Raffles Medical Group

 My Fundamental Analysis of Raffles Medical Group
 1
1.) History of Consistently increasing sales, earnings and cash flow
 Yes, Sales has increased 10% YOUY, Earnings 13% YOY, Cash flow increased YOY
2.) Good competitive advantage
Yes, there is a competitive advantage here, as Raffles medical group is a private medical group which purports to offer value added services to people who are willing to pay, and to cater to the growing medical tourism sector. As a consolidated company which can cater fully for the medical tourists, foreigners will flock to RMG for ease and convenience.
3.) Future growth drivers
Yes,
-Ageing of Singapore
-Medical tourism
-Prosperity of Singaporeans leading them to prefer private hospitals, though more expensive, to restructured
4.) Long term debt < 3x per annum profits
Yes. Debt is at a comfortable 22 million level. Profits to date is already 30 million.
5.) ROE above average
15%, MUCH MUCH higher than SG medical and Healthway
6.) Low capital expenditure reqd. to maintain current operations
Hmm, I'm not sure about this. Would probably be a yes. RMG already has it's own building, expensive MRI/CT etc machines have been acquired.
7.) Senior management staff are holding, buying the stock
Yes. Dr. Loo Choon Yong , CEO, 54%

When to Buy:
1.) Undervalued
Px less than intrinsic value

P/E Ratio: $2.34/$0.08= 30 (WAY too high for a defensive stock)
note: Healthway has a larger PE Ratio because it's earnings have fallen off a cliff. Still, RMG's PE ratio is too high at this point of time.
P/Book Value: 2.34/$0.525= 4.45(Again, too high)
Intrinsic Value: I used Excel and calculated it's future cash flow for 20 years.
Assume modest 5% P.A. Growth, 12.5% Discount Rate: Intrinsic Value $1.96
5% growth, 10% Discount Rate: IV $2.30
Best Scenario:10% Growth, 10% Discount Rate: IV $3.38
Worst Scenario: 0% Growth, 12.5% DR: IV $1.47
(EDIT: I edited the discount rate. my discount rate previously was way too low at 3%, it should be closer to 15%, i put it at 10 and 12.5%, with the current low interest rate environment)


As you can see, Intrinsic Value at modest growth rate and modest discount rate is still only $2.30. Trading at slight premium to IV. Hence it leads me to the conclusion that it's overvalued, when PE, P/BV are put in context.

2.) Stock price in consolidation phase/ uptrend
Currently Long Term Uptrend, beating STI

Conclusion:
Looks good, good fundamentals, very healthy (health care stock healthy, ha ha ha) but seems to be too overvalued as of now(by it's PE ratio/ Price over Book Value ratio). I will KIV this stock and wait till it's ratios/price comes down to a more reasonable level before entering. After all a defensive stock shouldn't be trading this high.
Current Opinion: Stay out
If price drops (or earnings increase substantially) to PE 15-17, P/BV to a more palatable 2x, it would be a good investment. Also trading at a premium to IV, which i am extremely uncomfortable with.

These are simply my opinions.

Emotions on the market

As per my previous post, I bought 2 lots of Cosco corp call warrants, which basically means im bullish on cosco. Today, however, cosco corp's share price dropped, at one point by 4 cents, which disproportionately affected the market maker's price of the warrant.

I set a stop loss target for myself at 38.5 cents. Reading alot of books, the authors all similarly and repeatedly hammer the point where you HAVE to bite the bullet and cut your losses. Today, i realised how difficult it is, the emotions that flow thru you when your own money is on the line.

Anyways, this can be construed as me paying tuition fees to Mr. Market for teaching me how to trade.

After all, you have to lose to win.

After a long day of trading, eventually cosco corp traded 1 tick down from Friday. (phew!)

Paper Losses and Warrants

In my fledgling investment hobby, I've made my first paper loss.

The loss is from Sabana REIT. This counter debuted on SGX at 1.00 and closed at 1.02, leaving me with a $30 paper loss (not including my brokerage fees). Oh well, there's still the 8% dividend to look forward to.

If Sabana rises to maybe $1.12-$1.13 (doubt it though), I will sell it off immediately. Reason being I'm not very sold on Sabana's parentage, which is Freight Links, and also the multiple restrictions on Shariah financial products, which is pretty cumbersome.

So for Sabana, my selling point will be $1.12 onwards.
I doubt REITS have a very low support level, since if it drops, the dividend yield is higher, hence the support level should be quite strong.

I also bought my first derivative product on POEMS today.
I bought 2 lots of "CoscoCorBNPeCW110530", KG6W, at $0.485, from the market maker. I was the only buyer of the stock today.
Reasons for buying:
1.) After reading Cosco's 3Q financial statement, it seems to be in a good position, with positive cash flows and increasing revenues and profits. They may also have a few big contracts which will hopefully increase their profit.
2.) 1 lot of Cosco cost $2060 today. Hence, by buying the warrant, issued by BNP Paribas Warrants, i gained exposure to 2 lots of Cosco for a mere $995 incl. brokage fees.


The warrants have an exercise price of $1.68, and is due to be redeemed on 30th May 2011. Warrant:Share ratio is 1:1, hence my break even price (after factoring in all costs including brokerage fees) is $0.51 per warrant. 


My short term view on Cosco is bullish, and hopefully I'll be able to gain some profits in the short term, hopefully before CNY.


The theoretical Delta for this warrant is 0.78, hence, for every 1c the counter moves, the warrant will move 0.78c. Hence, for my target profit taking level, Cosco Corp has to move roughly about 20.5 cents up.




If there's anyone reading, would you care to comment on my buying on this warrant?


Anyway,
Target Profit taking level: $0.65
Self Declared Stop Loss: $0.380 (21.8% away from my purchase price- at this price i will lose $260)

Sabana Reit, Amtek IPO

Have just logged on to posb i banking and realised I've received 1 lot of Sabana. Will sell it off if it reaches $1.15 tomorrow afternoon. Unlikely though.

Amtek has just opened applications for its' IPO at $1.30 a pop.
Seems like out of it's 200 million shares, a substantial amount are vendor shares, and will be used to pay off it's creditors. Doesn't sound appealing...