Tuesday, May 27, 2014

Total Debt Servicing Ratio (TDSR) for Property Loans - a very pleasant surprise

I haven't been looking at properties for some time but i had a pleasant surprise when a friend told me that I could actually use my equity portfolio to 'increase' my gross monthly income so that i can borrow more for a property loan based on Total Debt Servicing Ratio (TDSR)

Examples of some eligible financial assets to 'increase' ones gross monthly income
Gold, unit trusts, structured deposits, stocks, debentures

If i pledge these financial assets to the bank, i could use 70% of its value to 'increase' my gross monthly income. However, if these are not pledged, i could only use 30% of its value.

Gross monthly income from eligible financial assets = (70% or 30% X eligible financial assets) divided by 48

Say for example, SGdividends happens to have $1 million worth of eligible financial assets.

Pledge to the bank
70% X $1 million = $700,000
'Increased' gross monthly income = $700,000/48 = $14,583.33

Do not pledge to the bank
30% X $1 million = $300,000
'Increased' gross monthly income = $300,000/48 = $6,250

Now, that's a lot of 'additional' gross monthly income. However, this is what the MAS guideline (MAS notice 645) allows and i have not verified how much more stringent the banks will be. 

Friday, May 16, 2014

Old Town Berhad and Super Group - different state of affairs

Super Group dropped another 3-4% on 15 May 2015. So i shout with GLEE, YES! Having bought at $2.95, why am i happy when it closed at $2.84 the next day? Shouldn't i be a bit affected  if not emotional? Actually, i exaggerate and i am not happy but i am definitely not emotional and i stand ready to buy. 
Firstly, looking at the number of short sellers,
15 May 2015 - Volume of  transacted shorts 630,685
14 May 2015 - Volume of transacted shorts 421,000
12 May 2015 - Volume of transacted shorts 90,000
09 May 2015 - Volume of transacted shorts 70,000
08 May 2015 - Volume of transacted shorts 173,000
It is obvious that this price plunge is due to people playing the market and not due to the long term fundamentals of the company.

Secondly, my partner- in -crime alerted me to a somewhat opposite state of affairs across the Straits of Malacca in our friendly neighbourhood of Malaysia, Truly Asia. Old Town Berhad's shares has been acquired by Artisan International Small Cap Fund ,Matthew International Capital Management and Mawer Investment management pretty aggressively since March 2014. And Old Town Berhad is a direct competitor of Super Group especially after Super Group ventured into the cafe business under the brand of Owl Cafe (link.).( The other one is VizBranz but it has been taken private some years ago and it doesn't have cafes).
Old Town doesn't have better ratios , more of comparable ratios to Super, if not lousier than Super Group slightly.(Bloomberg Mobile) So, why are funds buying into Old Town? A logical answers would be there must be some value in this FMCG space.
Super Group
P/E - 16.55
P/B - 3.29
P/S - 2.88
Div yield-3.17%

Old Town Berhad
P/E - 19.29
P/B-3.22
P/S-2.58
Div yield - 1.44%

I am taking a risk, yes. Let's wait to see if there is any announcement over the weekend of any news.Not too long ago (Jan 2014), Bloomberg ran an article of possible acquisition of Super by Suntory or Kirin. , with many analysts reports placing target prices of $4-6. Now, they are reversing their target prices, after the FACT. Really lame. Maria, get me a cup of Nanyang White Coffee. You give me more value than these analysts!

Wednesday, May 14, 2014

Super Group - A Home Grown Company Getting Shorted

Super Group dropped about 8-9% on 14 May 2014. They released their financial statements on  12 May 2014 and frankly, it wasn't a very bad set of results. Revenue decreased 6% and profit reduced 19% and dividends were XD on 9 May 2014. This drastic plunge in price perked my attention, especially when i do enjoy their products such as their Super Charcoal Roasted White Coffee.

I looked at their dividend policy and it looks good, with the Super Group management committing at least 50% of net profits to shareholders and furthermore, the recent $0.07 dividend is higher than the previous same period amount of $0.051 which could possibly point to a higher annual dividend this year than last year. 


Yearly revenue, net profit and dividends has been steadily increasing and gross margin is about 38%. This company has very low debt-to-equity ratio and with $94.7 m in cash, it is able to nearly fully repay all its liabilities (current and long term)  of $99.6m so why the steep plunge in price in just one day?
Could it be a Muddy Waters kind of event ?
Looking at the  daily short sell report, my questions were answered. Yes there indeed are people shorting this company. RSI chart shows a very deep selling. AND SHARES SHORTED MUST BE BOUGHT BACK EVENTUALLY.
If this was a S-share, i would think there is a very high chance that something scandalous has happened and the risk for me is just too great. Given that Super Group is a Singapore- based company with most of its higher management residing in Singapore and that i do actually like their products and most importantly, i do see with my own eyes their products being sold in all supermarkets and them venturing into the cafe business at Bedok Point, Republic Plaza and Star Vista, under the brand name Owl, i bought into their shares, my virgin ownership @ $2.95, giving me a dividend yield of about 3.05% ( based on last year's annual dividend amount of $0.07). It's 52 week high was $5.05 btw.
Hope i will be 'ji' happy like this viral marketing video by OWL-Super Group. Let's Support Home Grown Singapore Companies!

Friday, January 31, 2014

First purchase in 2 years - Boardroom Limited

The recent market volatility made me salivate and perked my interest in the equity market again. I have been extremely uncomfortable with my asset allocation but even more uncomfortable with the relentless surge of the equity markets. These 2 years have indeed been a lesson of patience for me. So it was with extreme joy when the Fed decided to cut back a further $10 billion dollars of money printing.

It has been a period of elation for me too when emerging currencies plummeted while the Sing dollar held strong. But, things are still too expensive. 

Boardroom offers mainly :
  1. Corporate Secretarial Services, 
  2. Shareholder Services  
  3. Accounting and payroll services. 
Based on it IPO prospectus in year 2000, it has acted as a share registrar or share transfer agent for approximately 43.6% of listed companies in SGX . For corporate secretarial services, it has a market share of 19% of listed companies in SGX, in addition to private limited companies. As of Annual report 2013, share services captured about 63% of Singapore IPOs, or 86% of total IPO market capitalisation. Examples include, Asian Pay TV Trust, Croesus Retail Trust,Mapletree Greater China Commercial Trust,Far East Hospitality Trust, Ascendas Hospitality Business Trust and  IHH Healthcare Berhad. In Australia, about 30% of successful listings were completed by Boardroom.

With many acquisitions since their IPO in 2000 ($0.39), their footprint is now in China, Malaysia, Australia, Hong Kong and Singapore.

GKGoh (through Salacca) made a mandatory conditional(SGX rule 14)  cash offer of $0.575 for Boardroom after their percentage increased from about 33% to about 44% in January 2014. ( married deal with Third Ave).
In the past (in 2006), GKGoh had also made a mandatory conditional  cash offer of $0.50 for Boardroom.
In the 2008-2009 Financial Crisis, Boardroom dropped to the lowest closing price of $0.42.
It has a dividend yield of 5.17 percent with a ex-div of $0.01 every year in Feb(coming soon) and $0.02 every year in late Oct. Dividends has been consistent at $0.03 every year and i believe this is sustainable based on it's consistent free cash flow generation every year, which after netting off repayment of loans, is still enough for paying out the dividends.


A further confirmation of the sustainability of the dividends is given in a statement in the Offer Document that the purchase was for a stable, recurring income for GKGoh.


Now, is there any possibility of GKGoh being able to take Boardroom private ( happens only when it attained more than 90% of Boardroom) ? I do not think so. In fact, i am pretty confident that GKGoh will not even be able to attain 50% of Boardroom through acceptances ( 50% is needed to make the offer binding) as it would be quite silly for investors to sell it at $0.575 given that the lowest price it dropped to was only $0.42 in 2008-2009 and it current dividend yield is pretty decent. It is further confirmed by the offeror that the intention is to maintain the listing.


To me, Boardroom is a "under the radar" kind of  company with a limited dearth of information from both research analyst, bloggers or forumners ( Try Googling it). It is a cow to be milked for its dividends and it offers a limited downside ( hovering about $0.575 due to GKGoh offer price serving as a anchor point), with the worst case scenario of $0.42 ( Financial Crisis). In terms of upside, it has reached a high of $0.70  in march 2013 and given the historical performance of both the share price and the company fundamentals, it is quite safe to say that in the long run, capital appreciation is highly possible( barring any corporate mischief of course). Its current other significant shareholder now is Nanyang Press (Singapore) Limited with about 12% ownership. ( Nanyang Press owns about 0.5% of SPH. It seems that they invest in dividend paying companies.)As important to me is that this company does not print shares( akin to printing money through rights, thereby devaluing the value of something) and the shares outstanding is pretty stable ( yes, there is still employee options and scrip dividend but thank GOD no rights issuance). Of cos i am vested.
Update: Salacca shareholding has reached 81.28% . I was wrong. I have exited and learnt a valuable lesson.
Exercise caution in dealing with highly illiquid counters. I believe that this Offer by Salacca was done to allow existing substantial shareholders or management who have considerable holdings to encash their shares without affecting the share price since its highly illiquid. Another reason for my exit was because i didn't want the risk of holding a delisted counter in case the public float became less than 10%. Life sucks but lesson learnt is priceless.

Wednesday, August 7, 2013

Should HDB owners take a private property loan?

Assuming a HDB home loan of  $350000 to be paid back in full in 30 years at the HDB loan rate of 2.6%.
Total payment after 30 years = $504,428.04. 
Interest paid after 30 years = $154,428.04
Assuming a bank loan instead to be paid back in full in 30 years at the following rates : 1.2% first year, 1.45% second year and 1.95% thereafter. (Based on 3-month Sibor + 0.5%, 3-month Sibor + 0.75% and  3-month Sibor + 1.25% from a local bank).
Total payment after 30 years = $457,747.21
Interest paid after 30 years = $107,747.21
By taking a HDB loan, the customer actually pays $46,681 in interest more over 30 years.
(I have excluded the miscellaneous cost, such as legal fees e.t.c, focusing on interest only. )

Reasons for taking a HDB loan is that HDB is more lenient and you can miss a few payments. (From hearsay)Taking a bank loan is a one way street and you lost the chance of taking a HDB loan forever. 

It makes me wonder whether if you miss payments on a bank loan, can the bank take back your HDB given that it is actually the property of the government and HDB owners are not actually owners but long term tenants with a lease period of 99 years. Maybe the difficulty could be so onerous for the bank that one could be allowed to miss a few payments too.(Maybe)

Especially when interest rates have been so low for so long but the prospect of it rising is a real possibility but when it finally do rise above the 2.6% rate, your outstanding balance would be so small that a lump sum could be paid to settle it. Think about it.