Marco Polo Marine: Persistent insider buying.

I find Marco Polo Marine, an offshore and marine company, a rather interesting proposition at current prices of 31.5c to 32.5c a share.

1. PER of about 8x
2. Net profit margin just under 20%
3. NAV per share at 37c
4. Interest cover ratio at 8.3x
5. Gearing at 30%

Marco Polo Marine has the intention of listing an Indonesian subsidiary on the Jakarta Stock Exchange. This could unlock value as Kim Eng estimates the listing could value the company's stake in the Indonesian subsidiary at more than 30% of the company's current market cap.

Perhaps, it is the persistent insider buying over the last 12 months that really nailed it for me here:

Announce Date [Date of Effective Change]	Buyer/ Seller Name [Type*]	S/ W/ U **	Bought/ (Sold) ('000)	Price ($)
					After: No. of Shares ('000) ***	% Held ***
05/06/12 [05/06/12]	LEE WAN TANG [DIR]	S	1,095	0.325	195,311	57.02
05/06/12 [05/06/12]	NAUTICAL INTERNATIONAL HOLDINGS LTD [SSH]	S	95	0.325	191,399	56.17
01/06/12 [01/06/12]	LEE WAN TANG [DIR]	S	110	0.335	194,216	57.00
01/06/12 [01/06/12]	NAUTICAL INTERNATIONAL HOLDINGS LTD [SSH]	S	110	0.335	191,304	56.14
16/05/12 [16/05/12]	LEE WAN TANG [DIR]	S	114	0.340	194,106	56.96
16/05/12 [16/05/12]	NAUTICAL INTERNATIONAL HOLDING LTD [SSH]	S	114	0.340	191,194	56.11
10/05/12 [10/05/12]	LEE WAN TANG [DIR]	S	100	0.340	193,733	56.85
10/05/12 [10/05/12]	NAUTICAL INTERNATIONAL HOLDING LTD [SSH]	S	100	0.340	191,080	56.08
15/12/11 [14/12/11]	LEE WAN TANG [DIR]	S	159	0.335	193,892	56.90
14/12/11 [13/12/11]	LEE WAN TANG [DIR]	S	100	0.335	193,733	56.85
05/12/11 [02/12/11]	LEE WAN TANG [DIR]	S	100	0.341	193,633	56.83
05/12/11 [02/12/11]	NAUTICAL INTERNATIONAL HOLDINGS LTD [SSH]	S	100	0.341	190,980	56.05
02/12/11 [02/12/11]	LEE WAN TANG [DIR]	S	70	0.345	193,533	56.80
02/12/11 [02/12/11]	NAUTICAL INTERNATIONAL HOLDINGS LTD [SSH]	S	70	0.345	190,880	56.02
28/11/11 [28/11/11]	LEE WAN TANG [DIR]	S	11	0.330	193,463	56.77
28/11/11 [28/11/11]	NAUTICAL INTERNATIONAL HOLDINGS LTD [SSH]	S	11	0.330	190,810	56.00
28/11/11 [25/11/11]	LEE WAN TANG [DIR]	S	500	0.330	193,452	56.77
28/11/11 [25/11/11]	NAUTICAL INTERNATIONAL HOLDINGS LTD [SSH]	S	500	0.330	190,799	55.99
07/09/11 [06/09/11]	LAI QIN ZHI [DIR]	S	71	0.337	192,952	56.63
07/09/11 [06/09/11]	LAI QIN ZHI [DIR]	S	100	0.343	192,881	56.60
07/09/11 [06/09/11]	LEE WAN TANG [DIR]	S	71	0.337	192,952	56.62
07/09/11 [06/09/11]	LEE WAN TANG [DIR]	S	100	0.343	192,881	56.60
07/09/11 [06/09/11]	NAUTICAL INTERNATIONAL HOLDINGS LTD [SSH]	S	100	0.343	190,299	55.85
05/09/11 [02/09/11]	LAI QIN ZHI [DIR]	S	117	0.350	192,781	56.58
05/09/11 [02/09/11]	LEE WAN TANG [DIR]	S	117	0.350	192,781	56.58
31/08/11 [29/08/11]	LEE WAN TANG [DIR]	S	100	0.350	192,664	56.54
31/08/11 [29/08/11]	NAUTICAL INTERNATIONAL HOLDINGS LTD [SSH]	S	100	-	190,199	55.82
29/08/11 [26/08/11]	LEE WAN TANG [DIR]	S	64	0.345	192,564	56.51
25/08/11 [25/08/11]	LEE WAN TANG [DIR]	S	299	0.338	192,500	56.49
25/08/11 [25/08/11]	NAUTICAL INTERNATIONAL HOLDINGS LTD [SSH]	S	299	-	190,099	55.79
24/08/11 [23/08/11]	LEE WAN TANG [DIR]	S	50	0.340	192,201	56.41
23/08/11 [22/08/11]	LEE WAN TANG [DIR]	S	251	0.332	192,151	56.39
22/08/11 [19/08/11]	LEE WAN TANG [DIR]	S	170	0.333	191,900	56.32
19/08/11 [18/08/11]	LEE WAN TANG [DIR]	S	300	0.347	191,730	56.27
21/06/11 [20/06/11]	LEE WAN TANG [DIR]	S	100	0.374	191,430	56.18
20/06/11 [17/06/11]	LEE WAN TANG [DIR]	S	150	0.373	191,330	56.15
16/06/11 [15/06/11]	LEE WAN TANG [DIR]	S	120	0.376	191,180	56.10
14/06/11 [13/06/11]	LEE WAN TANG [DIR]	S	150	0.377	191,060	56.07
10/06/11 [09/06/11]	LEE WAN TANG [DIR]	S	100	0.386	190,910	56.02
07/06/11 [06/06/11]	LEE WAN TANG [DIR]	S	200	0.385	190,810	56.00

AIMS AMP Capital Industrial REIT and Sabana REIT: Performance fees.

This issue of The EDGE has a very interesting article by Goola Warden on S-REITs. In a nutshell, it looks at potential conflicts of interest between their external managers and unitholders. To this end, it looks at the layers of fees charged by the managers.

As investors, we want to make sure that the REIT managers are fairly rewarded since no one would work for free. However, we have to safeguard our interests too especially when there is a lack of uniformity in the way the fees are calculated.

On the issue of performance fee, CLSA says that AIMS AMP Capital Industrial REIT and Sabana REIT are amongst S-REITs with the most equitable performance fee structures. The managers are only paid performance fees upon satisfying certain conditions.

The manager of AIMS AMP Capital Industrial REIT gets paid 0.1% of the deposited property value if distribution per unit (DPU) growth exceeds 2.5% per annum. The manager gets paid 0.2% of the deposited property value if DPU growth exceeds 5% per annum.

The manager of Sabana REIT gets paid 0.5% of the net property income (NPI) if the REIT achieves DPU growth of 10% per annum for unitholders.

So, if unitholders get a meaningfully higher DPU, the managers are rewarded with a performance fee. I doubt if anyone would quarrel with this. It appeals to my sense of fair play.

Between the two REITs, however, I believe that Sabana REIT's performance fee structure is fairer. Rewarding the manager with a percentage of the NPI makes sense because a higher DPU is probably due to a higher NPI. 

So, having the REIT manager rewarded a percentage of the NPI makes more sense to me than rewarding them with a percentage of the deposited property value.

Nonetheless, AIMS AMP Capital Industrial REIT's conditional performance fee is still better than those of REITs like Suntec REIT which pays 4.5% of the REIT's NPI as performance fee to its manager regardless of performance. 

Er... Am I missing something here?

Seems like there is more reason to like Sabana REIT now apart from its very high distribution yield. ;)

Reference:
"Growth versus value.", Goola Warden, The EDGE, pages 22 to 24, 18 June 2012.

Related posts:
1. Sabana REIT: 1Q 2012 DPU 2.26c.
2. AIMS AMP Capital Industrial REIT: 4Q FY2011.

Olam: Accumulate now?

A few days ago, I blogged about Olam and how Kim Eng has a SELL recommendation. That got a reader who is invested in Olam sufficiently flustered to send me an email. Hey, I was just sharing an analysis which I thought made sense. Don't shoot the messenger and if it is any consolation, my badly timed initial investment in Wilmar fared worse.

"Olam has been the second worst performing member of the STI this year, with only Wilmar having done worse." (The EDGE, 18 June)

Anyhow, the article by Joan Ng in the same publication went on to report that CIMB Research thinks that present cheap valuations could be a buying opportunity for long term investors.

"The correct investment stratey to follow since 2009 has been to raise market exposure and beta when sentiment enters the panic zone, like now," Ajay Kapur, Deutsche Bank. He notes that there have been three major reflation exercises over the past three years.

"At the start of each of these episodes, investors were incorrectly cynical, consumed by the panic of the moment. We think we are on the verge of another policy reflation in the coming weeks or months. Start buying during this bottoming process rather than over-analysing." (The EDGE, 18 June)

For the numerically inclined, Olam is said to be trading at a price to book value of only 1.2x now compared to its trough of 1.5x during the global financial crisis.

Accumulate? Olam's management seems to think their stock presents great value too.

Related post:
Olam: Share price up on buy backs.

Soup Restaurant: Gain of $7.7m.

On 14 June, Soup Restaurant confirmed the sale of its stake in YES F&B Group Pte Ltd. The consideration is S$7.9m which represents an excess of some S$7.7m over the cost of investment of the Group at the end of FY2011.

The net tangible assets (NTA) per share and consolidated earnings per share (EPS) of Soup Restaurant will be positively impacted in the current FY2012. The former would see an increase of 1.18c per share while the latter would see an increase of 1.05c per share.

The completion of such a sale is not going to happen immediately. It is going to take some time but the rising OBV seems to be telling us that smart money is accumulating shares of Soup Restaurant even as its share price suffers from some weakness in recent sessions.

I bought some shares recently at 12.3c. If I do not make money from this investment, at least I would get a 15% discount when I dine at Soup Restaurant outlets in future as a shareholder. ;p

See announcement: here.

Related post:
Soup Restaurant: Special dividend?

China Minzhong: High volume white candle day.

Having added to my long position in China Minzhong recently, believing that it was not a time to sell, I am pleased to say that I seem to be on the same page as Mr. Market now.

I added more to my long position today as share price broke resistance provided by the 20dMA at 57c on the back of very high volume in the morning. Volume is the fuel that drives rallies and the high volume breakout could see some follow through.

Fundamentally undervalued, China Minzhong was, technically, also very oversold. However, with the relentless selling by Mr. Market and decline in share price, the technicals are pretty damaged and it would take some time to repair.

The share price is in a downtrend; there is no doubt about it. Drawing a trend line shows us where resistance could be found over time in the event of a price recovery. Shortists who might have covered their shorts today could come out of the woodwork once the share price is at resistance.

In the meantime, the rising momentum oscillators suggest that selling pressure continues to ease and if buying pressure should continue to overcome the sellers, a test of trend line resistance is on the horizon.

The resistance provided by the declining 50dMA is something to watch out for as, if I were to hazard a guess, sellers would be out in force then. Immediate support is now provided by the 20dMA, formerly resistance at 57c.

Related post:
China Minzhong: Too cheap to sell.

Buying a piece of real estate within your means.

This blog post is part of ASSI's voluntary community service to help raise awareness on personal financial planning. Sounds altruistic, doesn't it? Well, it doesn't cost me anything.

Sky Habitat. 509 units in two 38 storey towers. Price: $1,700 psf!

From the CPF Board:

Buying a house is the single most expensive financial commitment for most people. This decision can be scary if you have not done your sums. It is worse if you have committed to a home you cannot afford.

If you haven't given much thought to your home purchase, use the checklist created by the CPF Board to guide you through your decision making.

Take part in an online quiz to win attractive prizes: http://www.cpf.gov.sg/imsavvy/ayr_list.asp?catid=2



Related post:
Buying a private property?

Olam: Share price up on buy backs.

I have always thought Olam's gearing level quite scary. Then again, it is the same with Noble and Wilmar although not as highly geared as Olam. I was told that their business models are such that high gearing level is nothing to worry about. Indeed, Mr. Market seemed to think so as their share prices were sky high once upon a time.

Gearing is a double edged sword and if a business is able to magnify its returns through gearing, then, higher gearing would intensify the returns many times over. However, in down times, things could turn really ugly. Then again, in the current environment of very low interest rates, borrowers are shouldering much lighter burdens.

When Olam announced that they are buying back shares from the market, my immediate reaction was a positive one. Hey, the management are confident in their own business and are walking the talk. However, when we remember that it still has plenty of debt in its books, it doesn't seem to make much sense anymore.

Kim Eng has this to say:
Share price jumps on buyback mandate. Olam’s share price has jumped 11% since the company announced last Friday that it has commenced a share buyback programme. While such a move is usually a positive sign, the circumstances for Olam seem rather unusual. Fundamentals-wise, other than to deter the short sellers, we do not think it is necessarily an enhancive step for shareholders. Borrowing money to purchase shares. The case for a share buyback is stronger for companies with piles of idle cash coupled with strong operating cash flows. Olam, however, is considered highly leveraged with net gearing of 189% and adjusted net gearing of 42% as at FY6/12. Since listing in 2004, its operating cash flow has been positive only in 2006 and 2009 as funds were needed for expansionary working capital.

Kim Eng has a SELL recommendation on Olam with a TP of $1.43.