Posted by: donmihaihai | May 3, 2008

It is dry, let make it wet.

It is very dry here, nothing much to think about or write as I have been busy occupy by other thing besides investing. While there are quite a number of things that I was interested to write about recently, I was unable to complete them and stopped halfway either due to sudden lack of interests or don’t want go round and round into a circle that I may not get out after writing. This post start without a plan and will end when I get dryer or wetter.

Lee Kuan Yew is the Warren Buffett of Singapore? That is a joke provided by Internet because the 1st ever person I know of saying this is Charlie Munger at his Wesco 2007 annual meeting where he refer to Lee Kuan Yew was the Warren Buffett of Singapore in his unscripted opening speech at the start the meeting. And no, there is no connection linkage to investing. Apart from the wonder created by Internet, noted taken down for Wesco annual meetings are as good as those from Berkshire Hathaway annual meetings co-chaired by Warren Buffett and Charlie Munger.

Reading it again bring me lot of smiles and I hope he have many more years of aging to enjoy. One comment he made :

I’m getting more experienced at aging. I’m like the man who jumped off the skyscraper and at the 5th floor on the way down says, “So far this is not a bad ride.” [Laughter] I’m getting better with aging. I’m not going to complain about age because if I didn’t have it, I’d be dead.

In fact it is after I re-read this note that I decided not to write about LKY, GIC and likes because it is unlikely that I can avoid going round and round. It is too crazy and like other I am armed with what being printed in the news written by journalist or anyone. Are these articles helpful in getting insights/knowledge into what happening? If it is a big YES then these writers should start their commentaries prior rather post event. It is also possible that those guys running GIC would very much like to switch job and start writing on every significant investment that drop in value immediate after that. Their article will punch more meats as they know how thing work out there and can always put Ex-GIC beside their name. I am trying to control myself, haha.

What is the financial position of Citibank? Is their balance sheet strong? How many take a look before writing?(I must stop here!!!) I don’t know and neither do I understand. I try my luck on financial institutions, going from IPO prospectus of Finaone to latest available statement. After reading all these, I was unable to pull the trigger. Finaone has a small portion of their business in US property segment where they do the lending but their main businesses are in Taiwan, China and Thailand which are doing very well and can be even better going forward. Best of all, the trigger is infront of me because Finaone is trading at just above SGD$0.50 for so long(it get below $0.50 for a short period once) while their NTA at end 1st quarter is USD$0.57. Finaone is trading at about 60 to 70% discount to NTA, add in a dividend of USD$0.03 in 1st quarter. I will hit anyone head if they say it is justify because of the current banking crisis but I didn’t buy because I do not know what the numbers are telling me. Unless I do, no amount of discount and high dividend yield can make me feel comfortable of buying. I have been thinking about buying one lot to get their annual report yearly to cut short the process and force myself to learn.

I have not been to many AGM, just a few as each AGM require me to take leave. There was one AGM(technically it was not) I attended recently as quite unique because base on what I saw, while there were about 10 ppls attending, 70% or more are serious investor. The ratio is the highest among all AGM I attended. There was a representative from an award winning local fund house. It is a disappointment to hear him asking question and right at the spot I told myself, “Heng, I am not holding on to their award wining funds and will not do it easily in the future.”

While there are many articles written about short AGM or food seekers, I only encountered food seekers because I seldom get the chances to have anything more than some drinks. Most of the AGM I attended were long and everyone seems to want to speak their mind for whatever reasons. One point I noticed is while many shareholders will question board of directors when the company produce “unsatisfactory” results, most do not query the directors when the results are good. Start searching for fire extinguisher when there is a fire?

Next period projection is not a big business here but many love it and I think one of the objective shareholder going to AGM is to look for projection, whether it is next year profit, factory utilisation, GP/NP margins forecast, wanted to incorporate them into their calculation. Of course they usually don’t get what they want but this does not stop them from asking. That usually utilitises time that cut short the available time for other to put up more important questions.

Recently I got some appreciation from shareholders attending the same AGM by queried the directors on some of the actions that they carried out but never reported. There was some satisfactions because it seem that I am doing some good thing out there but I thinking about it, I rather not enjoy it because it show how many are not reading annual report. And of those who read, many only selectively go through some pages but not all. It is not hard to read every pages, if I can learn reading it by myself without help, I believe many can do better.

S chips. What a name, it sounds like Singapore stock. Why not China/Chinese stock(C Chips) or Singapore Chinese/China(SC chips) stock? That sounds better. Anyway I am ok with any name, even with “black sheep”(B chips).

The local seem to bring their act together to raise the profile of S chips in Singapore after the huge slump of many Chinese stocks. I become part of it as one of my earlier post was taken, rewrite and posted elsewhere(I said yes to him). While many are cheap, they are facing many headwinds. The trouble caused by Snowstorm is not a big factor. For exporter of low value added products, many already understood the impact of exchange rate and it will keep going on for many years to come. These companies will do their usual act again, change location.

Raw material Inflation is not new either, and like the exchange rate, it will hit the companies for a long time. But for stronger company, they can and will adjust themselves. With the headline news on inflation keeps popping up, this become much easier for them to increase selling price. Same goes for labour cost.

Then there are the changes in China tax regulation starting from 2008 for those foreign incorporated enterprise and China incorporated enterprise to be tax at the same rate of 25%. While there are companies who may receive more incentives at local tax rate, for most China companies listed here, they are going to pay more tax, these together with the other headwinds mentioned above will make their Net profit harder to move higher in the next 3 to 5 years. But not all are going for higher tax, some company like Pfood who listed here earlier will enjoy lower tax as their tax rate will reduce. These are the minority.

I am getting wet… because of the weather. That all for today.

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