Bull markets are born on pessimism, grow on scepticism, mature on optimism and die on euphoria.

Wednesday, December 26, 2012

~ Tambun Indah 恒大置地 (TAMBUN) AnAlysIs ~

Recently, there are quite a number of investors mentioned about Tambun Indah online through blogs and forums for the past few weeks which really caught my attention. I decided to study about this company through the weekend. 

Tambun Indah is a propert developer with most of their land mark in Mainland Penang. There are many completed/ongoing projects mainly focus on residential properties. Tambun Indah listed on the main market in Jan 2011. 

Tambun Indah group managed to record profits for the past 5 years albeit a lower revenue on year 2009, but overall it's still considered as a good fundamental company which recorded profits continuously for the past few years. As the group is only listed last year, not much historical data can be studied. The fact that Tambun Indah which started up in year 1993 and survived few financial crisis until today shows that the management team is doing really a good job to establish itself as a premier real estate and property developer. 

As at cumulative quarter Q312, Tambun recorded a 63% y-0-y increase in revenue and the diluted EPS for 9-months period is 11.30 cents. It should has no problem to get a full year 14 cents EPS for year 2012. Base on today price of RM0.76, its PE is only 5.4 which still has much more room to grow. Profit margin at the region of 18% and ROE at 20% which shows the management team control the cost of sales and utilise their earnings for expansion expenditure pretty well. 

As at balance sheet, debt/Cash ratio is less than 1 which majority of the borrowings are long-term loan. The current ratio is high at 3.80 which shows a good liquidity. Retained profits are low, which is 1/3 of share capital. Thus, it's understandable that the group issued a right issue consisted of 2 right shares and 1 warrant for every 5 shares previously held to raise money. 

Tambun has a dividend policy of distributing 40-60% net profit as dividends. As a predicted  full year EPS of 14 cents, it will distribute at least 5.6cents as dividends. Based on today price of 0.755, the dividend yield is 7.4% which is consider high. 

Tambun's portfolio is on mainland Penang which I personally think that the price of the residential property will just keep increasing due to the land scarcity there. The challenge for them is to get the land to develop and control the operation cost as well as the cost of sales. 

I have put Tambun in my monitoring list and it's one of the property stocks I would like to have beside Hua Yang and Mahsing. These three companies are just as good as they are in terms of fundamental. What I need now is to wait for the price to come down a bit so that I can own some as the price has gone up almost 20% thanks to the recommendation of 冷眼 during his talk. Perhaps the correction after the exercise date of its interim dividend at Jan 2013 will be a good time to purchase.

Wednesday, December 19, 2012

~ Road to My Investment Goal ~

I, like majority of the typical fresh graduates who stepped into working society without much savings and being took up a study loan to finish my tertiary education didn't make me feel better in terms of financial situation

I started to invest in share market during my first year of working with no investment background and knowledge, follow the rumours, purchase the share and pray the price will goes up the next day and sell it off. During that period, I made profit but at the same time also lost it back. What I get at the end is just waste of time and higher heart beat rate.

That changes when one of my friends introduced me some books regarding long term investment based on fundamental analysis. I read and learn all the way until today, learning just never stop. I earning some passive income through the dividends distributed by the companies I hold. There are many experts willing to share their knowledge too in the forums.

But one of the advice given is I need to set a goal. A goal that makes me stick to the plan and investment philosophy. My goal is simple, to get 15% annual return and reach RM1 million in my investment capital at the age of 55.

I just wrote a post regarding the power of the compounding interest earlier. Let's say I didn't invest in the first year and save RM250 monthly to get my initial capital of RM3k. Sparing RM250 monthly for investment will just keep on continue. At the end of the second year, I target to get 15% of my initial capital of RM3k plus another RM3k that I save every months, that will be RM6450 and the result of the following years will be as shown in the table below. 

Take note that the 15% annual return is based on the investment capital from previous year which does not include the annual RM3k that I spare out monthly for investment on that respective year. 

I will have RM1 million if everything goes according to the plan at the 29th year. Of course I will reach my goal faster if I can get higher annual return, or pump in more monthly investment especially during the early stages. 

One million may not seem quite much 30 years later compare of today due to inflation. But I believe if I have the ability to get this amount of money, it should not be problem to go on further from there. 

Sunday, December 16, 2012

~ Tasco 泛亞物流 (TASCO) AnAlysIs ~

Tasco Berhad is a subsidiary of Yusen Logistics which in turn is a subsidiary of NYK group (Japan) . TASCO provides logistics solution covering air, sea and land transportation for domestic & international shipments. 

Tasco had just released its latest 3rd quarter report weeks ago. A slight drop in revenue but recorded a improved nett profit for the cumulative 9 months period for year 2012 compare with previous year thanks for a better profit margin control and better performance from the domestic logistic department. EPS for nine months is 21.1 cents. Foresee EPS for whole year 2012 will be around 30.0 cents as Tasco usually recorded higher earnings at fourth quarter. With this earning, the PE is around 6~7 based on the market price of RM2.00 per share, which considers undervalued. 

At the balance sheet, Tasco has around RM53millions cash and FD which translated into RM0.53 cash per share. Not a bad deal to fork out RM2k to own a tiny stake in a company that has RM530 cashback to you. Gearing ratio remained low at 0.40. Tasco has taken some term loans and it should not be a concern as the cash alone can settle all the short and long term loans. 

In terms of equity, Tasco has a considerable amount of retained profits and its NTA is well above its par value of RM1.00. Thus, there is a mathematical chances Tasco will perform a bonus share option to increase the market liquidity, perhaps 3-to-1 or 4-to-1? 

Looking back on its 5 years performance, ROE is around 10 and profit margin is around 7%. The management team should pay more attention to improve the ROE and profit margin but it shows some improving trends consecutively for the past 5 years. That's a good sign. 

Tasco started to give out dividends since year 2009. It has not fix any dividend policy but the dividend payout ratio is in the region of 36-43% for the past 3 years. As of this year, it just declared the first ever interim dividend of 5.4 cents. That is another good sign. 

Look at its segments performance, the international business division contributed around 40% of the overall revenue but only contributed to a mere 10% of overall profits before tax due to very poor profit margin. 

The contract logistics division served as the main contributor to Tasco's profit which contributed up to 80% of Tasco's overall profit. Perhaps that is the reason why Tasco invested and launched two new warehouses in Bangi and Shah Alam respectively in 2H 2011 to cater the customer demand for warehousing and contract logistics services and both warehouses will make full year contributions to financial year 2012. 

Tasco is yet another company with good fundamental that suits long term investors but one must keep attention on its every latest quarter reports due to its low profit margin as any big change of business will have a significant impact on it's earnings. 

Happy investing ~

Friday, December 14, 2012

~ Magic of Compounding ~

" The most powerful force in the world
that is how the all time genius, Albert Einstein thought about the compounding interest.

He even called it as the 8th wonder of the world.  

In simple term, compounding interest is as you start earning interest on your investment and the interest you gained is added back to your investment. As time goes by, you start earning more interest on your interest!

Everyone knows this, understand this but not many people fully understand the impact of compounding interest in the long run. 

The 2 important elements in compounding interest is the interest rate and the time. 

Let's first compare the impact of interest rate on our initial investment capital. This is easy. 

Of course, the higher the interest rate, the higher return you get from your investment capital.

 Next, let's us apply the same interest rate with period of 10 years. 

By using Excel, you can easily get a table like this by multiplying 1.1, 1.15 and 1.20 from previous column. 

Few things to note here:
  1. You get around 5k at the end of 10th year, it's 5 times your initial investment capital with the annaul return rate of 20% compare with around 2k with return rate of 10%. It's almost 3k more if you able to get addition 10% annual return from your investment from 10% to 20% annual return. 
  2. You get 100% return from your investment capital at 9th, 6th and 5th year with annual return rate of 10%, 15% and 20% respectively. This is common sense as you reach your target (100% return) faster with higher annual return. 

Okay. It's always easier said than done. Who doesn't want to get rich faster. Higher return of course comes with higher risk. So far I only show you positive return which is profit. What if the return is negative or lost, you definitely will get your blood being sucked out faster and become a zombie. 

I, like a typical employee or worker/labour in other term, every penny earned is my hard earned penny which scarificied lots of time and sweat. 

But the good thing is I'm still young. I'm able to absorb failure and start over again. Learn from mistake I did on investment, I know I'm better than yesterday. 

Start react now or else the inflation evil will knock me to dead in the long run

Monday, December 10, 2012

~ Mudajaya 成榮集團 AnAlysIs ~

Mudajaya is one of the companies I holding currently

Mudajaya main business involves construction, manufacturing, trading & plant hiring and property development. Out of these segments, construction segment alone contributes around 90% of the revenue especially on power plant and highway projects. 

From the latest quarter report, Mudajaya achieves 34.86sen EPS in 9-months period, expect the full year EPS for year 2012 can reach 45sen. With this earning ability, its PE ratio is 2.60/0.45 = 5.78 based on today price of RM2.60 per share. It's still undervalued, perhaps the lowest PE among the construction stocks. 

For the past 5 years, it able to record continuous growth on its revenue, net profit, assets and return on equity holder. Profit margin is >10, ROE too >15 for the past 4 years.

In terms of balance sheet, it's gearing ratio is around 0.5, should not have any difficulty in liquidity. In addition, it has ~RM420m cash in hands which translated into RM0.76 cash per share. Apart from that, Mudajaya has no outstanding borrowings at the latest quarter. Thus, the cash in hands can use to purchase property or equipment or investment without taking up heavy loan for financing. 

As for dividends, Mudajaya is not as generous as it should be. It only pays out less than 20% of its net profit as dividends for the past few years. Up to date for year 2012, it distributed 6.5cents dividends, foresee there will be a final interim dividend at last quarter which total up to around 9cents dividend for year 2012. Thus, the dividend yield is only 3.4% based on today price of RM2.60. 

On the other hand, Mudajaya always practise shares buy back from the open market. Up to  date, Mudajaya holds around 1.04% treasury shares against the total number of outstanding listed shares. It's good as the company feel that his company is undervalued, and purchase back its shares and put as treasury shares. 

On the equity page, the numbers of share permium is almost double of the share capital. There is a good chance the company will perform a bonus share option to improve the share liquidity in the market as its NTA per share is well above its share par value too. 

Of course, there is bad side of this company. The on-going saga in India about the coal supply which deters the investors from paying more attention on him and of course the high price that Mudajaya paid to acquire around 26% stake in RKM Powergen in India still left some unwanted memory in the investors' mind. But it does provide a recurring income to Mudajaya if the plan goes through. 

Anyway, Mudajaya is still consider fundamentally good at least to me. If the price goes up to let's say a PE of 8 to 10, it provides at least 40% upside of current price albeit a little bit low dividend yield and uncertainty in India. 

Just keep monitoring and happy investing

Thursday, December 6, 2012

~ SKP Resources (SKPRES) 星光资源 AnAlysIs ~

It was back to March this year when SKP Resources announced the bonus share option, only I started to pay attention to this company and monitoring ever since then. 

Brieftly speaking, SKP Resource involves in plastic manufacturing especially on plastic ejection moulding and is renowned within the plastic industry which constantly maintains and deliver products and services of world class standard and quality.

SKP Resource just announced its half year report for year 2013 fortnight ago and it showed that the contract it got from its main customer, Dyson is not one time deal. The business is just keep going. The revenue and net profit are constantly good for the past four quarters. 

It ables to achieve a half year EPS of 2.64 sen (after bonus shares issued). Foresee it can achieve a full year 5.2sen EPS for year 2013. Based on today price of 36.0sen, its PE is 36/5.2 = 6.9. Its price still has room to grow higher if I apply a PE of 8 or 10 into it which translates into 15 to 40% profit. 

Graph below shows the financial highlight for the past 5 years. Bear in mind that the EPS for the past 5 years are being calculated excluded the bonus share issued. It able to improve ever since the downturn in year 2009. 

Apart from that, its profit margin is around 10% which the cost of sales alone already accounted around 80% of its revenue. This is a point where the management team has to look at to improve the operation cost.  

Let's now take a look at its balance sheet, one thing to note is SKP Resources handles its financial really very well. Its gearing ratio is quite low. Another point is its borrowings or loan is extremely low or totally zero for the past 5 years. It takes no debt to generate income for the company. How nice is that. 

In terms of cash, it has RM88m cash in hands announced at the lastest quarter report. If we divide the RM88m cash by the number of shares (900,000,000), its cash per share is RM0.098. Image you buy 1000 lots today at RM0.36 to be a minor shareholder of this company. So, you paid RM360 for it, but you have close to RM100 cash in hands. Interesting, isn't it?

You may doubt of its high amount of cash in hands as in other mean, the management team does not fully ultilise it cash to invest for future. But take a look at its ROE, it able to achieve an ROE >15 for year 2011 and 2012. It shows the management team able to bring a good return to its shareholders to at least 15%. 

Another point is SKP Resources adopts a policy of distributing at least 50% of its net profit as dividend to its shareholders. Foresee its EPS for year 2013 is 5.2sen, so it probably can give around 2.6sen as dividend to its shareholders. Base on today price, its dividend yield is 7.2% which far better than you put your money in to FD. 

I first bought this company back to July this year and start to accumulate more as time goes by. I had receive dividend for 2 times throughout this period amount to total 2.35sen per share. Not bad huh

But there is a bad side of this company as its main customer, Dyson contributes quite heavy of Skpress's total reveune. SKP will have a hard time if Dyson reduce its business with SKP. 

Since I cannot predict the future, just hold on to receive dividends and check the result quarterly to evaluate more. 

Happy Investing