Reconciling between achieving Partial vs Complete Financial Freedom‏

1,2,3…Set….Go.

I’m sure all of us remember the day we started off our financial journey. We knew the road to financial success will be a long and daunting process yet at the same time we feel excited to finally get off the mark on a new adventurous journey. Those were the days.

Roll forward to the present days, are your motivation still around? If the answer is yes and you are still hanging on just like me, then give yourself a pat on the back. No matter where you are and how much you’ve accomplished, you’ve done a great job which not too many people in this world are able to do it.

For me, I’ve worked hard over the past couple of years and amassed experiences in my workline that can substantiate the knowledge for fundamental investing. Yet, it seems that there is still a long and arduous journey, probably another 7 years of working 9-6 office job. So how do I reconcile the celebration of having achieved something the past couple of years versus the fact that there is still so much to do for the next couple of years?

For many, the answer lies in living at the present.

While it is tough to handle the daily grind of working 9 to 6 everyday, we should consider ourselves lucky to have a job that can provide us with basic everyday needs. Of course, somewhere in the world we always have people who are extremely better or worse than us, so we seemingly always ended up in the middle.

If you consider your financial independence journey boring or stagnant, you may consider taking a break from it to give yourself a breather. Take and use the money to spend on things you’ve always wanted to but never had a chance to do it. In this instance, you’ve felt the real purpose of money.

Last but not least, do not go extreme over your goals and chill about it. Wearing a big hat while your head is small is as bad as wearing a small hat while your head is big. One results in underutilization while another results in overutilization.

It’s always easier said than done but until you do it, perhaps you have not given yourself enough justice.

ValueMax IPO - Is it worth getting it?

For some reason, I don’t usually get lucky in IPO balloting process, especially if they are those which are oversubscribed by many fellow retail investors. The latest incident was the SPH Reit. Balloted and failed. Another $2 wasted.

This week, we have the “ValueMax Group”, one of the oldest pawnbroking chains in Singapore, launching a $70 Million IPO seeking to be the first in its industry to list on the mainboard of the Singapore Exchange. Previously, MoneyMax and MaxiCash have been listed on the catalyst.

Based on the way the company is offering the shares to the public, it looks like another $2 going right to the bin. The company is issuing 138 Million shares at $0.51 each –> 133 Million under the placement tranche and only 5 Million under the ATM tikam scheme.

The last ballot for the public will be on the 28th October 12pm.

Performance against Peers

So how do ValueMax fares against its peers, MoneyMax and Maxicash?

Let’s break it down more in details.

For the purpose of the analysis, I will be using the Dupont ROE as a method of analyzing their respective income and balance sheet statement, touching on both their operational and financial efficiency for FY2012.

Return on Equity (ROE) = Profitability (Net Income/Sales) x Operating Efficiency (Sales/Assets) x Financial Leverage (Assets/Equity)

1.) Profitability – MoneyMax > MaxiCash > ValueMax

ValueMax ranks bottom at 2.9% compared to the other two – MoneyMax at 7.7% and MaxiCash at 4.1%. This is largely due to the small margin of their retail gold business as compared to their pawnbroking business which yields a healthy margin of over 90%.

2.) Operating Efficiency – ValueMax > MoneyMax > MaxiCash

ValueMax ranks top at 2.7x and way ahead of the other two by a large mile. MoneyMax’s operating efficiency of utilizing its assets in terms of sales only stood at 0.52x while Maxicash at 0.51x.

3.) Financial Leverage – MaxiCash > MoneyMax > ValueMax

ValueMax ranks the best here by using the least financial leverage at 2.54x. MoneyMax used the most leverage at 3.67x while Maxicash’s financial leverage stood at 3.07x.

With this 3 factors in consideration, ValueMax’s ROE ranks top at 18,22% while MoneyMax is a little behind at 14.72%. At the bottom of the three, MaxiCash ROE was lowest at 6.54%.

Translating this into PE valuation, ValueMax FY 2012 PE is trading at 12x while MoneyMax at 25x and Maxicash at 48x.

In terms of dividend yield, ValueMax will be paying out 50% payout ratio which translates to about 1.5% yield on Offer Price. MaxiCash is yielding 2.5% while MoneyMax doesn't pay any dividends. 

Is it worth to ballot and flip?

Let’s be honest. The public ATM tikam tranche was only offered 5 Million. So chances are you are not going to get much from the ballot, even if you bid in excess of 100 lots. If you look at previous MaxiCash IPO results, you would notice that even the top bidders only gets about 7 lots and that comes with a very small probability of getting it.

So how will this fare on their first day of trading? The FA are all pointing in favor of ValueMax ahead of the other two peers and I would actually be very surprised to see them trading underwater on their day of trading. But stock market is stock market and it can be crazy at times. So no one can guarantee anything.

Am I going for this?

Compared to its peers, I’m actually quite impressed by the figures for ValueMax based on its prospectus.

Anyway, I have went for the bid. To increase my chances of getting them, I have submitted the bid at the middle to high range where I think the probability is going to be the highest. Let’s see if I get luckier this time round.

FCT - Q4 FY13 Results

In case anyone is wondering why FCT share price did not gap up after it announces its results despite the record high 2.98 cents/share, it is because of the relatively poor operational performance in the 4th Quarter. 

In fact, Net Property Income fell 5% for the quarter. 

The main reason why the distributable income was up was due to 2 factors. First, there was seemingly higher distribution from its overseas joint associates Hektar Reits. Second, the company dishes out the cash they had retained in the earlier half of the year. In other words, the payout ratio is more in the 4th Quarter.

Management for FCT has a record of increasing its DPU year after year and rewarding shareholders well. From the operational point of view, the renewal lease for 34% of CausewayPoint portfolio occupany next year would boost a positive rental revision for the NPI and offset any weaknesses in their other malls.

I mentioned last year that there was a high chance FCT would not be injecting Changi City Point this financial year and I was proven right despite the hypes by the analyst since a year ago. Going back to this, I think the time is ripe now for an injection into FCT portfolio. There was pressure to keep the operational performance going with an increasing DPU to reward shareholders. And the pressure to increase DPU next year without the injection of Changi City Point seems improbable. Given the low gearing it has right now, I think the management would see this as a good timing and opportunity for all parties.

Living a Rich Tai-Tai Life -- Just once...

We decided to splurge on a Sunday afternoon.

And so we went to the Ritz Carlton famous high tea buffet in Singapore -- Chihuly lounge. I really like the place and ambience of the lounge. It is spacious with a live classical music played to your ear. The staff is also attentive and friendly, which is expected of the service of a 5-star hotel. However, everything comes at a cost. We ended up paying $131 for 2 packs, which translates to about $58++ per person.

I am not entirely a desserts type of person because they are simply too sweet for me so I probably have known that I would be literally paying more to go there. But anyway, my wife wanted to try the high tea at Ritz Carlton and live a rich tai-tai life for once, so I complied.

Below are some of the food we have eaten. They are generally tasty but not a lot of variety. I guess it's high tea and tai-tai don't eat much so I have to lower my expectations of not expecting a lunch buffet with huge Alaska crab or something.

The 3 keytakeaways from today's big splurge are:

1.) High teas are designed specifically for Tai-Tai. 70% of them are Japanese while another 20% are Chinese. Only 10% are probably local.

2.) No matter how much you can eat, you will still ended up losing on the extravagant price you pay to them. Again you pay for the quality, service and ambience -- all of which made up the difference between what you consumed and what you paid. I guess this is what they called intangible cost in accounting terms.

3.) As a normal human being, we only live once, But that also means that we probably only try once to live a tai-tai life. It's time to go back to reality.

Chihuly Lounge
7 Raffles Avenue
Lobby Ritz-Carlton Millenia
Tel: +65 6434 5283
Timing for afternoon tea: 2.30pm – 5pm

Why is Money never enough?

The known truth of the unknown is out - Money can never be enough.

I am not talking about the Needs versus the Wants in this posting but rather the way of how we as humans perceive "Money". He who loves money can never be satisfied about money. It is akin to looking at a half filled glass of water as half-empty or half-full. Understanding the reasons why money can never be enough is not a step one two three which even a primary kid student can comprehend. It takes a lot of patience, ground understanding and experience to complete that magical jigsaw puzzle in your life.

As you climb through the corporate ladder in your career or as a financial freedom chaser who can see quite the tips of the mountain, you are able to see further than the rest of most people. But as you climb further, you will see many taller mountains, extended for the purpose of people who can never feel enough. As you began to age, you will see many more extension that will drive you crazy as you start to regret on your life journey. $1 Million used to be the ground rule for most people, until someone set it as $10 Million, only for another to break it at $100 Million.

I never can quite understand how these people think nor can I get sufficient explanation to make them understand. The answer is right under the eyes but if it is unfortunate that most people don't open them and because of that, there's no way how they can understand the solution to a simple question.

“Happiness is the meaning and the purpose of life, the whole aim and end of human existence.”

"Oct 13" - SG Transactions & Portfolio Update"

No.	Counters	No. of Lots	Market Price (SGD)	Total Value (SGD) based on market price	Allocation %
1.	FraserCenter Point Trust	30	1.845	55,350.00	25.0%
2.	SPH	7	4.18	29,260.00	13.0%
2.	Vicom	6	4.86	29,160.00	13.0%
4.	FraserCommercial Trust	14	1.24	17,360.00	8.0%
5.	Neratel	20	0.725	14,500.00	7.0%
6.	First Reit	13	1.12	14,560.00	7.0%
7.	Ascott Reit	9	1.245	11,205.00	5.0%
8.	SembCorp Ind	2	5.31	10,620.00	5.0%
10.	Boustead	7	1.38	9,660.00	4.0%
11.	Plife Reit	3	2.47	7,410.00	3.0%
12.	China Merchant Pacific	8	0.885	7,080.00	3.0%
13.	Second Chance	13	0.45	5,850.00	3.0%
14.	Ascendas Hosp. Trust	7	0.76	5,320.00	2.0%
	Total SGD			217,335.00	100.00%

It's yet another month gone and we are entering towards the last 2 months into the new year shortly. My Portfolio for the month of Oct has a 2.74% increase from the previous month of $211,535. The STI market continues to consolidate at the 3200 point mark.

October has been a period of much inactivity for me as we await the outcome for the US debt ceiling (finally just settled yesterday!!!). The attention has now shifted to the next FOMC meeting at the end of October. The only activity I had for October was the accumulation of 1 lot of SPH. I have previously blogged about how SPH is going to go from here and I will use the chance to monitor their progress every quarter closely from now.

There are going to be a whole train of earnings report coming out next week. I'll be excited to see how some of them will perform. In the meantime, I guess just sit tight as usual, enjoy the time and enjoy the month ;)

Is it just me or the month has been going past faster and faster each day?? Hmmm, scratch head.

When do you reject a higher paying job?

I was recently offered a position in the finance department of a construction industry that pays in excess of 20% on top of my current salary. It tempted me without saying. I imagine having to earn an extra 20% a year and even through stocks or property that wouldn't be easy. So having done the cost vs benefit analysis, I am still unsure. When do people reject a higher paying job? Unless you are of course leaving a current job that you love dearly.

The answer to this can never be sure and is probably a 50-50 chance. On one hand, my current role gives me time to pursue on other things like studying and bonding with family but on the other hand, the other role gives me a better opportunity for career advancement. Needless to say, the other role wouldn't allow me time to bond with my family and study, at least for the first year or so.

There are many discussions over a dream job vs lucrative paying job out there and it is more obvious to state the least. But when you are faced with a "nah paying job vs a nah nah higher paying job", the decision is not so easy. Interested to see how folks who are more experienced would take this into consideration.

SPH FY2013 - Hold on or Let go

When SPH announces its FY13 results on Friday after market close, investors would be most pleased to hear that they will pay a final and special dividend of 15 cents/share, which is down 2 cents from the previous year of 17 cents/share. Combined with the 18 cents special dividends given earlier, it brings the total dividends to 40 cents/share, which is a record high for SPH. So should investors hold on to this stock or should they let go and move on to other stocks with clearer earnings direction?

Overhead Costs

Investors need to take note that the lower YoY% drop in profits for FY13 were mitigated by the special provision of their variable bonus, which otherwise will look much worse than what is in their books. There were also a couple of impairment losses recorded on their books under the operating expenses which has increased quite a bit this year.

Core Business

The management seems to be satisfied with the performance of their newspaper ad revenue, which has declined lower than the previous couple of quarters and that the figures might stabilized in the near future. Having said that, newspaper print prices are expected to remain flat in the near term, hence a lower volume drop in the next quarter would give them a direct impact on their PnL.

Future Direction

The management seems to finally be able to account to the shareholders in terms of its strategy moving forward. 

First, the $19 Million savings initiative that they had planned is a great start, but it would probably not be material as it accounts for less than 0.5% of the full year profits.

Second, they had a project team working on initiatives to improve their gross profit margins. Based on the direction they are going, it seems like they are trying to lower the material costs by saving on some unnecessary workflow steps. Again, this is a short-term measure which is unlikely to bring the company to the next heights.

Third, the company had engaged an external consultant to review new growth opportunities in their core media business. From my experience, when a company engages a consultant like Mckinsey, it is going to always be a long drawn process. It means that we are unlikely to see any growth and expansion from SPH anytime soon.

For now, SPH looks to be able to maintain their future dividends payout of 22 cents to shareholders, which translates to about 80% payout on earnings. Seletar mall - which will open by the end of 2014 will bring temporary boost to its earnings while the management think of how they are going to shape the future of the company. My take is they will only package Seletar Mall into their Reits only when they had a clearer direction of their core business. Until then, it is hard to imagine anything more than the 22 cents/share dividends next year with a limited capital appreciation to its price. Long term shareholders might just hold this darling grandfather stock, but I'm not so sure about whether the new kid on the block who has just invested in SPH will hold on to this or not.

Life is all "About Time"

About a year ago, I've written an article about a movie called "click" (link here) which allows the user to travel forward in time in order to bypass the period in life which may seem monotonous, difficult and unpleasant. Yesterday, I've watched a movie with my wife (celebrating the end of my exam) called "About Time" which has quite similar plot meaning to it except that it allows you to travel back past time to allow you to make amends for a better future.

In life, there are always things which we wish we could have gone back and done something better to it, regardless of whether its a relationship, exam, parenthood or others. The great thing about this movie is it touches not only on relationship but also love, hatred, struggle, family, career, sibling, parenthood and all side factors. The movie also teaches us two things in life.

First, even with the ability to travel back through time, it is better to bypass the moment with that little piece of unpleasantness, re-live each day with all the stresses a normal person would face. If everything that you do has to be a masterpiece of perfection, then you will never truly learnt the art of struggling and picking up from where you left off. It is like a linear equation in life which has a straight line drawn to it, no ups and no downs over time.

The second thing which the movie emphasized is how different your life would turn out to be if you perceive it differently. For instance, you can have a bad day in the office and have someone in MRT steals your seat and suddenly you find yourself the worse moment you can be in. But if you perceive it with a sense of purpose with learning and happiness attached to it, then even faced with a similar situation, you find that it's been a good day after all. For example, when someone steals your seat on the train, you can either be angry about it or you can look it another way by thinking that perhaps this person may need it much more than you.

Overall, this movie is a good perceive of laughter, fulfillment, happiness and many more that touches on our daily life. It is a very good movie to watch with your other half, family and even friends on a weekend. After all, life is about doing monotonous things over and over again, the same time we wake up, go to work, kiss goodbye to our kids and then "rewind" the same video again and again. Life is all about time and nothing more special than to relish that "moment" when it comes to you.

Time to rejoice over Earnings Season

First, I would like to apologize for my inactive posting over the past week due to having to rush out reports for my group projects as well as preparing for the upcoming exams this Saturday (ohh noo… I am mentally unprepared).

Anyway, the big news over the past week has been the US shutdown and the government debt ceiling meeting on the 17th October which are about to take place. Closer to home, the trio stories of Blumont, Liongold and Asiaone have been largely dominating the stock market, after plunging more than 90% of their stock price in a few days (God bless those who owns them at $2).

After all the noises we had globally and at home, we finally turn our attention back to the earnings season – a factor which I think is undoubtly the ultimate importance to all companies and investors. Earnings season is usually 4 times a year and it reflects the quarterly performance of the companies. It works almost like a clockwork giving investors like us timely reminder to shift our focus once again to the most important factors of all – EARNINGS. 

For me, I am excited for the upcoming earnings season because it typically means that I get to review the performance of the companies I am invested in. If they are performing well, then thumbs up but if not, then I will be doing further review to decide whether it’s worthwhile to keep the shares. Earnings season also usually coincides with the announcement for dividends payout, not all but at least it is the case for my Reits. This means that another bountiful month with dividends income is going to come by and I am extremely excited to receive them. It feels like extra income just passing by waiting for someone to pick them, with little or no effort in doing so.

With that, I will await for the upcoming full year results for one of the companies in my portfolio, SPH. They will be releasing their full year results after market close on the 11th October 2013. I will be analyzing their results once it is released.