Posted by: donmihaihai | January 30, 2017

Number never lie.

Aim my gun at the best and brightest.

Some say CMT is the best managed REIT around SG. The number suggest well….

CMT listed in 2002 with portfolio of 3 properties namely, Tampines Mall, Junction 8 & Funan IT Mall

IPO  valuation  SGD895M.

Dec 2015 valuation SGD2,299M

Increase in valuation – 157%

NAV per share at IPO – SGD0.97

NAV per share at Dec 2015 – SGD1.86

increase in NAV per share – 92%

157% vs 92%. Management destroyed shareholders/unit holders value.

Dividend per share at 2003 -SGD0.0803

Dividend per share at 2015 – SGD0.1125

increased in dividend per share – 40%

Net property income for 3 malls in 2003 -SGD78.4M

Net property income for 3 malls in 2015 – SGD121.5M

increase in Net property income – 55%

55% vs 40%. Management destroyed shareholders/ unit holders value again.

Some say REIT learned the lesson in 2008. so REITs are creating value since then.

Portfolio value(less property not in the list in 2015) – SGD6,287M

Portfolio value(less property not in the list in 2010) – SGD8,424M

Increased in valuation – 34%

NAV per share at Dec 10 – SGD1.54

NAV per share at Dec 2015 – SGD1.86

increase in NAV per share – 21%

34% vs 21%. Same story.

It is the same for dividend.

The management or external fund manager is the one that benefited.

Some say their yields is high, range from 6% to 10%. Where can you find these yields?

True dividend yields look high, not easy to find stock paying this kind of yields. Unlike REIT, stock usually don’t pay out 100% of earnings. So it is back to same valuation, ROE. Even with revaluation, REIT hardly pass the 10% mark. But those at the upper range start look cheap. Maybe there are reasons behind.

But REIT pay out cash yearly or even quarterly. Cash in hand is worth more than in the hand of management. True. this is attractive. But as above, REITs destroyed unit holders value. It is a small pie and many hands are helping on that pie.

Well REIT is safer than stock and history say so! underlying any REIT, stock is a business. All businesses are risky in natural. REIT traded just like any other stock in SGX.

So what is really different? Hit me a good reason.

I have not look into CMT in details, but will never invest in a REIT at book value with an ROE of 6% and a manager screwing unit holders yearly.

Posted by: donmihaihai | November 27, 2016

Strong Cash flow. What is that?

Take Boustead Singapore 1HFY2017 results

NPAT was SGD22M.

Cashflow from operating activities was SGD77M.

Cash increased from SGD259M to SGD297M

Use NPAT rather than profit attributable to equity holder of the company for good reason. What in concern is cash and cash has to be look at in this way.

Wow Boustead Singapore is generating load of cash, 55M more than NPAT, cash generating machine. you might say! True it is generating lot of cashflow but cashflow can’t be look into on a single year basis. Cashflow before changes in working capital basically just above PBT. That say there isn’t lot of one-time non cash item. So basically, the cashflow of the company is just about Net profit. The “pop” is due to changes in working capital which can be easily explain by saying timing differences.

From FY11 to FY16. Boustead Singapore generated SGD375M NPAT and SGD408M Cashflow. Sound just right. Depreciation would explain the reason for the higher cashflow. That SGD55M will be not continue for sure.

What about SGD297 cash? Well SGD134 sit in Boustead Project and the remaining SGD163 sit in companies other than those in Boustead Project. Most are wholly owned subsidiaries. That SGD134 can be say as restricted by Boustead Project and is not available for Boustead Singapore to use it as like ATM. The easiest way to think about it is ask shareholders of Boustead Project, “Are you going to let Boustead Singapore to use your cash?” Some shareholders might just say, “No way. They have no rights and what do I get”

So what is strong cashflow? Cashflow is strong when the company is generating good return. ie good ROE. Nothing more nothing less and of course I am assuming cashflow is almost the same or just above NPAT.

Free cashflow is another thing and for some industries, growth require heavy investment in working capital.

Talk about working capital. Recent times is pretty bad for many companies. More decent company will see increasing cashflow despite reducing revenues. This is just changes in working capital and is not a sign that company is doing well. Of course they are not doing badly as well. As the lousy companies will not see the “pop”.


Posted by: donmihaihai | November 13, 2016

Last time writing about ARA?

Might be the case. Privatization on the card at S$1.78 per share.

Almost a non event for me as I have few shares left. What about offering price? At S$1.78, it is just above 3XBV with a long term average ROE of 28% (12 years exclude FY16). ROE of 28% is boosted by earlier years. From the look of it, a wild guess on forward ROE will be around 20%.

Valuation part is easy. The price is not extremely undervalue or overvalue. Look fair. Considering the future of ARA, S$1.78 should be a little more than fair price.

Talk about growth. ARA is growing and one of the better way to look at the growth is AUM and ROE. In the last 5 years(FY2011 to FY2015), AUM increased by 50%. ROE reduced from mid 30s to my wild guess 20%. This growth is not cheap. If I use actual ROE rather than wild guess, ROE dropped from mid 30% to between 15% to 20%. Straightly from this, fair valuation of ARA dropped by half at least. Lets not forget, the 1st 15% to 20% ROE is not as valuable as the next 15%.

Lets not forget AUM is growing at single digit. And this single digit growth causing the company to put up more capital. Negative. Perhaps the company was laying down ground work for explosive growth going forward. But can it do so without even greater capital? If it does need that capital, recent Rights issue won’t be the only one. If that happened, consider all the broken dreams of investors, share price might drop to a bargain if ARA remains listed.

ARA has a lot of financial assets. It make no sense to invest in these as they generate less return than their fund management business. But it is there. Why don’t sell them all, even for non-listed financial assets. Here is the problem, if those are sold, I wonder what will happened to AUM in the next 5 years. Forget about growth, think about survivor mode.

This is no longer the same ARA when I invested. My selling was correct and lucky. ARA might not stay private for long if it does get delisted. Might look at Strait Trading in the future.

Posted by: donmihaihai | November 2, 2016

Financial PR and what I avoid

Financial PF subsidiary Shanghai Shihua Financial Information Service listed in Beijing OTC stock exchange. Doing pretty well to get listed but what kind of business is investor relationship?

Hate it when company engaged company like Financial PR. Or should I love it. Basically what it try to create can be summary as below.

The results: A share price performance of 184% year to date, which is more than any company can hope for.

Nice pop! Who doesn’t like it? Ask Swiber, what will happen to Swiber if it got such a pop post announcement of almost a billion of project? Some companies might be desperately need that pop. By hook or by crook………..

Back to investor relationship business. It will be interesting if Financial PF gained a reputation for “effective communication” or “performance investors relationship” without getting any spotlight from regulatory. And this is not the result of one or two “star player” but many star players and can be re-created if one left just like investment banker. Financial PF will be a very interesting company if this is the case.

I am always trying not to get sold by listed companies. Financial PF is one of the tool. Names that appeared in are companies I would not look into. But I read those articles, trying to get how they are selling. My feel is NextInsight is doing pretty well as selling these companies.

Other than NextInsight, I feel the best when the company I am looking at does not appear in The Edge Singapore, BT, valuebuddies & SG investment blog.

When will I kick this habit of checking and reading valuebuddies and SG investment blog? They do not serves the purpose anymore.

NextInsight, The Edge Singapore and BT are a must. They provide the news, interviews and most importantly gossip.


Posted by: donmihaihai | September 11, 2016

Jardine C & C

A Conglomerate within a conglomerate owning a conglomerate? Not true. JC&C is an investor within a conglomerate owning a conglomerate.

Invested in 50.1% of Astra International, 43.8% of Tunas Ridean, 27.1% of Truong Hai Auto, 22.7% of Refrigeration Electrical Engineering and 24.9% of Siam City Cement.

While REE is a mini conglomerate, Astra is as the AR says, a premier conglomerate with listed subsidiaries and associate such as Astra Otoparts, United Tractors, Astra Agro, Astra Graphia, Permata Bank & ACSET.

I say invested because these entities do not intergrade into Jardine. If I am correct, it stop at JC&C and Bintang level.

JC&C owned 50.1% of Astra International and consolidated Astra results. But JC&C doesn’t seem to be running or even leading Astra. Astra is still being run by Indon management. Regardless of what accounting say so, Astra is just an investment. It is the same for the others.

Which mean JC&C is an expensive “closed end fund” or “investment holding company”.

Having so many listed subsidiaries and Associates is making life easy with looking at JC&C. The only black box is Truong Hai Auto. The rest are a group of excellent companies mixed with few lousy ones. Jardine direct motor interests in Singapore and Malaysia are pretty good companies too.

More excellent than lousy, on average I think these companies can generate ROE of above 15%. 15% is what I would pay for an investment. Which mean no go for JC&C.


Posted by: donmihaihai | July 30, 2016

Time flies

Wrote about OSV players many years back. Mainly Jaya, Ezra, Swiber and CH Offshore. Ezra and Swiber were there sexiest out there. It was hard to has another view. Due to that, commented on MTQ, China Fishery and maybe another few as well.

Those were good times for them, even Jaya got out pretty well in the end and I was lucky.

It is no longer the case now and pretty much will be the same years down the road, unless peak oil with no alternative. But I think current energy supply situation changed. So unless the drop in supply mirror whale hunting, then OSV will not enjoy good time any time soon.

What about shipyard? What can they build? What is in demand? Specialised vessel? I don’t know. How big is that segment? Offshore related was the last bright side of shipping building. Which mean it is back to sunset industry again until supply and demand back to normal or better still undersupply.

But well, this is time to find bargains.

Not interested to know about order book. Whether from OSV or shipyard. Order book does not tell me the quality of these contract. In down cycle, any order won will be lousy margin.

Of course we need strong companies with strong B/S. But that doesn’t mean it has to be debt free.

I can’t see bargain in this industry. Not those listed in SGX and I am not actively searching. A long way to go.

Interested in vessel owner not shipyard.

I don’t understand how shipyards earn money over a long period. Since cheaper alternatives are available, only way is to specialize. But with cheaper alternatives popping out and expensive yards trying to specialize, doesn’t sound good.

Vessel owner is easy. They are price taker, no control on charter rate and contract pricing. But with weak players like Swiber or Ezra, give smart owner chances to buy assets at lower price.

It is not hard to see theses smart owner buyers riding the down cycle and enjoy up cycle.



Posted by: donmihaihai | January 8, 2016

Market talk 8 Jan 2016

Lets talk about the market. The most common things around for start of 2016.

Markets in red since the start of 2016 and dropping pretty fast. What will happened next and what to do? I don’t know.

What do I know.

  • There are many investors blogging online, having huge readers, giving out advises and even provide courses. To be honest, I don’t know most of them and pretty sure they “pop” out quite recently. I always say the same thing. Bull market suck people in, bear market throw people out. Never change since the day when I bought my first share. Lot of investors back then are either MIA or doesn’t blog or forum much. Not going to think how many of these current investors will still be around few years down the road.
  • Investors who are a little longer in this “game” always say GFC as if the crisis is one we should avoid or buy like crazy. When I started, we keep saying about tech bubbles and Asian crisis. Sound old? Stock market has hundreds of years history and we are just babies.
  • Last 13 years or so was good! Was either a bull market or 2. I don’t know and really doesn’t matter. But I do think that it is a secular bull market and not sure if it has ended. Because of this, I think the next up will be secular bear market. Which mean the return for the next 10 to 20 yrs(after secular bull market) will not be as good.
  • It is stock market and you will never know. How many investors predicted that stock markets dropped on the first trading day of 2016? How many investors predicted the bull market of Japan? What about the slump in commodities? The great US secular bull market from 1980 to 2000? Japan bubbles? Taiwan bubbles?
  • If I have a crystal ball, I will short commodities and long Japan equities for the past 2 years to 3 years.

Pretty much end of my market talk. Pretty much all backward looking because I don’t know what is going to happen going forward.


Posted by: donmihaihai | January 1, 2016

CDL, conglomerate & RNAV

Realised that I loves to read conglomerate, especially those with many listed subsidiaries. I am a generalist and reading conglomerate is one way to learn more industries. And yes, I don’t feel conglomerate complicated, at least not those listed in SGX.

Conglomerate also force myself reading reports from places like England,  NZ and Indonesia etc. Even English version of Indonesia annual report is hard to read because of the way it is.While I do not know the tax and law in Indonesia, I do understand why there are so many tax disputes, rulings, notifications, etc due to my experiences in work and reading.

CDL considered itself a conglomerate and its main businesses are property related. Property development, investment properties and hotel. Pretty easy to understand but the way I look at CDL changed after reading 70 overs reports which exclude the listed subsidiary in Philippines. I don’t think many peoples know CDL well.

Not revaluing investment properties projected a conservative image, but CDL is aggressive, gear up when needed and hide it well or this is the way CDL operates. Over capitalized listed subsidiaries and leveraged CDL. Eating up these listed subsidiaries over the years. This is one of the reason why CDL dividends has been low over the years but it might change. over capitalized listed subsidiaries ensured they won’t be asking for money from CDL and M&C acted as first line of defense for CDL REIT and First Sponsor. Smart move, really. Sorry Aberdeen, I do not agree in investing all the listed subsidiaries. Invest in snake head is better.

It is hard not to write about NAV or RNAV when it come to property companies. NAV of a property company is about the method of accounting being used, willingly or forced. This is the first layer. RNAV is about how you  want to trick other. If CDL want to trick other about how high their RNAV is, all it need to do is to revalue investment properties, hotel properties and project all profit to be made from all land banks. Here it goes, RNAV surged.

And what next? It can always tell other, “look at my leverage after RNAV, we can borrow more.” Ok sure, new development, new Investment properties and new hotel. So RNAV increased again! What a trick as long as bank is willing to finance it and most banks are willing! The only block is to make those so called analysts and investors believe in it. Now everyone started to use RNAV and a promotor will always find the highest RNAV.

End of the day, it is not about RNAV. It is how the company grow NAV. Growing NAV mean ROE. This E can appear in P&L or B/S. Realised or unrealized. Lumpy of course, due to industry and accounting. ROE goes back to quality of earnings. Which is Margin, asset turnover and leverage.

Property industry is no different from other industries. With or without RNAV. Earning is earning and money is money. Trying to make it unique doesn’t mean it is.



Posted by: donmihaihai | July 13, 2015

More of the same

Behavioral and culture,  independent, we don’t talk about IQ, never mention at all. If you can find a way round Omaha, you have high enough IQ. It is about other elements, playing a different game. Culture and conviction. Focus investing is a highly focus activities.

Boost his team and his team bounce it back 24/7. 4 peoples team managing 3 – 4 billion of assets.

New ideas does not automatic pop on the desk every Monday morning. Doesn’t work this way.

Focus investing can be a big advantage. Why play the game everyone is playing? Focus can be an edge if do correctly,  repeatable.

David Rolfe Of Wedgewood Partners

Sound just like good company with good products. Like I always say “More of the same.”

Posted by: donmihaihai | July 4, 2015

Some thoughts 4 July 2015

The article in this weekend The Edge Singapore confirmed my view that new is not always good especially in aerospace MRO. Nope I have not been reading ST Engineering or SIA Engineering nor went through their number in details. But this does not stop me from understanding and forming opinions in this industry.

Aerospace industry is pretty simple. People travel more yearly and more goods will travel in the sky. This mean more airplanes. Who is/are the winner? Of course that few airplane manufacturers. Airlines have never benefits from it except a few LLCs but if the increased in LLCs are faster than traveler then LLC will not be of exception of competition.

Companies like ST Engineering and SIA Engineering operate in the backend or workshop of air travel/ airplane. With increasing airplanes flying in the sky, their future are bright especially with a sizable market shares and I assume working toward better than today. Airplane Manufacturers will come out with new model and the players who are able to service these new model usually belong to the existing players doing a good job for current model.

But there is a twist! New model does not mean higher profitability. These MRO are working like clock work in the current model which produce those profitability. New model mean start again. Maybe not to zero but getting to clock work required time and effort and available plane. Next, Airline does not like MRO but the plane need it. Manufacturers want to produce more planes, with buyer coming back for expensive components and new model to repeat the cycle. It doesn’t want old plane flying in the sky that does not produce much to bottom line and risk of another crash that hurt their reputation. Which mean MRO is getting the stick!

ST Engineering and SIA Engineering, I assumed are the better players will fight it by doing the job better, offer more for the same thing and most likely do pretty good as well. Investor should so ok as long as the price is right.

SIA Engineering is a good lesson on extrapolation. Few years back, there were few expressing opinion in the internet on the impressive upward movement in profit and dividends from associates and JV which base on the historically look very likely to  continue and produce impressive growth for the company. I disagreed. And now the trend stopped. Extrapolation does not tell us that trend is illogically. If its continue, these associates and JVs will be the best companies in the world that require little or even negative equity. Trees can’t grow into the sky.

Other than extrapolation, there are many other ratios are in fact not so useful when use wrongly or even if two are use together. Ratio must use right with good understanding. One good example is debt/equity and interest coverage. WB recently talk about interest coverage of BNSF. Why BNSF and not BH level? Because most likely BH will not be helping. If this is the case, which debt/equity should we be looking at BNSF or BH?

And this go back to my current favourite Jardine C & C. Exclude financial services company – Low Debt/equity, even lower net debt/equity. Interest coverage is about 20X. Include non controlling interest, equity stood at USD10.8B. With rock solid B/S and cash generating businesses, why there is a need for right issue just because Jardine C&C is buying an investment at around USD0.6B? Cash on B/S is over a Billion USD. The Debt/equity does not tell us that tell us that Jardine C&C is a conglomerate with listed subsidiary and associates. Majority of businesses, assets and liabilities belong to its listed subsidiary Astra which is another conglomerate by itself. Segment information say Jardine C&C equity exclude Astra stood at USD382.5M and net cash of USD60M.

Astra with its huge businesses and B/S will not be funding its immediate holding company Jardine C&C because of the simple facts that shareholders of the remaining 49.9% not owned by Jardine C&C will not allow it to do so. Debts taken for this investment has to be served by Jardine C&C unlisted subsidiaries profit and dividends from non wholly owned subsidiaries, associates and investments. Debt/equity and interest coverage don’t tell you this.

Another time.

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