Tuesday, March 29, 2011

Popular Holdings - An analysis

How many of you know about Popular Holdings? What kind of business do they do? Do you know of anybody who owns their shares?

Click here to read the Popular story.

Till now, it has evolved into owning over 130 bookstores in Singapore, Malaysia and Hong Kong. It also has a publishing business and e-learning business. Only recently, the company expanded into property development.

Please click here for the past 10 years summary numbers of Popular Holdings.

As of 31 January 2011, their net asset value is 23.26 cents. The stock is trading at 15.5 to 16 cents as of 29 March 2011. This is a discount of about 31% to their net asset value. The P/E ratio for trailing 12 months earnings is 4.3 (Earnings for TTM is 3.69 cents)

If you would like to find out more about Popular Holdings results you can click here.

If you have any questions about Popular Holdings, feel free to leave it in the comments.


Disclosure: Blogger owns Popular Holdings shares.
Disclaimer: Analysis in this post is a personal view by blogger. It should not be used as an indication to buy or sell the company's shares.

Saturday, March 19, 2011

A thin line between an investor and a speculator in the stock market

Anyone who buys stocks and shares in the stock market, has always been calling themselves investors. What makes an investor? How is an investor different from a speculator?

Both investors and speculators buy and sell shares of company through the stock market. The difference between them is only the TIME factor.

1.     An investor buys a business while speculators buys stocks.
2.     An investor buys the shares of a company and hold them for a long time, at least 3 years or more while a speculator buys the shares of a company, hold them for a short time and sell them, either for a small profit or even at a loss.
3.     An investor buys the shares only when they have enough money to hold them. A speculator does not have enough money to hold the shares, he normally contra the shares he bought.
4.     An investor makes time to do research in the companies before making a purchase. A speculator simply buy and sell the shares without looking into the company's information.
5.     An investor treats the stock market as a convenient place for them to own businesses while speculators treats the stock market as a 'casino'.
6.     An investor has faith in his own investment in the 'wonderful business', he is not affected by the daily fluctuation in the share price. A speculator's emotion is affected by the daily fluctuation in the share price.

The above are extracted from my second book on investment. I would like to thank those who have bought and read my first book, "Route to Successful Property Investment in Singapore". Do look out for my second book on investment in wonderful businesses.

Are you an investor or a speculator? Do test yourself with the six points above and find out.


Monday, March 14, 2011

This is a good chance for value investors

Stock market around the world has been affected by the Japan crisis. Japan stock market lowers another 4% after a 6% drop yesterday. Stock market around the world also experience the drop for the past 2 days.

If you know the value of the companies and have your own strike price, this should be a good chance for you to hunt for some good companies shares at bargain prices.

Japan should need another 5 years to bring their economy back to pre-quake level. It is going to be a long, tough road ahead.

Just minutes ago, when more nuclear reactors are posing more threat, the Singapore stock market takes a plunge by up to 67 points. This is an opportunity but do not rush.

Property market will also be affected. When stock market goes down, property price goes down as well. That will property investors' chance to strike in the next few quarters, or end of the year.

Meanwhile, grow our war chest and get ready to strike.

Berkshire (Buffett) strikes again.

Buffett's itchy finger has pulled the trigger.
He is purchasing Lubrizol for $135 a share. That's 28% above the closing price of $105.44 on Friday.
Click to read the news.



Friday, March 11, 2011

Starbucks Coffee - 37% growth in stock value for the past 10 months

Not long after changing their logo on their 40 anniversary, Starbucks made another announcement regarding the joint venture with Green Mountain yesterday. Starbucks shares move up almost 10% in a single day. This is not what I would like to share.

For the past 9 months, Starbucks has grown from around $26 in April 2010 to the current $37-$38. That's an increase of 37% in stock price. Starbucks has more room for growth and they are currently moving on the right track.

It was once a battered stock when the group made a wrong decision by expanding too fast in the China market and in the end, had to close down stores and retrenched workers.

Glad that the CEO has learned his lessons and he is much more focus on increasing shareholders' stock values by going into the single cup market.

If you search in MSN MONEY, you will be able to find that Starbucks will growth at a rate of 16% compounded for the next 5 years. So isn't this a good news to value investors?

Wait for a good opportunity to buy this stock. Remember, be greedy when people are fearful.


Disclosure: Blogger owns shares of Starbucks.

Thursday, March 10, 2011

Chip Eng Seng and other good dividend stocks.

Since my last blog 2 weeks ago, Chip Eng Seng is trading at 4.5 cents higher at around 47 cents. That's already a 10% increase in value if you have bought then. If you buy now at 47 cents, the dividend yield is only 8.5%. If you have bought at 43 cents, the yield is actually 9.3% in addition of the value increase of 8.1%. That's a total increase of  17.4%. This is the percentage return of invested capital only if you have bought their shares at $0.43 and intend to hold till their exercise dividend date.

Popular Holdings will be reporting their 3rd Quarter results ending 31 Jan 2011 after market close on 11 March 2011. The current trading price is at $0.155 to $0.16. The 0.4 cents interim dividend that was issued on 25 Feb 2011, is considered 2.5% of the price of $0.16. There should be a final dividend to be given in August 2011. Therefore, the dividend yield is actually higher than 2.5% for the year 2011.

Cerebos Pacific will be giving out dividend of 32 cents per share, in May 2011. This gives us a good dividend yield of 6.15% at the closing price of $5.20 on 10 March 2011. CEO's target of $2 billion revenue is within reach in the next few years. If you have the patience, this company can bring you higher than expected returns.

CapitaMall Trust gives out dividends every quarter. At the current price of $1.83 and total dividends of 9.24 cents for the last 4 quarters, it brings us a dividend yield of 5.05%.

Frasers Centrepoint Trust is trading at $1.51. It's total dividend for the past 4 quarters is 7.51 cents. This brings us the dividend yield of 4.97%.

Rental market is in the bull run now. Offices, shops, residential and everywhere else, are increasing their rents. My tuition centre is experiencing the same thing. The landlord decided to increase my current rent by 17%. If you own shares of CapitaMall Trust and Frasers Centrepoint Trust at the current price, what will be your dividend yield in 2011 and 2012? Definitely more than what is stated here.

Have a good day.


Disclaimer: All investments carries a certain degree of risk. Readers are advised to exercise their own discretion when investing.

Disclosure: Blogger owns Popular Holdings and Cerebos Pacific.

Monday, March 7, 2011

Hyflux, did you missed the boat?

Hi all,

After yesterday's announcement of being awarded the desalination plant in Tuas, Hyflux shares shoot up by more than 10% of closing price of $1.83 on Friday. If you have followed my blog, I hope you have bought the shares then.

However, you did not miss the boat. It's just that you will not be buying this share at a 10% to 15% discount. You can actually say that you will earn 20 cents per share lesser. Hyflux is still a good company for long term investment.

Lessons to be learned here.
1. We do not invest blindly. We do our homework before buying or selling the shares.
2. It is always good to grow our war chest with cash so that when there is an opportunity to buy, we have the money to buy. The opportunity does not come very often. News of Libya crisis has caused the price to drop more than 20%. This is the opportunity that I am talking about.
3. Knowing the value and growth prospect of the company is very important. It can help us buy an undervalued company anytime, or sell them when it becomes overvalued.
4. Do not hesitate, strike when the price is right.


Saturday, March 5, 2011

Another successful purchase of undervalued property

Dear readers,

Hope you have enjoyed reading my book "Route to Successful Property Investment in Singapore".

My books are currently available in NLB libraries. Click here to check.

If you think this book is a good read, recommend it to your relatives and friends. They can be purchased from major bookstores like Kinokuniya, MPH, PageOne, Big Bookshop, Harris, The Prologue, Select Books.

It will soon be made available in Popular and Times.

Alright, back to the subject.

I just checked using the URA website, http://www.ura.gov.sg/, regarding the transacted prices for landed and non-landed properties. A property that I bought last year has appreciated by at least 15% within 6 months. A unit within the same project was transacted for 15% above the price that I bought with.

Last year, the propery market is still red hot but using the same strategy as mentioned in the book, I managed to find this property selling at undervalued price.

Just to share that even at current property craze, you will still be able to find a good property selling under their value. Just follow the strategy in the book and you may one day be a successful property investor.


Friday, March 4, 2011

Benjamin Graham's Formula for value investing

Correction for the past two weeks has come to an end. If you have bought some shares during that period, you have got yourself a bargain.

These few days, I have been thinking of Graham's Formula. Benjamin Graham, the father of value investing came up with a formula to do valuation for companies. The original formula looks like this:

Value = Earnings x (8.5 + 2 x growth rate)
Value: Current value of the company
Earnings: Earnings per share for the past 12 months. Be careful not to include any one time charges or income.
Growth Rate: Rate of growth expected for the next 7 to 10 years. You can use the growth rate for the past 7 - 10 years as a guide.

Even if we know the value of the company using the above formula, we will only buy the shares at a discount of that value. The reason for buying at a discount is to allow us to have a buffer for error.

I will use Cerebos as an example.
The growth rate for the past 5 years is 9.2%. So, I will use 9% as my growth rate.
The Earnings for trailing 12 months is $0.345 per share.
The Value will be
$0.345 x (8.5 + 2 x 9.2%) = $3.00

However, he has modified the formula in his book "Security Analysis" to include the corporate bonds rates. The reason for doing this is because economy keeps changing, therefore if bonds can offer better returns, we should invest in bonds instead.

The new formula is as follows:

Value = Earnings x (8.5 + 2 x growth rate) x 4.4 / Bond Rate
Bond Rate: I will use the most recent ones, 2%, offered by CapitaMall Trust.

The Value will be 
$0.345 x (8.5 + 2 x 9.2%) x 4.4/2 = $6.59

Current share price of Cerebos is close at $5.15, on 4 March. This share price is actually traded at a discount of 21.8%.

Should we trust Graham's modified formula or Graham's original formula?

I used the modified formula and bought some Cerebos shares when they were traded between $4.20 to $4.50. The current value, excluding dividend, is about 22% to 25% higher at today's closing price.

Now, you can use this above formula, and use them on some companies that are of your interest.

Kindly share your insights and calculations by commenting here.