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CONTENTS
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Issue 23
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11 Jan - 07 Feb 2010
Despite the challenging year that was 2009, some positives did emerge in the Malaysian investment scene, the equity market in particular.
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PERSPECTIVE FEATURES
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2010: The Malaysian Economic And Investment Outlook
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The 5 Essential Elements Of Financial Freedom
p8 Land Banking: Could This Be Your Preferred Choice Of Investment In 2010?
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Malaysian Air Plans To Buy 15 Airbus A330-300s
p11 Domestic Recovery To Boost Economy
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Sharing Effective Investment Strategies
Information in this guide has been obtained from sources believed to be reliable. However, its accuracy or completeness is not guaranteed. While every precaution is taken to ensure accuracy, the publisher accepts no liability for any error which may arise. The articles are based on the opinions of the various authors and do not represent the opinions of this publication and/or the opinions of the organisation he/she represents. In no event is SHARES INVESTMENT liable for all and/or any direct or indirect loss arising from any use or any reliance of any information provided.
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All materials printed in SHARES INVESTMENT are protected under the copyright act. All rights reserved. No part of this publication may be reproduced in any form or by any means without the written permission of the publisher. Information in the publication should not be taken as offer/ advice to buy or sell securities. We, our associated companies and / or their officers, directors and employees may own or have positions in securities mentioned in the publication, and may from time to time, add on to or dispose of such securities.
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REGULARS
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Supported by
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• editorial desk •
T
he last FOMC meeting of 2009 ended without much fanfare, as the Federal Reserve voted unanimously to keep interest rate at the prevailing near-zero level. More importantly, the Fed reminded market watchers that a pullback of most of the special liquidity facilities will take place in the coming months, which could put a halt to the ongoing equity rally. Before we know it, 2009 has already flown by. For the aforesaid period, the local equity bellwether FBM KLCI has recovered strongly from a trough of 836.51 in March to close the remarkable year at above the 1,250 mark. Which means to say, investors who were brave enough to go contrarian at the pinnacle of all the doom and gloom were more than amply rewarded. As always, this is the time of the year where analysts and market experts gaze into their crystal balls, sticking out their necks to make bold predictions as to where the market is heading towards next. But whatever the predictions, do pay attention to the upcoming 4Q results reporting season, which could very
much dictate the market direction at least for the near term. For 2010, oil prices look poised to keep the upward momentum, underpinned by continuing global economic recovery and robust demand, particularly from China and India. This could benefit oil majors and players supporting the offshore and oil & gas industries. And since palm oil prices are positively correlated to crude oil prices, plantation companies could also receive a boost. This issue, we share some equity investment strategies, which investors can adopt going into the brand new year. We also take a look at what some analysts have to say about Selangor Properties, Berjaya Corp, TSM Global and Crescendo Corp in our ‘Investors’ Corner’. Wrapping up this first issue of 2010, the entire Shares Investment team wishes all our readers a wonderful and smooth-sailing year ahead! May you make huge profits in the stock market! Clement Kan Research Editor
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Perspective text : Sherman Kumar
2010: The Malaysian Economic And Investment Outlook
D
espite the challenging year that was 2009, some positives did emerge in the Malaysian investment scene, the equity market in particular. In hindsight, the Malaysian equity market performed better than most analysts predicted it would. The re-listing of Maxis into the local market provided the much needed liquidity and confidence to start the New Year. However, with the Maxis issue already factored into the equation, positive news from the external along with the internal environment should play a key role to help boost the FBM KLCI
further into 2010. The external factors are more visible, with the US recovery, China consumption patterns and regional trade and currencies being the main issues. However, of most importance would be understanding the internal issues surrounding the Malaysian economy. To know more about this, let us first look at the Malaysia economy in 2010.
Economic Outlook
The year 2009 was a challenging one, with an expected GDP growth rate of -3.3% (including 4Q2009-estimated figures). Industrial production was hit along with the much slower than expected growth
in the export sector, led by electronics, manufacturing as well as a slower than expected growth in imports due to companies slowing down on their re-stocking and component purchases. In 2010, the Malaysian economy is expected to grow by some 3%. The government expects private consumption to expand by some 2.9%; with private investments growing by some 3.4%. This is at the back of a 2.5% rise in per capita income to RM24,661. According to the Malaysian Institute of Economic Research (MIER), the liberalisation measures of the services sector that were announced in April 2009 was to ensure
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that the services sub-sectors were fully liberalised to foreign investors. This is on the premise that Malaysia lacks expertise and local investments in many of these sub-sectors. Among the sectors opened up are computer and related services, health and social services, tourism services, transport, recreational, business services, and shipping. In addition, the long-standing 30% Bumiputra equity requirement for newly listed companies was removed, making investment conditions less restrictive. This development took place on 30 June 2009. The measures were to bring Malaysia’s financial market closer to regional benchmarks. For the average person, the relief came in the individual tax relief on broadband subscription fee of RM500 a year from 2010 to 2012. In addition to this, the Malaysian government has decided to offer tax incentives for healthcare service providers who offer services to foreign health tourists with income tax exemptions of 100 per cent on the value of increased exports from 50 per cent previously. However, the impact of most measures will probably only reflect in 2Q2010.
Key Investment Portfolio
The New Year will likely see more activity in the construction sector as several projects are underway to boost infrastructure spending. These include the RM5b to be spent by Tenaga Na-
sional Berhad (TNB) to implement electricity generation, transmission and distribution projects in 2010. Other projects include the RM12b rail double tracking project in the northern region of Malaysia (30% completed). Meanwhile, the southern region double tracking project costing some RM3b is to take place from 2010. Other projects include an integrated immigration, customs and quarantine complex in Bukit Kayu Hitam, construction of 6 UiTM (University Institute Technology MARA) campuses and the development of the MATRADE centre. All these developments would shift the investment play on infrastructure, construction and property players in 2010. Most investors are bullish that the long dormant property sector would recover, aided by the developments of supporting projects that cater to the needs of the various infrastructure projects taking place in 2010. However, the plantations industry might be sluggish in 2010, as the Malaysian palm oil plantations undergo a replanting programme. The Malaysian government has encouraged the replanting of trees. This exercise will take a period of three years, translating into a loss of 400,000 tons of palm oil in the marketplace. As an effort to mitigate losses due to this exercise, the main players in the Malaysian market are currently on a business diver-
sification strategy to ensure better performance of their respective companies. The exercise has however put a dent to investors holding of commodity and commodity related stocks and funds. The oil and gas industry remains bullish despite the uncertainties of the global price of the commodity. It is estimated that Malaysia will account for 1.92% of Asia Pacific regional oil demand by 2014, while providing 8.74% of supply. Regional demand had risen to an estimated 16.94m barrels per day in 2009 and is forecast to reach 20.41m barrels per day by 2014. The principal importers will be China, Japan, India and South Korea. It is estimated that by the year 2014, the only regional net exporter will be Malaysia. In terms of natural gas, the region consumed an estimated 459b cubic metre (bcm) in 2009 and the demand is expected to rise to 582bcm by 2014.This augurs well for Malaysia, a principal natural gas exporter. Malaysian gas production is expected to rise from an estimated 65bcm in 2009 to a possible 110bcm by 2019. With all the information provided, we encourage investors looking to invest in Malaysia to consider these factors before making their investment decision. However, like all investment decisions, investors are advised to conduct an in-depth evaluation study before attempting any capital investment strategy. 5
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Perspective text : Yap Ming Hui
Yap Ming Hui (yapmh@whitman.com.my) is the Managing Director of Whitman Independent Advisors Sdn Bhd, who has recently launched Roadmap to Financial Freedom service to help Malaysians achieve their financial freedom.
5 Essential Elements of Financial Freedom The
I
n order to achieve financial freedom, I believe that one has at least to understand and manage the 5 essential elements of financial freedom effectively. Without knowing how to manage these 5 elements effectively, I would say financial freedom will only be a dream, not a goal to most people. Therefore, it is very important for us to understand what these 5 essential elements are and how to manage them.
Spending
Spending is one of the 5 essential elements of financial freedom. Unless and until you understand the impact of your spending to your achievement of financial freedom, it is unlikely you will achieve your financial freedom. We need to understand that the more we spend, the less we save. The more we spend, the more money we need to maintain our lifestyle in retirement years. Based
on the definition of financial freedom that I have shared previously, your spending level measures your needs and wants component of the definition.
Inflation
Inflation is another essential element that will make or break your financial freedom planning and attainment. Why? Because inflation will not only deplete your accumulated capital, it also reduces your purchasing power. This is one of the most challenging elements to understand and manage because it is intangible and difficult to see. You can only feel it stronger over an extended period of time, say 10 years or more. The fact is that most of our important financial planning goals like retirement planning and children tertiary education planning have very long time horizon. If we do not invest to grow our money higher than inflation rate, our saving will shrink by the time we need
to use it 10 or 15 years later. As a result, we will have to save much more than what we presume it needs.
ROI
Despite the negative effect of spending and inflation, one can count compound interest to help him to achieve financial freedom. The higher the return on investment (ROI) rate one can achieve, the better he can make his wealth work for him. As far as achieving financial freedom is concerned, we are not talking about ROI in isolation. It is not that you have a choice as to what ROI you want. If you don’t achieve certain ROI for your money, your effort to achieve financial freedom will be very much discounted by the impact of inflation and spending.
Time
Time is another essential element for you to consider and integrate in your financial freedom planning. Based on
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the definition of financial freedom, we need to understand the time when our financial needs and wants appear. For example, at which year will you need to finance your first child’s tertiary education, or at which year will you need to buy your house. In addition, we also need to know the time horizon that you have to accumulate your financial resources. Will it be short term, medium term or long term? Only then, you are able to structure your investment properly to achieve your funding target.
Saving
The importance of saving in achieving financial freedom needs no further emphasis. The more we save, the less we spend. As a result we have a less expensive lifestyle to maintain when we retire. In addition, the more we save, the less ROI we will need to achieve the
31-12-92 31-1292 31-12-93 31-1231-12-94 93 INTERIM
EPS EPS 73.345 – – 984.661 984.661.144 73.345 984.661 .144 1:5 114.797 – 1,110.6 1,110.615.187 114.797 .187 1,110.6 1:2 200.591 200.591 .259 15 1,765.835 15 .259 – – 156.831 156.831 – 1,765.8 1,765.8 *.2*.2
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FOR YOUR INFO
same accumulation target. For example, if you can save RM16,000 per year, you will need to get an annual ROI of 18.3% to accumulate RM1m in 15 years time. However, if you can save RM36,000 per year, you will only need to achieve an annual ROI of 8.3%.
Applying The 5 Essential Elements To Your Own Life
So, do you feel that you understand all the 5 essential elements? If you do, I must congratulate you. If you don’t, I am afraid you need to learn more about them if you really want to achieve your financial freedom. After examining the 5 essential elements of financial freedom, you will find that all these 5 essential elements are closely related and interconnected. One essential element will affect another essential element. For example,
how much you spend will affect how much you save. How much time horizon you have will affect the ROI you need to achieve an accumulation target. Therefore, understanding each of the essential elements is not enough. You need to understand the combined result of these 5 elements. As I mentioned before, each one of us will have our own financial freedom goal. Therefore, each one of us will also have our own code for our financial freedom. As a result, we need to find out what combination of spending, ROI, inflation, time and saving is the right code for us to achieve our own financial freedom. If you have not, you had better start finding it out before it is too late. You do not want to find it out too late. By then, without the essential element of time, it is going to be very difficult, if not impossible to achieve your financial freedom.
Henry Ford (1863-1947)
Ford, considered the father of the auto industry, launched a business that revolutionized American life perhaps more than any other. He founded
Ford Motor Co. in 1903 and five years later introduced the Model T, the first car to target the mass market. Ford became the biggest automobile producer in the world, manufacturing low-cost automobiles by cutting production costs, controlling raw materials and using an assembly line. When his factory workers began quitting because of the monotony of the work and rising production quotas, he doubled wages and offered a profit sharing plan.
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Perspective text : KM Lee
KM Lee is an Associate of TSI International Group Inc. Canada – A Real Estate & Land Banking Investment Company. He can be reached at lee.khai.mun@gmail.com
Land Banking: Could This Be Your Preferred Choice Of Investment In 2010?
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eople who wish to diversify their investment portfolios may want to include foreign land banking in their investment strategies. The potential returns are high, albeit not without risks. But as an instrument for medium-term placements of investible money, land banking may be one of the best investment products around for you to consider in year 2010.
Have You Heard of Land Banking?
The term “land banking� may sound new, but the idea is not. The concept may be as old as civilisation itself, or at least as old as private property rights. Land banking used to be the exclusive domain of royalty and the landed gentry, and many royal families still earn large incomes from their land holdings. Real estate develop-
ers and commercial building companies also engage in it. Some of the richest people in history started or expanded their wealth through land banking. Many people have heard of the huge fortunes made by Howard Hughes, who owned large tracts of land near Los Angeles and Nevada, and Donald Trump, who still has large holdings in Manhattan and Toronto. But few people know that one of the most successful individual land bank investors was the comedian Bob Hope, who bought 10,000 acres in San Fernando Valley, California when the area was principally orange groves, and thousands more acres in Palm Springs and Malibu when these were still undeveloped areas. He later sold these holdings at immense profits when residential development reached these areas. The basic strategy is to identify land parcels likely to
be crossed by the development path of rapidly expanding urban centres, buy the land, bide your time until actual development approaches, then sell the land to developers at a price several times more than the original purchase price. The strategy is essentially medium-term, or even longterm, in nature, because it entails holding on to the property investment and then either developing it at some future time or selling to someone else who will. It is not meant to generate immediate income to support current requirements. Three things work for you with this investment: it has huge potential for appreciation; it eliminates the hassles associated with traditional real estate investing; and it is something you can do alone or in partnership with more experienced organisations. Going into land banking requires plenty of time, knowhow and financial resources. You
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may not have these resources if you go it alone. But you can still become a land banker by partnering with organisations that specialise in raising the millions of dollars and spending the countless hours required for success in land banking. For the small investor, partnering with a reliable land-banking firm is the most viable option.
Looking For The Right Land Banking Firm
While there is great promise in land banking investments, investors should always be careful in their choice of the land banking company to put their money in. Remember, the investment is for the medium- to long-term and many things could happen in the interim. The key factor in land banking is the thrust of government policies on land use and development planning. Some companies are better equipped to deal with all the variables than others. Here are some things to look for when considering investment in land banking schemes. Company Reputation. A company with a wellestablished reputation is
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73.345 73.345 114.797 114.797 200.591 200.591 156.831 156.831 –
EPSEPS – – 984.661 984.661.144 .144 984.661 1,110.615.187 .187 1,110.6– 1,110.6 .259 15 1,765.835 15 .259 – 1,765.8– 1,765.8 *.2*.2
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one’s best bet. The firm is in the best position to assess the land and to know factors such as government policies, directives, and taxes (among others) that will influence development directions. •
Location. The old adage about “location, location, location” is always true for land.
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Timing of returns. While land banking companies will point out that their investors earned returns, it is best to find out how long it took for the returns to happen.
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Exit strategies. A landbanking project generates profits for investors only when planning permissions are granted for the development plans. One should ask the land banking company about fallback plans in case planning permissions are not obtained.
Outlook For Year 2010
Starting in 2010, the prospects of land banking project become more promising as
economic recovery takes hold. Land banking companies and governments learned from the lessons of the recent past about the proper management and supervision of land banking projects. There is no dispute about the fundamental soundness of land banking as a strategy for medium-term investments. The fact that governments in the UK, Australia, the U.S. and Canada have, in varying degrees, felt the need to engage in land banking is proof that the strategy works. The strategy is so effective that there may be up to 200 local governments operating land banking units by yearend 2009, in the US alone. This is on top of private land banking enterprises. Only the better-capitalised and better-managed companies have been able to weather the crisis, and they are now poised to take full advantage of the lower property values in the fringes of major cities. Small investors would do well to strike up a partnership with successful land banking companies, since their resources are not enough to fulfil the huge capital needed to pursue such projects successfully.
Ex-Dividend
Ex-refers to a period of time immediately before a dividend is paid, during which new buyers in the stock are not entitled to receive the dividend. A stock’s price is revised lower to reflect the dividend value on the first day of this period. On that day, a stock is said to “go ex-dividend”, which literally means “without dividend.” 9
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Corporate Digest
text : Dow Jones Newswires
Malaysian Air Plans To Buy 15 Airbus A330-300s
M
alaysian Airline System plans to buy up to 25 new wide-body Airbus planes at a list price of US$5b and is partly funding its expansion via a RM2.67b cash call. The national carrier signed a memorandum of agreement with Airbus for the purchase of up to 25 new A330-300 aircraft – 15 on firm order and an option for a further 10 planes – as part of its fleet renewal program. The company also said it plans to raise RM2.67b in a rights issue to purchase aircraft, repay debt and to meet working capital requirements. Managing Director and Chief Executive Azmil Zahruddin told reporters at a briefing that the one-for-one rights issue, to be priced at RM1.60 each, is expected to be completed in the first quarter. The planned cash call is in line with industry practice to fund major expansion, he said. Azmil said the new planes
will be delivered between 2011 and 2016 and further financing could be sourced later in the form of borrowings or further share sales. The A330-300s will be used to replace older wide-body aircraft, as well as add new capacity for its growing markets in South Asia, China, North Asia, Australia and the Middle East, he added. Airbus senior vice-president for sales and customer affairs Asia, Thomas Friedberger, said the more fuelefficient aircraft will lower operating costs. Azmil said the airline expects savings of RM300m a year when the 15 new A330-300 aircraft replace older planes. “The A330 will complement our incoming fleet of six A380s and 35 B737-800s. The new fleet will create a strong platform for us to profitably grow,” Azmil said. “By 2016, all the aircraft we have ordered will be in and we expect to have one of the youngest, most fuel efficient and environmentally-
friendly fleet in Asia.” Azmil added that the carrier plans to start owning more of its fleet. Currently, most of the airline’s planes are leased from parent Penerbangan Malaysia “Our strategy is to transform from a 100% leased fleet to owning at least a third of the aircraft in our core fleet. This will give us the flexibility to refresh the aircraft on a needs basis to provide our customers with the latest product,” he said. In a late announcement, the company said that it has signed agreements with Penerbangan Malaysia to take over its parent’s current order for six A380’s as well as two B777 and two B747 aircraft for RM3.19b. Azmil also said Airbus will compensate Malaysian Air with over RM300m for the late delivery of its A380 super jumbo aircraft. The first plane, which was scheduled for delivery in January 2011, will now be delivered eight months late in August 2011.
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INVESTORS’ CORNER
compiled : David Chung
Domestic Recovery To
Boost Economy Selangor Properties
Selangor Properties’ (Selprop) FY09 results were above expectations with a strong showing in the final quarter that pushed its net profit to RM32.3m for FY09 from a net loss of RM3.2m for 9M09. The variance was mainly due to higherthan-expected contributions from property development, which jumped 154% Q-o-Q to RM27.5m in 4Q09 from RM10.8m in 3Q09. Selprop reported a 9% Y-o-Y raise in net profit to RM35.8m in 4Q09 from RM32.9m in 4Q08 (+7.5% Q-o-Q from 3Q09’s RM33.3m). The strong property development profit came mainly from its two property projects, Bukit Permata and Selayang Mulia, which are located in Batu Caves and Selayang, respectively and also a 50%-owned shopping mall/apartment project in Perth, Australia. Selprop also Selangor Properties (FY Oct 2010) Research dated Forecast EPS 10 (sen) PER 10 (x) Forecast DPS 10 (sen) Div. Yield 10 (%) Call Target price (RM)
benefits from the turnaround in the exchange rate of A$ and its overseas investments in 3Q09 onwards. With demand for properties still strong, especially high-end properties, Selprop is likely to launch its major development project in Damansara Heights, a 107unit high-end condominium project (Gross Development Value: RM240m) in 2010.
Berjaya Corporation
Berjaya Corporation’s (BCorp) 1H10 net profit was better than expected, growing 11.5% Y-o-Y to RM93.6m, or 57% of Standard & Poor’s previous FY10 estimate. 1H10 revenue, however, was in line, rising 4.2% Y-o-Y to RM3.2b. The improved results were mainly due to higher EBIT contributions from its financial services (EBIT of RM49.1m vs. LBIT of RM18.6m in 1H09), consum-
Share price as at 31 Dec, 2009: RM3.27
Standard & Poor’s 29 Dec 2009 11.6 27.1 10.0 3.20 Buy 3.90
er marketing (+37% Y-o-Y), property (+546% Y-o-Y) and improved associate income (+250% Y-o-Y). There was also a RM74.2m write-back on the impairment of investments in its associates and investment (impairment of RM70.2m in 1H09). Gaming EBIT, however, slipped 3.6% Y-o-Y due to lower ticket sales. Berjaya Sports Toto’s resilient and defensive gaming income will continue to underpin BCorp’s FY10 earnings. Its consumer products, property and financial services divisions are expected to post stronger earnings growth, in line with the recovering economic outlook. The impending listing of Berjaya Retail (BRB) on Bursa Malaysia and the injection of Cosway into Cosway Corp Ltd, meanwhile, will further entrench BCorp’s presence in the consumer products segment. Standard & Poor’s maintains its Hold recommendation on BCorp, but lifted its 12-month target price to RM1.30 (from RM1.02). H o w e v e r, S J S e c u r i t i e s maintains its Buy recommendation on BCorp with a fair value of RM2.24. This is based on a discount of 35% 11
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Berjaya Corporation (FY Apr 2010) Research dated Forecast EPS 10 (sen) PER 10 (x) Forecast DPS 10 (sen) Div. Yield 10 (%) Call Target price (RM)
Share price as at 31 Dec, 2009: RM1.31
on the fully diluted RNAV per share of RM3.45. SJ Securities said that the group is set to perform better with the H1N1 scare being over. The hotel and resorts business will be the key sectors benefiting from this. Meanwhile the overall property market has been stronger industry wide. Moreover, the group’s property divisions had reportedly done very well over the past few months. SJ Securities expects the consumer-marketing segment to continue to grow moving forward.
TSM Global
TSM Global (TSM) reported 9M10 net profit of RM17.0m. Revenue was flat Y-o-Y but operating and pre-tax profits fell by 12% and 8% respectively due to higher copper costs and a stronger Yen versus the RM, TSM Global (FY Jan 2010) Research dated Forecast EPS 10 (sen) PER 10 (x) Forecast DPS 10 (sen) Div. Yield 10 (%) Call Target price (RM)
Standard & Poor’s 28 Dec 2009 5.7 21.1 2.5 2.1 Hold 1.30
which inflated raw material costs. A lower effective tax rate helped boost profit at the net level. 3Q10 revenue declined marginally by 1.2% Y-o-Y to RM65.1m, as sales gradually recovered to pre-crisis levels. Meanwhile, net profit for the quarter was 4% higher Y-o-Y at RM6.5m, largely boosted by a lower effective tax rate of 9.3% vs. 21.3% a year earlier. Standard & Poor’s believes TSM’s prospects are improving, judging from the sequential increases in sales and net profit over the last three quarters. It expects the uptrend in performance to prevail into FY11, underpinned by the gradual revival in the automotive industry. Standard & Poor’s continues to like TSM for its resilient earnings delivery and swift recovery from the economic
Share price as at 31 Dec, 2009: RM2.08
Standard & Poor’s 28 Dec 2009 41.2 4.9 5.0 2.5 Buy 2.30
SJ Securities 24 Dec 2009 8.3 14.5 5.0 4.1 Buy 2.24
downturn. TSM is expected to benefit further from the liberalization initiatives under the recently revamped National Automotive Policy. Valuation appears to be undemanding at prospective 4.5x FY11 PER. The current share price is also lower than its NTA/share and net cash/share of RM2.53 and RM2.26 respectively as at end-October 2009. NRA Research is projecting a sustained performance in 4QFY10 and further recovery in FY11 on account of higher vehicle unit sales and an improving economy. A fluctuating Yen and further increases in copper prices would however impact on margins. Mitigating factors for the group include its exposure to high-volume, fuelefficient and affordable cars such as Perodua’s models, sales of which have been NRA Research 27 Dec 2009 44.0 4.6 5.0 2.5 Buy 2.40
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Crescendo Corporation (FY Jan 2010) Research dated Forecast EPS 10 (sen) PER 10 (x) Forecast DPS 10 (sen) Div. Yield 10 (%) Call Target price (RM)
Share price as at 31 Dec, 2009: RM1.07
more resilient during the current economic downturn. The group also appears to have been successful in its efforts to improve productivity and control costs.
Crescendo Corporation
Crescendo Corporation’s (Crescendo) 9M10 net profit of RM14.4m came in below expectations, achieving only above-50% of consensus estimates. The variance was largely due to lower-thanexpected progress billing and sales of concrete products. Standard & Poor’s expectation of a stronger 2H10 has not materialized, as evident in the respective 11% and 29% QoQ fall in Crescendo’s 3Q10 revenue and net profit.
31-12-92 31-1292 31-12-93 31-1231-12-94 93 INTERIM
EPSEPS 73.345 – – 984.661 984.661.144 73.345 984.661 .144 1:5 – 114.797 1,110.615.187 114.797 1,110.6 .187 1,110.6 1:2 200.591 200.591 .259 15 1,765.835 15 .259 – – 156.831 156.831 – 1,765.8 1,765.8 *.2*.2
Standard & Poor’s 28 Dec 2009 11.7 9.0 7.0 6.6 Hold 1.10
Consequently, 3Q10 net profit margin fell to 10.8%, vs. 13.4% in 2Q10 and 17.7% a year earlier. Revenue from the property development and construction division in 9M10 fell 23% Y-o-Y, while the manufacturing and trading arm suffered a 27% drop in sales. Given the lackluster 9M09 results, it appears that demand for industrial/commercial properties, construction services and concrete products in Johor has yet to recover, despite the gradual improvement in the domestic economy. On a positive note, Crescendo’s balance sheet remains healthy, backed by a NTA/share of RM2.59 and a net gearing of 0.3x as at
TA Securities 24 Dec 2009 13.0 8.2 7.0 7.0 Buy 1.14
end-October 2009. TA Securities (TA) estimates Crescendo’s 9M10 sales to reach RM110m, representing 54% of total sales for FY09 (i.e.: RM203m) and expects sales to pick up in 4Q10 as the company is in negotiation with a few parties for sale of completed factories. As for the manufacturing division, TA expects the price and margin for concrete manufacturing to stabilise in 4Q10 as demand for concrete products remained strong, thanks to the construction boom in Singapore and the stimulus packages. The 2 ready-mix concrete plants are currently running at 80%, producing 654,000m3 of concrete.
Dollar Cost Averaging
Dollar Cost Averaging is a well known investing technique that involves investing a constant amount of money each month, quarter or year. The advantage of the technique is that the investor buys more shares when FOR YOUR INFO stocks are cheap and fewer shares when prices are high. While the technique can be used with any investment, it is most commonly used when investing in mutual funds. The disadvantage to using dollar cost averaging when investing in stocks is that transaction costs, as a percentage of the periodic investment, can be relatively high. $12.00 $11.00 $10.00 $9.00 $8.00 $7.00
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Across the causeway text : Xavier Lim
Sharing Effective Investment Strategies stocks, bonds, mutual funds, cash and currencies, and not stocks and stocks alone. Those who believe that diversifying their portfolio equates choosing stocks in various sectors rather than focusing on one, suffered many sleepless nights when the stock market crashed in late 2007 to early 2009 due to the financial crisis. Many people
1. Diversification
No matter what the financial experts say of investing, the best investment advice continues to be maintaining diversity in your investment portfolio. This is because you do not want to put all your eggs in one basket. Unfortunately, many people fail to understand that true diversification comes from holding
5-Year Historical Benchmark Yield
5.0 4.0 Yield (%)
3.0 2.0 1.0 Jan-09
Nov-09
Mar-08
Jul-06
May-07
Sep-05
Jan-04
Nov-04
Mar-03
Jul-01
May-02
Sep-00
Jan-99
Nov-99
Mar-98
Jul-96
May-97
Nov-94
0.0 Sep-95
I
n today’s rapidly-changing economic climate, a company needs to develop a business strategy that can adapt to changes effectively. Companies, both big and small need to understand that a small company may not always be the one, which will end up being ‘eaten’ by a big company. It is a slow company that is most likely to be ‘beaten’ by a fast company. A fast company is one that anticipates what might happen or what it might be able to make happen, and is fast to bring its products and ideas to the marketplace. Therefore, companies should understand how to develop and use foresight and anticipation to envisage possible future scenarios in preparing for change and managing it well. The same reasons apply to investment. A well-planned investment strategy is essential before making any investment decisions. With many uncertainties yet to be resolved, the investment climate remains challenging. Taking action now may feel counter-intuitive, therefore, it is advisable for investors to develop an investment strategy to handle the volatile market conditions. Here are some suggested strategies that may help you invest with more confidence in 2010.
Source: Monetary Authority of Singapore, as at 30 November 2009
10-year period chart for STI
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learned valuable lessons during this time frame. Nobody dare to say that we will never again experience a significant stock market crash. If this were to happen again, your entire retirement hopes, dreams, and funds invested in the stock market would be in deep and shark infested waters.
2. Keep It Simple
The key point is to understand what you invest. Investors may want to figure out their own financial goals and develop an investment strategy that requires little analytical research and time. For example, investing in stocks such as United Overseas Bank, Venture Corp and Keppel Corp will reduce your worry of these companies going bankrupt when the economy is in a bad shape as these 3 companies are leaders in their field. Investors should also invest in simple products with transparent structures that help to provide assurance, such as the Singapore Government bonds, REITs and international funds.
3. Asset Allocation
“No pain, no gain”, all investments involve some degree of risk. By investing in more than one asset category, investors reduce the risk of losing too much money and their portfolio’s overall investment returns will have a smoother ride. Besides holding stocks, bonds and cash, investors may want to consider allocating some of their investable assets into foreign currencies, leaving this money in a bank's foreign deposit account.
Investors need to determine his/her financial goal and risk tolerance in order to establish an appropriate asset allocation model. Investors will be able to handle volatile market conditions with an established appropriate asset allocation model that will smooth his/her ride in investment. The model should also allow investors to limit their losses and reduce the fluctuations of investment returns without sacrificing too much potential gain.
4. Rebalancing Of Portfolio
Periodic rebalancing of asset allocation is a good way of market timing. For example, if an investor’s 60/40 stock/bond allocation has morphed into a 70/30 split, then that investor should sell stocks and add bonds to bring the portfolio back on track. Data has shown that investors who aligned his/her portfolio back to the target range once a year between 2003 and 2007, was less exposed to the market crash in 2008. What’s more, if an investor trimmed the bond portion at the beginning of this year, he/she will have captured more of the rebound in stocks.
5. Be Sensible
The recent recession has taught us that we need to be more attuned to the valuations of a stock. Runaway real estate and stocks at high prices made everyone think that ‘this time it is different’ - until it was not. Everyone think they are an expert when the market is bullish, in fact, one should be staying on top of his/her investment plan and look at the valuations
of the stock using the financial ratios (those who want to find out more can visit our website www.sharesinv.com to read the archived “Education” articles). Put it simply, be proactive, not reactive. Investor should find an asset allocation model that works, stick to it, and be prepared to hold more cash if you think stocks are overvalued. This writer urges investors not to jump in and out of the stock market. This writer feels that having a cash reserve would reduce some worries of investors, allowing investors to use averaging down technique to lower their average cost in a stock that has dropped in price and ride out the storm. One of my peers complained to me that averaging down technique does not work and it is only a ‘game’ for the rich. Yes, he is right that you need some cash reserves to practise averaging down, but you do not need a huge cash reserve if you understand and has developed your investment strategy well. Global stock markets have been soaring since 09 Mar-09 on the back of efforts by the governments over the world to stabilise the financial system and push for economic growth. However, it remains uncertain whether the current rally will be sustainable in 2010. Therefore, this writer suggests that investors should not only diversify their portfolio among different class of assets, but also choose stocks in various sectors to reduce risks. Remember that investing in what you are comfortable with is one way to balance your risk and return. 15
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