Saturday, November 28, 2009

Boustead Holdings Berhad - Under Appreciated Conglomerate

Historically conglomerate generate poor returns due to lack of focus and also difficult to evaluate. One of the most popular valuation methods is Sum-Of-Parts: valuing a company by determining what its divisions would be worth if it was broken up and spun off or acquired by another company(Investopedia). However, I like simple PE approach because of its simplicity and something that man on the street will try to have a feel of how much a company worth and they are willing to pay for it. ROE of 10-20% for a conglomerate plus LTAT and other institutional funds as major shareholders attracted me to this company.

As you can see in the picture, Boustead engages in plantation, heavy industries(mostly ships building), property development and investment, finance, trading and manufacturing.

What is striking from that table is most(80%+) of the earning drivers are coming from plantation and heavy industries and property development segments.

Some of the important information regarding its subsidiaries and associates are as follow:
(i) Boustead Plantation 100%
(ii) Boustead Properties 100%
(iii) BHIC 65%
(iv) UAC 65%
(v) Affin Bank 20%

It has closed to about 75,000 hectares planted area and most of them are in the prime time. They can reap the benefits if the CPO is on the uptrend. I would expect the CPO to be around RM 2,200 - 2,400 throughout 2010. This should bump up the division profit to be around 200 mln.

After BHIC came out from its restructuring, this quiet division profit contribution has been significant for the last 3 years and not many pros discover this yet. Orders booking have been relatively resilient especially on Naval side. Commercial ship building especially on dry bulk related has been very ugly globally but BHIC is relatively resiliet because of its revenue stream is coming from off-shore oil and gas industry. RM 150 mln profit should be quite sustainable through 2010.

Property recovery is should delivery stable earnings. I normally don't quite like hotel segment because of its large investment and incurring a lot of debts. They seems to have high confident their 5-star Royale Chulan Hotel and Royale Bintang Seremban Hotel will enhance their earnings together with Mutiara Damansara and Mutiara Rini town together with its stable commercial and retail properties. Let's assign about 50 mln contribution from this division.

Affin Bank has been performing well by bringing down its bad debts and coming out with some innovative products. Boustead should have benefited from Bank of East Asia as one of the major shareholders and tap on its management experience. They can easily booked about 80 mln profit from its 20% stake but their other division of finance is bleeding which I hope their either fix it or close it. They should get the hell out of the insurance business in my opinion. My expectation is 50 mln earning contribution from this unit.

Trading revenue is huge but profit margin is very bad. Let's they are earning 1% on revenue, their earning could be around 30 mln.

On their manufacturing side, the major contribution is coming from UAC which involves in manufacturing of fibre cement. 20 mln should not be a problem.

Adding up all of them, I think Boustead should deliver a min of about 500 mln profit. They incurred close to about 140 mln interest due to its 2 billion plus debts. If they continue to dispose non-core business that they estimated to be around 600 million plus recent rights issues, this should pare down their debts to about 1.8 billion saving interest rate of 60-70 mln/year which I did not take into the account in my 500 mln estimate. Taking the dilution effects of the rights issues, I think they can easily deliver earning of 0.53 - 0.60/share. I would think at $ 3.43, selling for 5 - 6 times earning, investing community is not doing any justice to this company. A company has been paying dividend consistently around 35 sen during so so years and 60 sen during very good years translating to dividend yield of 10-17% gross dividend yield, I will take a bet like this at any given day.

Disclosure : the author has long position in Affin Bank and Boustead Holdings Berhad.

Friday, November 20, 2009

Thursday, November 19, 2009

Happy Thanksgiving

Trading volume will be light in the US markets -- things could be volatile in view of low trading volume. See you all over the weekend.

Wednesday, November 18, 2009

Paulson Bets Bank of America Will Almost Double by End of 2011

This is a quite a news to me as he is one of the top hedge fund managers that made US $ 17 billion out of subprime mortgages mess and financial stocks in 2007/2008. He was also buying some large position in gold mining stocks beting on inflations earlier.

Nov. 18 (Bloomberg) -- Paulson & Co., the hedge fund firm run by billionaire John Paulson, told investors Bank of America Corp.’s stock will almost double in the next two years as writedowns ease.

Bank of America, ranked first by assets and deposits in the U.S., may rise to $29.81 by December 2011, Paulson said in a quarterly letter to clients. A copy was obtained by Bloomberg News. Bank of America closed yesterday at $15.77 on the New York Stock Exchange.

“Banks will have passed the current writedown cycle and have visibility for growth in 2012,” the letter said. Bank of America dropped to $2.53 in February amid concern that the U.S. might seize banks that ran short on capital. While the bank “has risen from when we purchased the stock, we believe considerable upside remains,” the letter said.

Paulson reversed course this year by investing in Bank of America, ranked among the nation’s biggest home lenders. Last year, wagers by his New York-based firm against the U.S. housing market helped earn an estimated $2.5 billion. Charlotte, North Carolina-based Bank of America represents Paulson’s biggest holding among financial companies, the letter said. Earlier this month, he disclosed a stake in Citigroup Inc.

Paulson, who manages about $29 billion, started a hedge fund last year called Paulson Recovery to invest in financial companies hurt by mortgage writedowns. His firm held 160 million shares of Bank of America at the end of the third quarter valued at $2.7 billion, according to regulatory filings.

Tuesday, November 17, 2009

A weekend assignment -- take a look at plantation sector.

Most plantation companies earnings dropped by half because of crude palm oil price dropped by half on flat output. The market seems like not wanting to price in a scenario of 10-20% increase in 2010(RM 2,400 - RM 2,500). While most brokerage houses singing melancholic tunes, I will want to take a look at some of the counters like Boustead, Hap Seng Plantation, Sarawak Oil Palm, Tradewind Plantation and KLK.

Nov. 17 (Bloomberg) -- Palm oil traded near an 11-week high as JPMorgan Chase & Co. said dry weather in Southeast Asia may curb production in the first half and after soybean oil jumped in Chicago, increasing the appeal of the tropical commodity.

“There’s some value in the palm oil-bean oil spread,” Tobin Gorey, a commodity analyst at J.P. Morgan Securities Ltd. in London, said in a report. The “deep discount for palm” reflects tightening supplies of soybean oil and more palm oil, and “those drivers will shortly go into reverse,” he said.

Palm oil for February delivery climbed as much as 1.5 percent to 2,370 ringgit ($705) a metric ton, the highest level for the most active contract since Aug. 28. It traded 0.4 percent higher at 2,346 ringgit by the 12:30 p.m. break on the Malaysia Derivatives Exchange.

Soybean oil for January delivery surged 2.9 percent to 40.18 cents a pound yesterday in Chicago, posting the highest close since June 4. That left soybean oil $193.59 a ton more expensive compared with palm oil, the widest premium since Oct. 22, according to Bloomberg calculations.

Seasonally, palm oil production has peaked while soybean oil supplies are just coming onto the market, and these factors will reduce soybean oil’s premium, Gorey added.

Malaysia, the second largest producer of palm oil, reported record production of 1.99 million tons in October, lifting stockpiles to a 10-month high of 1.97 million tons, according to the Malaysian Palm Oil Board Nov. 10.

Narrower Spread

Drier weather in Southeast Asia because of El Nino may “crimp” production of palm oil in the first half and lower yields in the second, potentially narrowing the tropical oil’s discount to soybean oil, the JPMorgan report said.

Soybean oil dropped 0.6 percent to 39.94 cents a pound at 2:04 p.m. Singapore time, narrowing the premium to $184.40 a ton, according to Bloomberg data.

“Global vegetable oil inventory levels are, if not tight, then lean,” Gorey added, referring to stockpiles of palm, soybean, rapeseed and sunflower oils. “It would not take big problems with oilseed crops to see inventory levels drop to tight levels.”

In China, the largest consumer of edible oils, May-delivery palm oil on the Dalian Commodity Exchange rose as much as 1.5 percent to 6,452 yuan ($945) a ton, and last traded at 6,414 yuan by the 11:30 a.m. trading break.

Which trading day should I sell out my rights?

Which trading day should I sell out my rights if I have no intention to subsribe to a company rights issues? Based on a limited sample size, as a general rule, the first traded day fetched the highest price unless the "mother" share is emitting some bullish signs.

Monday, November 16, 2009

Turtle Portfolio Record Update

(Click on the image to see results)
Making a net profit of 1.7%(inclusive dividend) by selling out Shell Refining. If you look at the crude oil price chart, so far Q4 '09 price is still higher than Q3 '09. It's not that I don't have the patience to wait though there is a good possibility of better results coming out in February 2010. The main reason, however, I want to have some cash as KLCI is approaching 1,300. Whether there is a shallow or deep correction ( 5 - 15% ), Turtle does not want to get caught with no money when buying opportunities show up.

Saturday, November 14, 2009

Faber -- The Empire Strikes Back, Part II

Since the share price has appreciated by almost 30% within a short period of time, it will be appropriate for me to start off with some technical stuffs. Two key price points to watch, $ 1.58 and $ 1.86. Those want to trade on the short-term basis should know what are your odds, either waiting for confirmation whether there are genuine buyers after breaking out from $ 1.58 to cash in 15% short term gain.

Those belongs to investor category, this is what I think about the company. After diposing all the non-core assets, the company has done a good job by focusing in two core competencies:

(i) Integrated Facilities Management health care(IFM). Faber provides integrated services such as facility engineering maintenance, central management information, linen and laundry service, cleansing and janitorial services, clinical waste management services and bio-medical engineering maintenance. It's a stable and steady core division of 6-7%/year growth. Their concession renewal due in 2011 but chance of not getting renewal is very remote. Some worried earlier when the present government lost a big chunk of support in last year GE. This division generates about RM 500 mln revenue.

(ii) Property development. The revenue can swing wildly between 150 mln to 200 mln over the last three years.

This is how the revenue breakdown looks like graphically.

If you look at EPS and price chart, it is clearly that the price is catching up with the fundamentals. There was a huge divergence between price and fundamentals in 2008.How should we value the company given the slow growth of health care unit and cyclical property development. Let assume the IFM unit revenue to grow at 6% for the next three years, the revenue should come in around 600 mln. Property division to generate about 200 mln, in 3 years time Faber group should have revenue of 800 mln. Net margin of 9% will give us earning of roughly 72 mln or EPS 0.20. A simple 10 x PE worth RM 2, 12X, RM 2.4 or 15X, RM 3. The reason I am running through multiple PE scenarios is all depending on the "speculation" mood by expanding their value justifications. I can give you 10 reasons why you pay multiple of 6 and 50 reasons of why you should pay 20 times multiple.

It will be very difficult for the share price to come down below $ 1.41 but I certainly will not pay anything above $ 1.60 to generate at least 10-15% per annum over the next three years.

Friday, November 13, 2009

Understanding Rights Issues

With so many right issues these days, some of us lose money for nothing either
(i) Got the wrong procedure without knowing they have given up their exercise rights or
(ii)or simply lack of understanding

Here is a good article to share with all.

Cash-strapped companies can turn to rights issues to raise money when they really need it. In these rights offerings, companies grant shareholders a chance to buy new shares at a discount to the current trading price. Let's look at how rights issue work, and what they mean for all shareholders.

Defining a Rights Issue and Why It's Used
A rights issue is an invitation to existing shareholders to purchase additional new shares in the company. More specifically, this type of issue gives existing shareholders securities called "rights", which, well, give the shareholders the right to purchase new shares at a discount to the market price on a stated future date. The company is giving shareholders a chance to increase their exposure to the stock at a discount price.

But until the date at which the new shares can be purchased, shareholders may trade the rights on the market the same way they would trade ordinary shares. The rights issued to a shareholder have a value, thus compensating current shareholders for the future dilution of their existing shares' value.

Troubled companies typically use rights issues to pay down debt, especially when they are unable to borrow more money. But not all companies that pursue rights offerings are shaky. Some with clean balance sheets use them to fund acquisitions and growth strategies. For reassurance that it will raise the finances, a company will usually, but not always, have its rights issue underwritten by an investment bank.

How Rights Issues Work
So, how do rights issues work? The best way to explain is through an example.

Let's say you own 1,000 shares in Wobble Telecom, each of which is worth $5.50. The company is in a bit of financial trouble and sorely needs to raise cash to cover its debt obligations. Wobble therefore announces a rights offering, in which it plans to raise $30 million by issuing 10 million shares to existing investors at a price of $3 each. But this issue is a three-for-10 rights issue. In other words, for every 10 shares you hold, Wobble is offering you another three at a deeply discounted price of $3. This price is 45% less than the $5.50 price at which Wobble stock trades. (For further reading, see Understanding Stock Splits.)

As a shareholder, you essentially have three options when considering what to do in response to the rights issue. You can (1) subscribe to the rights issue in full, (2) ignore your rights or (3) sell the rights to someone else. Here we look how to pursue each option, and the possible outcomes.

1. Take up the rights to purchase in full
To take advantage of the rights issue in full, you would need to spend $3 for every Wobble share that you are entitled to under the issue. As you hold 1,000 shares, you can buy up to 300 new shares (three shares for every 10 you already own) at this discounted price of $3, giving a total price of $900.

However, while the discount on the newly issued shares is 45%, it will not stay there. The market price of Wobble shares will not be able to stay at $5.50 after the rights issue is complete. The value of each share will be diluted as a result of the increased number of shares issued. To see if the rights issue does in fact give a material discount, you need to estimate how much Wobble's share price will be diluted.

In estimating this dilution, remember that you can never know for certain the future value of your expanded holding of the shares, since it can be affected by any number of business and market factors. But the theoretical share price that will result after the rights issue is complete - which is the ex-rights share price - is possible to calculate. This price is found by dividing the total price you will have paid for all your Wobble shares by the total number of shares you will own. This is calculated as follows:

1,000 existing shares at $5.50 $5,500
300 news shares for cash at $3 $900
Value of 1,300 shares $6,400
Ex-rights value per share $4.92 ($6,400.00/1,300 shares)

So, in theory, as a result of the introduction of new shares at the deeply discounted price, the value of each of your existing shares will decline from $5.50 to $4.92. But remember, the loss on your existing shareholding is offset exactly by the gain in share value on the new rights: the new shares cost you $3, but they have a market value of $4.92. These new shares are taxed in the same year as you purchased the original shares, and carried forward to count as investment income, but there is no interest or other tax penalties charged on this carried-forward, taxable investment income.

2. Ignore the rights issue
You may not have the $900 to purchase the additional 300 shares at $3 each, so you can always let your rights expire. But this is not normally recommended. If you choose to do nothing, your shareholding will be diluted thanks to the extra shares issued.

3 Sell your rights to other investors
In some cases, rights are not transferable. These are known as "non-renounceable rights". But in most cases, your rights allow you to decide whether you want to take up the option to buy the shares or sell your rights to other investors or to the underwriter. Rights that can be traded are called "renounceable rights", and after they have been traded, the rights are known as "nil-paid rights".

To determine how much you may gain by selling the rights, you need to estimate a value on the nil-paid rights ahead of time. Again, a precise number is difficult, but you can get a rough value by taking the value of ex-rights price and subtracting the rights issue price. So, at the adjusted ex-rights price of $4.92 less $3, your nil-paid rights are worth $1.92 per share. Selling these rights will create a capital gain for you.

Be Warned
It is awfully easy for investors to get tempted by the prospect of buying discounted shares with a rights issue. But it is not always a certainty that you are getting a bargain. But besides knowing the ex-rights share price, you need to know the purpose of the additional funding before accepting or rejecting a rights issue. Be sure to look for a compelling explanation of why the rights issue and share dilution are needed as part of the recovery plan. Sure, a rights issue can offer a quick fix for a troubled balance sheet, but that doesn't necessarily mean management will address the underlying problems that weakened the balance sheet in the first place. Shareholders should be cautious.

Turtle sold 200 shares of Shell Refinery

Turtle sold 200 shares of Shell Refinery @ 10.70. More update later.

Thursday, November 12, 2009

Shell Refinery Third Quarter 2009 Results -- dissapointing

Top line: flat QoQ, YoY 27% drop.

Gross margin deteriorated significantly. 10% swing is very serious and volatile compared to last two quarters. The silver lining is, they did much better compard to the same quarter last year.

The main reasons, the company said it was due to poor demand and more competition(more refinery capacity is coming on stream). You can see that they are producing less and selling less, 10% lower.

PBT - breakeven.

Inventory increased by almost $ 399 million, comparing Dec 31, 08to Sept 30 '09. Pray hard it will worth a lot more if the crude oil price goes up further, on the flip side turning south could be bloody(click on the chart below).

Right environment to unleash animal spirit

Got to keep things brief this morning after looking at the headlines. China economic data that released yesterday was very pleasant, very sharp rebound in IPI shows that the world economy recovery is on track. Bank lending slowed down which is a good thing so that the rate of speculation is in check. Chinese consumer confidence is rising that translates into fast recovering retail sales is also comforting.

Things got even juicier when the Fed said they will maintain the low rate for an extended time. This has reversed the fear of rising rates and creating the right environment to unleash the animal spirit, well shall I say casino business is back? The low rates also spurring mega deals ........... buckle your seat belt and enjoy the ride.

Tuesday, November 10, 2009

Turtle Portfolio Record housekeeping

Not much to publish today. Thought of just doing some light posting -- record housekeeping. Be patient on Faber Part II as I need to find time over the weekend to pour out what is inside my head.

Also need to digest on CIMB results, first impression is all coming from Indon units while domestic front is still hanging there nicely. ROE is around 14-15%, nicely done there, on the way to 18% as promised?

Monday, November 9, 2009

Why the switch?

Why the switch? First CIMB is getting expensive. It can run up to $ 14 if someone believe it should worth $15. Tanjong has been having trouble of breaking $ 16 resistance for a while because there has been no major institutional funds buying -- thin volume. That was the reason why I took profit on Tanjong earlier to put money to work in CIMB which turned out to be a good decision.

When I saw huge volume breakout from $ 16 two days ago, only guys with deep pocket can do it. So bye-bye $ 16 for a while, now it should aim $ 18- $19 or breaking a new high $ 20?. Given a choice of choosing 10% more upside on CIMB vs. 18-20% on Tanjong, I like Tanjong odds better.

Turtle took profit on CIMB, Switched to Tanjong

Sold CIMB 300 shares @ 12.64, bought Tanjong 300 shares @ 16.10.

Faber Group -- Past Sin Redeemed? -- Part 1

This is the second time(the first time was MUI) I write about a company restructuring itself after fallen very badly. You can almost make a TVB soap opera out of this company. The original root of the company was Merlin Hotels Malaysia Berhad, listed in KLSE under Hotel category in 1964, so it's a 45 year old company we're talking about today. The company merged with Faber Union Sdn Bhd in 1972, a property development company changed their name to Faber Merlin Malaysia Berhad. Subsequently they changed their name to Faber Group.

The company tied up with Starwood International to rebrand its hotel to the Sheraton in 1993. In 1996, they were awarded a 15-year concession Health care Support Services to 72 government hospitals. While flying high, they incurred large debt and humbled by 1997/98 crisis. They were crippled and classified as PN4 in 2003 as theirs debts were worsening, incurred almost $ 2.2 to generate every $ 1.0 revenue. PN4 is much more worse than PN17, so why I want to talk about a company like that, esspecially with this kind of track record?


YTD Q3 2009/11.1

Holy sh** you must scream, I suppose, when you look at their huge losses from 1997 - 2004, and must be skeptical when they make 5 year profit continuously in the recent years. Not convinced? Your friendly neighbourhood Public Mutual took almost 4% or 16 million shares position.

Public Small Cap Fund 6.3 million shares
Public Far-East Property & Resorts Fund 5.2 million shares
Public Balanced Fund 2.3 million shares
Public Islamic Sector Fund 2.1 million shares

How now ? RHB rated the stock as outperformed with a price target of $ 2.49. OSK has a target of 1.54(revised up from 1.24).

Every sinner has a future, they truly repented I think. Should be forgiven. Check this out:

Year/ current ratio x:

2004 / 1.9
2005 / 2.0
2006 / 2.0
2007 / 2.5
2008 / 3.1

They are a bit overdrive and so Kia-Si, current ratio 2.0 is quite strong already but going up to 3.1x? Gearing from all times high that was unheard of 32 times in 2002 down to 0.60 times in 2008. They are in net cash position actually recently.

Market capitalization : 363 mln shares x 1.29 = 468 mln. Can market cap grow to about 550-850 mln? What are the drivers?

Disclosure: Long position.

Saturday, November 7, 2009

TSM Global -- A Big Cash Generator Machine

TSM Global is a very low profile company but they have very respectable clients.

What a pity that Proton is not buying from them? A-hem! If the Japanese can buy and recognized their outstanding quality, delivery and service, why Proton is not buying from them, again may I ask?

Don't get cynical too fast, they invested RM 30 mln last year to expand their Tapah operations, which is very close to Proton City Tanjong Malim -- breaking into Proton finally??

TSM Global basically invested in several companies that are in wiring harness business for automotive industry. Their subsidiaries are J.K Wire Harness(60%) and J.K Sumi Wire Harness(60%) and a rather odd fit wholly owned TSM Wellness, basically a fitness company operating in Klang area. They invested about 15% interest in a company in China way back in 1993 -- Fujian J.K. Wiring Systems. They have got a very credible partner, Sumitomo, of which is a big Japanese multinational. This joint venture relationship has been forged since 1983.

It has a market capitalization of about RM 105 mln (54 mln shares @ $ 1.95 quoted price).

Their margins have been very stable despite of crazy Japanese Yen in the last year. Gross margin has been hanging around 23%, is okay for a manufacturing company. Though serving their customers in heavy industry, the company is not really in a capital intensive business, depreciation/revenue around 4% only. The issue with this company is they already own a substantial market share. I was not sure whether they are doing any business with Proton which has about 26% market share, top line growth is a concern here. It will be a stretch for revenue to go up to about 370 mln(from present 230-250 mln). Beyond that they must go for regional expansion.

Assuming they did grow to about 370 mln revenue, EPS is roughly about $ 0.53 (370 * 13% Net income * 60% goes to equity holders of parent)/54 mln shares. Typical PE multiple for manufacturing is about 6 - 7 times, so I will value the company between $ 3.18 to $ 3.71 / share.

From discounted cash flow perspective, if we discount the cash flow of RM 250 mln at 10% discount based on 5% growth model for the next 10 years and 3% terminal growth, the company worth $ 4.81/share.

Assuming the company takes about 4 - 5 years to achieve our target, the company has a potential market capitalization growth from $ 100 mln to $ 170 mln - 260 mln. So it has a potential appreciation of 15-20% p.a. over the next few years.

Credit Suisse has a 5% stake in this company. They increased their stake from 2.6 mln shares in 2008 to 2.8 mln shares 2009 is a vote of confidence that they really like the company when most foreign investors winding down their stake during the period of deleveraging. Other notable shareholders.

One of the things that they should do better is to have better capital management. They declare 5 sen dividend which translate to dividend yield of 2.5% only. Not sure why they want to keep almost 110 mln cash, returning half of it to shareholders in the form of special dividend will translate to $ 1/share. 60-70% annual payout as dividend, they definitely can afford $ 0.27/share or dividend yield of 13%. What is troubling me, like most Asian SMEs, they might piss away shareholders money by going into unrelated business like fitness center(WTH is that??!!**). They deploy 24 mln into short term investment, I hope they invest conservatively. Their investment in Fujian is quite good, putting 12 mln to work but booking almost 2 mln/year profit.

To sum up thing, this business has tremendous power to generate cash. I will swallow the whole company if I'm Warren Buffett. I hope their major shareholders will force them to return cash to them if they can't find good idea to invest. On balance, I quite like the company.

Financial results highlight

Disclosure : no position yet.

US unemployment rises to 10.2% -- silver lining ??

First reaction of the US unemployment crosses 10.2% was horrible but equities bounced off after the first negative reaction.


(1) (MarketWatch) The Labor Department revised its payroll tallies, adding 91,000 to the figures reported for August and September, meaning that the job losses for those months were less than previously estimated.

The report pointed to health care, education and professional and business services as the sectors that added jobs in October, while also illustrating a rise in the hiring of temporary workers -- seen as a precursor to a rise in permanent positions.

(2) Oppenheimer and Bernstein upgrades on GE was very powerful. The stock surged almost 7% limiting market losses on Friday.

Looks like the worst is behind us, not strong enough to crash the market.

Friday, November 6, 2009

Fed to markets: Let the bubble blow

(Market Watch)That's the signal the Federal Reserve gave to commodities markets and the stock market Wednesday after keeping interest rates unchanged at historic lows and making no noise about when its policy of easy money will end.

That markets fell in the last hour of trading after the Fed decision inspired a brief rally had more to do with concern about Friday's jobless numbers and Washington meddling in the financial industry than the rate scenario. Who wants to be long when unemployment ticks past 10%, which is possible Friday?

Read more :

With the Dow reclaimed 10,000 as initial unemployment data dipped again which gave some hopeful signs that unemployment is peaking. Unemployment data is something Pros watch carefully. Tonight is a big night, release of employment situation in the US. The Pros may have follow through buy if the number beats expectation. A dissapointment may turn the tide around. For short term trader, managing volatility with position sizing is important.

Thursday, November 5, 2009

Rogers Says Roubini Is Wrong on Bubbles as Gold, Stocks Rally

I've not been featuring Jim Rogers for a while. No quarrel with him that commodities are performing below expectation, the CRB index only gone up by 37% from the low, has not been catching up with most of the stock indices(at least 50% or more). His changing tone on emerging stock markets is something a surprise to me. I suspect he is looking for a correction to buy before the last train leaves the station.

(Bloomberg)Nov. 4 (Bloomberg) -- Jim Rogers, the investor who predicted the start of the commodities rally in 1999, said that Nouriel Roubini is wrong about the threat of bubbles in gold and emerging-market stocks.

Many commodities are still down from record highs and equity markets aren’t on the brink of collapse, Rogers, chairman of Singapore-based Rogers Holdings, said in an interview on Bloomberg Television today. The price of gold will double to at least $2,000 an ounce in the next decade, he said.

Roubini, the New York University professor who warned in 2006 about the coming financial crisis, said on Oct. 27 that investors are borrowing dollars to buy assets and creating “huge” asset bubbles. Rogers said that he’s not buying stocks now, though he may buy more gold.

“What bubble?” Rogers said, when asked if he agreed with Roubini’s view. “It’s clear Mr. Roubini hasn’t done his homework, yet again.”

Roubini told a conference in South Africa last month that investors were doing “the mother of all carry trades” by buying assets with borrowed dollars. He said emerging-market equities are showing a bubble, that gains in some developing- nation currencies are becoming “excessive” and that the rally in oil is “not justified by the fundamentals.”

Read more

Wednesday, November 4, 2009

TSM Global

A reader left me a very good suggestion. TSM Global is in automotive industry which has been bashed down very badly. Another company with ROE of around 18-20% but selling at distressed level PE multiple of 3 - 4 times. Another good weekend assignment suggestion.

Shien Yang said...
why dont you check out TSM Global.The stock is only selling at cash level.The business is profitable and it is growing.

Tuesday, November 3, 2009

Something caught my eyes today

(1) Australian central banker sent a strong message by raising interest for the the second time within short period of one month. This strong message frightened people to unwind risky asset. For example, Vietnam stock market dived 3.9% today.

(2) IMF expressed concerns of Hong Kong property price soared not within reason sowing a small seed of speculation fever curb is underway. The pressure built up will force Hong Kong stock market to correct.

(3) Our stock market performed quite nicely today despite of the negative regional markets weakness. We have 261 stocks advanced and 389 stocks declined. It's not the internal winner to loser ratio that I want to highlight(it's too basic). It's within 261 winners, 156 of them were penny stocks, wow 60% of winners contributed by penny stocks. What amazed me was 33 stocks gained more than 10% in a day. A little bit hot I think.

(4) The first three points have no significant impact on me but this one that I saw will excite me.

Faber Group reported their Q3 '09 results today. This company involves in Healthcare Facilities Management and property development. The revenue has been recovering steadily over the last three quarters.

Revenue(Q1/Q2/Q3) $ million : 140 / 170 / 197
Profit after tax (Q1/Q2/Q3) $ million : 7.2 / 13.8 / 19.0
EPS (Q1/Q2/Q3) sen : 2.0 / 3.81 / 5.23

Q1 '09 has been exceptionally weak due to lower contribution from the property division. With the recovery, I believe Q4 EPS should come in around 4 sen, normalized EPS in region of 18 sen is a piece of cake. At the closing price of $1.06, a company with ROE of 12% selling at low PE multiple 5-6 times only, will certainly worth investigating further. It's my coming weekend assignment I guess.

Monday, November 2, 2009

Keeping bank failures statistics in perspective

How many banks failed during the Great Depression ?

Approximately 12,000.

Source :

How many bank failed during Saving and Loan Crisis?

U.S. bank failures have not reached the 100 mark since 1992 during the savings and loan crisis when 181 institutions were closed. In 1989, during the height of the savings and loan crisis, 534 banks failed.

Approximately 534

Source :

How many bank failed in 2008 Financial Crisis ?

Through Oct 2009 : Approximately 99

Do you believe the number of banks closure will hit

A. 100 - 150

B. 151 - 200

C. 201 - 300

D. 301 - 500

E. 501 - 1,000

Leave your answer in the comment area. Thank you.

P.S. Do you know why not many banks failed in 1938 when it was a double-dipped recession?