Singapore 2050: A niche and luxurious country?
Property rising, continuous chain of en-bloc activities, upgrading neighbourhoods and even more foreign talent, boutique hotels and the anticipated F1 Grand Prix, Singapore is possibly, to some extent, trying to go as far as it goes; literally like the saying 'the sky's the limit'.
The future of Singapore, disregard the type of people that will be living in Singapore – as we know, by 2015 Singapore will be filled with more foreign workers – will be full of integrated and niche activities.
In my eyes, Singapore could be seen as a niche and luxurious country.
My reasons:
First, the government is looking at a population of eight million by 2015. Yes, yes, just like the song goes, 'What Singapore needs now is land, sweet land.' But just for an instance, let's do away with land and let us project where Singapore will be in the year 2050.
The outcome; more sophisticated, high-rised buildings, upgraded neighbourhoods, higher standards of living and possibly, even a new way of travelling. As it is, we recently have been introduced to Treetops@Punggol, a 'green' housing project which could possibly provide us a glimpse of our lifestyle in future.
Second, integrated programmes like the integrated resorts, F1 Grand Prix will definitely colour our Island. There is definitely bound for more programmes or activities to spring up along the way. Even more sophisticated, Singapore could even be seen as the Asian and modern version of Atlantis? Perhaps.
Looking at the map of buildings for Singapore over the next few years is definitely scary as this little Island is developing even more and at a break-neck pace that sometimes sends jitters down my spine when I think about the future of Singapore.
Nurwidya Abdul
The future of Singapore, disregard the type of people that will be living in Singapore – as we know, by 2015 Singapore will be filled with more foreign workers – will be full of integrated and niche activities.
In my eyes, Singapore could be seen as a niche and luxurious country.
My reasons:
First, the government is looking at a population of eight million by 2015. Yes, yes, just like the song goes, 'What Singapore needs now is land, sweet land.' But just for an instance, let's do away with land and let us project where Singapore will be in the year 2050.
The outcome; more sophisticated, high-rised buildings, upgraded neighbourhoods, higher standards of living and possibly, even a new way of travelling. As it is, we recently have been introduced to Treetops@Punggol, a 'green' housing project which could possibly provide us a glimpse of our lifestyle in future.
Second, integrated programmes like the integrated resorts, F1 Grand Prix will definitely colour our Island. There is definitely bound for more programmes or activities to spring up along the way. Even more sophisticated, Singapore could even be seen as the Asian and modern version of Atlantis? Perhaps.
Looking at the map of buildings for Singapore over the next few years is definitely scary as this little Island is developing even more and at a break-neck pace that sometimes sends jitters down my spine when I think about the future of Singapore.
Nurwidya Abdul
Labels: 2015, 8 mln population, Atlantis, En-Bloc, F1 Grand Prix, Foreign Property Funds, integrated activities, Treetops at Punggol
How About This Tool - The Markowitz Portfolio Model
So this is how the saying goes, “all roads lead to Rome.” Now if only that's true for making money in the equity market.
See, there's a whole variety of tools available for investors pitching to be “your professional stock picker” or your “leading securities and investment broker”
Or promises that you'll “be empowered to make informed trading decisions.”
etc etc.
Whichever tool you use, fundamental analysis, technical analysis, behaviourial analysis, at the end of the day, you just want to make money.
The question is, how much? And at what risk?
Now lets just take a look at how useful these reports are to a typical investor. Over here you see what's going on with the company being analysed. You get some number crunched into your EBITDA, PE RATIO, EPS etc and then they tell you what action to take – to buy, sell, hold or avoid and oh goody, at which price.
We get more numbers and derivations in the next page.
And then you have a disclaimer which in this chunk of words has this nugget of a sentence, “This
document is for the information of addressees only and is not to be taken in substitution for the exercise of judgement by addressees, who should obtain separate legal or financial advice.”
I see. So I guess I can't really trust them huh.
Well the thing is this, you can only trust yourself to make the decisions in your trade. You make a profit, the reward is all yours, you make a loss, well, you'll be the only one bearing it.
Nobody is going to play charity when it comes to investing.
So aside from going to other people for advice and help, I learnt about this tool back in school which may give you another perspective on your investing decisions.
It's called the Markowitz Portfolio model which was published in the Journal of Finance in 1952.
Basically, by using the Microsoft Excel, you should be able to find out the optimal combinations of risk and return for your portfolio.
So say, you want 15% returns . Punch in the right numbers and formula, you get an idea of how you should assign different weightage to different stocks on your portfolio. Pretty nifty actually.
And the best thing is, it's free. Just google for it.
But i'll have to add a disclaimer now, This is just another optional tool you might want to consider. We're not allowed to give financial advice!
But hey if you can't find it online, I'll be glad to provide you a copy of my school notes containing instructions if you just drop a comment here.
See, there's a whole variety of tools available for investors pitching to be “your professional stock picker” or your “leading securities and investment broker”
Or promises that you'll “be empowered to make informed trading decisions.”
etc etc.
Whichever tool you use, fundamental analysis, technical analysis, behaviourial analysis, at the end of the day, you just want to make money.
The question is, how much? And at what risk?
Now lets just take a look at how useful these reports are to a typical investor. Over here you see what's going on with the company being analysed. You get some number crunched into your EBITDA, PE RATIO, EPS etc and then they tell you what action to take – to buy, sell, hold or avoid and oh goody, at which price.
We get more numbers and derivations in the next page.
And then you have a disclaimer which in this chunk of words has this nugget of a sentence, “This
document is for the information of addressees only and is not to be taken in substitution for the exercise of judgement by addressees, who should obtain separate legal or financial advice.”
I see. So I guess I can't really trust them huh.
Well the thing is this, you can only trust yourself to make the decisions in your trade. You make a profit, the reward is all yours, you make a loss, well, you'll be the only one bearing it.
Nobody is going to play charity when it comes to investing.
So aside from going to other people for advice and help, I learnt about this tool back in school which may give you another perspective on your investing decisions.
It's called the Markowitz Portfolio model which was published in the Journal of Finance in 1952.
Basically, by using the Microsoft Excel, you should be able to find out the optimal combinations of risk and return for your portfolio.
So say, you want 15% returns . Punch in the right numbers and formula, you get an idea of how you should assign different weightage to different stocks on your portfolio. Pretty nifty actually.
And the best thing is, it's free. Just google for it.
But i'll have to add a disclaimer now, This is just another optional tool you might want to consider. We're not allowed to give financial advice!
But hey if you can't find it online, I'll be glad to provide you a copy of my school notes containing instructions if you just drop a comment here.
Labels: Excel, Fundamental, Markowitz Model, Technical
ETFs: Finally Coming Into Their Own
I find it difficult to understand why Singaporeans still like to throw their money at mutual funds, when they have similar but better listed products to choose from. In my personal view, Exchange Traded Funds, and the very similar Zero Certs launched recently by ABN AMRO, combine the best of both unit trusts and stocks, yet despite copious marketing dollars being spent on promoting them they have seemingly not taken off in a big way. The reason for this may well be that Singaporeans are either too lazy or too unsophisticated for them. They would rather get hassled over the counter by a salesperson dressed up as a bank teller to buy this or that unit trust than to check out the cheaper alternatives which are listed on the market.
Recall, ETFs are unit trusts that act like stocks. They track a range of underlying stocks, therefore providing diversification, but without the upfront fees of mutual funds. Plus, they are as liquid, transparent and easily bought and sold as stocks.
Personally, I'm still smarting over the 5% upfront sales charge DBS hit me with some years ago when I bought the so-called '8' funds they were marketing for Frank Russell. It didn't help that the funds performed awfully at first, although that was probably due to the post-bubble crash, SARS, Iraq and all the other stuff that, until March 2003, kept our market from rising.
This, incidentally, would also be my counter-argument to the notion that actively managed funds outperform the benchmark. The evidence is that, yes, some funds do outperform but you never know which one ahead of time, and funds rarely outperform year in year out.
Fact it, you can now buy so many markets and themes it's embarrassing to be caught buying unit trusts – even if FundSupermart.com has a lower sales charge below 3%. The country themes offered by Lyxor and ABN AMRO for their products are at worst interesting. (I have omitted links to their sites lest I be accused of advertising for them).
I'm also pleased to see an article in The Edge some months ago is on the way to be proven wrong. In it, the magazine headlined a story "ETF woes on the SGX" and basically said that Singapore's ETF market was too small and too illiquid, and serious players would rather go into US-listed ETFs. (Reminded me a lot of R Sivanithy writing off the Singapore market in a Business Times article many years ago because there were so many penny stocks it was becoming irrelevant. It turns out, they were just cheap. I wonder how often he ate those words since then.)
A quick check on the volumes chart of the ETFs today show volumes aren't exactly huge (charts below). But half of the ETFs have at least been traded. That's more than I can say for the ABN AMRO Zero Certs. But if the ETFs are any indication, we may see some movement soon among these, to once again prove the naysayers wrong.
Mark Laudi
Recall, ETFs are unit trusts that act like stocks. They track a range of underlying stocks, therefore providing diversification, but without the upfront fees of mutual funds. Plus, they are as liquid, transparent and easily bought and sold as stocks.
Personally, I'm still smarting over the 5% upfront sales charge DBS hit me with some years ago when I bought the so-called '8' funds they were marketing for Frank Russell. It didn't help that the funds performed awfully at first, although that was probably due to the post-bubble crash, SARS, Iraq and all the other stuff that, until March 2003, kept our market from rising.
This, incidentally, would also be my counter-argument to the notion that actively managed funds outperform the benchmark. The evidence is that, yes, some funds do outperform but you never know which one ahead of time, and funds rarely outperform year in year out.
Fact it, you can now buy so many markets and themes it's embarrassing to be caught buying unit trusts – even if FundSupermart.com has a lower sales charge below 3%. The country themes offered by Lyxor and ABN AMRO for their products are at worst interesting. (I have omitted links to their sites lest I be accused of advertising for them).
I'm also pleased to see an article in The Edge some months ago is on the way to be proven wrong. In it, the magazine headlined a story "ETF woes on the SGX" and basically said that Singapore's ETF market was too small and too illiquid, and serious players would rather go into US-listed ETFs. (Reminded me a lot of R Sivanithy writing off the Singapore market in a Business Times article many years ago because there were so many penny stocks it was becoming irrelevant. It turns out, they were just cheap. I wonder how often he ate those words since then.)
A quick check on the volumes chart of the ETFs today show volumes aren't exactly huge (charts below). But half of the ETFs have at least been traded. That's more than I can say for the ABN AMRO Zero Certs. But if the ETFs are any indication, we may see some movement soon among these, to once again prove the naysayers wrong.
Mark Laudi
Labels: ABN AMRO, DBS, ETFs, Frank Russell, R Sivanithy, The Edge, unit trusts, Zero Certs
FED up with car loans
Guess who's among the happiest when the FED announced a 50 basis cut on interest rates?
*BIG FAT GRIN*
I am now one step closer to THE VOLKSWAGEN GOLF GTI!
Well i'm not expecting prices of cars to drop of course
But the more than expected FED rate cut does mean that interest rates for loaning big ticket items such as cars – flash picture again –hehe, is likely to take the cue and come down as well.
So this morning, I did what every good employee would do when their boss is not around. Looked through the classified ads and made a few calls.
And when I asked if they knew interest rates are going to come down, I was kindly informed that interest rates are not likely going to come down at all.
Unconvinced, I began looking through the papers and calling about another 10 more car dealers both authorised dealers and parallel importers.
Same story. Interest rates are going to stay the same and in fact, more likely to go north than south.
I feel cheated.
I mean the singapore market ended up the day the the cut was announced. Banks like UOB and OCBC were among the biggest gainers. A friend who already made money on the market on DBS even complained to me that he should have hold on to it longer.
But it doesn't mean that the lower rates will translate to a lower cost of borrowing for lenders like your truly. One kind soul even advised me to look more to currency movements.
I'm now upset I didn't buy any of these bank shares.
At least it would have been some consolation to me.
But hey, if you've got any news about car loan interest rates coming down, remember log on to investorcentral.blogspot.com to tell me about it.
Ashley
*BIG FAT GRIN*
I am now one step closer to THE VOLKSWAGEN GOLF GTI!
Well i'm not expecting prices of cars to drop of course
But the more than expected FED rate cut does mean that interest rates for loaning big ticket items such as cars – flash picture again –hehe, is likely to take the cue and come down as well.
So this morning, I did what every good employee would do when their boss is not around. Looked through the classified ads and made a few calls.
And when I asked if they knew interest rates are going to come down, I was kindly informed that interest rates are not likely going to come down at all.
Unconvinced, I began looking through the papers and calling about another 10 more car dealers both authorised dealers and parallel importers.
Same story. Interest rates are going to stay the same and in fact, more likely to go north than south.
I feel cheated.
I mean the singapore market ended up the day the the cut was announced. Banks like UOB and OCBC were among the biggest gainers. A friend who already made money on the market on DBS even complained to me that he should have hold on to it longer.
But it doesn't mean that the lower rates will translate to a lower cost of borrowing for lenders like your truly. One kind soul even advised me to look more to currency movements.
I'm now upset I didn't buy any of these bank shares.
At least it would have been some consolation to me.
But hey, if you've got any news about car loan interest rates coming down, remember log on to investorcentral.blogspot.com to tell me about it.
Ashley
Labels: Federal Reserve, interest rate, volkswagen, volkswagen golf GTI
The big loser from the CPF changes: the stock market
The proposed CPF changes raising interest payments on funds less than S$60,000 by 1% would be welcomed by most Singaporeans. But unfortunately the loser out of this is the stock market. While nominated MP Siew Kum Hong went into bat for the man in the street in parliament yesterday by saying it wasn't enough, calls for the cap on stock market investments to be raised were absent.
Currently, CPF members can draw 35% of their account balance to buy shares. This is already a small percentage, particularly for the young people the Singapore Exchange is trying to attract, who have to finance a house with it. If they will now receive higher interest on their CPF savings (at least, the first S$20,000 in their ordinary accounts), there is even less encouragement to withdraw some money and invest it in higher-yielding listed securities. Remisiers, who have been calling for the longest time for the 35% cap to be lifted, might as well give up now.
Clearly, there is a case for protecting CPF members from themselves. Previously, they could draw 85% of their savings before the dotcom bubble burst, a whole bunch of them got burnt and are now calling on their MPs for food vouchers to help them out. Further, the government probably has bigger fish to fry than to help out the stock market. It's concerned people won't have enough retirement savings.
However, a commensurate increase in the stock market investible treshold would have been useful, so that at least the playing field remains as it was before.
While it's become more difficult to buy shares using money you have, it's becoming even easier to buy shares using money you don't have. Case in point: Standard Chartered's share financing scheme. Great idea in theory: let people borrow up to 10 times their monthly salary at 12% a year to buy shares. Only trouble is, who in their right mind believes any stock investment is going to throw off a 12% p.a. return in this day and age, having watched the way the market has moved since March 2003? The big sub-prime inspired shakeout perhaps gives us cause for optimism that the market is going to move higher from here. But what's the bet there'll be foreclosures on people who make losses on their share investments. How is that different from gambling your CPF retirement savings away? The bank wins, as usual.
Mark Laudi
Currently, CPF members can draw 35% of their account balance to buy shares. This is already a small percentage, particularly for the young people the Singapore Exchange is trying to attract, who have to finance a house with it. If they will now receive higher interest on their CPF savings (at least, the first S$20,000 in their ordinary accounts), there is even less encouragement to withdraw some money and invest it in higher-yielding listed securities. Remisiers, who have been calling for the longest time for the 35% cap to be lifted, might as well give up now.
Clearly, there is a case for protecting CPF members from themselves. Previously, they could draw 85% of their savings before the dotcom bubble burst, a whole bunch of them got burnt and are now calling on their MPs for food vouchers to help them out. Further, the government probably has bigger fish to fry than to help out the stock market. It's concerned people won't have enough retirement savings.
However, a commensurate increase in the stock market investible treshold would have been useful, so that at least the playing field remains as it was before.
While it's become more difficult to buy shares using money you have, it's becoming even easier to buy shares using money you don't have. Case in point: Standard Chartered's share financing scheme. Great idea in theory: let people borrow up to 10 times their monthly salary at 12% a year to buy shares. Only trouble is, who in their right mind believes any stock investment is going to throw off a 12% p.a. return in this day and age, having watched the way the market has moved since March 2003? The big sub-prime inspired shakeout perhaps gives us cause for optimism that the market is going to move higher from here. But what's the bet there'll be foreclosures on people who make losses on their share investments. How is that different from gambling your CPF retirement savings away? The bank wins, as usual.
Mark Laudi
Labels: CPF, CPFIS, Standard Chartered, Stock Market
Construction sector: is it built on sand?
"A correction is going to take place. The question is: how severe?"
This is how Winston Liew, analyst at OCBC Investment Research, is quoted by Reuters as describing the construction sector. The buying frenzy seems to be abating, fewer deals are being struck, private home prices are plateauing, the report says.
Well, fundamental investors can make their own guesses about that. We're not financial analysts, but you don't have to be Einstein to figure out how ugly it's going to get for some stocks if you applied straight-forward fundamental benchmarks. We value investors care about these far more than any blue-sky hype or earnings potential. And our very un-scientific survey found that while some stocks are just way out there price-wise, others still fall within the value framework.
Price-To-Book
On a price-to-book basis, there are few "cheap" stocks. Reuters data shows Bukit Sembawang Estates trading at 2.9x book value, Lian Beng is trading at 3.56x book, Koh Brothers at 3.7x and Chip Eng Seng at 5.6x.
You've also got Top Global at 10.6x, See Hup Seng at 11.6x and Abterra at (do my eyes deceive me?!) 315.3x.
If you take the true meaning of value investing as trading below book value, there are few to choose from: Guthrie, Permasteel and Lion Teck.
Clearly, in the event of a collapse in the property market, not every stock is going to return to book value. But what if they did?!
The problem with book value is that construction companies are not as easily measured by this. Afterall, how many assets do they actually carry on the books?
Happy to debate this with you.
Price-To-Earnings
Price-to-earnings is also not a perfect ratio, in my view, because of the way construction companies recognise earnings. And anyway, profit is an imperfect measurement of a company's financial health because of the various non-cash measures that influence it. Still, on a P/E basis, Bukit Sembawang and Permasteel are trading at 21x, See Hup Seng 25x, Top Global 43x and Lian Beng 55x.
Guthrie's, by comparison is a sanguine 9.2x, Lion Teck 7.4x and Koh Brothers 6.1x.
Yield
To fall within value criteria, few construction companies can risk any downside. Reuters data shows us TEE International is best placed with a yield of 3.2% and Low Keng with 3.9%. Few others transcend the 2% mark.
Every drunk fool looks funny when they party hard on the dancefloor and everyone else is drunk, too. But when the music stops, the lights come on and the audience sobers up, they'll be seen for what they are.
Mark Laudi
This is how Winston Liew, analyst at OCBC Investment Research, is quoted by Reuters as describing the construction sector. The buying frenzy seems to be abating, fewer deals are being struck, private home prices are plateauing, the report says.
Well, fundamental investors can make their own guesses about that. We're not financial analysts, but you don't have to be Einstein to figure out how ugly it's going to get for some stocks if you applied straight-forward fundamental benchmarks. We value investors care about these far more than any blue-sky hype or earnings potential. And our very un-scientific survey found that while some stocks are just way out there price-wise, others still fall within the value framework.
Price-To-Book
On a price-to-book basis, there are few "cheap" stocks. Reuters data shows Bukit Sembawang Estates trading at 2.9x book value, Lian Beng is trading at 3.56x book, Koh Brothers at 3.7x and Chip Eng Seng at 5.6x.
You've also got Top Global at 10.6x, See Hup Seng at 11.6x and Abterra at (do my eyes deceive me?!) 315.3x.
If you take the true meaning of value investing as trading below book value, there are few to choose from: Guthrie, Permasteel and Lion Teck.
Clearly, in the event of a collapse in the property market, not every stock is going to return to book value. But what if they did?!
The problem with book value is that construction companies are not as easily measured by this. Afterall, how many assets do they actually carry on the books?
Happy to debate this with you.
Price-To-Earnings
Price-to-earnings is also not a perfect ratio, in my view, because of the way construction companies recognise earnings. And anyway, profit is an imperfect measurement of a company's financial health because of the various non-cash measures that influence it. Still, on a P/E basis, Bukit Sembawang and Permasteel are trading at 21x, See Hup Seng 25x, Top Global 43x and Lian Beng 55x.
Guthrie's, by comparison is a sanguine 9.2x, Lion Teck 7.4x and Koh Brothers 6.1x.
Yield
To fall within value criteria, few construction companies can risk any downside. Reuters data shows us TEE International is best placed with a yield of 3.2% and Low Keng with 3.9%. Few others transcend the 2% mark.
Every drunk fool looks funny when they party hard on the dancefloor and everyone else is drunk, too. But when the music stops, the lights come on and the audience sobers up, they'll be seen for what they are.
Mark Laudi
Labels: Bukit Sembawang, Chip Eng Seng, construction stocks, Koh Brothers, Lian Beng, Singapore Property
Crude Oil Prices Hit US$80 mark
Year 2004. August. Oil prices hit another new high after Russian oil giant Yukos announced it will not be allowed to use frozen funds to pay for operations. The market grips its chair in tension and scrutinizes charts as oil prices reach - $44.
Year 2007. September. Crude oil prices hit US$80. And frankly the market doesn't care. In Singapore, the STI closed at 1.69 points lower yesterday. And according to the Straits Times today, economists and analysts don't think very much of this new figure nor future record highs.
US$100 per barrel . So freakin what?
The question ringing in my head now is - we're not too far off from 2004, so why the big difference in the reactions now? I think i've got an idea. Remember that our economy is in a boom. GDP for Q2 2007 saw a 13.6% quarter on quarter growth and the optimism is still growing on strong.
And that's where the little increases – no matter how many – don't count. GST increase, grumble grumble. Bus fares increase, grumble grumble. And that's it. Everybody's in too optimistic a mood to throw a wet blanket on the party. Inflation creeps out at us but we don't care.
But we should. The US is experiencing the pains of ignoring this crafty little thing call inflation. Alan Greenspan just admitted last week on a CBS News programme, 60s that While he was aware a lot of these practices were going on, he had no idea how significant sub prime mortgages were going to be until very late.
See what that late realisation did to the markets?
We're in trouble of making that same mistake and not realise it until we reach the brink of a recession. Could be too late by then.
Ashley Choo
Year 2007. September. Crude oil prices hit US$80. And frankly the market doesn't care. In Singapore, the STI closed at 1.69 points lower yesterday. And according to the Straits Times today, economists and analysts don't think very much of this new figure nor future record highs.
US$100 per barrel . So freakin what?
The question ringing in my head now is - we're not too far off from 2004, so why the big difference in the reactions now? I think i've got an idea. Remember that our economy is in a boom. GDP for Q2 2007 saw a 13.6% quarter on quarter growth and the optimism is still growing on strong.
And that's where the little increases – no matter how many – don't count. GST increase, grumble grumble. Bus fares increase, grumble grumble. And that's it. Everybody's in too optimistic a mood to throw a wet blanket on the party. Inflation creeps out at us but we don't care.
But we should. The US is experiencing the pains of ignoring this crafty little thing call inflation. Alan Greenspan just admitted last week on a CBS News programme, 60s that While he was aware a lot of these practices were going on, he had no idea how significant sub prime mortgages were going to be until very late.
See what that late realisation did to the markets?
We're in trouble of making that same mistake and not realise it until we reach the brink of a recession. Could be too late by then.
Ashley Choo
Labels: Alan Greenspan, crude oil prices, grumble, GST hike, inflation
Fare Hike: SMRT Shareholders Penalised Again
The Public Transport Council uses a fairly vague financial ratio to decide not to grant the Singapore MRT an increase in fares. So we decided to do a comparison of a variety of other ratios to see whether this yardstick stands up to scrutiny. Our conclusion is that ROTA is not only not useful. It is unfair to punish SMRT for being an efficient, profitable company.
The PTC said in granting SBS, but not SMRT, the right to increase fares by up to two cents it used the Return On Tangible Assets (ROTA) as a "reality check". This measures how much money the company makes based on the value of its trains, equipment and other sellable, tangible assets. According to Reuters data, SMRT has a ROTA of 11% while MTR Corp's is 6.7%. In terms of gross profit margin, last financial year MTR Corp's was a hefty 81.1%, but outpaced by SMRT's 89.8%. At best, all this means is that SMRT is better managed, not that it is gouging consumers.
On a cashflow basis – always our preferred yardstick – MTR is actually performing significantly better than SMRT: S$0.37 compared to SMRT's S$0.18. But even so, this depends on the number of shares on issue.
Let's check out some other ratios, based on Reuters data and a HKD-SGD exchange rate of 5.148:
Revenue growth (last financial year)
MTR Corp: 4.24%
SMRT: 4.41%
Revenue per share
MTR Corp: S$0.34
SMRT: S$0.51
Net earnings per share (a fairly useless but commonly-accepted accounting standard, but let's use it anyway for now):
MTR Corp: S$0.27
SMRT: S$0.09
Dividend per share (last financial year)
MTR Corp: S$0.08
SMRT: S$0.07
Book value per share
MTR Corp: S$2.70
SMRT: S$0.42
Total revenue per employee (last financial year)
MTR Corp: S$282,454
SMRT: S$132,938
We could go on and pick probably a dozen other ratios, but what does this list tell us?
In short, pretty much nothing.
The reason is that while SMRT and MTR Corp are both light rail operators in city states, that's just about where the similarity ends. MTR Corp is a S$24.8 bln company, almost ten times the size of the SMRT's market capitalisation of S$2.6 bln.
Further, MTR Corp has many more people to serve than Singapore, based on population size alone.
In my view, the much better yardstick would be to look at the inflation rate, to see how much of an impact the fare increase has on the average consumer. Is the fare increase going to hurt people's hip pockets? That should be the ultimate question, not whether a company is so well run that it is efficient and profitable.
Two cents is pittance, really, but the principle counts. They are robbing Peter to pay Paul, by penalising shareholders to appease commuters. If you take this attitude, it would be better for the SMRT to be less-well run. With a lower ROTA, it would be granted fare increases more readily.
Or take SMRT private and run it as a public service, not as a publicly listed company. Ultimately, publicly listed companies have their shareholders to answer to, not their customers.
Mark Laudi
The PTC said in granting SBS, but not SMRT, the right to increase fares by up to two cents it used the Return On Tangible Assets (ROTA) as a "reality check". This measures how much money the company makes based on the value of its trains, equipment and other sellable, tangible assets. According to Reuters data, SMRT has a ROTA of 11% while MTR Corp's is 6.7%. In terms of gross profit margin, last financial year MTR Corp's was a hefty 81.1%, but outpaced by SMRT's 89.8%. At best, all this means is that SMRT is better managed, not that it is gouging consumers.
On a cashflow basis – always our preferred yardstick – MTR is actually performing significantly better than SMRT: S$0.37 compared to SMRT's S$0.18. But even so, this depends on the number of shares on issue.
Let's check out some other ratios, based on Reuters data and a HKD-SGD exchange rate of 5.148:
Revenue growth (last financial year)
MTR Corp: 4.24%
SMRT: 4.41%
Revenue per share
MTR Corp: S$0.34
SMRT: S$0.51
Net earnings per share (a fairly useless but commonly-accepted accounting standard, but let's use it anyway for now):
MTR Corp: S$0.27
SMRT: S$0.09
Dividend per share (last financial year)
MTR Corp: S$0.08
SMRT: S$0.07
Book value per share
MTR Corp: S$2.70
SMRT: S$0.42
Total revenue per employee (last financial year)
MTR Corp: S$282,454
SMRT: S$132,938
We could go on and pick probably a dozen other ratios, but what does this list tell us?
In short, pretty much nothing.
The reason is that while SMRT and MTR Corp are both light rail operators in city states, that's just about where the similarity ends. MTR Corp is a S$24.8 bln company, almost ten times the size of the SMRT's market capitalisation of S$2.6 bln.
Further, MTR Corp has many more people to serve than Singapore, based on population size alone.
In my view, the much better yardstick would be to look at the inflation rate, to see how much of an impact the fare increase has on the average consumer. Is the fare increase going to hurt people's hip pockets? That should be the ultimate question, not whether a company is so well run that it is efficient and profitable.
Two cents is pittance, really, but the principle counts. They are robbing Peter to pay Paul, by penalising shareholders to appease commuters. If you take this attitude, it would be better for the SMRT to be less-well run. With a lower ROTA, it would be granted fare increases more readily.
Or take SMRT private and run it as a public service, not as a publicly listed company. Ultimately, publicly listed companies have their shareholders to answer to, not their customers.
Mark Laudi
Labels: fare hike, MTR Corp, Public Transport Council, SBS, smrt
Analysts shut the gate after the horse has bolted ...again
Check out this headline in the Business Times today: "Buy stocks with good earnings, yields: analysts" Ah, here we go again. That old tradition of shutting the gate after the horse has bolted. Where in the world were the analysts before the US subprime issue blew up in our faces? Remember what happened during the dotcom days, when analysts were among the cheerleaders for overhyped, under-profitable tech stocks. Only after the crash did they say, "oh… um… yeah, it's better that you stick with companies that are actually generating cashflow".
Here are some of the gems from the report this morning.
No kidding!
And Carmen Lee from OCBC Securities is quoted as saying:
I am sick to the teeth with this sort of stuff. Don't tell me to stick to value stocks after the market has fallen 500 points! The real worth of analysts' calls is to help their clients avoid these big falls in the first place. All the comments are valuable, but they are coming far too late. We needed to have heard these comments when the market was tracking above 3,600 in late July.
Here are some of the gems from the report this morning.
"…Citigroup's Lim Jit Soon said that feedback from a marketing session in Hong Kong suggested investors are 'generally focusing on markets that have better earnings prospects'."
No kidding!
"Another emerging theme: 'avoiding companies with direct exposure to the US'."It's like rocket science.
And Carmen Lee from OCBC Securities is quoted as saying:
"'One area we are focusing on now is higher-yielding stocks.'"Pure genius.
I am sick to the teeth with this sort of stuff. Don't tell me to stick to value stocks after the market has fallen 500 points! The real worth of analysts' calls is to help their clients avoid these big falls in the first place. All the comments are valuable, but they are coming far too late. We needed to have heard these comments when the market was tracking above 3,600 in late July.
Mark Laudi
Jobs wishlist for Lee Hsien Yang
The whole discussion over whether Lee Hsien Yang should be paid a consultant's fee separate from a fee as chairman is a bit ridiculous, when you consider the calibre of the former CEO of Singapore's largest company. His 12-year experience and position as brother of the Prime Minister are incredible assets which other multinationals would pay considerable fees for. Which brings me to the point of this discussion: Lee Hsien Yang is completely under-utilised as chairman of Fraser & Neave, and we predict it won't be long - maybe 6-12 month-s - before we'll see additional appointments. To help speed this process along, we've made a list of possible jobs for Mr Lee:
Chief Executive, Integrated Resort & Casino. We don't care which one - Marina Bay or Sentosa. But the fact that Lee staked his reputation on the purchase of Optus makes him a perfect contender for this job. That acquisition has paid handsome dividends for SingTel since 2001 and shut up the naysayers who accused him of overpaying. He took a big gamble and won. What more can we ask for from a possible CEO of one of the two biggest gambling houses in Singapore (incidentally, he is already a director of that other big gambling house here, the Singapore Exchange).
Ambassador to the United States. His pedigree, his business acumen and the tempering effect his self-effacing and modest nature will have on the brash and outspoken Americans suggest that he would be well-suited to a political appointment. Plus, the well-regarded Chan Heng Chee has been there since July 1996 and may like to refresh herself with an extended return to Singapore.
Chairman of Virgin Group. Richard Branson's a fun guy - but so is Lee Hsien Yang. Short of joining SIA as Chief Executive (Chew Choon Seng's been there a few years already, but we reckon he's doing alright), Hsien Yang may as well whip Virgin Atlantic into shape, so SIA's 49% is well looked after.
What are your suggestions? And why?
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Chief Executive, Integrated Resort & Casino. We don't care which one - Marina Bay or Sentosa. But the fact that Lee staked his reputation on the purchase of Optus makes him a perfect contender for this job. That acquisition has paid handsome dividends for SingTel since 2001 and shut up the naysayers who accused him of overpaying. He took a big gamble and won. What more can we ask for from a possible CEO of one of the two biggest gambling houses in Singapore (incidentally, he is already a director of that other big gambling house here, the Singapore Exchange).
Ambassador to the United States. His pedigree, his business acumen and the tempering effect his self-effacing and modest nature will have on the brash and outspoken Americans suggest that he would be well-suited to a political appointment. Plus, the well-regarded Chan Heng Chee has been there since July 1996 and may like to refresh herself with an extended return to Singapore.
Chairman of Virgin Group. Richard Branson's a fun guy - but so is Lee Hsien Yang. Short of joining SIA as Chief Executive (Chew Choon Seng's been there a few years already, but we reckon he's doing alright), Hsien Yang may as well whip Virgin Atlantic into shape, so SIA's 49% is well looked after.
What are your suggestions? And why?
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Labels: Chairman, Consultancy, Fraser Neave, Lee Hsien Yang
Ben Bernanke & "Curing Mad Cow Disease"
Ben Bernanke had a tough job last Friday. His speech had to both calm the capital markets as well as remind people they needed to take responsibility for their own finances. In hindsight, it was probably obvious he was going to say the Federal Reserve stood ready to support the financial markets with liquidity when necessary. Was he really ever going to say the opposite? But the most important aspect of his speech was that people needed to be held accountable for their own actions. We see this every time there is a bubble in one part of the economy or another. Remember Alan Greenspan's "irrational exuberance" and "conundrum" comments? They were in essence gentle reminders to people to… ahem… take a reality check. It's a lesson we value investors learnt long ago, and frankly we wished everyone else would wake up and took note of it.
Value investing is about not overpaying for assets, not overstretching yourself to buy them, and selling out before "mad cow disease" (=bull run not based on fundamentals) strikes. Out of all the investment strategies available, I fail to see why so many people don't invest based on value criteria. Instead, they trade based on rumour and momentum, and then look for someone to blame when they get burnt. As they inevitably do, because people who trade based on rumour and momentum have to watch the market continuously, and must continuously look for signs that the market is about to turn against them. There is certainly money to be made in markets this way, but there is also a lot to be lost this way.
Ben Bernanke did well to tell people the Federal Reserve wasn't there to bail out overleveraged positions. Amen! If anything, the Federal Reserve is there to whack those speculators over the head, as part of its role to maintain stability in the financial system, be it price stability or stability in the sustainability of the economic cycle. If I was Bernanke, I might have had harsher words for those who not only bought sub-prime mortgages (which have every reason, so that poorer US families can also afford their own homes), but also packaged them neatly into securities, then sold them, then leveraged them to the hilt. Bernanke is far more the diplomat, but quite clearly his message to all those "mad cow" sufferers is: serves you right!
Now, let's get back to sensible investing based on strong fundamentals (which many economies in the world are currently enjoying) and let's hope the hot money from the speculators who punted big on sub-prime mortgages either join the fray or stay out altogether. We'll all sleep better for it.
Mark Laudi
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ArchivesValue investing is about not overpaying for assets, not overstretching yourself to buy them, and selling out before "mad cow disease" (=bull run not based on fundamentals) strikes. Out of all the investment strategies available, I fail to see why so many people don't invest based on value criteria. Instead, they trade based on rumour and momentum, and then look for someone to blame when they get burnt. As they inevitably do, because people who trade based on rumour and momentum have to watch the market continuously, and must continuously look for signs that the market is about to turn against them. There is certainly money to be made in markets this way, but there is also a lot to be lost this way.
Ben Bernanke did well to tell people the Federal Reserve wasn't there to bail out overleveraged positions. Amen! If anything, the Federal Reserve is there to whack those speculators over the head, as part of its role to maintain stability in the financial system, be it price stability or stability in the sustainability of the economic cycle. If I was Bernanke, I might have had harsher words for those who not only bought sub-prime mortgages (which have every reason, so that poorer US families can also afford their own homes), but also packaged them neatly into securities, then sold them, then leveraged them to the hilt. Bernanke is far more the diplomat, but quite clearly his message to all those "mad cow" sufferers is: serves you right!
Now, let's get back to sensible investing based on strong fundamentals (which many economies in the world are currently enjoying) and let's hope the hot money from the speculators who punted big on sub-prime mortgages either join the fray or stay out altogether. We'll all sleep better for it.
Mark Laudi
Watch the BlogCast here, or using your mobile phone on the Investor Central pages of
StarHub Gee!
StarHub i-mode
MobileOne miworld
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