A Stable Dividend Stock worth looking at

China Merchants Holdings (Pacific) Limited (SGX: C22) reported a solid first quarter results yesterday, with net profits rising 14% to HK$222.67 million from the corresponding quarter last year.

Listed in August 1981, China Merchants Holdings (Pacific) Limited (SGX: C22) ("CMH" in short) was originally a hotel operator under the name of Hotel Tai-Pan Pte Ltd. However, according to this quarter results, the company has announced the disposal of its property development business on 16 April 2014. The sale is a positive sign since the segment has not been performing well and with that, CMH can now focus on its profitable and growing toll road division.

Currently, the company owns and operates four toll roads totalling 367 kilometres. They are located in Zhejiang province , Guangxi Zhuang Autonomous Region and Guizhou province in the PRC. These roads form the main component of the national and provincial road networks.

Some basic numbers

While group revenue for 1Q2014 increased 6% to from HK$436.4 million to HK$464.4 million, net profits edged up 14% due to several components in the income statement.
  • ·   Other operating income swelled 199% from HK$4 million to around HK$11.9 million mainly due to recognition of deferred income and effective interest on other receivables relating to compensation granted by local governmental authorities
  • ·    19% and 39% fall in admin and finance expenses. The former is because of lower professional fee incurred by the Company and lower administrative expenses incurred by Beilun Port Expressway while the latter is due to repayment of certain long term bank borrowings
  • ·    Share of results of jointly controlled entities also inched up 10% with higher contributions from the group's two toll roads, namely Gui Liu Expressway and Gui Huang Expressway

Financial Position and Valuation

If you zoom in on the liabilities area, you would have noticed that it is slightly on the high side at HK$3.38 billion as net profits only amount to HK$222.67 million for the quarter. On the other hand, cash and cash equivalents stands at HK$1.64 billion, and capital expenditure remain at a bare minimum - HK$5.05 million for the quarter.

Executive Chairman and CEO Mr Luo Hui Lai said, “The Group delivered strong results in 1Q2014, continuing the good momentum from FY2013. We expect our toll road business to continue to deliver positive results in light of the economic growth in the provinces where they are located and the continued growth in vehicle ownership.”

CMH last closed at S$0.96 and trades at a Price-earnings ratio of 7.28. It also offers a juicy 7.29% dividend yield, which may attract the attention of many income investors since its underlying toll road businesses can support the dividend pay-outs through stable, recurring cash flows.


Why SMRT and SBS Transit Prices increase/surge?

If you haven't notice, the prices of SMRT and SBS Transit soared to S$1.205 and S$1.315 respectively, up almost 20% from wednesday (23 Apr) closing prices!!

SGX has also launched an investigation/query to investigate on the unusual trading activity.

But what actually happened... I received an analyst report stating 2 possible reasons:

Scenario 1 

Railway Financing Framework in place - Highly possible – The house believes that SMRT is making inroads with regulators regarding the accounting of asset transfers under the new rail-financing framework. This is assume to be very close to a conclusion. 

In short, the end result will be a predictable cash flows and a more sustainable financing model, which will alter the fate of the company. Under the new rail financing framework, LTA will collect a licence charge that the operator will pay for the right to run and generate returns from the revenue service. The monies received will be pooled together to replace and enhance operating equipment such as trains, signaling systems and other operating assets for operating the Railway Transport System (RTS). 

The licence charge comprises fixed and variable components. The fixed component is calibrated to take into account factors such as the viability of the line, its long-term operational and maintenance needs, and the benefits and costs that the line is likely to bring to/impose on the rest of the railway network. The variable component ensures the appropriate level of risk-sharing between government and the operator. 

CIMB modelled in significant amount of service enhancement works that would be completed within the next 24 months, related costs would taper, leading to margin recovery in FY15F. As such, the house sees a 36% yoy improvement on core net profit (FY15 net profit S$84m).

The shift/change in business model (to cost-plus model, if indeed this happen) will would also go a long way into reversing SMRT’s bus losses 12-18 months from now and significantly improve margins, earnings and cash flows. This should help mitigate the incremental costs required to improve the other related opex, which are currently causing severe the cost-revenue misalignment.

Scenario 2: Nationalization of SMRT 

- Lower possibility – Though not ruled out entirely, is the possibility of nationalizing the company. CIMB however do not think it is in the interest of the government to “own” back the company, and subject itself to further abuse from disgruntled commenters whenever trains breakdown, or fare increase is necessitated. 


Investment/finance App (why moolah) review

Tried out one financial planning app yesterday which depicts your life from 24 (as you start working) to when you are around 33.

Unbiased review here since i am not paid or whatsoever..

The app is quite fun and enriching for those who are not so familiar with personal finance. Whole process only last 1hr+ but can give you knowledge for your entire lifetime!

Playing the game brings light to certain important financial decisions you would have neglected/missed out in your busy course of work.

For one instance, the wedding preparations do add up! My "dream" wedding costs ard $50+k and still may be insufficient for my partner (she want a europe tour :O)

On the other hand, the app may be too optimstic. It does not take into account many little things as well. For instance, a pub outing and giving of a "red bomb" only occurs twice per year? I think at my age where everyone is getting married, my ang paos amt and qty will soar..

Furthermore, it teaches about investing and how liabilities like a car can eat into your savings so quickly!

All said, Overall it can be quite enriching for ppl who are new to financial planning and interested to find out more. Playing and increasing your financial knowledge makes it a win-win situation!


QT Vascular IPO - upcoming IPO

Recently, the IPO fever seems to heat up again. While there are 2 upcoming IPOs, QT Vascular and PACC Offshore Services Holdings (POSH); the former seems to be down-played due to the lack of advertising and significantly smaller size.


QT Vascular produces devices to treat diseased arteries in the heart and elsewhere, aims to develop new products and enhance its existing ones. The company, which operates out of California and Singapore, registered revenue of US$1.5m for FYSep12, and doubled to US$3m in FY13. 

Current flagship product is a balloon catheter known as the "Chocolate" PTA balloon device, which is implanted to treat peripheral artery disease, or blocked arteries in the leg. It is the first Singapore-designed device to win approval from the US FDA. 

The company counts multi-national pharmaceutical company Johnson & Johnson, the Economic Development Board's Biomedical Sciences Investment Fund, and homegrown Juniper Capital among its major shareholders. QT Vascular is working with UOB Kay Hian and Prime Partners for the IPO.

Details of IPO
The company will list on the Catalist, with a placement of 196,429,000 new shares, at S$0.28 each. This translates to about S$50 million in proceeds, less fees. The offering is not made public and only Each of Three Arch Partners, BMSIF and J&JDC intends to subscribe for Placement Shares in the Placement.

QT Vascular will use S$5 million for commercial expansion and marketing purposes, while S$15 million will be used for new product development. The rest of the proceeds – S$30 million, will be used for general working capital purposes.

The IPO Prospectus can be found here.

Opinion of IPO

Since you are not able to buy it before it list in Catalist, should you buy after the IPO? IMO, it's a no-no. Just look at the continued losses it has been making.

Secondly, It doesn't even have a website!? Maybe it's only me who cannot find it though. Lastly, Biomedical technology companies similarly like Biosensors tend to fluctuate a lot based on the Patents and successful breakthrough next time. While it may work in the U.S. due to strong coverage, it may not bode so well for a rather small Catalist company like QT Vascular.


Why Money comes Later in Life...

If you have taken a chance to look at what my Fool.sg colleague, Ser Jing has mentioned in his post, You would kinda change your mindset on looking at how huge fortunes can be manifested with one word - Dream.

In the post, he talked about how many companies concentrate with a big dream be it like facebook (creating a social network for the world) or Apple (building great products with creative designs) and money will automatically flow into their pockets.

On another article by the Straits Times correspondent, Jonathan Kwok, he then mentioned about how some people should avoid following their passion if it does not equate to you making it big (something along the line). He concluded by saying that you should try to balance your personal interests and earning ability and you will be satisfied if you are good at something.

IMO, I will follow the mantra by the leaders of past eras to create the future ahead for me.

Like what Steve Jobs say, "would you want to regret living your life doing what people expect of you or doing what you love?"

Which one do you find meaning in? I have heard of many success stories from the newspapers where they started off part-time and eventually generate lots of money while doing something they love as well.

Body Shop is one famous example too where the founder wanted to make natural body soaps/lotions without chemicals that harm the earth. In the process of selling to millions of people, she became very wealthy as a result, a by-product from pursuing her passion. 

Hope this post will set you thinking for your good Friday tomorrow! I hope one day I will pursue my dreams & passion of educating the masses on how to get rich too! Cheers!


Why You should take Brokers' Analyst Reports with a Pinch of Salt

Conflicting Interests

If you have watched the "Wolf of Wall Street" Movie, the most significant takeaway is that people (not only stock brokers) are usually there for their own interests. When you know that a stock broker earns his pay-check by the commissions when you trade, you would have jolly well know that they will try all means to entice you to trade stocks in and out actively for their commissions to be as fat as possible.

Furthermore, they have the tendency to be slightly biased when the company is doing business with the bank they are working in too. That said, you cannot say that all of them are bad apples too. Some of them provide us with valuable and relevant stock information that are only available/accessible to them. My stock broker is one of them, everyday he sends me the forecasts and various reports.

However, ultimately I have to make the final judgement and decide whether to invest, according to my investment style. What he is doing is just to provide the information for me as a platform to filter through the stocks i want to look at. Thus, when you make money through their recommendations, you are happy and they will be happy too. However, if things turn for the worse, you cannot blame them as they are only providing recommendations - its up to you if you want to follow; and they are protected with disclaimers.

No crystal ball

When you see two different banks' analysis on a stock with different views, one say SELL, one say BUY, which one should you listen to? The following example below depicts the question relatively well...

Well, while analyst can do a detailed analysis of the firm using the same data set, different assumptions can lead to different results/outcomes. Neither one of them is wrong down here - they are just providing their viewpoint about where the stock price is going, a target price they say.

All in all, the lesson here is to educate yourself if you wish to be successful in stocks investment. And there is the slogan that goes - there is no free lunch in this world. You cannot expect to just buy into all the stocks recommended and think that you will become a millionaire at the end.


How Procrastination is not making you Rich

Procrastination can have a number of undesirable consequences, such as missed deadlines, wasted opportunities and sub-standard work as a result of insufficient time. The costs of procrastination, while substantial, are not easy to quantify.

But what can be quantified – at least to some extent – are the costs associated with putting off decisions and actions when it comes to personal finances and investments. Beware of such "financial procrastination," because the price tag of needless delay in this crucial area can be steep.

Five Costs of Financial ProcrastinationBroadly speaking, we can classify the costs of financial procrastination in four main areas: 

  1. Delays in investing
  2. Putting off routine investment decisions
  3. Tardiness in organizing personal finances
  4. Procrastinating on major financial decisions
#1 Investing Delays

Delays in putting your money to work through investments can eventually end up costing you a lot. Consider the case of two hypothetical investors, Mr. Invest-First and Mr. Play-First, who begin investing $2,000 annually at ages 30 and 40 in REITs, assuming that the annual return is 5% (rather conservative). By the time they turn 60, Invest-First's portfolio would have grown to about $132,878, twice the size of Play-First as Table 1 shows.

Annual Rate of Return 5.00% 5.00%
Period (years) 30 20
Annual Investment $2,000 $2,000
Total Investment (I) $60,000 $40,000
Total Value (V) $132,878 $66,132
Growth (V – I) $72,878 $26,132
Cost Of Procrastination$26,746

Of course, the fact that Invest-First invested an additional $20,000 over 10 years accounts for part of the difference in the two portfolios. But a substantial part of the difference – or $26,746 – can also be attributed to the compounding effect of the $20,000 for the additional 10 years that Invest-First has been investing. 

Another way of looking at this from Play-First's viewpoint is that this $26,746 in incremental growth represents his "cost of procrastination" for the 10-year period (recall that he commenced investing at age 40, rather than at 30).
#2 Putting Off Investment Decisions

Putting off investment decisions until the market "improves," or consciously delaying investing in a bid to "time the market," can also cost thousands of dollars over the long term. Many professionals view market timing as an exercise in futility, primarily because missing the market's best days can erode returns significantly. (Personally I am guilty of this too!)

One study shows that $10,000 invested in the S&P 500 on January 1, 1980, would have grown to $121,029 on June 30, 2008. But if the investment missed just the 10 best-performing days for the index over this period, it would have only grown to $70,745 or about 42% lower.

Another study shows that $10,000 invested in the S&P 500 for a 30-year period from January 1, 1979 would have grown to about $229,000 by December 31, 2008, or an 11.0% annual rate of return. Missing the best 20 months over this time-frame would erode the value of the investment to approximately $42,000, or 4.9% annually.

Sometimes, the best way out can be the easiest way too. And that one solution would be to make periodic investments through an automatic plan (we term it as dollar-cost averaging) rather than through a lump sum to avoid missing out on days when financial markets are on a red-hot streak.

3. Tardiness in Organizing Personal Finances

Getting your financial house in order is a vital area that may tend to get overlooked in the hustle and bustle of daily life. In some cases, this tardiness may have a direct opportunity cost - for example, a $50 gift card that you delayed using for two or three years until it was well past expiry. In other cases, procrastination may have a relatively minor effect at first, but may have a cascading impact that gets magnified over time.

One popular example, would be the tendency in delaying paying of bills and incurring late charges or interest costs. On top of these financial penalties, it may also lead to a bigger impact to one's credit profile and credit score.

A couple of minor bills that you never got around to paying can eventually end up as a red flag on your credit report. Lenders who view your credit report may then view you as a higher-risk borrower, and charge you a higher interest rate to compensate for this perceived greater risk. 

This can result in thousands of dollars in higher interest costs for big-ticket items such as a house or a car, a steep price to pay for procrastinating on a couple of bill payments.

#4 Procrastinating on Major Financial Decisions

While the preceding cases can cost in the thousands, procrastinating on major financial decisions can ultimately cost you the most.
Procrastinating on major financial decisions may lead to a number of pitfalls such as:
  • Making hasty decisions without adequate research
  • Having insufficient time to read and analyze the "fine print" in contracts
  • Not having adequate insurance coverage or assets in times of need
Buying an overpriced condo without assessing its investment merits; being unaware that one's adjustable-rate mortgage will reset to an interest rate that is twice the teaser rate; being struck down with a debilitating illness when one does not have long-term disability insurance. 

These are all examples of unfortunate financial situations that can wipe out a massive chunk of one's bank balance and net worth. However, doing one's homework and taking prompt action can help avert or at least mitigate these losses.


Time is indeed money when decisions have to be made and actions taken with regard to your personal finances and investments. In this regard, prompt action needs to replace financial procrastination, since the costs associated with the latter can be very steep.

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