Friday, February 28, 2014

Is Yongnam's disappointing FY2013 financial result a concern?

Yongnam reported its 2013 full year result just yesterday. I have friends and colleagues coming to tell me that Yongnam's profit drop drastically and its shocking. Yes it is if you're just looking at the numbers. Yongnam's net profit actually dropped by a whooping 87.3% from 43.5 million to just 5.5 million. EPS dropped from 3.45 in FY2012 to 0.44 in FY2013. I'm vested in this company since August last year so i should be concern right? Or maybe not. Ok, enough of the bad numbers. Let's look at what happened.

Firstly, revenue actually increased by 19.9% for them but why did profit dropped so much? This mainly has to do with cost over run of 3 structural steel works projects. Which 3 projects was it they did not mention in their report. This caused its cost of sales to increased by 43.3% resulting in lower gross profit.

There was also a "one-off non-recurring loss of $8.1 million on disposal of fixed assets in 3QFY2013 and a $5.1 million provision made on amounts owing from Alpine Bau GmbH, the insolvent main contractor for MRT Downtown Line 2 in 2QFY2013 caused General and Administrative expenses to spike from $24.2million in FY2012 to $31.1million in FY2013. However, this increase was partially offset by a decrease of $6.3 million in staff expenses during the year."

In spite of the drastic reduction of profits, Yongnam still declared a dividend of 0.6cents. This shows that they are still rewarding shareholders even when profits suffer. The cost overrun should be temporary and more of a one off event. Moving forward with more projects coming up, Yongnam's profit should return back to normal and even increase. With Singapore's Land transport authority already awarded various contracts for the construction of the new Thomson line, Yongnam will certainly be part of the game. Previously, Yongnam has been doing most of the Specialist Civil Engineering works for the MRT circle line.

Let's take a look at some of Yongnam's on-going projects:

1) National Art Gallery
  • Contract worth $38.8 million
  • Expected to complete 2Q 2014
2) Singapore Sports Hub (previously National Stadium)
  • Contract worth $110 million
  • Expected to complete 1Q 2014
3) Market Street Development
  • Contract worth $36 million
  • Expected completion in 3Q 2014
4) South Beach Development
  • Contract worth S$21 million
  • Expected completion Sep 2014
5) Marina One (New marina bay CBD)
  • Contract worth $168 milion
  • Expected completion in 2016
6) Various Singapore Downtown line projects
  • Total contracts worth $221 million
  • Expected completion June 2014 to Aug 2015
7) HK MTR Extension – 8 contracts
  • Contracts worth HK$766.6 million
  • Expected completion between 2014 to 2016

All the above on-going projects is expected to provide Yongnam with stable profits for at least the next 1-2 years. There are other potential projects for example the new Changi Airport terminal 4, Project Jewel in Chnagi Airport and Thomson Line etc. The construction sector does look promising to me at least for Yongnam who's playing a part in the commercial and infrastructure upgrade by the government. 

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Top 10 concerns of young Singaporeans

1) Don't touch my Whatsapp

Facebook bought over WhatsApp? Don't really know what will happen. Maybe its a good thing. Want to charge me over the use of WhatsApp? Everyone stands up and object! In the end its a misunderstanding and may not happen at all. But you can see how powerful is social media. It spreads like wildfire in a few hours.

2) Wedding cost how much?

Many young Singaporeans know wedding costs a bomb. The wedding gowns, the wedding photos, the wedding rings and finally the most expensive wedding banquet. Then there's this article on a $120k wedding and also this news on a $900 wedding. Which would you choose? You'll think maybe I'll choose somewhere in the middle. Occasionally some blogger post on how much is an actual wedding and everyone flocks to see it. The post goes viral again.

3) Housing cost how much?

Buying a house is the next major decision after planning for a wedding. Many young Singaporeans complain how are they going to buy a HDB flat which is so expensive but in the end they still have to buy it when they meet the Mr or Mrs right. No matter how expensive also must buy is what you would say. Buy now and think later. Then there's a post on how much money you need to buy a HDB flat and many people are curious on it. Shocking to pay $1000+ every month for the next 25 years? Can you afford one? Maybe its time to start planning.

4) Travelling

Travelling is not so much of a concern but its something young people like a lot. Travelling out of this small country of Singapore is a must for most of us since in Singapore there's not much left to see or do when you've been living here for the past 20 years. Many of us share on our social media pages the top 10 exotic destinations, the top 20 undiscovered places you must go, the top 5 romantic places for couples etc etc. Then there's this Scoot promotion with super cheap tickets and many young people flock to buy it. Are you one of them?

5) Public transport breakdown

This is the one that affects us the most especially you take the train everyday and it breaks down 3 times in a week. Late for work nevermind coz bosses can understand. Late for exams that's it. There's nothing you can do.

Not to mention the slow moving and packed buses, the jam on PIE when you take a taxi and queuing for MRT trains. What we can do is to wait for the government to penalise and fine them more and hopefully things will change soon.

6) Slow mobile internet

These days hand phones are not used for calling only. They are used for facebooking, whatsapping, YouTube, surfing the net and many more functions. Can't send out your whatsapp message? Can't load a webpage? Streaming video very slow? Can't load news feeds on Facebook? It gets frustrating I know. But maybe we can or we should just slow down a bit,  put down our phones and talk to that friend beside you!

7) Is Singapore still Singapore?

Another most talked about topic. Your school, your workplace, the public transport, the road congestion, the high housing prices. Everything is changing. How we wish Singapore was like when we were younger right? What is the cause of all these? Overcrowding? Too many reasons indeed. But still, we know we are fortunate to live in a peaceful small island city of Singapore.

8) Once in a blue moon politics

Have you noticed during the 2011 election that most of your friends start to talk about politics? Why it seems that most people are supporting the opposition? 5 years ago your friends or you didn't even notice the elections but now you're talking about it. Its a sign that you're part of adulthood already where every vote counts. Vote wisely is what they would say.

9) Money Money Money

Where to earn more money? Should I start a business? How do I invest? Many young people think of all these but in the end most of them end up in their 9am-6pm job. We are so busy at working trying to excel and climb the corporate ladder that we forgot what we work for. Is it just for survival? Or is there a way to get out of this rat race? Many thought about it but many gave up along the way and live a mundane life. Most only live to regret when they are older.

10) Having fun

When we're young, its all about fun. Where to shop? Where is a nice place for dinner? Where to travel? What movie to watch? Then its back to work, work and work. Don't you find this life mundane and repetitive? Maybe its time to stop for awhile and think: "What am I living for?"

May you find your passion and pursue your dreams. Make a difference in someone's life today. It makes life more worth living for.

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Wednesday, February 26, 2014

How much money do you need to own a condominium in Singapore?

Previously i blog on "How much money does a couple need to earn in order to afford a $300,000 HDB flat? Some of you may be interested to know how much money you need to own a condominium instead. This post will tell you whether you can afford one of those luxurious property in Singapore.

Staying in a condominium feels different from staying in a HDB flat. There is security, a swimming pool, a gym, barbecue pits and also the feeling of a high end living environment. It gives someone a rich feeling perhaps? Nowadays condominiums are going high tech. My uncle's condominium, which he just bought last year, has an auto lock door function.

Now, you may be looking at one of these condos:

Nice to have a gym with a nice urban scenery? How much is the price? 

Here you go:


I hope you expected that it was this price. Did it dash your hopes of buying a condominium? Time to break down the money you need in order to own one of these. 

Most likely an average person will go for a 2 bedroom or a 2 + Study type. Let's make the price at $900,000 for easier calculations.

Can you afford a $900,000 condominium in Singapore?

Maximum loan tenure you can take from the bank is at 35 years now. The maximum loan amount you can take is 80% of the market value of the house. This is only for loan tenure of up to 30 years. If your loan if more than 30 years, you can only borrow 60% of the market value of the house. This is the Loan to value (LTV) ratio.  

Another thing to take note is the Total Debt Servicing Ratio (TDSR). It is at 60% currently. This means you can only use a maximum of 60% of your gross monthly income to pay for all loans. This include all your other loans including car loans, credit card debts, students loans and personal loans etc. 

Let's say you do not have any other loans currently so you can use up fully the 60% ratio. You also take the maximum LTV ratio at 80% so loan tenure is 30 years.

Below are the summarised details:

  • Property Price: $900,000
  • Loan tenure/period: 30 years
  • Loan amount: $720,000 (80%)
  • Down payment: $180,000 (20%)
The monthly repayment when calculated based on a 2% interest will be $2661/month

You can only use 60% of your gross income to pay the loans. This means you need a monthly gross income of $4435. 

*However, MAS requires financial institutions (FI) to use a higher interest rate of 3.5% when calculating monthly loan repayments. Thus, at 3.5% you're require to have a gross monthly income of $5388.53 to qualify for a $720,000 loan for 30 years. 

Now, having a income of $5388.53 sounds quite easy especially if you are a degree holder working at the manager level. But don't forget, you still need to pay 20% down payment. This amount is $180,000. Now, it doesn't look that cheap any more. Furthermore, you can only pay 15% of the 20% downpayment by CPF and you'll need to pay 5% of it by cash or cheque. This is 75% of $180k by CPF and 25% by cash. This sums up to $45k by cash. 

In any case even if you can afford the down payment, i don't think you'll want to use 60% of your income to pay the monthly instalment. By the end of every month, you'll be left with nothing much. It is also dangerous to have such high ratios of debt to income. In the event you lose your job, you'll be stressed out. 

Probably an income of $8870 would be comfortable to own a condominium. In this way, you'll only be using 30% of your income for the property.

P.S: If you're unsure about your loan eligibility or wish to apply for a new housing loan, contact me at for a complimentary consultation today. I compare the rates against 16 different banks and financial institutions in Singapore to provide you the best housing loan package at the lowest interest rates. Refinancing enquires are welcomed too. Click here for more information on the services I provide.

*Do take note that there is a Mortgage servicing ratio (MSR) of 30% for Executive Condos (EC) bought directly from developers. This means you can only use 30% of your gross monthly income to pay for EC housing loan instalment. The above condo, The Panorama, is used for illustrations only. If it is an EC, then the respective 30% MSR applies.  

*Disclaimer - The above calculations are used for illustrations only. It does not reflect the actual loan that you will qualify. When in doubt, check with a licensed financial institution for more information. 

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Tuesday, February 25, 2014

How much money does a couple need to earn in order to afford a $300,000 HDB flat?

You have been dating your partner for the past few years and now it seems like the time to settle down. Apart from the proposals and wedding preparations, most couples will apply for a HDB BTO flat even before they get married. This is to ensure they have their house ready for them to move in by the time they get married. This is the dream of owning a home of your own for many young couples.

Everyone knows that property prices have risen by a substantial amount over the past few years. Young people are getting increasingly worried about not being able to afford a HDB flat. Getting a flat may be the first time you'll be getting into debt. The word "debt" scares many people and the thought of paying a monthly instalment for the next 20-30 years is a burden. How much income do you need to buy a flat? How much loan can you take? These are some questions which many young couples would want to know. So can you really afford a HDB flat in Singapore? Let's find out.

Typical Scenario

HDB flat price: $300,000 (4 room flat)
Down payment: $30,000 (10%)
Number of years of loan: 25 years 
Loan amount: $270,000
HDB loan interest rate: 2.6%
Monthly housing loan instalment payable: Estimated $1225 (Calculated from HDB loan calculator)

Here i put the HDB flat price at $300k. This is typically the price of a BTO 4 room flat. If you are able to get yours at a cheaper price because of the various grants, then you can expect a lower monthly payment. If yours is more expensive, you can adjust accordingly.

Here are a few things a couple should note when buying a house:

1) Downpayment of 10%.
This means if you don't have $30,000 in your CPF account, prepare to pay some in cash. You need this amount to settle the first part of your house. However, you can pay 5% first when you apply for the BTO and 5% later when it is completed before you move in. This gives you more time to save up that amount. 

2) Number of years of loan from HDB is limited to 25 years currently. You can't get more than that. Previously it was 30 years but it was brought down during the cooling measures last year. 

3) HDB loan interest rate is fixed at 2.6% currently. Banks offer a lower interest rate but they are floating. This means the interest rates of banks changes depending on economic conditions. With HDB loan, you don't have to worry about interest rates rising

4) A maximum of 30% of your gross monthly income can go into home loan repayments currently. If you earn $3000, only $900 can be used to pay for your housing loan. This is known as the Mortgage Servicing Ratio(MSR) Also take note that housing loan repayments, after adding all your repayment obligations (student loans, credit card debts, car loans, personal loans, etc.), cannot exceed 60% of your income. This is the Total Debt Servicing Ratio(TDSR). 

*All the above factors may change as the government adjusts their housing policies. Info correct as at 24/02/14 as stated on HDB website.

How much money does you and your spouse need to earn in order to afford a $300,000 HDB flat? 

If monthly instalment is $1225 for a $300,000 HDB flat with 25 years loan repayment period, you and your spouse's combined gross income must be at least approximately $4100. The magic number is $4100. This is to meet the 30% criteria of the maximum gross monthly income that can go into home loan repayment. Any income below that level and HDB may not grant you the loan you need. 

Even before that, you need to come up with the $30,000 for the down payment. With a combined income of $4100, you and your spouse need to work for 34 months(~3 years) before your CPF savings have the $30,000. (calculated based on monthly CPF contributions to ordinary account only. Approximately 63.9% of total monthly CPF contribution goes to ordinary account. The rest goes to special and medisave account respectively)

Let's summarise it. To afford a $300,000 HDB flat, you and your spouse should have a combined gross income of at least $4100, work at least for 32 months to save up for the down payment ($30k) and pay $1225 monthly for the next 25 years. 

However, do note that with $4100 combined gross income, it is not enough to pay for all of your housing loan by CPF since only $900+ goes into your Ordinary Account (OA). You and your spouse need to have a combined gross income of about $5500 to pay for all your housing loan by CPF and without cash.

I hope the above information helps you in planning to buy your first home. 

*Disclaimer - The above calculations are based on estimation and calculated using tools on HDB website. It does not reflect the actual loan that you will qualify. When in doubt, check with HDB or a licensed financial institution.

P.S: If you're unsure about your loan eligibility or wish to apply for a new housing loan, contact me at for a complimentary consultation today. I have links to 16 different banks and financial institutions in Singapore to provide you the best housing loan package at the lowest interest rates. Refinancing enquires are welcomed too. Click here for more information on the services I provide.

Here are some facts from HDB website:

Maximum Loan Quantum

The maximum loan amount that may be granted depends on:-

(a) maximum repayment period;
The maximum loan repayment period is 65 years minus the buyer’s age or 25 years, whichever is shorter. 

(b) applicable interest rate;
Computation of the maximum loan will be based on the prevailing interest rate which may be revised from time to time. The interest on the HDB loan will be computed on a monthly rest basis or such other basis as the HDB may decide. 

(c) monthly instalments; and
This is capped at 30% of the gross monthly income.

(d) loan ceiling.
The loan that can be granted for the purchase of an HDB flat is subject to:
Direct purchase flats:  90% of the purchase price
Resale flats:      90% of the resale price or 90% of the market value, whichever is lower
*If you have selected your flat before 19 Jul 2005, your loan ceiling is capped at 80%.
*The above info is quoted from HDB website. For more info, visit:

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Sunday, February 23, 2014

Baker Technology: A cash cow company

This is the first time i'm doing a write up on this company called Baker Technology. I've been invested in it since the beginning of 2012 and dividend yield has been great so far. This company has no debt at all with quite a big stash of cash kept away. It's cash position stands at S$205.9 Million currently. This translates to a cash of 23.6 cents per share. At the current trading price of 0.31 cents, isn't it a good bargain? 

As stated on its website: 
Baker Technology Limited (Baker Tech) is a leading manufacturer and provider of specialised equipment and services for the oil & gas industry. Its core business is in the design and construction of a wide range of equipment and components for use in the offshore environment.
The current situation of the industry which Baker Tech is in is still relatively competitive. Order book has slowed down from 3Q of FY12 to 2Q of FY13. However, for the past 2Q which is the second half of FY13, order book has seen an increase. It's primarily market is in China contributing 76% to its net order book followed by Singapore at 23% and the middle east at 1%.

With 100% cash and zero gearing(no debt), this company can ride out the downturn relatively easy. During the downturn in 2012 and 2013, this company has given dividends of 10 cents in FY12 and 5 cents in FY13. This is almost 50% dividend yield for the past 2 years. Of course if you had bought the shares at a higher price, the dividend yield is about 40%. Still not bad at all. As i had bought the shares much earlier, i had in fact got back more than 40% of my money.

With cash of 23.6 cents a share and only slightly more than 50% of my initial invested capital in this stock, my risk exposure is relatively small now. I will stay invested in this company and who knows maybe i will get back all my initial invested capital within the next few years. Till then, it would be a free cash cow company providing me income for as long as its there.

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1. Croesus Retail trust 2nd Quarter results beats forecast. DPU 3.1% higher than forecast

Wednesday, February 19, 2014

How banks make their money and why we should learn from them?

When we play the game monopoly, we know that the bank is rich and everyone pays to the bank when they buy a deed of land. In our real world, we know that banks are rich as almost everyone deposits money in the bank. So how do banks make money?  Banks lend out money and earn from the interest. This is the primary business of a bank.

The business of the bank

Banks do the same thing over and over again. Take the money they have, lend it out with interest, get back the money with interest and lend it out with interest again. This creates a consistent cash flow for them. Of course banks do other things with the money the have for example investing it in bonds etc. But come to think of it, isn't investing in bonds lending out money with interest too?

How we can be like the bank?

Lending out is a good business. We can also be like the bank and create consistent cash flows for ourselves. Take the money we have, lend it out with interest, get back the money with interest and lend it out with interest again. So who do we lend it to? The answer is we can lend it out to the financial markets.

The financial market is created to facilitate the transactions between lenders and borrowers. With the financial market, borrowers can seek funding from lenders and lenders can lend out money to borrowers in a fast and efficient manner. The stock market and the bond market are part of the financial market.

In the bond market, corporations or the government can borrow money through the issuing of bonds. When we buy a bond, we are lending money to the corporation or government who issued the bond. By lending money to them through bonds, we are paid interest for it. We become like the bank who lend money out to others. However, before investing in bonds, you should know how it works and how interest is paid out etc. Read: 4 things you should know before investing into bonds

In the stock market, companies who need more money to expand their business can seek for people to invest in their companies. When we invest in a company through the stock market, we effectively own a part of the company. This is even better than lending out money only. Owning a part of the company entitles you to dividends that the company pays. This is like the company paying you a share of their profits. As the company earns more money, dividends are expected to increase. Of course sometimes it does not increase and that's where we have to look out for.

How to choose who to lend out to?

Choosing who we lend our money to is important. Choose the wrong person and you may lose all your money. We can learn from the bank on how to choose the correct person to lend out to.

Banks do a detailed report of a person before deciding if they will lend to an individual. Some deciding factors are:

  1. Does the person have a stable income and how much income?
  2. Does he have many other outstanding loans?
  3. Is that person over leveraged on debt?
  4. Does he have any assets?
  5. Does he have any prior bad financial report ie. failure to repay loans or bankruptcy
I'm sure there are other factors but well i hope you get a rough idea. Using the above profile, we can do a detailed profile of the company we want to invest in too. Some factors to look out for in a company are:

  1. How much profit does the company have and is it consistent?
  2. Does the company have huge debt? Is it manageable?
  3. Does the company have any assets?
  4. Does the company allocate capital efficiently?
These are just some simple factors to consider. This is not enough when evaluating a company as companies are more complicated than individual persons. I have written a series of post on how to pick stocks. You can read it up to learn more here

A risk to take note

Banks have collapsed before and the most famous one is Lehman Brothers which collapsed during the 2007/08 global financial crisis. Why did it fall? The answer is that it was over leveraged. To say it simply, it actually lend out more money than it had. Reports say that Lehman Brothers has a leverage ratio of 44:1. This means that every $44 it lend out, only $1 was from its own pocket. 

When we invest, do not invest using money which you do not have. Using borrowed money to invest is dangerous. In stricter sense, do not even invest money which you will need for paying bills or for emergency. 

By learning from the bank, we can be like the bank. Use the money we have, lend it out or invest it with interest or dividend yield, get back the money with interest and dividends then lend it out or invest it again. Repeat the process correctly and you will become rich one day. We may not have people depositing money with us but we can deposit money into ourselves. This is the art of savings. Using this money we deposited into ourselves, lend it out or invest it. Put it in the correct place and see it grow. However, put it in the wrong place and it will wither away.

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Related Posts:
1. Buying the company on the streets (Part 1) - Discovery stage
2. Investing is like water that flows out
3. How to pick stocks (Part 2) - The profitability of a business

Monday, February 17, 2014

Teens in Singapore to Learn How to Manage Finances

Teens learning to manage finances early in life will be a revolutionary shift as far as Singapore’s growth in the areas of education and economics is concerned. Read on to know what the program is about and how it’ll operate!

Even though Singapore already has a high literacy rate and is already the international hub of education, the Government of Singapore is keen to educate its young generation on how to better manage finances. As a practical step ahead in this direction, ‘teens studying finances’ will be a definite part of MoneySense, the country’s national financial education program.

What Does the Move Aim At?

The move will address a range of grave financial issues every person faces in life at one point in time or the other. This will help ultimately future Singaporean adults become more efficient at managing their finances!

Educationalists and social workers from across Singapore are likely to be involved with a single goal - spreading financial literacy among people, especially the youth.

Teachers will also be trained and prepared to impart quality financial education to students.

How Will the Program Be Brought into Practice?  

All Secondary 1 and 2 scholars will get a chance to develop finance management skills through this program initiated by the Ministry of Education, Singapore. 

The Ministry is all set to prepare teachers for this challenging responsibility by equipping them with all essential skills and information, so that they can make lessons both relevant and interesting for the young minds. 

Interestingly, it will not be a compulsion for the students to take exams for getting admission in the program, for the ultimate purpose of this initiative is to instill certain confidence and impart practical skills that can be utilized in future. 

Future Perspective and Scope of Success 

The idea is to make teenagers comprehend an otherwise complex subject - finance management early in life - so that they face no difficulty in developing the right attitude and approach during their formative years towards saving and spending money. 

The program also focuses on using social service networks to make more helpful ways and opportunities available to those going through financial problems. This is the reason a pilot program has been specially designed to coach social workers on financial literacy. Once properly trained, these counselors will be able to offer help to households with low income. 

Author Bio: Lim Chuwei is a Teacher in Singapore at ChampionTutor and highly advocates the use of cloud based application for teaching and learning.

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Friday, February 14, 2014

Croesus Retail trust 2nd Quarter results beats forecast. DPU 3.1% higher than forecast

Croesus retail trust has another quarter of DPU which is higher than its forecast. Final DPU is 5.24cents which will be payable in march. This is good news for shareholders of this trust. I've initiated a long position in November last year at a price of 0.875. After the announcement of good earnings, the stock price closed at 0.915 today. Another good news for shareholders.

Fundamentals wise, this trust remains strong and outlook remains positive. They have 4 shopping malls under them and all have approximately 100% occupancy rate. 100% of their total debt has been swapped to fixed rate which will minimize their risk in case of interest rates spikes. At least 80% of their debt has also been hedged against currency fluctuations. Gearing ratio is currently at 41.8% and they have also issued S$100million of fixed rate notes to be due in 2017. I hope they will make some good acquisitions to include more properties in their portfolio using the debts they have and this will increase DPU as well. It is written in their Quarter 2 financial statement that the S$100Million notes will be used by:
"CRT and its subsidiaries for the purpose of financing or refinancing its acquisitions and/or investments, financing any development and asset enhancement works on the properties in which it has an interest and general corporate purposes." 

Uniqlo was recently one of the new tenants in their Aeon town Moriya shopping centre. Having big and branded tenants in their shopping malls will certainly attract more customers as well as other tenants to set up their retail outlets with them. NAV per share has risen slightly from JPY72.40 to JPY74.09. This is about 91.7 cents when converted back to Singapore dollars. At the current price of 91.5 cents. it is still at fair value. Investors who buy now will still enjoy a annual dividend yield of about 8.9% if DPU is maintained. Those who bought at 87.5 cents would have enjoyed a dividend yield of 9.3% p.a.

It was reported today that Japan is moving to speed up the impact of a US$50 billion stimulus package aimed at countering any slowdown from a looming sales tax hike. They really seem to be doing whatever they can to bring their economy out of the decade long depression. Prices will start to increase in Japan which will boost consumer spending. Previously, due to deflation, consumers hold back their purchases as they keep thinking if I don't buy now, i will be able to buy at a cheaper price later. Japanese people have became savers over the past few years. Now when prices start increasing, they will want to buy now for fear that prices will keep rising in the future. CRT which owns shopping malls will stand to benefit as more tenants look for space to set up their shops.

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Related Posts:
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Sunday, February 9, 2014

Investing is like water that flows out

Water that flows is constantly renewed with fresh water. Water that doesn't flows will become stale after awhile and the colour will change. Why am i talking about water here? The reason is I think water represents our money.

Some time ago, there was one news reported where people feedback that one of the private swimming pools in a residential unit has not been changed for a very long time. Algae has started to grow in it and the water is no longer clear. It was later found out that the owner was not staying there and had turned off the outlet where the water could flow resulting in the water turning stale.

Money that doesn't flow will also become stale. What I mean is money that you save which is not invested will become stale. We all know that inflation decreases the value of our money. The higher the inflation, the lesser the value of your savings is worth year after year. It is wise to put your money in a place where it can flow. Investing for income creates that flow where your money generates income in terms of dividends from stocks or rental from properties. This flows back to you creating a constantly cash flow for yourself.

Rich people become rich because they know where to put their money. Their money is constantly flowing like fresh water that is always renewed. If you do not let your money flow, it will become stale and worth less and less overtime. Then again, make sure you put your money at the right place. Placing it in the wrong place may lead to drying up. There must be water flowing back as well.

Giving is also be a form where your money can flow. It adds purpose and meaning to what you have. Treat your family or friends for a good meal? Surprise your spouse with something special? Giving back to your parents who have raised you up over the years? Donating for a good cause in society? These are some things which adds value to our money. Creating cash flow will  make you wealthier while giving back will make you a better person. This will certainly make our lives more worthwhile to live. Don't let your money become stale and smelly.

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2. 7 factors that differentiate rich people from normal people

Wednesday, February 5, 2014

Buying the company on the streets (Part 2) - When to buy?

In the previous post, the companies on the streets were discovered in our everyday lives. I have said that even though we have discovered them, we should not buy them immediately. In this post, I'll touch on some simple ways we can value a company.

Knowing the nature of a business is important before anything else. What business does the company engage in? How much does that product contribute to the company's profits? For example, we know G2000 is partly owned by Wing Tai. Wing Tai has a retail business but they also engage in building properties. G2000 is an established brand with good sales record. However, Wing Tai only owns 45% of G2000 and this only contributes to a small portion of its income. The main income comes from its property business. So no matter how successful G2000 may be or how long the queues you see outside G2000, the impact on Wing Tai's profit is very minimal.

Now, even before you start investing, i would suggest you forget about the stock price. The stock price the company is trading at now does not mean anything. You are not buying the stock price but buying a part of the business. Look at the company with the eyes of a business owner.

When to buy?

This is a question a lot of people ask. To be honest, there is no perfect entry point to buy a stock. In fact, most of the time when investors buy the stock, its price will most likely go down. Does it sound shocking to you? Of course you do not want to be buying at the high also and don't want to be paying a high price for what the company is actually worth. It'll be good if you can buy the company at a discount of its fair value.

Now, to determine the value of the company, we can look at 2 things:

  1. Intrinsic value
  2. Assets the company owns

Intrinsic Value

You might have heard of this term called the intrinsic value. Investopedia defines intrinsic value as "The actual value of a company or an asset based on an underlying perception of its true value including all aspects of the business, in terms of both tangible and intangible factors". So how do we calculate the intrinsic value of a company?

Cash flow can be used in the calculation of intrinsic value. Cash flow is a more accurate measure of a company's worth than earnings. It is the real cash that the company generates every year. To know more about cash flow, read: Understanding Financial Statements (Part 3) - The Cash Flow Statement

The most common valuation that investors use to calculate intrinsic value is called the discounted cash flow model. It factors in the estimated future cash flow growth rate of the company and discount it to the present value. Intrinsic value is therefore the present value of all expected future net cash flows to the company. This will give a rough gauge of how much value the company is worth today based on the predicted cash flow growth. 

Not to worry if you do not understand what i wrote above. I know sometimes it is not easy to understand the finance concepts if you're not a finance student. There is a free intrinsic value calculator you can use provided free by You can download the free intrinsic value calculator here

Assets the company own

Assets have value and this is especially important for companies that deal with or own properties. We can do a simple valuation of property stocks using the Price to Book(PB) ratio. Book value is similar to what we call Net asset value(NAV). The NAV of a stock is derived by taking the total Assets minus the total liabilities. The NAV shows us the total net assets the company has. The PB ratio is derived by taking the stock price per share divided by the NAV per share. A PB ratio of less than 1 means the stock is trading less than its NAV per share.

Let's say Capitaland stock price is now at $2.50. Assuming it's NAV per share is $5, the PB ratio would be 0.5 ($2.50 divided by $5). If you buy its stock at $2.50 now, you would have bought at less than it's actual value based on its assets. Isn't that a good value that you have found?

Margin of Safety(MOS)

Buying a company below its intrinsic value gives us a margin of safety. This will somewhat limit the downside risk if the market turns bearish. Buying 25% below the company's intrinsic value is a safe margin. However, the stock price can fall even lower and when that happens, it should be good news for value investors like us. This also means that we should always have extra money on reserve no matter what. This is to take advantage to buy at lower prices when Mr market decides to have a bad mood. Unless if i can find many stocks trading at more than 50% lower than it's intrinsic value, then maybe i will be invested fully. When the crash comes it takes courage to invest. Will you be in the game when it happens?


This ends the 2 part series on buying the company on the streets. Next time when you go shopping, remember to look around to find companies which you can potentially buy. Then, research on the company based on its economic moats, profitability of its business, strong balance sheet, intrinsic value and assets. This is what Warren Buffet says to buy good companies at undervalued prices.

It's bad to go to bed at night thinking about the price of a stock. We think about the value and company results; The stock market is there to serve you, not instruct you. -Warren Buffet, 2003 

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Related Posts:
1. Buying the company on the streets (Part 1) - Discovery stage
2. Understanding financial statements (Part 1) - The income statement

Sunday, February 2, 2014

100,000 page views!

My blog has surpassed 100,000 page views right after Chinese new year! An auspicious time for an achievement indeed. Thank you all my readers for your support and i will definitely write more quality articles this year.

A peek at the top all time traffic source for my blog. As a finance blog, the top post should be something to do with investment but surprisingly it is not. The top all time posts was the post on my Taiwan trip which i manage to spend only $702 for 8 days. I discovered that various searches on Google ranked my Taiwan trip post as the top search result. You can try searching "Taiwan trip blog" or "taiwan trip itinerary" and both searches show my site as the first result. So, that's where the traffic is coming from. People love to travel and the most number of searches that come in was during the November and December holidays. That's when i know people are planning for their holiday trips. Well, till now there are still searches coming in so i guess there are people travelling throughout the year.

Some other financial bloggers will agree that we have a very small audience compared to lifestyle or travel bloggers. Indeed my travelling post become number 1 in page views. The second top page views post is on WhyMoolah which is a life simulation app to help young adults make wise financial choices. This was something interesting which i have also tried the app personally myself. You can try it if you had not done so. The third most page views is the post on POSB invest saver. I hope that post has helped more people in making better investment decisions.

For the readers who visited my blog, most are from Singapore. Next is followed by United States as the second, Malaysia as the third. There are people from many other countries including Europe, Russia, Australia, UK, Ukraine and other parts of Asia too. This is something interesting to me to have readers from all over the world.

Also, the Facebook page that i started with 0 Likes has already garnered 122 Likes as of now. Thanks to everyone who liked my page. Once again, thank you all of you for your support. Stay tune for more exciting post coming soon.