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Tuesday, December 30, 2008

Fund of Funds - The more fund managers there are, the more people are managing my money, therefore i feel safer.

We engaged a cheapskate artist to help us draw a pictorial view on why its not wise to invest with fund managers. With the latest invention of fund of funds, which is basically, a fund which invest in other funds, its even more silly. The more managers there are, the more manager fees one pay, the less cash is actually invested. This is lame.
With the recent scandal of Madoff, it signals that the more people there are managing one's money, the higher the risk there is. Remember the lawyer who ran away with the clients money? So, in conclusion, the above shows when one uses fund managers, they decrease their returns and increase their risk.

But if one is really clueless about investing, then just go for exchange traded funds, like for example STI ETF or Lyxor where your investment just tracks the index but fees are way less. Yeah it kinda sucks that fees still have to be paid for someone just to copy and track the index, but its the lesser of 2 evils.

Read what the Old Fogey Warren Buffet has to say about fund managers in general.
Important: The objective of the articles in this blog is to set you thinking about the company before you invest your hard-earned money. Do not invest solely based on this article. Unlike House or Instituitional Analysts who have to maintain relations with corporations due to investment banking relations, generating commissions,e.t.c, SGDividends say things as it is, factually. Unlike Analyst who have to be "uptight" and "cheem", we make it simplified and cheapskate. -The Vigilante Investor, SGDividends Team

Friday, December 26, 2008

A Peek Into the Fund Managers Holdings

Fund managers seem to be very restricted in their investments. We were just thinking one day and imagining when a large redemption occurs, if fund managers had placed their allocations into stocks that are highly illiquid, they will find it quite difficult to sell such stocks and therefore have to sell them at a very low price so as to meet the redemption. This implies they would prefer to place their allocations into stocks that are more liquid. Judging by the monthly fact sheets published by them, where they show the funds' top 10 holdings, it is usually the common suspects which are highly liquid, Singtel, DBS, UOB, OCBC e.t.c. But are there interesting stocks not shown? Let us see.

Since the market is pretty uninteresting at the moment, we decided to peer into their equity holdings as shown in their prospectus, just to kaypoh a bit. We randomly picked 5 funds, whose objectives are generally the same : Capital Appreciation in the medium to long term. We have highlighted counters which only appears in one fund. Therefore, the fund with the most red colour counters is quite gungho as they have the most different counters. Some of the red counters are really bad investments with totally no fundamentals are all, in our opinion.( Actually, its includes many of the black colour ones too) But its good to see some variety.

Aberdeen Singapore Equity Fund ( As at 30 Sep 2008)
Bukit Sembawang Estates Limited
Capitaland Limited
City Developments Limited
ComfortDelGro Corporation Limited
Eu Yan Sang International Limited
FJ Benjamin Holdings Limited
Fraser & Neave Ltd
Hong Leong Finance Limited
Keppel Corporation Limited
Oversea-Chinese Banking Corporation Limited
SBS Transit Limited
SembCorp Marine Limited
Singapore Airlines Limited
Singapore Airport Terminal Services Limited
Singapore Exchange Limited
Singapore Food Industries Limited
Singapore Petroleum Co Limited
Singapore Post Limited
Singapore Press Holdings Limited
Singapore Technologies Engineering Limited
Singapore Telecommunications Limited
United Overseas Bank Limited
Venture Corporation Limited
WBL Corporation Limited
Wheelock Properties (S) Limited

(SGDividends : Wah, all the counters like really household names man!)

HGIF Spore Eq-A USD (As at 30 Sep 2008)
ALLGREEN PROPERTIES LTD
BANYAN TREE HOLDINGS
CITY DEVELOPMENTS LTD
DBS GROUP HOLDINGS LTD
HO BEE INVESTMENT LTD
JAYA HOLDINGS LTD
KEPPEL CORP LTD
MOBILEONE LTD
SC GLOBAL DEVELOPMENTS
SEMBCORP MARINE LTD
SINGAPORE AIRLINES LTD
SINGAPORE EXCHANGE LTD
SINGAPORE PRESS HOLDINGS LTD
SINGAPORE TELECOMMUNICATIONS
STRAITS ASIA RESOURCES
UTD OVERSEAS BK
VENTURE CORPORATION
WHEELOCKPROPERT(SINGAPORE)LTD
WING TAI HLDS
SARIN TECHNOLOGIES LTD
BEAUTY CHINA HOLDINGS
ARA ASSET MANAGEMENT
MERMAID MARITIME PCL

Lion Global Balanced Fund (30 June 2008)
DBS Group Holdings Limited
United Overseas Bank Limited
Oversea-Chinese Banking Corporation
MacarthurCook Industrial Real Estate Investment Trust
CapitaMall Trust
Macquarie International Infrastructure Fund Limited
CapitaLand Limited
Hongkong Land Holdings Limited
Frasers Centrepoint Trust
CDL Hospitality Trusts
Suntec Real Estate Investment Trust
Ascendas India Trust
Ascendas Real Estate InvestmentTrust
SMRT Corporation Limited
Singapore Post Limited
Cosco Corporation (Singapore)Limited
Hyflux Limited
Unisteel Technology Limited
Singapore Technologies Engineering
AusGroup Limited
SBS Transit Limited
Peace Mark
Raffles Medical Group Limited
Wilmar International Limited
Ezion Holdings Limited
China Fishery Group Limited
Thomson Medical Centre Limited
Singapore Telecommunications
StarHub Limited
Keppel Corporation Limited
Tat Hong Holdings Limited
CitySpring Infrastructure Trust
Ferrochina Limited

SCHRODER SINGAPORE TRUST CL A(3o June 2008)
Asia Dekor Hldg Lt
Fraser and Neave Ltd
Golden Agri-Resources Ltd
Jardine Cycle &Carriage Ltd
Parkway Hldg Ltd
Singapore Airlines Ltd
Singapore Post Ltd
Singapore Press Hldg Ltd
Wilmar Intl Ltd
Jardine Strategic Hldg Ltd
Noble Group Ltd
ARA Asset Management Ltd
DBS Group Hldg Ltd
Keppel Corp Ltd
Oversea-Chinese Banking Corp Ltd
Singapore Exchange Ltd
United Overseas Bank Ltd
ASL Marine Hldg Ltd
ComfortDelGro Corp Ltd
Cosco Corp (Singapore) Ltd
Hiap Seng Engineering Ltd
Pan-United Corp Ltd
Rotary Engineering Ltd
SembCorp Ind Ltd
Singapore Technologies Engineering Ltd
Allgreen Properties Ltd
Ascendas Real Estate Investment Trust
Ascott Residence Trust
Bukit Sembawang Estates Ltd
Capitaland Ltd
CapitaMall Trust
City Developments Ltd
Guocoland Ltd
Keppel Land Ltd
Suntec Real Estate Investment Trust
UOL Group Ltd

Wing Tai Hldg Ltd
Datacraft Asia Ltd
Singapore Telecommunications
Total Access Communication PCL

DWS SINGAPORE EQUITY FUND(30 June 2008)
DBS Group Holdings Limited
United Overseas Bank Limited
Keppel Corporation Limited
Oversea-Chinese Banking Corporation
Singapore Press Holdings Limited
SembCorp Industries
Capitaland Limited
Cosco Corporation (Singapore) Limited
StarHub Limited
Fraser & Neave Limited
SMRT Corporation Limited
Capitamall Trust Real Estate Investment Trust
City Developments Limited
Singapore Exchange Limited
Wilmar International Limited
CDL Hospitality Trusts
Hotel Properties Limited
UOL Group Limited
Raffles Medical Group Limited
Jaya Holdings Limited
Unisteel Technology Limited
Ascott Residence Trust Real Estate Investment Trust
FJ Benjamin Holdings Limited
Singapore Airlines Limited
Wheelock Properties (S) Limited
Allgreen Properties Limited
Ausgroup Limited
Yanlord Land Group Limited
China Eratat Sports Fashion Limited
First Resources
Synear Food Holdings Limited

"Wide diversification is only required when investors do not understand what they are doing."- Warren (Pot calling the kettle black. Just joking, it makes sense actually.)


"Diversification is a protection against ignorance. It makes very little sense for those who know what they're doing" - Old Fogey WB


The strategy we've adopted precludes our following standard diversification dogma. Many pundits would therefore say the strategy must be riskier than that employed by more conventional investors. We disagree. We believe that a policy of portfolio concentration may well decrease risk if it raises, as it should, both the intensity with which an investor thinks about a business and the comfort-level he must feel with its economic characteristics before buying into it. - Old Fogey WB



Important: The objective of the articles in this blog is to set you thinking about the company before you invest your hard-earned money. Do not invest solely based on this article. Unlike House or Instituitional Analysts who have to maintain relations with corporations due to investment banking relations, generating commissions,e.t.c, SGDividends say things as it is, factually. Unlike Analyst who have to be "uptight" and "cheem", we make it simplified and cheapskate. -The Vigilante Investor, SGDividends Team

Monday, December 22, 2008

Recession, zero growth next year

Canada, the best performing among the G7 economies, is officially in recession and there will no growth in 2009, the country's top bank has said in a new report.


The Royal Bank of Canada (RBC), the country's number one bank, said the US downturn and credit squeeze have led Canada's economy into recession.

The economy will grow by 0.6 percent in 2008 and post no growth in 2009, the report released Friday said.

Craig Wright, senior vice-president and chief economist at the RBC, said the US economy has fallen into a deep recession, dragging the Canadian economy along.

"However, we expect the slowdown in Canada not to be as severe as in other countries since the imbalances plaguing other countries are more pronounced. We expect to see a moderate, though sustained, recovery in the second half of 2009," he said.

After six years of solid gain, the report said, falling commodity prices will cut domestic income that has supported consumer, business and government spending for the past several years.

The outlook for 2009 is very bleak as the combination of falling domestic income, credit squeeze, and a rising debt-to-asset ratio will curb consumer spending, it said.

The bank said though negative growth is only expected to last the next two quarters, its impact will be far reaching, with the unemployment rate climbing to 7.4 percent in 2009.

On the economic deterioration in the US which accounts for more than 85 percent of Canada's global trade, the report said the real GDP in America will decline by 1.5 percent in 2009 because of slower export growth and weakening in global economic activity.

Though the Bank of Canada has reduced the overnight rate to 1.5 percent to stimulate the economy, the report expects the rate to be further reduced to one percent as the economy enters the weakest period for growth.

Friday, December 19, 2008

Free Float - A Necessary Consideration for SGDividends

We have beening bio-ing ( a.k.a Stalking) some companies which seem to be pretty under researched, boring , unexciting with super attractive valuations. But being the ever kiasee investors whose number one golden rule is to eliminate as much risk as possible first before even considering the potential returns ( basically we try to go for investments with the highest potential returns per unit potential risk), we are held back from clicking the " submit" button. So unless an earthquake hits or a childish adult comes along and push our collective fingers on the left button of the mouse to hit the "submit", we think we will give these companies a miss. ( anyway, seriously, adults are more childish than teenagers if you just open your eyes and ears to observe with an open mind.)

The reason is because of the free float of these companies which are very small. Singapore's regulation is for at least 10% of the shares of an SGX listed company to be free floated where free float refers to shares owned by persons who are not existing directors or substantial shareholders of the company. Free float shares can also be thought of as shares owned by the public and very generally speaking , such shares are highly illiquid with a large bid- ask spread. Being illiquid with a large spread is fine from a fundamental long term investing standpoint,nothing wrong with that, but we believe that adults, in addition to the capacity for love, kindness, are inherently greedy. Therefore, a concentration of power in a few individuals in a collective investment just reeks of a high risk investment, Ceteris Paribus! Based on logic, a low free float counter may also result in an investment considered a Value Trap.

Well, guess nothing looks interesting to invest in at the moment from our inexperienced perspectives. Here are some links, here and here which are related to the issue of free float size from our venerable and Hot Monetary Authority of Singapore.
" Investing is a Zero Sum Game " - Mr Siew Khim, Daniel SXXXX537E
Important: The objective of the articles in this blog is to set you thinking about the company before you invest your hard-earned money. Do not invest solely based on this article. Unlike House or Instituitional Analysts who have to maintain relations with corporations due to investment banking relations, generating commissions,e.t.c, SGDividends say things as it is, factually. Unlike Analyst who have to be "uptight" and "cheem", we make it simplified and cheapskate. -The Vigilante Investor, SGDividends Team

Tuesday, December 16, 2008

Something that puzzles SGDividends Maybe Due to their Inexperiences

Before we invest in something, we seek to understand it first. Thats the basic need. When we look at some trusts, something just don't click with our subconcious mind but guess its due to our inexperience regarding such entities, don't know, not sure.

Beefy Barber wants to unlock some cash value from his scissors and shavers lying in his run-down barber shop. He thought of a smart idea, why not package these scissors and shavers into a erm.."Package". Securitise it with say 100 shares. He keeps 40 shares and sell the remaining 60 shares equally to the Sexy VJC Girl and the Scheming SGDividends Team. The maintenance and usage of the scissors and shavers will be managed by Beefy Barber's employee. The revenue from the scissors and shavers will be (after deducting the management fees for Beefy Barber's employee) distributed to Beefy Barber ( 40%), Sexy VJC Girl ( 30%) and SGDividends Team ( 30%) according to their percentage of shares.

So in summary:
Beefy Barber gets 40% of net revenue + management fees ( through the employee)
Sexy VJC girl gets 30% of net revenue
SGDividends gets 30% of net revenue

Should we invest in it?Since Barber is a majority shareholder of the "Package" and also the 100%manager of the "Package", could Barber increase his management fees so as to leave little for the owners of the Trust? Hmm...So our Sexy VJC Girl thought of a smart idea. Lets create a trust deed so we can bind the amount of management fees to be received by Beefy Barber. (little kids these days..) Ok, hmm since the trust deed requires the majority shareholders to vote for it to have binding powers so we should be safe since Sexy and SGDividends hold 60%. So we decided on an appropriate management fee....say 4.5% of the revenue derived from the "Package" . Beefy Barber however wants 10% but since we (SGDividend and VJC Girl) own 60%, we win. We can only hope that Beefy Barber don't get pissed with us and still put in the effort to manage his scissors and shavers well.

So how about in the real market? Generally, a trust ( or REIT) is made up of many many investors who come and go and may not be united. Will they be able to muster up collective action even if collectively they hold the majority shares?

The point is, is there a conflict of interest between Barber and the rest of the other shareholders like Sexy VJC Girl and SGDividends?Who is to check the Beefy Barber who has the "most" say in the Trust and who is also the manager of the trust?
In a company structure, the board of directors checks the management to ensure shareholders rights are protected. In the trust structure, it seems there is no such structure in place. This is how we feel about Trusts.

We hope our worries are unfounded.

Let us meditate on the island of Sakhalin to find the answer.

Important: The objective of the articles in this blog is to set you thinking about the company before you invest your hard-earned money. Do not invest solely based on this article. Unlike House or Instituitional Analysts who have to maintain relations with corporations due to investment banking relations, generating commissions,e.t.c, SGDividends say things as it is, factually. Unlike Analyst who have to be "uptight" and "cheem", we make it simplified and cheapskate. -The Vigilante Investor, SGDividends Team

Friday, December 12, 2008

Scheming SGDividends Just Playing Around

Cambridge has sort of cleared some issues with their financing. So, what now, can buy, can short? The Article Written by Our Sexy VJC Girl seemed to have drawn an intense discussion Here.Maybe its cos of the word SEXY which after minusing the "Why" gives a pretty nifty,cool word. Anyway, the discussion was on the value to use as a discount factor, k, so that when we discount back to find the fair value of Cambridge, its appropriate. Probabilities, Scenarios, CAPM words were mentioned and its quite an intellectual read actually, which left us starry-eyed.

Ok so we used 6% ( preferential DBS share) as the discount factor(k) used previously to find the $1 value(Max) and it has drawn some different reasonable opinions and they got a point since DBS is less risky than Cambridge REIT. But SGDividends just don't know how to use Probabilities, CAPM, calculate the WACC ( especially the Cost of Equity) e.t.c to find the discount (K) appropraite to discount back to find the value of Cambridge. So can we be more simple?Can we use some scenarios based on comparing with industrial reits in Singapore by using their dividends yield? Is it logical? Hmm, if dividend yield is one of the factors which investors look at when deciding which Industrial reit to invest in , can we consider the dividend yield as an opportunity cost? For example, if we were to invest in Cambridge, we would be forgoing the dividend yield in MapleTree and vice versa. ( OK this is not from CFA textbook, we just play play test test only lah...give chance) We all know that dividends yield is constantly fluctuating too but anyhow lets take it with a pinch of salt and just try using it as the discount rate.

Let's experiment and try it out, shall we? Let's use the values from this fantastic blog .

REIT Dividend Yield
MI-REIT 40.870%
MapleTree 17.671%
A-REIT 13.367%
Average Dividend Yield above ( as at 12 Dec 2008) = 23.96%
Average Dividend Yield for Singapore REITS = 19.314%
( Let's assume their data is correct! Should be lah...randomly tested.)
Growth Rate ( G) = 0,

Discount Rate ( k,Required Rate of return) = Dividend Yield of Peers

Dividend (D) = $0.053 ( after cut of 0.9c).

Years of asset (n) = 65 years
(Pls see our article Titled : Sexy Vjc Girl Analyses Cambrigde REIT to understand the gibberish we are merlion-ing)

Lowest Value of Cambridge ( Using MI REIT yield) = S$0.13
Highest Value of Cambridge ( Using A-REIT yield) = S$0.40
Average Value of Cambridge ( Using Average Yield) = S$0.22
Value of Cambridge when compared with Yield of Singapore REITS = S$0.27
Important: The objective of the articles in this blog is to set you thinking about the company before you invest your hard-earned money. Do not invest solely based on this article. Unlike House or Instituitional Analysts who have to maintain relations with corporations due to investment banking relations, generating commissions,e.t.c, SGDividends say things as it is, factually. Unlike Analyst who have to be "uptight" and "cheem", we make it simplified and cheapskate. -The Vigilante Investor, SGDividends Team

Wednesday, December 10, 2008

Research Analysts Never Fails to Bizarre SGDividends - Are they making sense?

Our Beefy Barber bought Olam and Noble recently. The reason, cos many analysts are calling for a buy or have given it a good review. That is utterly irrational! We decided to read some of the analyst reports that he has read and we really think this reports do make sense BUT are they forgetting the basics? Or maybe they know the basics but heck lah...who cares....im paid to write professional reports and if anything go awry, just change the target price loh...worse come to worse, just fall back on disclaimers. Or maybe, they have other income producing reasons? Anyway, you can read these reports from our fellow blogger Here . ( wonder where he gets so many reports from??hmm)

Ok so like that, SGDividends say SPH BUY $15 target!. SingTel SELL $0.50.Keppel SELL $1. Wilmar NEUTRAL $1 million. Feels good. If kanna the target price, we are saints. If not, heck lah, just change.

Ok on a more rational note. Let's look at the basics. Seeing is believing. Don't need to write so many reports one or else become keyboard warrior. Let's not even go into the metric Free Cash Flow. Let's just look at Cash Flow from Operations. See how negative their cash from operations. So unless they are drilling for some black gold underneath the sea level, hopefully they can come up for some fresh air.

Apologies for the harsh remarks but Beefy Barber is our friend even though he bullies us at times.
Important: The objective of the articles in this blog is to set you thinking about the company before you invest your hard-earned money. Do not invest solely based on this article. Unlike House or Instituitional Analysts who have to maintain relations with corporations due to investment banking relations, generating commissions,e.t.c, SGDividends say things as it is, factually. Unlike Analyst who have to be "uptight" and "cheem", we make it simplified and cheapskate. -The Vigilante Investor, SGDividends Team

Tuesday, December 9, 2008

Cambridge REIT- Take Care Cos i Care

Thanks to a fellow blogger by the nick of Cheng ( you can read his blog Here) who mentioned a red flag about Cambridge in response to the analysis done by our Sexy VJC Girl. This culminated into this article . We took a look at Cambridge to see what the hoo ha ha ha ha..Santa Claus is about.

It states that they still have S$336,843,000 dollars they have to pay within a year. Wow. So, we, being extremely nosey and kaypoh like what a hot auntie would naturally be, decided to look at the footnotes to gain some perspective on this "wow" figure, and here it is:

So, really, dear investors who invested in this counter, keep your eyes peeled on any news on this. BUT, we being extremely irritating, persistent, bo liao and totally curious decided that it shan't end like that. We decided to take a look at Maple Tree Logistics which is another sort of industrial Reit. And..TAaaa DAaaaa.... No mentioning of any debt to be repaid within one year! S$113,701,000 to be repaid winthin 1 year. Compare this with Cambridge.

So can islamic financing save the day for Cambridge? ( Hmm we seem to remember some article back that Islamic financing may not be immune to the credit crisis too?........Just can't find it..)

About half and hour after we posted, Anonymous cleared some air on the financing issue. Great, thanks Anonymous. This is taken from financeasia.com. Have they signed it yet, cos its 16 days to Christmas...ho..ho..ho!

See below for a post by a nick "Banker" at a forum.
Quote:
Cambridge Trust (CIT) has an option to extend the S$330+ mil facility. ABN Amro the trustee of CIT is the arranger for this facility. Moreover, this loan already has been securitized in the ABS market. In addition to the ABN Amro's backup, CIT has Australian National Bank as the major investor at the trust manager. I don't think refinancing is a problem. However, if CIT has to pay higher interest it will affect the DPU.UnquoteUpdated 11 Dec 2008: From a forummer nick "caseyc" regarding the Islamic Financing

Quote:According to the following source, it seems like Shariah-compliant loan is dead:http://www.sharesinvestment.co.../35054/en/"Refinancing will stem from conventional financing arrangements (as opposed to Shariah-compliant loan arrangements which CIT has been vying for) in the form of syndicated loan."I can't find any other references that mention this though, so take it with some salt.I've been waiting for the refinancing announcement, but decided to exit after I no longer felt comfortable with the lateness. Let's hope that they can pull through this. UnQuote

Important: The objective of the articles in this blog is to set you thinking about the company before you invest your hard-earned money. Do not invest solely based on this article. Unlike House or Instituitional Analysts who have to maintain relations with corporations due to investment banking relations, generating commissions,e.t.c, SGDividends say things as it is, factually. Unlike Analyst who have to be "uptight" and "cheem", we make it simplified and cheapskate. -The Vigilante Investor, SGDividends Team

Monday, December 8, 2008

New Housing Construction

Construction of new housing in Ottawa fell 36 per cent in November, led by big declines in townhouse units, Canada Mortgage and Housing Corp. said Monday.

Despite the big decline, housing starts are still running 7.7 per cent ahead of last year as builders put shovels in the ground for developments that were sold earlier in the year before sales of new units plunged this fall..

CMHC said that construction started on 492 units during the month, down from 769 units a year earlier. The big decline followed an unusually strong October in which Ottawa bucked a national decline in starts triggered by economic problems.

The number of new row housing units fell 61 per cent 108 units and single-family starts declined 31 per cent 266 units.

The declines were partly offset by increased construction of semi-detached and apartment units.

Despite a significandt decline in single-family housing starts to 266 units from 386 units a year earlier, it was still the single biggest generator of housing construction during November — a testamant to the fact that despite rising prices, buying a single-family unit is still more affordable here than in most big Canadian cities.

Sandra Perez Torres, senior Market Analyst at CMHC, said in a statement: “Single-detached construction is a better barometer of the health of the new construction market. After exceptional new construction activity in October, single detached construction still represented over half of total construction in November.

"Total housing foundations for this type of dwelling remained at a very high level, just marginally lower than last year’s numbers”, she said.

Sunday, December 7, 2008

Singapore Press Holdings - A recession proof play but is my money better utilised elsewhere?

We are making use of the sexy VJC girl to help us crunch some numbers and she gave us a list of data today. Shit man. Some of our investments SUCK after seeing what she crunched. Anyway, what emerged is so simple to understand but its just that we have been too absorbed into the world of sexy valuation names, such as Sum of Total Parts (SOTP) valuation, Cash Conversion cycle, DCF, PEG ratio e.t.c. . Not that they are useless of cos. What we think and reasoned is that before these ratios are used, the utmost prerequisite is that the investment has to be generating a positive operational cash flow consistently first before one
should even consider analysing further with other ratios. ( Unless of course if they are a new company without operating history, then its your call).

"Profits are an opinion, cash is a fact " - Unknown

Just imagine this, a company reports a darn large sales revenue. But this sales revenue may be "owed" by the customers to be paid say in 6 months time. What if the customers default? This sales revenue is then not realised but still recorded as net income previously. Similarly, net income is often contaminated with depreciation expense which is non-cash but purely an accounting concept. So if a company is generating a boatload of cash but if it is capital intensive, then net income will be seen as very little. To clear all this fluff, including management's easy manipulation of net income, one has therefore to look at the Cash from Operations. Or to be more conservative, Free Cash Flow from Operations from a reasonable amount of time period, say 4-5 years or more.( Deducting Capital Exp. from Cash from Operations.)
So, we decided to look at Singapore Press Holdings. Recently, 2 analysts have been stating a BUY call for this counter, including a consensus recommendation calling for a near buy. Its easy to agree with them. Straits Times Newspaper, Business Times everywhere and they should be recession proof, right. Let's look at their data. ( You can find the data at http://www.reuters.com/)
Wondering why their revenue have been increasing so remarkably but their net income seem to be going no-where, and their Cash from Operations is bobbing up and down the water. Their FCF seem to have the longest breath, staying submerged, only coming up for some fresh air in year 2004. Come to think of it. Does SPH really have an investment moat? It's great they came up with STOMP , Digital Newspaper ...but...is that enough?

The following is added on 9 Dec 2008 . This is from Today Newspaper published on 9 Dec 2008, a day after we published this post. Pls note that we are definitely not related to MediaCorp ( come on, just look at the quality of editing of this cheapskate blog) and their recent spat with SPH on whose readership is higher.
ucypmas, a reader, commented that their "Free Cash Flow" might be understated due to the large amount of dividends paid out by SPH. So we decided to relook at it. Yup....they shuld actually have a large free cash flow but due to the paying out of boatloads to investors, its lesser than it seems. It ain't that bad after all. So it must really be in a kinda stable industry where SPH chooses to give out cash instead of using it for investments! Thanks ucypmas for highlighting this fact.
Updated on 10 Dec 2008: We thought it was quite unfair to SPH and irresponsible for us not to show accurately the free cash flow of SPH. So below is the adjusted data where we added back the Dividends paid out to Investors to the Cash Flow From Ops and Free Cash Flow . (Anyway, wah lau, how come SPH placed Dividends paid out to shareholders under the Cash Flow of Operations section??? Shouldn't it be itemized under Cash Flow of Financing section like what usually companies do??? Bleah!)
Important: The objective of the articles in this blog is to set you thinking about the company before you invest your hard-earned money. Do not invest solely based on this article. Unlike House or Instituitional Analysts who have to maintain relations with corporations due to investment banking relations, generating commissions,e.t.c, SGDividends say things as it is, factually. Unlike Analyst who have to be "uptight" and "cheem", we make it simplified and cheapskate. -The Vigilante Investor, SGDividends Team


Friday, December 5, 2008

Is Macquarie International Infrastructure Fund a good buy for the Beefy Barber?

Whenever the Beefy Barber wants us to help him, we notice his biceps start bulging slightly. Barber wanted to know if Macquarie Infrastructure is a good buy as the price has dropped from an all time high of $1.23 to $0.295. He also mentioned about the very high dividends yield of about 24.5% (based on dividends of 7.25cents on market price of $0.295). But he is confused, he says. Lately, instituitions such as Capital Group has been reducing their stake from 7.0159 % To 6.9547 % . Macquarie has been reducing from 11.08 % To 10.71 %. BUT Directors such as Lee Suet Fern and Heng Chiang Meng are buying up shares. So what's up? We decided to go together to the Macquarie Seminar on 4 Dec 2008 to learn more. Frankly, we came out non the wiser. What was mentioned is exactly what has been announced on the SGX website and we won't elaborate more. We remembered only the speaker saying that the Catalyst of the plunge was due to Hedge funds who dumped around 10% late last year and Lehman's collaspe and something of a conservative estimate that the dividends will be expected to be 6 cents next year ( 20.3% dividend yield) and that once corporate debt has been repaid, MIIF will start to increase dividends again and that there is going to be a change of depreciation method from a straight line method to a units of production method for Hua Nan Expressway. Hiyah...don't understand the Australian Dudes slang!!! Anyway, as the Barber was more interested in the dividends, which is the meat of this investment, we decided to compile a chart, showing the Distributions of each of the underlying compared with the risk ( gearing) of each of this business. We reasoned that this would be helpful to Barber as any collaspe of any one of the businesses will mean no distributions from that business and therefore a reduction in dividends.

Please note that the distributions used above in the chart is based on operational dividends, excluding special, one -off ones. As can be seen from the diagram above, if Miao Li or Hua Nan were to collaspe, since their distribution contribution is so minute there should not be a material impact to the dividends received. (assuming fees and charges remain the same),especially Miao Li with the highest gearing.CAC and MEIF is quite risky and their distributions to MIIF is quite substantial.

We wanted to compare with what an appropriate infrastructure gearing is. And found this article.

Quote Gearing is higher for unlisted than listed infrastructure. One of the advantages of unlisted infrastructure is an owner’s control of the capital structure. Hence, gearing levels in privately held infrastructure range from 50% at the lower end, for higher risk infrastructure such as airports, to 90% for social infrastructure (schools, hospitals, etc) for which the revenue stream is typically backed by government or semi-government payments. On average, gearing for listed infrastructure companies is around 40%. However, it varies significantly across companies and across regions. For example, gearing for some of the Australian listed funds is quite high (above 50%) while the European infrastructure companies have a low level of gearing (around 30%). Unquote

Since MIIF underlying businesses are unlisted and the consolidated average gearing is roughly 60% and its within the gearing range of unlisted infrastructure as stated in the article above ( 50% - 90%), no glaring problem seen.

We have not heard from Barber since we left the seminar whether he would still want to invest in it. He owes us each an "ARMANI" haircut for accompanying him to this seminar.
Important: The objective of the articles in this blog is to set you thinking about the company before you invest your hard-earned money. Do not invest solely based on this article. Unlike House or Instituitional Analysts who have to maintain relations with corporations due to investment banking relations, generating commissions,e.t.c, SGDividends say things as it is, factually. Unlike Analyst who have to be "uptight" and "cheem", we make it simplified and cheapskate. -The Vigilante Investor, SGDividends Team

Thursday, December 4, 2008

The return of the Home Ownership Accelerator

One of the unfortunate casualties of the Mortgage Meltdown was the Home Ownership Accelerator loan program. This loan program allowed USA homeowners the power to utilize interest saving techniques used in Australia & much of Europe to pay off their Home Mortgage Early without paying any extra money each month. The Program has helped thousands of US homeowners speed up their loan payoff while maintaining their current lifestyle and no reduction in available spending money. The program was a victim of the credit crunch and was halted this past summer, as Secondary loan markets were cut off for non vanilla loan types.

These are not risky loans. In fact, when paired with Responsible Homeowners with financial discipline, these are a fantastic wealth builder. Unfortunately, the emotions of Wall Street froze the product for most of 2008.

Well, we are proud to announce that the Home Ownership Accelerator coming back soon, and VanDyk Mortgage has been chosen to be an exclusive Lender Partner for the re-introduction of the Home Ownership Accelerator program. This product won't be available to all Lenders and Brokerages this time around. VanDyk Mortgage was selected as an exclusing partner for the HOA due to our strong track record in origination of quality loans properly matched to clients for the best fit, affordability, and sustainability.

If you would like to be notified when the HOA or Home Ownership Accelerator is available again, send an email to us at HOA@vandykfunding.com or call Brian Skaar at 760-752-4480.

No declining market restrictions - 100% cash out - VA Loans

There are No declining market restrictions on our 100% cash out refinance VA Loans.

I forgot to mention this in the last blog post; blog post on 100% cash out VA refinances.

There is no limitation on which states qualify for the 100% cash out refi option on these loans, there is no additional declining market cap on LTV like Fannie, Freddie, & private loans. All "declining" markets are fully eligible for these loans, including California, Arizona, Nevada, Florida, Georgia, etc.

100% Cash out Refinance - VA Enhancements

You read the headline correct: VA now allows 100% cash out refinances. VA refinances are no longer capped at 90% of your current appraised value. This change will allow Veterans, Active Duty Members & Reservists the option to refinance their non VA loans into safe, secure, fixed rate VA Loans. VA Loans have no MI or Mortgage Insurance.

Even better news: The previous limit of $144,000 on VA refinances has been lifted, and the limit is now the VA Loan limit for your county. Click here to see your limit: New VA loan limits for 2009 Blog Post .

The Entitlement and Guarantee equations have been adjusted slightly as well to facilitate Refinances over $144K as well. I will post some scenarios in a future blog to illustrate this.

We are very excited about the enhanced possibilities for our Veterans.

Please call Brian Skaar at 760-752-4480 or visit us online at www.vandykfunding.com to find out more.

VanDyk Mortgage is a VA Direct Lender (since 1987). We are the VA Experts. We offer VA loans accross America including: California, Washington, Arizona, Texas, Florida, Georgia, & more.

Did Singapore Airport Services Really Pay A High Price for Singapore Food? Don't be fooled!

TODAY published an article on 3 December 2008 on the sale of Singapore Food Industries to Singapore Airport Terminal Services ( SATS). . The Editor used the market capitalisation of Singapore Food to state whether the sale price was at a discount or premium.So is market capitalisation a good measure of whether an acquisition is cheap or expensive?

Let's give an example, if 2 slaves each cost $4. ( just for simplicity sake lah...we hate slavery...don't be soooo uptight!). If one slave has a debt of $1 but another has a debt of $3. If a master was to buy a slave and he has to pay back the debt owed by the slave, which is actually a more expensive buy? Of cos the slave who has a debt of $3 is the more expensive buy. On the same token, if one slave has $1 dollar in his pocket and the other has $2 in the pocket. When you buy a slave, you get his dollar in the pocket. So in this instance, the slave who has $2 in the pocket is a cheaper buy as you get to pocket the $2. So let's use this concept to measure whether the buy price of Singapore Food is cheap or not, shall we?It is actually a well used concept with a jargonic name called Enterprice Value. It is a measure of the theoretical takeover price that an investor would have to pay in order to acquire a particular firm.It is better intepreted as the true cost of the acquistion in the market place ( See Opinions at the bottom of the article by CC for more insight. )Read Here to find out more about Enterprise Value.


Enterprise Value ( EV) = Market Cap + Debt - Cash



Debt = $74,968,000 (ABOVE)

Cash = $17,428,000 (ABOVE) From above, it is stated that 69.68% represents 359,731,154 shares. This means the number of shares outstanding for Singapore Food is 516,261,702 (100%)

Calculating...........

Enterprise value = 516,261,702 X 0.89( Using the price given in the above TODAY article) + 74,968,000 - 17,428,000 = 517,012,915

Therefore, the theoretical cost of the acquisition if we based on market-determined price of 89 cents listed on the Singapore Stock exchange in TODAY's article should be $517,012,915. If we divide it by the total number of shares = 517,012,915 / 516,261,702 = $1.0015 per share.
Today stated that 93 cents is a 4.5% premium to the 89 cents of Singapore Food. At first glance, it seems Singapore Airport Terminal has paid a premium. But based on Enterprise value, it seemed SATS did have a good deal after all, paying 93 cents instead of $1.0015, a 7% discount!
The cost of the acquisition to SATs if they are able to acquire all the shares in the market place based on last done market- determined price of 89 cents on the Singapore Stock Exchange in the TODAY paper above is therefore theoretically ( academically) actually $1.0015 per share. Mainstream media states 93 cents as the price paid per share.
But what is the true true true true true true true cost that it paid? Since SATs paid 93 cents. Based on the below calculation,
516,261,702 X 0.93+ 74,968,000 - 17,428,000 = 537663382.86
537663382.86/ 516,261,702 (shares)=$1.04 per share!!
(This article has been heavily edited after contributions from readers. SGDividends SUCKS!! )
Important: The objective of the articles in this blog is to set you thinking about the company before you invest your hard-earned money. Do not invest solely based on this article. Unlike House or Instituitional Analysts who have to maintain relations with corporations due to investment banking relations, generating commissions,e.t.c, SGDividends say things as it is, factually. Unlike Analyst who have to be "uptight" and "cheem", we make it simplified and cheapskate. -The Vigilante Investor, SGDividends Team

Wednesday, December 3, 2008

100% financing in California

100% financing in California. It still exists.

Fannie, Freddie, & the Private Mortgage Insurance companies have limited California purchases to a minimum of 10% down payment, or a maximum of 90%.

For Veterans & Active Duty Service members the VA loan still offers 100%, no money down financing in California. Recent enhancements for 2009 loans have increased the loan limits, and your entitlement might be higher that you thought. For example, San Diego VA loans are available up to $593,750, Los Angeles up to $737,500, Orange County up to $737,500, and San Bernardino / Riverside up to $417,000.

For non-Military, FHA is an incredible option for Home ownership at just 3.5% downpayment required.

VanDyk Mortgage is a Direct VA Lender and Direct FHA Lender. www.VanDykFunding.com

Canada Mortgage loan- tax deductable?

Canadian homeowners are green with envy over the fact our neighbours to the south are allowed to deduct the interest paid on their mortgages from their taxes. Is it possible to do the same thing here?

I received an elegant little flyer in my mailbox the other day. It was a small glossy fold-over, and it had a quality look and feel to it. The only text on the front flap of the flyer asked me a provocative question: "Is your mortgage tax deductible?" The inside of the flyer told me that I could learn how to collect tax refunds from my mortgage loan. "Canadian homeowners are entitled to collect Tax Refunds from their mortgage payments under Canada Revenue Agency (CRA) guidelines for 'Cash Damming'.

By following CRA's specific guidelines for borrowing and investing, you will claim thousands of dollars in Tax Refunds every year from your mortgage." The small flyer mentioned "Tax Refund" five more times, and twice pointed out that I could use my Tax Refund to pay off my mortgage faster. That's pretty exciting,

The biggest single expense of many Canadian families is their mortgage payment, and we've all been making those mortgage payments with after-tax dollars. Many a Canadian has looked across the border in envy at the tax deductibility that Americans enjoy on their home mortgage interest. If it turns out that we can be getting Tax Refunds from our mortgage payments too, well, that's just a no-brainer.

As it happens, I am quite familiar with this topic and strategy, so I can spare you the inconvenience of having to leave the comfort of your home to discover how this works. In fact, I'm going to provide you with all the essential information that you really must know about Canadian mortgage deductibility and Tax Refunds, all in the very next paragraph! How can I possibly do that? By using an enhanced information conveyance technology I like to call No Baloney™.

Ready? Here's what you really need to know about Canadian mortgage deductibility and Tax Refunds: In Canada, when you borrow money to buy your home, you can't deduct the interest. When you borrow money to make certain investments, you may be able to deduct the interest. There. Now that we've covered all the really important stuff, let's review some of the details. First of all, nothing about buying your personal residence is tax-deductible. You don't get to deduct your mortgage interest, there are no special tricks that have escaped your notice, and you will not be getting "Tax Refunds" from your mortgage payments. Period.

That being said, when you borrow money to make investments which have a reasonable expectation of income, you may be able to deduct the interest on the debt. So if you use your home as collateral when you borrow money to invest, you may be able to deduct that interest expense from your income taxes. You could, therefore, have a mortgage with interest that is partially or entirely tax deductible.

However, it's very important to remember two things: (1) No matter how you twist it, turn it, or wordsmith-manoeuvre-it, the money you borrow to buy your principal residence is not tax-deductible; (2) The only way the interest on your home mortgage can be tax-deductible is if you borrow against the equity you already own in your home, and use that money to investment.

The reason it's so very important to be clear about this issue is that borrowing to buy a home is something that most people must do in order to buy a home, and as long as they can afford their mortgage payment, they're psychologically comfortable doing so. They generally don't worry that their money is at risk. In fact, they feel a sense of security about the equity they are building as they pay the mortgage down. Borrowing to invest, on the other hand, is not something that anyone needs to do, and most people are not psychologically comfortable with it. In order for borrowing to invest to make sense, the average long-term, after-tax return on the underlying investment has to be higher than the after-tax interest rate on the loan.

That invariably means taking on investment risk. And for most people, tolerating investment risk is already sufficiently challenging without the added stress of knowing that those investments were made with borrowed money. Think about the recent gyrations in the stock markets, and consider how using leverage might change your emotional response to the hysteria. Don't get me wrong - I'm not picking on leverage as a concept. Using "other people's money" is an age-old investment strategy, it absolutely has its place as a financial planning strategy, and I've used it myself.

What I am picking on is the packaging of leverage - a strategy that inherently adds risk to investing - as a clever and heretofore overlooked way to get tax benefits on your home mortgage. Let's be No Baloney™ clear: For some people, borrowing money to invest may be an appropriate investment strategy. But borrowing money and investing it because you can get a tax deduction on the interest expense is a ridiculous tax strategy.

Tuesday, December 2, 2008

New 2009 VA Loan Limits - a snapshot

New VA Loan Limits for 2009 are now available.

The new limits range from the base limit of $417,000 up to $1,094,625 in the highest cost areas.

All VA loans require ZERO Mortgage Insurance, and as little as ZERO down payment.

Here are some of the new county limits:

CA
ALAMEDA
$1,094,625.00

CA
ALPINE
$503,750.00

CA
CONTRA COSTA
$1,094,625.00

CA
EL DORADO
$516,250.00

CA
LOS ANGELES
$737,500.00

CA
MARIN
$1,094,625.00

CA
MONO
$575,000.00

CA
MONTEREY
$525,000.00

CA
NAPA
$643,750.00

CA
NEVADA
$518,750.00

CA
ORANGE
$737,500.00

CA
PLACER
$516,250.00

CA
SACRAMENTO
$516,250.00

CA
SAN BENITO
$937,500.00

CA
SAN DIEGO
$593,750.00

CA
SAN FRANCISCO
$1,094,625.00

CA
SAN LUIS OBISPO
$610,000.00

CA
SAN MATEO
$1,094,625.00

CA
SANTA BARBARA
$656,250.00

CA
SANTA CLARA
$937,500.00

CA
SANTA CRUZ
$805,000.00

CA
SOLANO
$435,000.00

CA
SONOMA
$566,250.00

CA
VENTURA
$650,000.00

CA
YOLO
$516,250.00


FL
COLLIER
$487,500.00

FL
MONROE
$575,000.00

GA
GREENE
$560,000.00


WA
KING
$550,000.00

WA
PIERCE
$550,000.00

WA
SAN JUAN
$525,000.00

WA
SNOHOMISH
$550,000.00

The maximum guaranty amount (available for loans over $144,000) is 25 percent of the 2009 VA Limit shown below. Therefore, a veteran with full entitlement available may borrow up to the 2009 VA Limit shown below and VA will guarantee 25 percent of the loan amount. If a veteran has previously used entitlement that has not been restored, the maximum guaranty amount available to that veteran must be reduced accordingly.

VanDyk Mortgage is a Direct VA lender, and has been making VA Loans since 1987. Visit us on the web for more info or to apply for your VA Loan at http://www.vandykfunding.com/

VA loan enhancements for 2009

Enhanced VA home loan options are available for 2009 thanks to the Veteran's Benefits Improvement Act of 2008, passed on Oct. 10, 2008. The new VA home loan changes include higher loan limits (click here for 2009 VA loan limits by County).

VA Loans can now help Veterans and active service members refinance their non-VA loans into safe, secure, & fixed rate VA Loans. Previously, this type of refinance was only available up to $144,000. Now you can refinance into VA Loans up to $729,750 (depending on your county limit). Another huge change is that Veterans & active service members can refinance up to 100 percent of the property value (this was capped at 90% before).

For questions regarding calculation of your Entitlement under the VA Loan program call Brian Skaar at 866-900-2342 toll free direct. Your entitlement is now increased and we can help you figure out your eligibility based on the newest figures. It is likely more than you thought.

VanDyk Mortgage is a VA Direct Lender, and has been since 1987. We also offer FHA Loans, Fannie & Freddie Conventional loans, Jumbo Loans, and construction loans. Visit us on the web at www.vandykfunding.com.

Improper Disclosure for Minibonds? How about Fund Managers?

As we approach the end of the year, some people are speculating that certain counters will be rallying due to "Window Dressing" by Fund Managers. In case you are "sotong" about the term window dressing, it refers to the oft-said practice of fund managers buying stocks that have been performing well and discarding stocks that have been performing like shit just before they have to report their holdings in a prospectus or interim reports to unitholders. This is to make their holdings look good to people. (Wayang).

But SGDividends, as usual, don't give a fiddler's fart on what people say until we can prove it. But sad to say, we failed. Its nearly impossible to prove this due to either the lack of disclosure of their holdings and the lack of disclosure on the date they purchase their holdings...So well.

Anyway, we think the fund management industry has a lot to improve in terms of disclosure. If not for our curiousity in poring through their prospectus ( originally for the "window dressing" project), we would not have known that they are paid a performance fee on top of their management fee. Why can't these funds state that they also DO CHARGE performance fee in their well marketed FACT SHEET!See so much white space above in the box titled Fund Details? See below for the performance fee they charge in their financial statements.It's a little comfort to know that they do not charge performance fees that quarter ( from beginning of year 2008 to 31 March 2008), given that they have unrealized loss. But isn't it such a great business to have, lose money, i don't get bonus(Performance fee), win money, i get bonus(Performance fee). All in all, portfolio profit or loss...i still get money(Management fees), only how much money (fees) i get.

Anyway, could the rally in the Month of March this year 2008 be due to "Window Dressing"?

Important: The objective of the articles in this blog is to set you thinking about the company before you invest your hard-earned money. Do not invest solely based on this article. Unlike House or Instituitional Analysts who have to maintain relations with corporations due to investment banking relations, generating commissions,e.t.c, SGDividends say things as it is, factually. Unlike Analyst who have to be "uptight" and "cheem", we make it simplified and cheapskate. -The Vigilante Investor, SGDividends Team

Monday, December 1, 2008

People Quarrel Over Coffee...Don't drink Coffee with Friends or Loved Ones

We were shopping with Barber for groceries and was at the coffee beverage section of Giant. A couple was quarreling over which brand of coffee was better Super 3 in 1 Instant Coffeemix or Gold Roast 3 in 1 Coffeemix. They were at it for 10 minutes while, we, the ever kaypoh and bo liao people, pretended to be looking at some Lee Kum Kee Oyster Sauce, but we were eavesdropping on the couple's war of words. They finally chose Super..the guy's favourite. The girl seemed to walk off in a huff. Tsk Tsk, such an ungentlemanly guy.....come on..its just coffee dude.

So just what is so special about coffee that can cause couples to quarrel? Our curiosity was aroused and we decided to buy both and give it a try. ( Barber, you still owe us 20 cents, dont forget to return...this is not OCBC smartchange ok..)

We tasted both and Barber liked the Super but we liked the Gold Roast. And then it happened again, another quarrel. But since Barber was a beefy person, we decided not to make him too angry by arguing too much. We decided on a fair way of winning this argument, to look at the financial statements of the companies of these 2 brands Viz Branz ( Gold Roast) and Super Coffeemix( Super).

We reasoned with Barber that the Inventory Turnover ( COGS/Average Inventory) of Viz Branz was consistently higher and getting higher, than Super Coffeemix. (See below first chart, purple for Viz, blue of Super)This implied that Viz Branz's products were flying faster off the shelf than Super, which meant it is most likely more well-liked. Barber could not reply, but only mumbled something under his bad breath. And that's how we ended the quarrel with Barber. [ It could mean that Viz Branz is managing its inventory better too by using a Just-in-time policy but this the barber don't know...hehe. Anyway, its a metric that signifies good management.]
Since we were looking at these 2 companies, we decided to look at some other ratios just out of curiosity again ( since it is so simple to do, so why not?), and it had nothing to do with which coffee tasted better.

We decided to look at how strong the company is, in relation to its customers. We looked at the Accounts Receivable Turnover Ratio(Revenue/Average Accounts Receivable) to see which company was taking a longer time to collect their money from customers. A higher ratio implies its collecting money faster which is good. (See above second chart) Viz Branz started out pretty worse off than Super Coffeemix but is catching up and is nearly as good as Super in 2007...a good sign of improving management ability.

Next, we decided to look at how strong the company is, in relation to its suppliers. We looked at Accounts Payable Turnover Ratio ( COGS/Average Accounts Payable) to see which company had better purchasing terms from its suppliers. A lower ratio means a company can take a longer time to pay off its bills to the suppliers.( See above third chart) Super Coffeemix seems better in this metric and seem to be in a stronger buying power or having better supplier relations compared with Viz Branz.

So who is better? Super Coffee Mix or Gold Roast. You decide!

Important: The objective of the articles in this blog is to set you thinking about the company before you invest your hard-earned money. Do not invest solely based on this article. Unlike House or Instituitional Analysts who have to maintain relations with corporations due to investment banking relations, generating commissions,e.t.c, SGDividends say things as it is, factually. Unlike Analyst who have to be "uptight" and "cheem", we make it simplified and cheapskate. -The Vigilante Investor, SGDividends Team