hai-o all is strong. but what to do now?

early this week, before the hai-o price continue its surge from RM8 to current RM8.7, i have being comtemplating my choice as to what i should do with it. The main idea is circled on how to deal or avoid the odd lots which i am to get if stay on without doing anything. (note: odd lots due to bonus issue)

i have a choice to either buy 100 shares or dump 400 shares. eventually just as its price surge through RM8.13, i decided i should buy. But thanks to the overhot market it shoots all the way up to current stratosphere level. Should i still buy?

back to my objective, it is to avoid odd lots. but, actually holding odd lots also won't be losing $. in fact if i still want to make up my odd lots to even, i may as well buy odd lots in the market in future. So, based on this i think should do nothing now due to the too hot price.

as per fundamental, it seems it has reached a fully valued price, with PE of 14.2, ROE 31.78%, and dividend yield still at 5% (as in my previous blog, if the company stick with its dividend payout policy, there is some chance that dividend will be increased as per increase in EPS). Current EPS stood at 63.12 sen.

on technical wise, i am no expert, so i consulted my guru friend. The answer is if the price reaches new level, technical couldnt tell how high the price could go... so technical is a HOLD. why HOLD but not BUY ?? because the buying shd be done when it broke 8.05 level (was a resistance) but now seems too late to BUY.

so the decision is clearly a HOLD for the moment.

some good books to read for clues on how to invest

The market is pretty high now. Will it continue to improve as economic condition improves, or will it correct itself? There are many conflicting bulls and bears out there. Just today, the star published a news whereby Mohamed El-Erian, chief executive of giant bond manager Pimco, says the market is gonna correct by at least 10%. So, investor like us should listen to them or not? (well i have not listened to the bears since half year ago, and am happy to reap the rewards now).

i think it is pretty futile to try to predict the macroeconomic condition. We should rather have long term strategy with the companies we invested into by analyzing their actual business. Now is a good time to go and read some books or refresh one's memory from the books that we have read. From the many investment books i have read, today i would like to recommend The Five Rules for Successful Stock Investing: Morningstar's Guide to Building Wealth and Winning in the Market by Pat Dorsey. Reading it isn't just a matter of understanding PE ratios and other ratios or metrics, which most other books explain more or less adequately. Instead, the author has in a lively and clever way, presents analyzing balance sheets and cash flow and income statements clearly. It has a simplified hot dog business and some real companies to compare with as example. It has shows how bad companies cook their account by popping up some figures. In fact this book has helped me to avoid myself investing in a hot stock (Megan Media) listed in Malaysia years ago which has since gone burst due to account irregularities. In that case, one can see that the debt of the company has increased way faster than it sales.

Koperasi Tentera - capital guranteed with 12% return annually

today i made my maiden investment into Koperasi Tentera

it needs RM100 as starting modal, RM10 as account opening fee. Subsequenty one can put money into fee advance (simpanan pendahuluan yuran) whereby each month a maximum of RM300 will be deducted into the account that enjoys 12% dividend per year. i also bank in some money into the special savings account (akaun simpanan khas) where one enjoys 5% interest

so for people who has access to this, it is a good place to park your money as part of a diversified portfolio

hai-o the real cause of the surging stock price

rather than the 'market inefficiencies' citing insider information of bonus issue, another real reason for the run up of the stock price is its stellar business performance in 1HFY10 results
you can get the report from bursa malaysia

from annual report, it is cited that
The Group is adhering to its dividend policy by paying not less
than 50% of Profi t After Tax as dividends to shareholders.

what this means?
Hai-o profit jumps 57.8% year on year. This will virtually means more dividend in the future.
in addition, PE is going to be down due to improving EPS. Added with more liquidity post the enlarged share capital, it has all the ingredients to go up in next level, at least in term of stock price performance.

let's not forget that stock price is not the only concern here, in fact the real concern should be the real business that it is doing. Its MLM business, which make up 70% of the profit, can perform so strong even in economic crisis time. And this is only mainly from Malaysian operation. I would want to imagine that there will be another surge when they are opening up Indonesian market.

hai-o corporate maneuver explains the share price rise

Hai-o just made announcement on some corporate maneuver which include bonus shares, shares split and placement. the bonus is a real bonus given presumably from retained profit. this explains the rise of its price over the last week. This also reminds me of what NTPM did less than 1 year ago, by share split. One thing that puzzles me is if this is the reason of the rise, why investors know about it? isn't that we should live by efficient market theory? does this mean market is not efficient and we are not on a level playing field? certain people has insider information

(i) Proposed bonus issue of up to 16,891,469 new ordinary share of RM1.00 each held in Hai-O (“Hai-O Shares” or “Shares”) (“Bonus Shares”), to be credited as fully paid-up, on the basis of one Bonus Share for every five existing Shares (“Proposed Bonus Issue”) held in the Company on an entitlement date to be determined later (“Entitlement Date”) (“Proposed Bonus Issue”);
(ii) Proposed share split involving the subdivision of each Hai-O Share held in the Company into two ordinary shares of RM0.50 each in Hai-O (“Subdivided Shares”) (“Proposed Share Split”);
(iii) Proposed amendment to the Memorandum and Articles of Association of Hai-O (“Proposed M&A Amendment”); and
(iv) Proposed private placement of up to 10.0% of the then enlarged issued and paid-up capital of Hai-O (“Placement Shares”) (“Proposed Private Placement”).

For the full announcement please refer at bursa malaysia

wire transfer to hong kong public bank

i transfer some money to my public bank hong kong account lately. it cost RM30 for the transaction charge. So it is more worthwhile to transfer a big sum rather than small sum. in fact it cost more to transact a small sum. In fact i have transfered it before i get access to the .net banking. Tonight i got my .net banking activated. It is a surprise that the process is easier than having me going to branch to activate a local bank .net banking. "money can let the ghost push the grind", there seems to be truth with this old wisdom. In order to facilitate my trading of stock, the broker has to help me with such account opening.

today Haio is drop to RM7.5. as i have said i will hold it long term. now that i have received the dividend, i am thinking whether to reinvest it into Haio or other stocks. Yesterday i received dividend from Digi. In fact after 1.5 months switching to digi i find the customer service at digi is actually better than maxis, despite the latter size and better network coverage. I would think digi will be able to continue its growth in Malaysia. Holding digi stock, which yield a higher dividend than Haio, may be a good supplemental choice

Haio swing and its near future growth to be driven by Indonesian penetration

With the 'phenomenm' swing by Haio from RM8 down to RM6.2 and now back to RM7.6, a 22.5% swing over the course of 1.5 month. i decided to find some trace as to why this happen. i couldn't find any relevant infor and has to conclude that it is purely sentimental driven.

i have a friend who has, under my constant promotioning of the shares, having some discussion with me on haio. He has previously shunt the stock, preferring glove stocks, which i shunt. However, months back he has said haio has forged some alliance in china and will probably do some great business in china. Referring to this actually what i do understand is indeed Haio has forged some alliance in china but its near future growth is not in china. In fact it is targetting Indonesia. Here is related report on this matter. In fact i feel more comfortable with Indonesia than china as china business scene is bit different from what Haio is exceling in Malaysia, where its majority Malay driven MLM business is very successful. Indonesia is having a more similar environment than china and that's why i am optimisitic with its Indon's venture. Below is the announcement regarding this matter

Article entitled "Hai-O aims to strengthen Indonesian ops"
We refer to the news article, appearing in the New Straits Times, Biznews page
B6 on Thursday, October 29, 2009 in particular pertaining to the sentence
which is reproduced as follows :-
"Tan said the group is on track to achieve over 10 per cent growth in profit
and revenue for the current financial year ending April 30 2010, . "
The quoted statement is strictly an aspiration set to be achieved by the
Company after taking into consideration the Companys recent performance,
growing in the number of distributors in our multi level marketing division and
the ongoing sales promotion activities in plan. For the 1st quarter ended 31
July 2009, the Company had achieved financial performance with growth rate of
about 32% and 36% increase in revenue and profit after taxation respectively as
compared to the corresponding quarter of the preceding year.
The targeted revenue and profit to grow by 10% per cent this financial year is
an internal target set by the Company to achieve and not in any way intended to
refer to any financial estimates, forecasts or projections of the Company and
have not been reviewed by the external auditors of the Company.
The announcement is dated 29 October 2009.

The fall of the trader

Yesterday my friend told me about the phenomenm rise of Adam Khoo, a forex trader.

Today my friend forwarded me an article of the fall of Boaz Weinstein, once one of Wall Street's hottest traders, speaks volumes about why financial firms still are reeling from the shattered global markets.
Again it is proven that trading cannot really works over long term. one big fall will wipe off profit accumulated over the years. Bob is a brilliant man, as shown in his resume
- chess master, poker and blackjack devotee and top trader at Deutsche Bank AG, Mr. Weinstein made big bets using complex financial instruments, generating large returns for the bank and about $40 million in annual pay for himself. But in 2008 the group he ran saddled the bank with $1.8 billion in losses, erasing more than two years of trading gains.

to me, trading is still beyond my comprehend and my taste.For layman investor, i still prefer just choose and hold. The Haio debacle last month really gives me some shock, when it fell heavily. Today, it has recovered to RM7.48 again. I'm again the paper profit region. i happy to stick with this model as of now. more important is to continue my income stream as 'bullet' to buy up more stocks along the way

possible asset bubbles at Hong Kong

I got this email from my broker, which reads of possible asset bubble at Hong Kong.
HK and S'pore property price has recovered lots of lost ground ever since the crisis. Malaysia, on the other hand, pretty unmoved (neither drop too much and subsequently not going up). We have a lower standard deviation but lower return. so, which property market is better?

*******here is the text*********
Asset bubbles rather than inflation will be the key concern for the financial stability of Asian economies next year, according to Hong Kong Monetary Authority chief executive Norman Chan Tak-lam.

Chan told the Hong Kong Economic Summit yesterday that although there was no asset bubble in Hong Kong as yet, it was important to prevent any from forming because it would be more difficult to mitigate the effects later

He added that as a small economy, Hong Kong could not merely respond through an interest-rate increase as that could have the adverse effect of triggering even more liquidity to flow into the market.

More than HK$640 billion has flowed into the city since October last year, with 20 per cent of that directed at the property market, pushing home prices up for 10 consecutive months.

Warrent Buffett and Interpretation of Financial Statement

A friend of mine has just read Warren Buffett and the Interpretation of Financial Statements: The Search for the Company with a Durable Competitive Advantage

Accordingly, the book is nice to read. The bookstore Popular is offering discount now and it cost around rm7X. normal price RM89

here is a link to the book at amazon

As i glanced through the table of contents, it covers a lot of financial statements (means look at the account) and it does looks to be comprehensive. Indeed, i have had a book by Morningstar which touches the same topic. Reading the accounts give you a sword at least at avoiding companies which less sound fundamental. For example, i avoided Megan Media (which was popular on local forum few years back but subsequently gets suspended due to account fraud) partly due to observing its accounts that the debt is increasing in higher pace than revenue and a doubtful manipulation of ratio such as ROE through accounting means.

Stock or property?

My friend has just came back from his Singapore visit and brought back a word, Singaporean's buying power really si beh gao lak. To give you a picture, people que to buy LV Loius Vuition and Prada. That's truly beyond my imagination. His Malaysian turned Singaporean friend told him 'where got recession'... Well, actually there are some similarities in Malaysia, actually still see the same number of crowd in shopping mall, although in term of salary one does feel the pinch last year (with either no increment, pay cut, or forced leave). Compared to 1998 when i was still not working, that crisis the effect i actually couldn't feel at all. Conclusion from here, asian still loves to shop, and still have money to shop. So, the retailers, who have seen their stock price drop, should see bright days ahead.
My friend got another word from his friend, that rich people buy property and poor people buy stock. To be fair, investing in property, to be in lesser risk, does need the investor to be cash rich. Otherwise, you expose yourself to leveraging. I have a rich relatives, she buys property but she also buy stock. So i wouldn't say that saying that my friend got is true. Conclusion, there are many roads to ROME. Just stick to your own liking.

OSK seminar on investing in foreign market (Singapore, Indonesia)

Yesterday i attended a seminar by OSK Investment Bank at Cititel Penang. OSK has its partner from Singapore (DMG) and subsidiary from Indonesia (PT OSK NusaDana) giving some insights in stock investing at their countries. I have never directly invest into foreign stock exchange, except indirectly through unit trust.

Well, i have always stick myself to investing in Bursa, as it is free from forex risk and i'm only familiar with companies in Malaysia. However, bursa (actually calling the old name KLCI sounds nicer) current market PE of 19.7% is at premium of 12 years average PE of 16.63%, suggesting that it is likely that stock price is somewhat ahead of fundamental. That's why i think it is not bad to divest a bit to foreign country. In fact i have just made my first foray to Hong Kong, having transfered some money to Public Bank Hong Kong. However i find it somewhat weird to have to search HK stock by stock number. It is still hard for me to browse for information easily. So i haven't done anything yet.

Back to yesterday talk. For Singapore, sectors like REIT and transportation is covered. I haven't invested into neither of this two sectors before, as such what the analyst mention during the talk does serve the purpose for me to see how they value such stocks. I found that the presenter, a he, likes to use P/B to compare REIT. He highlighted some stocks, namely CDL, cambridge and suntec reit. Singapore is currently having an office supply and demand mismatch, and rent has come down a lot since the heyday in 2007. The matter is complicated by another more than 4 million sq feet of new office space next year, with at most 1.2 million sq feet of space to be taken up. Hence, all the reit he recommended is in the industrial and retail. An interesting is that retail demand has maintained somewhat strongly. Not sure if we should take this as a sign that perhaps directly investing into retail consumer stocks are good or not. In fact, personally i have always like consumer stocks as their product i can see in shopping malls and i'm the direct user. For example, one will still see Padini (a garment & fashion franchisee in Malaysia) shops are still pack with people. I haven't been to Singapore of late, but i still remember how jam pack the retail malls shoplots are when there are the so called 'SALE' going on. Check out on Singapore SALES, which is happening now :) Back to the island state stock, the last stock mentioned by the analyst is SMRT. It has defensive business with dividend yield in the region of 5%. Its growth correlates strongly and will be underpinned by the continuous population growth. It is a not exciting play though. The reason the analyst bring out such defensive stocks is that he feels that the market is bit 'hot' right now, with lots of carry trade from foreign country such as US, where interest is to remain low well into 2010, as mentioned by Bernanke. As such it is more cautious to take a defensive position.
Selena from DMG is the second presenter who is presenting stocks on SGX. She covers plantation. SGX plantation companies are somewhat 'new', as all the while Malaysia is more famous for plantation stocks, with giants such as Sime Darby (huge in size but with mediorce ROE and efficiency) and IOI. At first i find it somewhat weird to try to listen to someone talking on plantation stocks from a country that has no oil palm plantation at all. It is noteworthy to know, however, that some giant plantation counters does list on SGX, like Wilmar (with operation spanning the bulk of South east asia and China) and some Indonesian plantation player. However, those stocks does not enjoy valuation as high as their Malaysian counterpart. Anyhow, she does provide some good insights. Since i am not well verse with plantation companies (although i used to have IOIcorp for some short time). She cover from basics of the palm oil production, like CPO comes from the fruit, and palm kernel oil comes from the brown color 'kernel'. CPO has a very strong correlation with crude oil movement, and recently the southern oscillation index has a strong -16, suggesting a likely El Nino that will affects CPO yield and hence its price. CPO also has a demand higher than supply. High demand growth is seen from China and India, with India having 12.7 kg/capita and 5.3 million tonne annual consumption, china having 22.4 kg/capita and 5.8 million tonne. US at 54.2 kg/capita and 0.9 million tonne and Europe 58.2kg/capital at 5.1 million tonne. The figure are interesting, say China is continuing to reach the level of kg/capita as Europe, the demand for CPO easily double. India's growth is expected to be 12 years behind that of China, but combined, the two giants will consumes more than what the current market player can supply. As such, over long term, CPO should be viable. I have always don't know how to judge the cyclic nature of plantation counters but looking at such market demand supply situation gives me some form of interest to relook into the counters. i have no interest, though, to look at plantation counters in SGX, including the First Resources that she recommended.
The analyst from Indonesia give me some feel on the Indonesia stock market, which is very much different from bursa and SGX. They have many mining companies in the top 10 biggest blue chip companies, at which Malaysia has none (to be fair, Petronas is one big company in Malaysia but it is not listed). The other bluechips are the traditional stocks, such as banks and telco. Of the many stocks that he fly us through, none is consumer stocks, which puzzles me. Indonesia is one of the world country with highest population at 234 million yet consumer stocks are no where near the blue chips? Well, actually i'm too bias, Unilever is in their top 10, which is a multinational manufacturer of food, home care, and personal products. The analyst recommended Inco, which mine for nickel and offers the world highest grade nickel. The big 3 cement players (one national, one from Swiss and another from some European country i can't remember) are also expected to do well due to less competition. Some very 'fresh' thoughts are that over the last 12 years, Indonesia has only built 12km of toll highway annually, suggesting how underdeveloped the country infrastructure is. NPL of the banks are pretty high, at 4.6% level generally. Inflation is low at 2% however take note that it has a high of 12% few years ago. He cites the country as politically stable, but to me that is different story. Anyhow, i think my minimal exposure to Indonesia via my unit trust is good enough.
The last analyst is from Malaysia, and he is talking on Genting Singapore, which has seen a 87% rise in stock price YTD. It is noteworthy to note that it is trading at 50% premium to its peer (the other casino gaming counter), although Genting enjoys a much less competition, in fact it is duopoly in Singapore (which is expected to have 6.2million chinese captive market) and its parent monopoly in Malaysia (2.2 million captive chinese market). It is surprising that he has put a much higher expectation on Genting Singapore than its Malaysian parent, with growth expectation in the region of 40%, and matching that of Macau. He does cautious investor that of all the 3 last listed stock on Macau, 2 of them see price dropping post casino commencement of operation. The 'support line' of Genting Singapore is at 87cent level (currently it is $1.29)
End of the story is that OSK has done a good job at organizing such seminar, which on top of trying to have bringing more business, is beneficial to the customers. Recently bursa has also organized some talks via some investment banks. I'll try to attend one locally to see how good it is. But from the topic it seems rather plain vanilla.

sharpe ratio for haio

Let's try to calculate Sharpe ratio of Haio

The definition of the sharpe ratio is ("Average return over 3 year" - "Risk free rate")/"Stdev over 3 years. so, sharpe ratio is a function of time too

From here we side track a bit
The risk-free rate is used to see if you are being properly compensated for the additional risk you are taking on with the risky asset. Traditionally, the risk-free rate of return is the shortest dated government securities such as MGS in Malaysia. While this type of security will have the least volatility, some would argue that the risk-free security used should match the duration of the investment it is being compared against.

Let's use 3% as the risk free rate.

Year 2007 2008 2009
Adjusted return 122.69% 12.08% 131.99%

Stdev Sharpe Ratio
66.71% 128.79%

The adjusted return is a sum of capital appreciation + dividend + free share over the login price annually

Good sharpe ratio means low in deviation, high in return that gives you the comfortable of the respective investment. This is because we are investor and not trader. we need to have a good certainty rather than gambling

from Haio as example, one can see that if both return and stdev is high sharpe ratio also will be high. There is no typical sharpe ratio value that we can target at. To yield a high sharpe ratio, it must has a high return with low STDEV