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.

Cheers.

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.

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.

Cheers.

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.
http://eservice.nlb.gov.sg/item_holding_s.aspx?bid=13768520

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.

Cheers.

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.

Cheers.

Finally, the day has come?

Dear fellow property investors,

According to a report from Channel News Asia website, http://www.channelnewsasia.com/stories/singaporebusinessnews/view/1112824/1/.html

City Development chief said in his interview that the property price will drop between 3% to 5% this year. The transaction volume will also be down.

Just a reminder, the bank's housing loan rates will never be kept at the current low rate. Once the rate increase, I believe there is going to be quite a number of fire sales out there.

Hong Kong and China property bubble has reached uncomfortable level. What will happen if it pops?

Current Libya and some North African countries' crisis causing the oil prices to roll over $100.

The stock market is currently undergoing correction.

With all these news happening at the same time, do you think that the day for housing prices to drop will come soon?

Build your warchest and continue your search.

Cheers.

STI to go below 3000?

This correction plus the middle east crisis is a good chance to do bargain hunting. I have bought some counters myself. Since we know the values of our own research companies, we should take this chance to build our portfolio and grow our nests.

Hyflux is one company that has projects in Libya that may or may not go through. However, if you have done enough research on Hyflux, I believe this is a company that is selling at a discount now.

UOL is actually selling at about 33% discount to their net asset value.

Cheers.

Please share your views by commenting on this post.

Another high dividend yield stock

Share price of Chip Eng Seng: Close at $0.42
Dividend to be given out this year: 4.0 cents.
Dividend yield: close to 10%

Cheers.

Jac's pick for 2011

After a month's observation and research, these are the few companies that I have chosen to monitor and invest into when there's a chance.

The companies here are not listed in order of merit.

1. Popular Holdings. Singapore
2. Cerebos Pacific. Singapore
3. Walt Disney. US
4. Starbucks. US
5. McDonald's. US
6. Citigroup. US
7. OCBC. Singapore
8. UOL. Singapore
9. Duke Energy. US
10. Las Vegas Sands. US

The above list is Jac's personal selection. Readers are adviced to exercise own discretion when investing as it involves risks.

Cheers.

Rates hike coming?

Today China's central bank has risen the deposit interest rate to 3% and the loan interest rate to 6.06%.

This rate hike is to fight against their inflation.

Is Singapore going to do the same?

What will happen if interest rates rise?

Those with their money in the bank will be happy because they will get more interest.

Those who has just taken the home loan? The smell of disaster is not very far away.

Looks like there will be some bargains for us out there very soon?

As we hope things to happen, we still continue to do our homework.

Cheers.

This is the time when people are greedy... in Singapore property market.

What do I mean?

Remember Warren Buffett favourite quote, "Be fearful when people are greedy. Be greedy when people are fearful."

The "People are fearful" times are over. But people never learn their lessons. They get greedy in such a short time. Have they forgotten the financial crisis that had caused the world to go into recession?

Singapore property market is still very hot, despite the cooling measures. More cooling measures are coming.

Well, people who buy properties in Singapore now are either GREEDY or just don't know what kind of shit they will get into. Why would people be willing to pay close to $900 per square feet for a 99 year property?

The buyers may question, "Property prices are going up in the long term, why not buy one now when the interest rate is so low?"

My answer to this question:

Interest rates will not be this low (1%) forever. Please do not forget that the banks revise the rates every 3 months. What will happen if interest rate increases to 4%? You can figure that out yourselves.

I would say now is the time to build our warchest with lots of money and the CPF monies. Invest in some company stocks that can give very good dividend instead. For example, Cerebos Pacific has declared a dividend of $0.32 per share. At today's closing price of $5.26, it's a yield of 6%. Isn't this better than property investment (rental yield) now?

Wait till the property price to be right before we sell our shares and turn to property investment.

Investment is just a transfer of your savings from a place to another to earn the highest interest possible.
You can leave it in a bank, buy the bank stocks, buy other company stocks, buy another property, the choice is yours.

I am currently holding on to only one property to stay in and currently growing my cash by buying some really good companies that I have found. Until I have found a good property at the right price (of course I am unable to find one now), I will continue to put my cash with these companies and earn a higher yield than rental yield.

Happy Investing and don't forget to do your homework.

Disclosure:-
I own Cerebos Pacific at the time when this post was written.

Disclaimer:-
Investment involves risks and readers are expected to exercise their own discretion when making an investment decision.