Turtle Portfolio Update - November 2009

Added $ 888 saving for November 2009.


Time flies, bit by bit $888/month, Turtle accumulated RM $ 20,844 saving. The portfolio gained 10% after navigating through scary October month which is famous for stock market crash. This is particularly gratifying as almost 98.8% US domestic mutual funds are losing money, only 1.2% making money in the last two years! (http://www.marketwatch.com/story/a-few-letters-now-beat-oct-2007-levels-2009-10-21).


My short term outlook. Correction in Bursa Malaysia should continue, as at 30 Oct, 60% of FBM30-KLCI components are still above 50-day moving average.

FBMSCAP, an indicator of speculators risk appettie, appears to be cautios for the last few months and resting on a critical support. Clearing above 10,424 of Aug 09 will invite more retail investors and speculators to play.


The downside, failing holding at current will have a possibility of 4 - 13% correction - something that most of us should be able to stomach. A word of cautious though, some stocks will suffer much more than FBMSCAP index. Dip buyer beware!

Mark Hulbert: A Stealth Bull ?

Mark Hulbert who tracks stock market newsletters highlighted some interesting points:

Dow at 9962 points, stock market timers advised their clients to allocate only 19.4% to equity, almost 80% out of market.

Many were very quick to take profit, when the market dropped by 3.3% maximum started a few weeks ago, they cut equity exposure from 42% to 19%. Interesting.

Such eagerness to get out of stocks in the face of only a modest pullback is an indication of just how strong the wall of worry is right now.

(click on this link if you want to read the whole article)http://www.marketwatch.com/story/no-more-bullish-now-than-2000-points-ago-2009-10-30

The US Economic is Back!

The US economy is back on growth path again. The bearish camp will continue to argue weak employment lead to weak spending, economy on stimulus steroid, unrecognized write down will bring down the stock markets. I would at this point searching for hints of governments plan to remove excess liquidity rather than making good bearish arguments.

S&P closed at 1066, up by 60% from mid March '09(666). This entry is for future record demonstrating how market is pricing ahead of actual recovery(3-6 months ahead).

It's a correction --- not a path to Great Depression II

When US $ index began travelling downtrend to a point of maximum of pessimism on Oct 22, stock markets around the world rally went into correction. It's not a surprise to me. The US $ index hit the bottom on Oct 22 and begin to strengthen, in my opinion some kind of short covering is going on. So, I would expect many asset classes to correct.

Right at our home, when I posted banking stocks hit new highs, I have a feeling it was about the time to correct because we almost running out of oxygen. I would think the correction is going to be short and shallow -- max 3 - 5 days more to go. Would expect people to step in to buy when S & P is hitting slightly below 1,050. Sorry, I got to keep things short because I am on the road for a few days.

First China A-shares ETF on SGX

Very light posting today. Saw this a while ago to share with all if you have access to buy stocks in Singapore Exchange and are interested in China A-shares. 30 times earning do not excite me, will consider when it comes down to 20 times earning. As usual, I got nothing to do with UOB.

(Business Times)FOR the first time, Singapore investors will have access to the restricted market of the China A-shares through an exchange traded fund (ETF).

The United FTSE/Xin-hua China A50 ETF, the first China ETF to be listed here, aims to raise an initial US$60 million. It will be denominated and traded in Singapore dollars.

This is also the first ETF to be managed by UOB Asset Management(UOBAM).

Chong Jiun Yeh, executive director at UOBAM, said the ETF will be priced at net asset value (NAV) for a start, with an indicative price range of between $2.40 and $2.50 per unit. The total expense ratio (TER) is estimated to be 0.94-0.95 per cent.

Given investors' appetite for the China growth story, demand from both retail and institutional investors is expected to be strong, Mr Chong added.

This is demonstrated in the performance of Hong Kong-traded I-Shares A50 China Tracker fund, which is currently trading at about 3-5 per cent premium to NAV.

The FTSE/Xinhua China A50 Index comprises 50 of the largest Chinese stocks, mainly financials and industrials. Its biggest component stock is Ping An Insurance, followed by state-owned banks.

Mr Chong noted that valuations of China A-shares 'appear relatively reasonable', with the index currently trading at 30 times price to earnings ratio, compared to its peak of more than 50 times. 'The positive cyclical China 'growth story' is expected to remain intact' as the case for policy tightening is an unlikely one, he said at a briefing yesterday.

But access to the A-shares market is restricted to Chinese investors and approved qualified foreign institutional investors (QFIIs). The upper limit on the QFII quota for any single investor to invest in China stocks is US$1 billion.

The quota available for the United FTSE/Xinhua China A50 ETF is US$100 million, as UOBAM and Rabobank - the counterparty and designated market maker for this ETF - each have a QFII quota of US$50 million.

This may cap the issue of new units and trading premium but Mr Chong said they plan to apply for an increase in QFII quotas.

With this ETF, the total number of ETFs on SGX will hit 43. Between April and September, trading volumes in ETFs hit $1 trillion. For the last quarter, trading volumes in ETFs on SGX grew by 30 per cent.

SGX's head of market development Chew Sutat said the growth prospect of ETFs is positive as investors seek simpler, transparent products. 'We certainly hope to repeat the growth rate of 30 per cent quarter-on-quarter,' he added.

Asked if the new ETF that tracks Chinese blue chips will snag trading interest in the smaller S-chips or China firms listed here, Mr Chew said he does not expect a significant impact on trading in S-chips.

'The investor profile for those who are taking a punt into S-chips versus those that the ETF hopes to attract could be quite different,' Mr Chew said. Investors also have had the opportunities to invest in China-related unit trusts and mutual funds.

UOBAM said the initial offer period for the new ETF is from Oct 29 to Nov 4. The indicative listing date is Nov 12.

Conflicting message by E&O insiders

CIMB issued a report asking their shareholders to sell E&O and buy rights to ICSLS(Irredemable convertible secured load stock). At that the point of their writing, E&O ordinary shares was quoted at $1.27 on 22 Oct, based on rights to buy ICSLS of $0.65, the intrinsic value,they argued, was $0.635(click on the image to see their working). The ordinary shares went under water as it went down further to $1.23 on Friday - theoretically in a bear territory(21% from recent high of $1.57). As the share price is heavily owned by retail investor after big instituitions like Goldman Sachs, Merill Lynch and etc exited the company at the height of 2008 financial panic. The selling pressure may persist as retail investors tend to be trend oriented -- overshooting on the way up or way down.

Kok Meng Chow, E&O's Finance Director, disposed 107,200 shares of E&O-LR. What is she thinking? As at 23 Oct, she still has another 350,050 E&R-LR shares. She exercised her ESOS of 250,000 shares of E&O ordinary shares early of this month. Her position as at 8/10/09 was 914,500 shares, I estimated she disposed around 1.5 mln shares in the last 2 months.

Kamil Ahmad Merican converted his 150,000 shares of E&O-LA on 9 Oct. After the conversion, he has 1.2 mln E&O ordinary shares.

Chan Kok Leong, an Executive Director exercised his ESOS of 1.2 mln adding his stake to 4.7 mln shares as at 28/09/09.

Tham Ka Hon, a large owner, has been busy converting his ICULS shares to ordinary shares. He also acquired a few millions E&O ordinary shares through 9 Oct. He has increased his interest from 17.92% to 20.54%.

I will not argue too much with CIMB pegging a fair value of $1.89. The major owners think the long term value remains bright. The Finance director is a mirror of short-term trading sentiment - bearish/cashing out. Up to this point, I was unclear of the cause-effect, was poor showing of E&O-LR putting pressure on E&O or the other way round. It will be interesting to find out at the opening bell.

Disclosure: No position yet.

Why White Horse Berhad ?

White Horse Berhad is in a boring business, making ceramic tiles but also one of the largest in Malaysia. What stands out though they are making quite a bit of high end tiles. 70% of theirs customers are homeowners and renovation contractors while remaining 30% goes to property developers. They have set-up a few of distribution centers in a number of countries to boost their export market in the last 2 years, namely Australia, Thailand, Vietnam, India, Indonesia, Singapore and Cambodia. The contribution from their export markets is not significant yet, about 10% plus.



Despite of weakening of worldwide economy for the last few years, revenue has been defensive, surprisingly 2008 was a new all time high. 1H of 2009 revenue was RM 218 mln vs. 234 mln 1H 2008, a slight drop of 7%. Net profit maintained at around RM 21 mln despite of top line had declined. Annualize their 1H '09 earning, EPS will come in about RM 0.19/share. At RM 1.32, this company is selling for PE of 7 times. They have been paying dividend consistently without fail since 2001. 2008 DY is around 5%. The gross margin has been under pressure in 2009 due to poor economic environment. Comparing to last 5 years gross margin of 31 - 34%, 1H 2009 of 28% certainly does not look very pretty. Raw material is about 40% of their operating expenses but half of them are in Euro $ or US $ denominated, strengthening of Ringgit will certainly helps to boost margin. There are more upsides to it when they are riding out from bottom of the cycle and oversea marketing efforts should bear fruits in the near future.

Reading through their management profile, one thing stands out, the key owners have more than 30 years industry experience though they have secondary eduction only. Nothing very flashy about their shareholders - only two smart money investors - Lembaga Tabung Haji (10%) and Great Eastern Life Assurance (2%). The rest are very tightly held by the owners.

Stable profit, consistent dividend, owners risking their own money, proxy to consumer spending and property market recovery(the worst is behind us) and some growth story is a good investment thesis. Ben Graham will certainly happy to approve my purchase, paying only half of the book value RM 2.41.