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Investment Plans forming in August 2011

Century Logistics announced their Q2 2011 results. Operating Profit has increased and that's comforting. Not sure why, perhaps the exchange rate or their cost control is getting better. The wonderful news is that an interim dividend is announced of 5cts per share.

As for EA Holdings, to my horror there's no liquidity at all for this counter too. My strategy is to hold it until the end of the month and till the quarterly results were announced. It should ride up if another huge revenue/profit comes in. I may or may not cash out to swap for Century Logistics.

Let's wait and see.

Gold has left me flabbergasted. All the research reports are not predicting well. The volatility remains high and is between $1750 - $1780 today. And the margins I have to loss is about 4%, whereas for Shares the total cost of transaction is about 1.5% + RM24. Unless Gold makes another strong leg up from the purchase price, it's not that easy to get another 10+% return.

Next target - EAH

I'm going to aim to stock up on EA Holdings into my portfolio. One would cringe if we see the charts of this counter. It sparkle during it's IPO but now seem to have taken a severe beating. One wonders why? Doubts creeps in whether it's too good to be true.

However upon more detailed analysis, the stock basically double it's base and it's CEO owns 62.5% of it valued at RM30 million. And the fact that when the stock is taking a beating, strangely enough the CEO parted with his money of about RM226,000 for mini acquiring of the stock. Was it to boost confidence? That paltry addition won't help since he's owning more than half the company anyway, he'll go down with the company if it indeed bust.

Q1 2011, Revenue RM11 million, Net Profit RM1.7 million, EPS 1.11cents
FYE 2010 Revenue RM20 million, Net Profit RM4 million, EPS 3.31 cents

Based on strong results, I see it as a bargain. I'm game for this counter.

First Foray

Today was my first foray into the market after I've obtained my CDS account and linked it with my Savings Account.

My first purchase was Public Bank, a very safe dividend yielding stock. Last year's dividend payout was RM600 per share. So at today's price, it's about 4.6% yield.

I looked at Hap Seng Plant to get some so as to profit when their new Q results were announced. But then I saw the humongous selling queue and I backed off.

Century Logistics again has liquidity so dried up that it shot up to RM1.66 with minimal volume. Q1 2011 result wasn't that great, with just RM6.2 million (20% of FYE2010) and EPS of 8.18 cents. Revenue was flat as with last year. Why do they need over RM30million in cash? And what's the use of having almost 5% as treasury shares? The directors controls almost half of this company and the PE ratio of just over 4 is the reason why this counter is still tempting despite the extreme low liquidity and low dividend payout policy.

The best way is to buy into a company that grows for years and this seems to fit into that criteria.

As far as my financial tracking began from Year 2004 - 2011, my total transacted investment income is RM 42455.

I last updated via twitter that those who bought Gold at USD$1780 and above were roasted. This 2 days it's hovering around 1740 and has tested the lows of $1730 twice. Now the buyers at $1750 are gone as well. I still hold to the view that Gold will weaken to below $1680.

Recently the idea of EuroBonds are gaining strength with Germany reluctantly to agree to it, but now do not oppose to such idea. George Soros said that the weak ones should leave Euro, namely Greece who was bailed out with 200 billion Euros and Portugal. Maybe this EuroBond is going to save Spain and Italy.

Swiss Franc has weaken and so shall Yen, USD, Euros, and these liquidity must go somewhere. Emerging market equities or Gold ? Will the rating agencies downgrade another big country for another hammering time? Mind boggling times are here.

Investment Strategy

Blogging this to make a mark on my thoughts and the formation of investment strategy that's in my head.

Matthias Chang is forever the perma-bear, predicting gloom&doom to some somewhat correct predictions but wrong in timing and Dali is almost always long on the market making persuasive analysis on the market overall. I have learnt a lot from both but they are not perfect.

After the Greece debacle which require a second tranche of 110 euro to bailout again. This was soon followed by Spain and Italy where their bonds hold more than 6% of interests. USA did not solve their debt limit problem until the last hour and raised it by a high 2.5 trillion with no view of increased taxes. Then S&P downgraded USA's credit rating to AA+. The market absolutely could not take it anymore and tanked.

In Malaysia, the effects were less and only about 100 points were lost, but a rebound has pushed up 50 points back now. It's hovering at around 1500 now. Meanwhile, Gold exploded to the upside from $1650 to $1810 and then sliding towards $1740. I made a huge exit from Gold at $1750 and somewhat regretted it. I could have made a bigger killing.

It's mid August now and I think Gold will move down below $1700 where I should then be making an entry again. I'm also itching to enter Equities again and Mr. Koon Yew Yin has recommended Plantation sector which the basis of growth in potential earnings concept really intrigued me. I'm planning to enter Hap Seng Plantations as soon as my CDS account is ready. As always, I'm wondering what I should do with Century Logistics. It's a very cheap stock of PE ratio of around 4x and a higher NTA than it's current stock price. But this counter is not moving. Growth in earnings can be seen. Or could it be that their policy of 20-25% dividend payout of net profit is too low? I wonder what do they use their 70% profit for? More expansion?

In any case, I'm happy to make 10% from my Gold this month and my war chest would be doubled by end of this month. Hope I have learned well and will strategise better moving forward.

I'll be posting an update in the very near future. *Crosses Fingers*

My Second Liverpool FC Match Experience

Circa year 2001 was when I registered my first attendance to an English Premier League match held at St. James Park. I remembered the whole lot of us pull together a huge sum for tickets and set a plan to buy the tickets from the ticket counter at St. James. In order to do that, we had to wake up and be there at an ungodly hour. It was at a time before the sun rises. We had to queue around the stadium for more than 2 hours before it was our turn. And when it was ours, the ticket attendant gave us some wry look when we wanted 9 tickets and asked the possibility of purchasing tickets of the visitor side. With a curt answer, no, we resigned to the fate and just agreed for a normal home side section.

I remember having some nap time in the afternoon after the gruesome queue before dawn. And in the early evening, the Toon Army turned the city into monotone. At every turn you make, you cannot fail but to surmise that, everyone suddenly has the fashion sense of a prisoner.

Our seats were as high as the stadium would go, and in front of us, are typical obese and burley Geordies. It was raining and visibility was poor due to the rain, our blocked view made of fats and the unfair distance allocated to Asians. Newcastle beat Liverpool 3-1 and on that night I wondered why we have to spend that awful sum for such an experience.

16-July-2011, Liverpool FC Asia Tour 2011. Legendary is a given. A historic night no less. Liverpool FC making their debut visit to Kuala Lumpur to meet their koppites from Malaysia.

Knowing that it was a sold out event, chaotic traffic is unavoidable. I planned to be there few hours earlier and to park my car at Sri Petaling with a brief walk towards Bukit Jalil. At every corner you see tons of fans in Jerseys marching towards the stadium. After meeting up with my friends and a quick lunch at Endah Parade, we too made our move.

The noise emanating from the stadium was unbelievable. It’s puzzling why the cheers and the Anthem is being sung few hours earlier from the match time. Upon reaching close to the stadium, it was madness. There’s a huge bazaar selling Jersey replicas for RM30 and scarfs for RM15. I wonder from where they were manufactured from. Vietnam, China, Malaysia? Shit, the quality of copying is astounding.

The hot sun had quickly drenched us in sweat and also we had to push through the crowd to head towards the turnstiles. With 2 hours in spare, the stadium was already almost half filled. We still have plenty of options to choose our seats. Stadium is spacious and the problem of the front row blocking your view eventhough the guy in front of you is standing does not occur. Took my time to let the atmosphere soak in and the sight of the sea of Reds packed this stadium is a sight to behold. The multi-racial crowd also made this a 1Malaysia moment as well.

The fans erupted at the sight of a Liverpool player emerging. Noise was unbelievably boisterous especially with the constant plastic horns. I could hardly hear the whistle.

The match was entertaining with a total of 9 goals. To their credit, Harimaus put up a good performance with notable performances from the captain. Number 7 and 8 stole the limelight. The free kick swerving to the side netting was just unbeatable.

Liverpool FC was gracious enough to change all 11 players for the second half. And with this, 22 players were showcased in this tour.

Joe Cole pulled a Harimau player’s shirt to catch up when he lost the ball and was rightly booed strongly by all. I somehow don’t quite see him fit in.

Adam was magnificent. In fine form and looked sharp. Absolutely dictating the midfield and has excellent devastating passes. He has sealed it as one my top 3 favourite players.

Carroll was slow and seem lost in the field. Everytime he ‘runs’ you feel you want to hit the ‘dash’ button to make him move faster.

Aquilani was dazzling with an array of mesmerizing passes and setup a few goals with his ability to read the game. He reminds me of Alonso.

Spearing, Meireles, Soto, Kelly wasn’t quite themselves and was poor on their touches. They also seem slow compared to Harimaus.

Maxi was always on the mark with clever runs.

Ngog showed speed where Carroll was obviously lacking. But again he’s not as clinical a finisher as I would have liked.

Flanagan showed clumsiness in keeping up with Gunalan and threw in some unnecessary rough tackles.

Kuyt was consistent, controlled the right wing of the field and showed fine technique when he collected a wayward ball at the lower right flank to thunderous claps from the fans.

Insua seems strong and his left crosses were decent.

The echoes of cheers from the stadium during the lap of honors after the match was nothing short but amazing.

The Anthem that was sung after the match was haunting and did not disappoint. Indeed Anfield was in Kuala Lumpur that night.

Walk on, walk on, with hope in your heart.

And you’ll never walk alone.

You’ll never, ever walk alone.

See you again in year 2013. I’ll be there.

Astronomical property prices

Today it is undeniable that property price is a huge concern for the Rakyat. The trend is not isolated in Malaysia but also in many other Asian countries. The other side of the world though is having a direct opposite situation. Now what has caused this situation? As recent as a few years back, there is a huge property glut. Pages and pages of advertisements can be seen in the newspapers. Options and choices are abundant.

The average price of a KL residential property is now about RM485,000, or roughly nine times the average urban household annual income of about RM54,000. The Demographia International Housing Affordability Survey rates markets, whose property prices are 5.1 times median income or more, as “severely unaffordable”.

Developers, bankers, agents are working in cahoots for their own vested interests. Friends and families of developers are loading up units for a good trade. Speculative plays also create artificial demand and further exacerbate the situation. Most worryingly, the people who are joining the speculation are over leveraging themselves with staggering loan to income ratio. Low and prolonged interest rates has always been the most commonly quoted source. But there are many more tricks under the sleeve. Creative packaging of 5/95, no SPA, Legal Fees, no Interest during construction, which in actual fact, is priced into your exorbitant swanky new home. All these sums up to be stoking artificial demand.

Supersized terrace houses, now the trend, is selling at figures near RM1 million. Some which are located deep into Sungai Buloh but conveniently rebranded as Damansara is now fetching RM1.4 million. Owners of such product at Desa Park City is grinning to see it’s going at RM2-4 million. And they proudly justify the valuations by giving one and only reason, that there is no other places in Klang Valley that has such a concept. Condominium units recently launched yesterday near Taman Pertama is asking for RM650k. But if I remember well, the erected board there says ‘Cadangan untuk membina pangsapuri kos sederhana’. Terrace houses nested deep in Cheras is asking for RM740,000 when that area is well known for robbery and cracked houses. Strangely enough the previous launch albeit being smaller units were sold for RM390,000 only. Condominiums in Mont Kiara is asking for RM2 million now.

Affordability does not seem to be having any impact. In fact, affordability today is much more worse than the years before yet the demand seen in the market clearly defies this logic. Rental yields are now fast becoming a laughing stock. Did our income levels gone two fold recently?

All in all, clearly it is a very frothy situation. I cannot for the life of me see the sustainability for this and where the actual demand comes from.

Bank Negara has raised OPR to another 0.25% and 1% increase SRR to 3% soaking up roughly RM7 billion of liquidity. The other policy of 30% downpayment for a third property purchase is also engaged to deter speculaction. It is widely anticipated that Bank Negara will do another round of this by end of the year.

Now this means higher mortgage payments and higher cost of fund for the commercial banks. Which means people will struggle to pay their mortgage and banks will be stricter in giving out loans thereby reducing demand. When more completion is delivered and the supply hits the market, speculators will start to flip and flood the supply. High mortgage payments will also trigger some to default and increase Bank Lelongs and also an increase of supply to the market.

I would hope to see an introduction of RPGT again with progressive tax brackets.

Cash out while you still can. Don’t buy into the cost of building materials is high story. Real actual buyers has the most to lose currently. But speculators will be burned.

Asset - Liability = 500,000

I have declared in my Facebook Notes, that I will achieve a nett asset of half a million by 1st of January 2013. A SMART objective as the term used in MBO appraisals.

Not an easy target unless I get some kind of windfall between now till the deadline.

My Portfolio in stocks currently registers a -RM1968 on paper and the total worth is only about 6% of my wealth. 81% is in Cash. The others are in Fixed assets.

Somehow my gut feel tells me there's a property bubble brewing as well as high risks that could derail the stock market. I would prefer to see myself being a failure to gain rather than risk losing what I already have.