years ago at a friend's recommendation to build up readership numbers for my blog but I didn't do much to it or with it. I still don't.

Anyway, try the button and let me know if it works:

If it doesn't work, I will need to seek help.