Monday, January 31, 2011

Singapore Airlines: So Expensive!

As some of you might know, I'm going to the UK for further studies in September this year.

Of course, I need to buy air tickets to go there.
So, I compared air tickets by different airlines.
Unfortunately SIA is by far the most expensive airline to travel in.

Let's do a comparison of air ticket prices...
I set departure date as 15th September, and return date as 20th November. I used flexi fares.

As you can see, SIA is by far the most expensive option. 



SIN-LON SIN MAN
5* SIA $2,313.10 $2,277.90
5* MH $1,744.50 NIL
5* Qatar $1,639.10 $1,603.90
4* British Air $1,916.90 $2,013.40
4* Emirates $1,475.70 $1,429.70
4* AF/KLM $1,755.20 $1,734.70
3* Brunei $1,573.10 NIL
Budget Air Asia X $1,104.00 NIL

Why?
SIA is arguably the best full service airline in the world, but Qatar is not far behind, and so is Malaysia Airlines.
From what I've read online, Qatar's services are on par, if not better, than SIA.

For the record, I'm proud of SIA and how it's done it's part to promote the Singapore brand, and I'd love to support it, but at such exorbitant prices?

At most, I'd be willing to pay 10% over what other airlines quote, but not 45% more!

A return flight to New York City cost upwards of $3000, when airlines like China Eastern, Cathay and United are selling at less than HALF for the same fully flexible fare!

SIA missed analyst expectations for it's full year profit just last friday, and breakeven load factor for them is roughly 70%. From what I've read, SIN-LHR is oftentimes not full.

Maybe they could try lowering prices to entice "retail" travelers like me to fly with SIA again, improving volume, turnover and profit! :D

As it is now, I think I'm probably going to pay the $150 premium to fly Qatar Airlines over Emirates. Heard some nasty things about Emirates...







 
 

Monday, January 24, 2011

Book Review: Secret Psychology of Millionaire Traders

I went to the library on Saturday and picked up a few books including this.


From the title and the blurb behind, I'd resonably conclude that this book would shed light on the mentality and what goes through the minds of professional traders like George Soros and the author, who claims to make USD2,500 a day thru trading.

Unfortunately, I have to say that this book is a letdown to say the least. Glad I didn't purchase this book.

I'd have expected that Mr. Conrad Lim would share what goes through his mind and pitfalls of novice traders, what professionals do and think in the heat of a trade, whether facing huge profits or losses.

However, this book starts off with how Lim was a high flyer who was bankrupt and had a second beginning as a stock trader. Then, it moves on to him blasting novice traders for asking stupid questions like, "What instruments are easier to trade? forex? indices? equities?"

The most important chapter would be the second, which could be summarised as such:
1.) Have a plan
2.) Cut your losses, let your profits run
3.) Look for reasons NOT to trade

Number 3 is my main takeaway from this book. It's important to resist rushes of blood to the head and impulse trading, and to set stop losses and profit taking targets BEFORE you make the trade, when you are at your most rational, and to set tight stop losses (within 10% would be my threshold).

After a promising start, the book goes downhill from there, sounding like a contrived, half hearted attempt to increase page count.
He again blasts traders for being stupid, greedy and overconfident.
Then he devotes a whole sub section into explaining why you should not share your opinion with friends. The whole topic was so contrived that I wanted to roll my eyes repeatedly.

The next chapter is even worse. He comes up with 9 trader profiles, and quoting verbatim from the book, " ....to identify with the one that best describes you, simply read through each one until you get the ahh factor."

The profiles were done very badly. He doesn't even state the positives/negatives for each of his "profiles".


It gets worse. The next chapter then introduces itself by saying that these traders' experiences are for you to learn. The "experiences" could be summed up as such:
1.) I was losing money trading
2.) I met the author
3.) the author is a great teacher, trader, mentor etc 
4.) Thanks to him, I'm a successful trader now

with an emphasis on point 3.

All in all, a very poorly written book (except for chapter 2) which could be seen as simply an attempt to create some side income for him (which he admits to, in the book). Far, far poorer than Lim and Adam Khoo's first book, Secrets of Millionaire Investors.

Having read SMI, Profit from Asian Recovery, Profit from downturn and this book, I dare say that if you've read SMI, you've read all the books from Adam Khoo's investing series.

I highly recommend Robbie Burns' "The Naked Trader 2nd Edition" which you can borrow from any library.

My rating for this book: 3/10.

Can't wait for my "The Confession" by John Grisham library reservation to be filled. :)

Tuesday, January 18, 2011

Dapai International Holdings: Broke out of multiweek consolidation

One of my value buys, Dapai International, (my FA here) broke out of it's relentlessly tested resistance of 22c to close at 24c today with a high of 24.5c, along with volume of 21.3million shares traded, as contrasted by daily average volume of 0.5 million to 1.5million the past few weeks.

It's unclear why it gapped up slightly today and why volume was so high, since there's been no announcements from the company since November 2010 where they issued a profit warning.

I'll be watching SGX for any corporate announcements on insider buying.
Very curious as to who is buying up this counter, could it be the Big Boys (Institutional Owners) or the retail investors?

When I bought this counter in December, the counterparty was UBS Securities, which likely meant that an institutional owner sold it's shares to me(which actually is not a good sign since institutional players are the ones who control the market, especially with illiquid counters like this), since UBS does not offer retail brokerage services. Contrast that to PohTC(my comments here), where the CP was CIMB and First REIT where the CP was OCBC Securities, which means that it would likely have been retail investors selling.

I still believe in this counter's extreme discount to it's intrinsic value, and I will be holding on to my small position till it reaches my TP of $0.52 (DCF valuation of it's FCF with 10% Discount and 0% growth). However, I will not be accumulating on weakness, as all my calculations and valuations are based on the assumption that the figures are true and accurate. Let's not forget China Aviation Oil, Jurong Tech, Fibrechem, China Milk ad nauseum.

Thursday, January 13, 2011

Poh Tiong Choon Logistics: Something Brewing?

Poh Tiong Choon Logistics has seen huge buying pressure the last 4 weeks from Substantial Shareholders and insiders.





As you can see, since 3/1/11, volume has increased powerfully to about 1 million shares a day.
There has been furious buying pressure from SSH and insiders.

SSH Adrian Ho Kim Lee has increased his stake from 6.24% last year and has been slowly but steadily increasing his holdings to 10.1%. Poh family holding companies, similarly, have been buying up the stock like there's no tomorrow. Poh Tiong Choon Holdings Pte Ltd, Poh Sin Choon Pte Ltd, Poh Choon Ann Pte Ltd ad nauseum have been buying up the stock.

This stock has been a high yield dividend star for the past 10 years, paying out dividends regularly every half year since it's listing in 1999.It is a profitable company, well run with moderate debt of $35 million, contrasted by profit level of $15 million in 2009.
In fact, last 3 years dividend yield has been 12%, 15% and 9% from 2007 to 2009 respectively.
This generous dividend yield is no doubt influenced by the fact that the Poh family and it's holding companies own much of the company.
It is also fairly priced at PE 7x, Price/NAV= 1.86x. Granted, this is a low growth stock.
Did a DCF valuation, based on it's FY2009 FCF of SGD21,000,000, 10% discount rate and 0% growth, assuming the company survives for 15 years, Intrinsic Value is at $0.80. 

It's financial results for FY2010 will be coming out mid to late February 2011.

This year is it's 60th anniversary.

With the incredible buying up of this counter by insiders, I suspect there might be some good news ahead.
Hence, I bought a small position in this counter.

As Peter Lynch said, "insiders sell for a multitude of reasons, but buy for only one: they think the price will increase."

Opinions?

Disclaimer: Vested at $0.48.

Tuesday, January 11, 2011

Intuitive Surgical (ISRG) Fundamental Analysis

Intuitive Surgical (NASDAQ: ISRG) is the maker of the breakthrough da Vinci Minimally invasive surgical machines mainly being used in the United States. It is a small to mid cap (comparatively) with a market capitalization of USD 10.5 billion, large by Singapore standards, small by US'.

Minimally invasive surgery is a big thing in the surgical field now due to better success rates, less human errors, faster recuperation time, less scars, less infections etc. than normal surgery.

The da Vinci surgical system is used by more than 1,500 hospitals worldwide; mainly in the United States though.

The FDA has cleared the da Vinci system for thoracic(chest), cardiac(heart),  urologic, gynae, paediatric and otorhinolaryngologic (ENT) surgery in the States.

It is used in world renowned hospitals like Johns Hopkins medical school hospital, New York University medical center, Massachussetts General Hospital, Mayo clinic and locally in SGH and Mt. Elizabeth. 

You might remember it being mentioned in ST a couple of years back.

An example of minimally invasive surgery would be removing ovarian cysts through the belly button as done at KK W&CH, or repairing torn rotator cuffs.

The info below has been taken from the US SEC website. 

1.) History of Consistently increasing sales, earnings and cash flow
Massive Sales growth from 2009 to 2010. Risen a staggering 25% from 2009 to 2010, and COGS has risen by about the same percentage.
Earnings have increased by a huge 60% from last year.
Cash flow has almost doubled from the same period last year, from 200 million USD to 380 million USD.


2.) Good competitive advantage
The da Vinci surgical system is protected by a multitude of patents, plus, there aren't any competitors now.
Even if there's a new upstart, the HUGE switching costs for Hospitals (a few million dollars) will ensure it's economic moat.

The davinci system also has many instruments which are disposable after every surgery, much like a needle is one use only, and a substantial part of it's growth has come out of sales of complementary instruments (37% of total sales). You can compare it to a razor blade and it's handle, or an electric toothbrush and it's changeable head. Eventually, once more and more hospitals adopt this system, the instrument market might make up a sizeable part of revenue for ISRG.



In addition, surgeons, once familiar with a certain system, loathe to change and hence create a status quo which will benefit ISRG.


3.) Future growth drivers

The large baby boomer generation is getting along in age, and with age comes illness.
Greying of the world's developed nations will ensure the demand for surgery.
80% of DVS is in the United States, and other developed nations' hospitals will be future growth drivers for this system.
Deteriorating health amongst developed countries also provide growth.

5.) ROE above average
Return on Equity is about 17%, above average.

6.) Senior management staff are holding, buying the stock

Senior Management owns only 1% of stock, and institutional owners own 89% of stock.
Management have been selling the stock since Feb 2009, and have only recently been buying up the stock since November 2010.

7.) Debt Level


Debt is at a manageable USD 130 million level. Profit to date for 3Q 2010 has already been 260 mil, so debt is low.


When to Buy:
1.) Undervalued
This stock is close to 52 week lows, but PE ratio is at a high 30x, forward PE is 25x but with such phenomenal high growth rates which do seem sustainable for the coming 2-3 years, the PEG is at 1.25-1.5 times, which is pretty average for a high growth stock. 

2.) Stock price in consolidation phase/ uptrend
ISRG has been in a downtrend since April 2010, in fact, the stock chart is VERY nice, very uniform, predictable downtrend which would have found favour with short term speculators.
It looks like there's recently been a descending triangle, and moreover current stock price is at resistance.


My conclusion:


Exciting growth stock with low analyst coverage but high growth mutual fund ownership.
High valuations but it's to be expected for growth stocks as such.
Good company with good fundamentals, low debt, huge economic moat, very large growth drivers esp. with the greying of America and the industrialised western countries in years to come. (From 2012 to 2020, the baby boomers will be retiring en masse)

From forums and websites, Doctors and hospital workers have said good things and have good reviews for this system, which indicates customer support.

However, negatives include low insider ownership, overly specialised field (high tech surgery mostly done in rich countries), one product company and low-mid capitalization, and high valuations for stock.

One product company is probably the most concerning because what if one day a really great competitor comes up? Hence, should I buy this company, I will have a short holding period of probably 1-5 years.


Next Steps: Stock is currently at resistance, and even though I only want to buy around 3-6 shares (1 share is $269.00), every penny saved can't hurt right? Also, I'd wait for a consolidation period to occur and for this downtrend to cease before buying.


Target price for entering will probably be slightly higher than the 52-week low(USD246.05) at USD250 to USD 260.


Target holding period: 1-4 years, or when valuations are ridiculously high.

Saturday, January 8, 2011

Trading Vs. Investing, and KIV Counters/Positions for next week

I have 2 very distinct animals inside me, one of which is the short term trader, and the other, the long term investor. I'm sure many of us do dabble in these 2, and most of the blog community here tends towards the investing side. No doubt, earning and losing money in days, let alone hours, is very exciting and something that I've covered in previous posts. Nonetheless, it's extremely high risk.

For example, I expected a market correction either yesterday or today, and I bet a small short contract on the SiMSCI yesterday. Needless to say, the Singapore market went up strongly and I ended up losing about the price of a G2000 shirt. Today, I expected the market to correct and I did put a SiMSCI Short again, earning back 1 bowl of sliced fish beehoon, can add fish and beehoon.

I'll state outright that I've lost more than I've earned thru my short term trading of warrants and CFD's, but the amount, in the grand scheme of things, isn't that much, about the price of a pair of cheapo jeans you can buy in the mall. However, losing money obviously hurts.

Luckily for me, I've been disciplined (so far) that I never put a significant sum of money on the line.

Investing, on the other hand, takes much more deliberation. You have to decide whether this business is worthy of your money. I took a very very very very long time deliberating whether or not to invest in Dapai and First REIT (especially Dapai), and glad to say, it's paid off somewhat with Dapai showing about 20% gain from purchase price, and First REIT about 7%.

I still think Dapai is a good company, BUT, obviously this is contingent on the management's integrity. All my Fundamental Analysis can go to hell if the books are cooked. (My FA on Dapai is here)

So in conclusion to my rant, is that I try to make most of my money, and have most of my money, in long term investments, whilst I try to make some kopi money from speculation. (currently losing a few starbucks frappucinos)


From the 2nd part of the blog title, it's obvious what I'm gearing at, the short term speculation of counters next week. Just posting these up as an opinion and to test my TA. Probably will use IG markets demo account to go with my predictions.

I'm looking at a few counters to go long (duration: Few days) next week, namely,
1.) Keppel Corp
2.) Wilmar

Also looking for opportunity to go short on SiMSCI.

For Keppel Corp, I will wait for a pullback before entering. Indicators showing that Keppel is WAY overbought, with RSI at 87% level and MFI at 80% level. However, there is no divergence (higher high and higher low) between RSI/MFI and Stock price, which indicates the trend is still intact. Moreover, Stochastics indicate overbought too, but bullish. So is MACD. However Keppel Corp is approaching 52-week highs.






So I'm predicting for next week that Keppel Corp will rise, but face strong resistance. I likely will not enter unless there's a huge correction.

Wilmar:

From the chart, you can see the negative divergences of RSI and MFI, these 2 indicators forming higher high and higher low (slightly) whilst Wilmar was downtrending, possibly indicating a turnaround. Also both hovering around mildly oversold conditions.
Looking at momentum, Stochastics just showed a bullish crossover, and so did MACD, which possibly also indicates a turnaround.

However, there was higher selling pressure on the 2 days that Wilmar dropped off a cliff, as compared to the moderate buying pressure the last 3 days (when Wilmar rallied). Not sure about that.

Fibonacci retracements show that Wilmar's next resistance is $5.79.

In conclusion: Wilmar's indicators look good for a turnaround, but next (minor) resistance is fast approaching.

My prediction: Wilmar will go up next week, but have to watch whether it can clear the $5.79 level. As short term traders go, Buy at support and sell at resistance.

2 scenarios which i will buy wilmar:
1.) Drop back to Tuesday's low or roughly about $5.50-$5.60
2.) Clear $5.78 at reasonable volume.


SiMSCI:

SiMSCI corresponds 99% to STI (difference is that SiMSCI has CoscoCorp whilst STI doesn't) so I'll be talking in terms of STI.
STI's currently at it's minor resistance of 3272 with indicators showing bullish yet overbought conditions. Stochastic is about to perform a bearish crossover, however, MACD is still bullish. RSI and MFI show no divergence, but at extremely overbought levels.
2 scenarios I can see panning out:
1.) STI surges thru it's minor resistance at 3272 next week to meet it's major resistance at 3310.
What I'll do in this scenario: Long STI on Monday, then SHORT STI when it touches 3310!
2.) Capricorn effect dissolves and STI can't, or will have major difficulty, passing thru the 3727 resistance.
What I'll do in this scenario: Review the indicators when it happens. either short or go long or sit back and watch the show.

I think scenario 1 is likely to happen, which is good as there's clearer technical signs for me to make some Frappuccino money.

Lastly, a disclaimer to this post: Obviously, I am super new to the stock market, so do not take me seriously. Please follow someone else more senior with your money.
I'm not even sure whether I just spent 30 mins typing bulls**t.
More senior readers please correct me if I'm wrong before Monday morning. :)
I will be playing out the scenarios I've described on a demo account with IG markets and with very little real money on City Index.

Wednesday, January 5, 2011

Hesitancy cost me 12.5% instead of 5%

I bought a CFD on Keppel Corp a few days ago which netted me roughly 5% over 3 days. Expecting a retraction, I sold off the first CFD at $11.48 and placed an order for Keppel at $11.40 again, which was filled about 20 mins before the market closed yesterday.

Looking at Keppel Corp's chart, it recently broke out of a multi week consolidation phase, and I bought the first CFD during this breakout. Sold off yesterday (4/11/10) at 5% profit over 3 days from 31/12 to 4/11.

From the chart, the Stochastic (which after analysing a few charts, incl. Wilmar and Sembcorp Marine, seems to be the most accurate indicator predicting the pullbacks and breakouts, crossed over yesterday, and I vowed to myself that I would sell it off immediately today. Unfortunately, Kep Corp opened at 11.42/11.44 today, which I was hesitant to sell off at, preferring to wait for a tick or two up. As you can see from the chart, Kep Corp dropped all the way and it triggered my stop loss at $11.30 (so important for CFD's) and I sustained a 12.5% loss of capital.

It could have been worse as Keppel Corp dropped further to $11.24/$11.26 soon after.

Well that's too bad for me and a lesson learnt.

I will still be monitoring Keppel Corp and taking a position once the uptrend has resumed. 

Monday, January 3, 2011

Outlook for 2011.

I've read an article whereby people say buy when the media report doom and gloom, whilst sell when the media reports rosy and flowery outlooks for the market.

Unfortunately there's been alot of noise recently, with people disagreeing on the outlook for 2011. Some people say another recession is arriving, whilst others say there's still 10% upside to the market.

So who to believe?

I personally feel it's not exactly a very good time to initiate "buy and hold" positions right now. Many stocks are either overbought or at median levels, which limits upside and with large downside. Risk to reward ratio for many stocks is not exactly very good. Most STI stocks are trading at PE>15, which is historically overbought territory.

Hence I will be nimble footed this year with my stock purchases, with tight stop losses.
I have the unique privilege of being unemployed during office hours when the market is running and employed at night (teaching tuition) hence I have more time to monitor the stock market.

From what I've read and what I've inferred, I will be staying away from a few sectors, namely:
1.) Property- I feel that the property market in Singapore, China and the Asia Pacific region is overheated. Look, HDB flats were selling at $70,000 over market value? The govt has done a commendable job of cooling the market, but still leaves much to be desired. Situation in China is even worse, hence I'm bearish with regards to property. REITs on the other hand, I have to be meticulous and buy into those with low gearing and with long term leases locked in, like First REIT, which I might increase my position should there be a huge selloff due to the rights issue.

2.) Companies with revenues largely deriving from Japan- Japan has an unstable government with very poor fore and insight, and the economy, whilst not being in shambles, is not doing too well. I will be staying away from companies with large Japan exposure like GLP. (unless it's for short term speculation)

3.) Airlines- The recent fiasco has shown how Airlines are at the mercy of so many factors. The weather is obviously a huge problem for them, with 2010 having the Icelandic volcano eruption, the poor planning for poor weather in E. United States and W. Europe, the staff unions, pilot unions, etc. Also, with commodity prices like Jet fuel expected to increase, their COGS will increase. Airlines though being an oligopolistic sector, is at the mercy of so many unpredictable factors, and I will be avoiding airlines.

I will be KIV-ing these sectors, however:

1.) Offshore Marine- With oil prices increasing, oil companies will be seeking out companies like Keppel and Sembcorp Marine to build rigs and other technical stuff for them to increase supply. Which obviously bodes well for these 2 companies and others like STX OSV, Cosco corp etc. In fact, I have a small long CFD position on Keppel now.

2.) Commodities- With global consumption from rising giants like BRIC and Indonesia, demand is expected to increase and hence increase the bottom line of commodity firms. Will be KIV-ing Golden Agri, IndoAgri, Archer Daniels Midland, Olam.

3.) Oil- Same reason as above. KIV: Petrochina ADR(NYSE market), ExxonMobil, ConocoPhilips (whilst not a dividend aristocrat like XOM, Buffett has a large position in this company, and probably DB Oil Fund). Not sure which companies in Singapore has a large portion of revenue deriving from Oil- with exception of Golden Agri and China Aviation Oil (Which I don't want to buy)

4.) Medical Services- Rapid greying of the United States, Japan and many of the developed countries will increase demand for medical services. Medical stocks in Singapore are not attractive to me. Raffles Medical (FA here) is way too expensive although I like the company very much. Healthway and SG medical aren't very established and both have unpredictable profits and revenue. They also don't or give miniscule dividends. Hence, I'll be looking at United Health Group Inc. (UNH)
 

Unfortunately I don't have much capital, it's tied up elsewhere, like I have to buy a laptop in preparation for University, my medical school texts, my winter clothes(which by the way cost a BOMB in Singapore) and other incidental expenses, like going to Australia to backpack with friends in June.(which by the way, the Aussie Dollar is SO EXPENSIVE!!!) Therefore, I'll be putting my money into a few well researched stocks. Hopefully Dapai puts up good 4th quarter results for 2010 in early Feb this year.

I also already have an exit plan for stocks as I prepare for uni. As I have to concentrate in school, I lose out on this unique opportunity the next 8 months presents me as a full time trader. I'm using the term very very loosely. I will probably put my capital into good dividend yielding counters come matriculation in september this year. If the market overheats, I'll be very happy to wait for the next recession and pile on my cash during the next market crash.

I also have to remember that stock investing is, and always will be, a secondary source of income for me. It's easy to get carried away when you're earning.

Personally 2011 looks to be a good year for me. 2 major milestones are reached in 2011. Firstly, my ORD in 2 months time, and matriculation into uni in September, where I can embark on my dream to be a doctor. It's also the year i turn 21, and the year I really test my independence from my family.

Let's look what 2011 holds for us.

Wishing all readers a happy and fulfilling 2011.