Tuesday, November 25, 2014

Malaysia Palm Oil Futures Rise - Hope for Golden Agri and Wilmar?

Malaysian palm oil futures rose on 25 Nov 2014, moving away from the one-month low.  It closed at RM2,218 as compared to the 28 Oct low of RM2,187.  Palm oil output rose 2.4% between 1 Nov to 20 Nov compared with a month ago, lifted mainly by a 9% increase in yields in Sabah.  Oil palm is a big thing in Malaysia.

Low palm oil prices have caused stocks like Golden Agri-Resources, Bumitama, First Resources, Wilmar, etc to drop in their share price over the past few month.  Export demand is expected to remain weak for the rest of November according to a Singapore-based palm oil trader.

In other competing vegetable oil markets, the US soyoil contract for December fell 0.5% while the most active May soybean oil contract on Dalian Commodities Exchange rose 0.1%.  Soyoil usually trades at a slight premium to palm oil.

Monday, November 10, 2014

Last Stage of Bull Market?

As Sir John Templeton puts it so rightly: "Bull markets are born on pessimism, grow on skepticism, mature on optimism and die on euphoria."

Pessimism is born.

After the global financial crisis of 2007-2008, stock markets plummeted and everybody got out of stocks.  People feared a great crash and cashed out.  The worst was feared.  Large financial institutions might have collapsed if not for the bailouts.  Everywhere was gloom and doom.  Nobody actually wanted to enter into stocks.  This would actually have been the best time to buy.  But nobody did.  Everyone was pessimistic about the outlook for the world.  Unemployment was high.  Who could be optimistic in a time such as this which the world has not seen since the Great Depression in the 1930s?

Skepticism grows.

As quickly as the stock market crashed, it started to recover.  Sure, unemployment rates particularly in US and other countries remained high.  But that did not stop the stock markets around the world to recover.  People were skeptical about growth prospects.  They were skeptical about the Fed's response (perhaps rightly so).  They were skeptical about every good news that came out.  Everything was taken with a pinch of salt.

Optimism matures.

Slowly but surely, unemployment rates went down.  Yes, the eurozone has its crisis.  But surely that can be solved.  Japan's Abenomics also seemed to be the solution.  Suddenly, the world was not as frightening a place.  Everything was getting better.  GDP growth, unemployment rates....even inflation rates remained low despite the amount of money that was printed.  With the pessimism and skepticism gone, gold prices began its fall as a safe haven is no longer required.  Why miss out on the bull market by keeping money in gold?

Euphoria kills.

Huge IPOs - LinkedIn (2011), Facebook (2012), Twitter (2013), Alibaba (2014).
Stock markets at record highs.
Heard people talking about the latest stock tip?  Or how much they made from investing in the stock market?  Sounds familiar?  It sounds eerily familiar.

Concluding remarks:
For those who have missed out on the bull run, it is just too bad.  Time is probably against you now. The last thing you want to do is to arrive at a party too late.  Yes, the party could go on for a long more time (maybe months or even years).  You might miss out the fun.  But there is also the possibility that the party ends the moment you get in.

This is the conclusion of the matter:  "Be fearful when everyone else is greedy".

Wednesday, June 18, 2014

4 in 10 Singaporeans Want to Retire at Age 55 ....but They Are Probably Not Saving Enough

A 2014 Randstad Award survey released earlier this year indicated that almost 4 out of 10 Singaporean employees wanted to retire at age 55.  That is a full 10 years before the official retirement age of 65 in high cost Singapore.  This survey involved over 6,000 employees with ages ranging from 18 to 65.

Is retiring at 55 realistic?

It is not surprising that many had mixed reactions on how realistic this target is.

In yet another survey by HSBC, 4 in 10 Singaporeans were found not to have set aside a single dollar for their retirement.  That is certainly a startling find!  And the main reason for not saving for retirement?  The high cost of living.  A large number of people also gave the reason that they have never thought about it.  Perhaps it is time that people start thinking about the size of their retirement nest egg.

So let's do the math.  4 in 10 want to retire by age 55.  Another 4 in 10 have not saved a single dollar.  I just hope that these people who have not started saving a single dollar for their retirement are not the ones who plan to retire at 55.  Because if they are.....I am guessing they will be in for a rude shock.

Well for those who are interested, please check out these few informative articles on retirement:



Friday, April 5, 2013

F&N to be delisted?

Fraser and Neave (F&N) might not be delisted after all.  After controlling shareholder took over the company, there has been 2 senior appointments to the board of F&N.  The property and beverage conglomerate has appointed Koh Poh Tiong and former Singapore finance minister Richard Hu to the board.  Mr Koh Poh Tiong is a food and beverage veteran.

These appointments have led to speculation that Mr Charoen who bought over F&N might be keen to keep F&N listed on the Singapore stock exchange.  Mr Charoen currently holds more than 90% of F&N shares and SGX listing rules requires a free float of at least 10%.  To do so, more shares will probably have to be issued.  SGX has given F&N until 18 April 2013 to declare its listing intentions.

Wednesday, March 20, 2013

Marco Polo Marine- A Buy

Marco Polo Marine (MPM) headquartered in Singapore is an investment holding company which was founded in 2006. Its primary business is to offer tug boats & barges to a diverse set of customers spanning from commodities, mining, infrastructure, construction, property development and land reclamation industries amongst others

 It also engages in transshipment services which could be defined as transportation of coal from the Indonesian mines to coal purchasers and from their transporting it to Asian electric power plants for final consumption. The two different business segments of MPM are Ship chartering & Shipyard. Ship chartering segment engages in charter, hire activities of ships while Shipyard deals with repair, maintenance & brokering activities of vessels.

MPM has a global presence, spreading across Thailand, Indonesia & Australian waters.

Strengths 

  • Ship chartering fleet has been operating at close to 100% of its capacity. 
  • Young & technologically advanced fleet: MPM vessels are well-equipped with sophisticated tools like satellite surveillance systems which ensure quick response-time. Its shipyard lately outfitted a DP-3 vessel, adding yet another feather in its achievement-hat. 
  • Diverse & reliant clientele: With its customers’ profile ranging from property developers to mining, MPM enjoys a stable & regular flow of business through the year. 
  • Cost containment: Successful integration of the two business segments helps MPM enjoy higher cost-benefits compared to its competitors. Moreover, its shipyard operational location at Batam; a free-trade zone & its ship chartering operations located at Singapore; an important industrial hub in the South East Asian region and is also in close proximity to vital shipping routes; aids MPM in getting an edge over its competitors. 
  • MPM enjoys various tax benefits.
Recent developments 

Chairman Mr. Lee purchased 1.0million of MPM common stock at S$ 0.42, the highest ever he has paid, totaling his stake at 59.5% (or a total of 202.8Million shares). This move of Mr. Lee signifies his confidence into the fundamentals of MPM.

The recent implementation of the cabotage law in Indonesia worked in favor of MPM. The enforcement of cabotage law compelled customers to cancel their contracts with foreign contractors whose vessels failed to conform to the norms of the cabotage law. Thus, as the supply suddenly shrunk from the foreign contractors, charter rates saw a sudden spike. MPM seized the opportunity & is reaping higher margins & better utilization rates.

Looking Forward

MPM is planning to further integrate its two business segments of Ship Chartering & Shipyard to establish ship repair, conversion & maintenance capabilities at its own shipyard.

MPM is inclined to broaden its product portfolio into bigger & sophisticated vessels such as the Anchor Handling, Towing & Supply (AHTS) vessels, tankers, cargo ships (which are 150 meters in length) and accommodation barges, all of which are in huge demand riding on the back of the oil & gas marine logistics industry.

It further plans to expand its customer base of its shipping business leveraging the growing industry & Singapore economy at large.

Stock Information

Marco Polo Marine (“MPM”) was listed on the Singapore Exchange Securities Trading Limited (“SGX-ST”) in 2007. Marco Polo marine (SGX:MPM) share price closed at S$0.43 a share. The average volume of shares traded is 0.2Million at the Singapore Stock Exchange.

Reasons to Buy 

With strong fundamentals & a robust business model MPM seems an attractive investment.  This is also considering the significant purchase by an insider who also happens to be the Chairman. Net revenue is expected to increase to S$ 108.8Million in FY2013 & to S$ 125.6Million in FY2014 respectively. Its EPS is estimated to reach S$0.07 per share in FY2013 & to S$ 0.077 per share in FY2014.

Monday, March 18, 2013

Nam Cheong Limited - A Buy

Nam Cheong Limited (NCL) is the largest Offshore Support Vessels (OSVs) shipbuilders in Malaysia. It is also one the largest regional players. Established four decades ago, NCL is headquartered in Kuala Lampur, Malaysia. Its prime focus is on building environment friendly & technologically advanced OSVs which are used in the exploration & production of offshore oil & gas.

Currently, NCL has 37 vessels in October 2012, under its shipbuilding program which is due for completion by 2013.

NCL’s global presence spans across Malaysia, the U.S., the Middle East and South-East Asian regions among others.

Financial Results 

NCL witnessed a whopping increase of 45% YoY to MYR 877Million in net sales in 4Q2012 primarily driven by significant growth in the shipbuilding business. Gross profit increased 56% YoY to MYR 164Million. Operating margin took a beating of 90bps YoY to 16.4% in 4Q2012 from 17.3% in 4Q2011. Net profit climbed up 47% YoY to MYR 137Million in 4Q2012.

Operational Challenges

Operating margin shrank due to declined margins in NCL’s vessel charting business. However, measures have been taken to redeploy vessels which completed their contracts. The primary reason for the considerable increase in net revenues could be assigned to the increase of 49% YoY to MYR 839Million in 4Q2012 in the shipbuilding business. Out of the 19 vessels which were deployed for 2013, the company already secured orders for 13 vessels.

Dividend Payout

Dividend paid for the reported quarter is 0.5 Singapore cents which accounts for 19.2% payout ratio of net profit after tax. The company paid a dividend of 0.2 Singapore cents in the year-ago period (4Q2011). There is no dividend forecast for the current year FY13.

Looking Forward 

Nam Cheong sits on an order book of MYR 1.3Billion which includes a big-ticket order of USD 130Million (MYR 405.3Million) from Bumi Armada. It needs to deliver four units of Multi-Purpose Supply Vessels. Revenue estimates for the current year is at an average of MYR 1.3Billion and for FY2014 it is estimated to be around MYR 1.5Billion against the last year revenue of MYR 877Million. The estimated EPS for FY2013 & FY2014 are MYR 8.7 per share and MYR 9.69 per share, respectively. NCL expects an uptick in vessels to 19 vessels in 2013 & 25 vessels in 2014, versus 13 vessels in 2012.

Stock Information

Nam Cheong Limited (“NCL”) was listed on the Singapore Exchange Securities Trading Limited (“SGX-ST”) on 27 May 2011. Nam Cheong limited (SGX:NCL) share price closed at S$0.25 a share. The average volume of shares traded is 13.3Million at the Singapore Stock Exchange.

Reasons to Buy

With increasing net sales and net profit, NCL appears to be a safe haven. The management has successfully utilized half of its S$160Million fresh capital which was raised through MTN issuance of shares in 2013 improving the gearing ratio to 0.40x by the end of FY2012 comparable 0.63x in FY2011. NCL has an expanding balance sheet with MYR 216.3Million in total assets at the end of FY2012 compared to MYR 26.7Million in FY2011. Furthermore, the Malaysian offshore industry looks robust and the demand for small AHTS vessels & PSVs seems to be gaining grounds as obsolete models are replaced by technologically advanced & greener vessels.  It is no wonder that various analyst have been giving BUY calls on this stock.

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