IFRS15 requires companies that enter into long-term contracts with customers, such as telecoms or membership services, to report revenues from such contracts separately from other revenues. Effective since 1 January 2018, the regulation requires a change in reporting practices.
Unchanged policy stance, continuing sales momentum, slowing land acquisitions, steady growth of property funding, improving working capital efficiency and declining leverage are the main factors in a forecast for China's property sector.
Does capital age of a firm affect its ability to affect capital efficiently? Are old-capital firms more exposed to aggregate productivity shocks? Do they earn higher expected returns? How does their cash-flow duration compare to that of young-capital firms? The authors study the effect of firms' knowledge about their exposure on their financial performance.
The Indian debt market has grown to USD 1.5 trillion over the past decade, largely due to the issuances from the central and state government. The ratio of government securities to corporate issuances is about 75 to 25, reflecting the subdued state of corporate bond markets in India. With a lack of participation, the Indian debt market remains smaller than the equity market—an anomaly among other global markets.
Strong Buyback Momentum Continued into Mid-August |
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Taking Stock of Singapore’s Recent Manufacturing Growth |
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Largest ASEAN Value Stocks Edged Ahead of Region Over Past 12M |
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Dividends Boost Average YTD Returns of Jardine Companies to 8% |
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Non-Monotonic NPV Function Leads to Spurious NPV and Multiple IRR Problems: A Critical analysis using a modified capital amortization method that Resolves These Problems
This analysis is conducted using some popular non-normal net cash flow (NNCF) investment data available in public domain and other hypothetical NNCF data. The methodology is mainly based on capital amortization schedule (CAS) and modified CAS (MCAS) methods along with a comparison of the results with the common DCF method. The findings are summarised here:
a. The problem of multiple IRR is caused by reinvestment income and the resultant non-monotonic NPV function. The CAS methods clearly indicate whether there is any reinvestment. Non-monotonic NPV function of NNCF investment leads to multiple IRRs or spurious IRRs, NPVs and MIRRs. With non-monotonic NPV functions the DCF estimated criteria are all spurious.
b. The MCAS method eliminates the reinvestment thereby leads to monotonic NPV function and resolves the problem of reinvestment, spurious NPVs, MIRRs, IRRs and or multiple IRR.
c. Neither the NPV nor the MIRR could resolve the problem of multiple IRR. With normal NCFs and some of the NNCFs also, there are no reinvestment at IRR or at hurdle rate as wrongly asserted in many published works.
d. It is normal for the estimated IRR to be either ‘nil or zero or negative’ when the sum of net benefits or NCF is zero or negative. Such IRRs are consistent with NCF or net benefit. IRR of ‘zero or negative or no’ is not a weakness or problem but it reveals the real or consistent return.
e. MCAS is an appropriate method to estimate the rate of return (IRR and NPV) for both normal NCF and NNCF and resolves the multiple IRR problem and eliminates spurious NPVs and MIRRS. The estimated IRR and NPV by MCAS method are consistent with NCF.
f. Ultimately, IRR and NPV, estimated by MCAS, are the best criteria available to investment, project and cost-benefit analysis.
In summary, NPV and IRR estimated by MCAS method are equally appropriate and therefore one cannot be the best substitute for the other. The multilateral and bilateral organizations and corporate managements may wish to revisit their recommendation to use the NPV only and not the IRR while dealing with multiple IRRs associated with NNCF investments.
HONG KONG, 3 August 2018. Pengyuan International (“PENGYUAN”) has today released its Industry Credit Guidelines for the Chinese Homebuilders and Property Developers for public consultation.
These criteria will be effective immediately on the date of final publication. We intend to complete a review of all affected ratings, if any, within the next six months. We expect no impacts on our current rating portfolio. We would appreciate comments on these draft criteria from investors and other market participants. The request-for-comment versions of these reports are available via the links below.
Our Industry Credit Guidelines: Chinese Homebuilders and Property Developers describe our analytical approach to assessing the credit risks of companies that have more than 50% revenue generated from China homebuilder and property developer industry. These criteria are developed within the framework of PENGYUAN’s General Corporate Rating Criteria and are supplementary to our General Corporate Rating Criteria. In addition to the credit ratios that are used in the Corporate Rating Criteria, PENGYUAN considers specific credit factors that capture the risks from China homebuilder and property developer industry, which are assessed to derive a company’s indicative credit score.
HONG KONG, 3 August 2018. Pengyuan International (“PENGYUAN”) has today released its Government-Related Entities (GRE) Rating Criteria for public consultation.
These criteria will be effective immediately on the date of final publication. We intend to complete a review of all affected ratings, if any, within the next six months. We expect no impacts on our current rating portfolio. We would appreciate comments on these draft criteria from investors and other market participants. The request-for-comment versions of these reports are available via the links below.
Our Government-Related Entities Rating Criteria set forth PENGYUAN’s approach to rating GREs in the corporate (including project finance), financial institution, insurance and public finance sectors globally. In our opinion, an issuer’s affiliation with the government may have a positive, negative or neutral impact on its overall creditworthiness. One of our primary considerations in analyzing a GRE is whether its credit profile may be enhanced by potential extraordinary support from the government in the event of financial distress, or conversely, impaired by potential extraordinary adverse interventions from the government should the government experience financial difficulties.
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Half the STI Constituents Averaged 1.5%+ Daily Trading Ranges in 1H18 |
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Key SGX Transportation Plays Cruised Through Recent Swings |
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Supermarkets Generate 12% Defensive Performance in 2018 YTD |
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Five Stocks on the STI Bench Average 10% Gain over Past 12M |
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Five Stocks with Manufacturing Focus Amongst Biggest Intraday Movers |
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Five Stocks with Manufacturing Focus Amongst Biggest Intraday Movers |
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Asia’s Largest Global REIT Hub |
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CFA Institute and PRI survey on ESG integration in Asia
In 2017, CFA Institute and the PRI agreed to undertake an ESG investing study that entails a survey, a series of workshops and the release of four reports: one case study report and three regional reports. The aim of the study is:
We would like you to help us by responding to the survey: https://start.yougov.com/refer/vXwDHpNl4ZBrY2
The results of the study and the feedback from the workshops will be published in the regional reports. There will also be regional and country guidance and case studies on how investors are integrating ESG issues into their investment analysis and decisions. These reports will be readily available for all CFA members and PRI signatories.
The survey contains two sets of questions that should take roughly 8 – 10 minutes to complete. It covers the impact of ESG investing at the financial market level and firm level. It is being completed by participants across seventeen countries.
If you like to fill out the survey, please do so by 15 June. We appreciate your response.
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ESG Integration Explained: An Alpha-Generating and Risk-Reducing Tool
The term “ESG integration” is often used when talking about ESG investing. Practitioners new to ESG investing are sometimes uncertain what ESG integration is and how it is performed—so much so that they may not realize they are already performing integration techniques informally.
One definition of ESG integration is “the explicit and systematic inclusion of ESG issues in investment analysis and investment decisions.” Put another way, ESG integration is the analysis of all material factors in investment analysis and investment decisions, including environmental, social, and governance (ESG) factors.
What does that mean? It means that leading practitioners are:
What does that not mean? It does not mean that
HONG KONG, 23 May 2018. Pengyuan International has today released its Chinese Local Government Rating Criteria for public consultation. These criteria will be effective immediately on the date of final publication, and we intend to complete the review of all affected ratings, if any, within six months thereafter. We expect no impact on our current rating portfolio.
We would appreciate comments on these draft criteria from investors and other market participants. The request-for-comment version of the Criteria and analyst contact details are available via the following link:
Chinese Local Government Rating Criteria: http://www.pyrating.com/Methodology/Index/10008.html
Our Chinese Local Government Rating Criteria describe our top-down approach to assessing the credit risks of all local governments (LGs) and assigning issuer credit ratings (ICRs) and issuance credit ratings to LGs in China. We explain how we assess the key rating factors (namely a LG’s economic strength, budgetary strength, debt burden, liquidity, and governance and financial management) that together drive a LG’s relative credit strength compared to peer LGs reporting directly to the same higher-level government. We combine the relative strength score of the LG with the rating on its higher-level government and our other analytical considerations to determine ICR on the LG.
ANALYST CONTACTS | MEDIA CONTACT | OTHER ENQUIRIES |
Chief Analytics Officer Tony Tang tony.tang@pyrating.com +852 3615 8278 |
media@pyrating.com | contact@pyrating.com |
Sovereign and Public Finance |
In the first of a series of nine videos examining valuation mistakes, award-winning equity analyst and former President of CFA Society Thailand Dr. Andrew Stotz, CFA, looks at why investors should be wary of overly optimistic revenue forecasts.
From this video you will learn:
• Questions to ask when forecasting a company’srevenue, for example, can it increase both profit and growth margins over time?
• How to understand a company’s marketing, branding, products, and services – in addition to its sales process, delivery, and after-sales service
• That if revenue forecasts are wrong, valuations will be too
• How to curb your enthusiasm.
Watch Andrew Stotz here:https://youtu.be/9jkfAPcDomY
HONG KONG, 25 Apr 2018. Pengyuan International has today released its Sovereign Rating Criteria for public consultation. These criteria will be effective immediately on the date of final publication, and we intend to complete the review of all affected ratings, if any, within six months thereafter. We expect no impact on our current rating portfolio.
We would appreciate comments on these draft criteria from investors and other market participants. The request-for-comment version of the Criteria and analyst contact details are available via the following link:
Sovereign Rating Criteria: http://www.pyrating.com/Methodology/Index/10008.html
Our Sovereign Rating Criteria describe our analytical approach to assessing the credit risks of all sovereigns and assigning issuer credit ratings (ICRs) and issuance credit ratings to sovereigns. We explain in detail how we assess the key rating factors (namely a sovereign issuer’s debt burden, stage of economic development, economic fundamentals, institutions and policies and distinctive movers of underlying liquidity risk) that together drive a sovereign’s indicative credit score (ICS). We also outline our other analytical considerations, which, together with the ICS, will determine an entity’s Issuer Credit Rating.
For these criteria, we define a sovereign as a member state of United Nations or a state that runs its own government, enjoys fiscal independence and determines its own monetary regime.
MEDIA CONTACT
media@pyrating.com
OTHER ENQUIRIES
contact@pyrating.com
Mapletree Greater China Commercial Trust (MGCCT) has recently announced its 1H FY17/18 earnings.
We take a look at its results to assess if MGCCT is a worthy candidate as an income play of any investor’s portfolio/.
Income Available for Distribution is 7.1% higher at $49m for 2Q. As for first half 17/18, it increased by 4.1% to $104m.
Quarterly Distribution per Unit (DPU) increased by 5.8% over last year to 1.868c. For the first half of year 17/18, DPU increased by 2.9% to 3.714c. Do note that MGCCT’s distribution occurs on a semi-annual basis.
The increase in Income Available for Distribution is due to the higher rental rates for all 3 assets.
Source: MGCCT 1H FY17/18 Earnings Presentation
2Q revenue stood at $88m, a 6.1% year-on-year rise. As for 1H 17/18, revenue showed a similar rise to $177m, a 5.4% increase.
Looking into the assets breakdown, we notice a broad-based revenue increase across all 3 assets. Gateway Plaza (GP) in Beijing showed the largest rise in revenue of 14.6%, followed by Festival Walk (FW) at 3%. Revenue for Sandhill Plaza (SP) remained stable.
Source: MGCCT 1H FY17/18 Earnings Presentation
Quarterly NPI stood at $70.9m, a 5.4% increase over last year. 1H 17/18 NPI likewise grew by 4.5% to $142m.
Looking deeper into each asset, both FW and GP showed an increase in NPI yield of 4.3% and 6.9% respectively.
Source: MGCCT 1H FY17/18 Earnings Presentation
We can calculate the NPI yield by dividing the NPI over revenue. This is an important figure that indicates REIT manager’s overall ability managing the properties well. I view it as the equivalent to net profit margin in a non-REIT company. A high NPI yield would likely give rise to a high distribution that enhances shareholders’ returns. Compared across REITs in the same asset class, NPI also allows us to assess managers’ competency.
MGCCT’s 2Q and 1H 17/18 NPI Yield is 80.5% and 80.7% respectively, a slight dip of 0.6% and 0.9%. Given the small decrease and the similar NPI yield in 2Q and 1H, I would not flag this as a cause of concern.
MGCCT maintained a high Occupancy Rate of 98.2%, an improvement from 87.1% of the previous quarter. FW and SP continue to have full occupancy rate, while GP saw a small decrease.
Source: MGCCT 1H FY17/18 Earnings Presentation
In 2Q, all 3 assets under MGCCT enjoyed positive rental reversions, in particular, SP that had its rentals renewed at a 14% higher rate than previous lease cycle. It is quite clear that MGCCT assets were able to raise their rentals at a healthy rate over past 1 year.
Source: MGCCT 1H FY17/18 Earnings Presentation
FW 4Q enjoyed higher footfall of 19.4m in 1H 17/18, a 2% growth over last year. Tenant sales also showed healthy growth of 2.5% to HK$ 2.37 billion.
Source: MGCCT 1H FY17/18 Earnings Presentation
Similar figures for GP and SP were not disclosed, as they were commercial properties with performance more directly impacted by economic activities and rental rates of offices. However, judging by the high occupancy rate and positive rental reversions, it is quite clear that GP and SP are healthy assets.
In terms of balance sheet strength, MGCCT’s gearing ratio stood at 38.5% at 2Q 17/18. Its interest cover ratio is 3.9 times. Both figures did not show large changes compared to previous year.
Source: MGCCT 1H FY17/18 Earnings Presentation
MGCCT’s total portfolio value is $5.96 billion in Q2, compared to $6.22 billion at end of year 16/17. The decrease is mainly due to translation loss arising from the weaker HKD against SGD.
Investors usually buy into REITs as an income play, attracted by its high dividend returns. While REITs are required by law to distribute 90% of its returns to shareholders as dividends, on a longer term, quality of REIT assets and capability of REIT manager are the key factors in determining a growing DPU, hence a higher return for investors. MGCCT has done well in this area, as seen from its trend of rising Quarterly Distributable Income and DPU since IPO.
I personally have to hold MGCCT since 2014, and it has rewarded me reasonably well through regular dividends that grow steadily.
Based on a price of $1.17 on 31 Oct 17, and trailing 12-month dividends of 7.456 cents per share, MGCCT dividend yield is 6.37%
The stock markets around the world have been rallying in 2017. The Kuala Lumpur Composite Index is up about 4% year-to-date. The Singapore Straits Times Index has a much better performance till today at about 15% year-to-date. More impressively is the Hong Kong Hang Seng Index, which rallied about 30% since the beginning of 2017.
Much of the gains are coming from the boom in the technology sector globally. However, that does not mean that there is no value left in the non-tech sector. In fact, we have been able to score a great return over the past year on a simple, consumer businesses that we have invested in.
Here is the story of how we made about 87.2% return on a non-tech company within a year.
Boring Consumer Business
We have been watching Tingyi (Cayman Islands) Holdings Corp (HKG:322) since 2011. It is the largest instant noodle and Ready-to-drink tea producers in China. Their staple brand “Master Kong” is well-known throughout China.
In fact, the company owns about 44% of the market share of the instant noodle market and about half of the ready-to-drink tea (RTD) market in China. The company made more than USD9.1 billion in revenue back in FY2015 when we started getting interested in them.
This is because, in 2016, the company hit some setbacks regarding its succession plan and also some management error in expanding their business. These issues might have caused the company to see their share price dropped from close to HK$ 25.00 per share to about HK$6.50 per share from 2014 to 2016.
A Turnaround Situation
After the sharp drop in their share price, we decided to invest into the company as we saw that Tingyi Holdings might just be suffering from a temporary setback and was bound to return to its full potential after sorting out its problems.
The fundamentals of the company remained strong. For example, it is still the largest instant noodle and RTD tea producer in China. Moreover, it is the official Pepsi Cola partner in China and they have even won the rights to sell Pepsi Cola in Disneyland Shanghai, the only Disneyland in the world that is not distributing Coca-Cola.
It has the distribution network for the entire China. For foreign consumer companies wanting to distribute their products, Tingyi Holdings is the perfect partner for them.
At that moment, Tingyi Holdings was trading at least 50% lower than its intrinsic value based on our internal calculation.
Review on that Investment One Year On
We made an investment in Tingyi Holding back in the middle of 2016. Today, the stock has recovered and we have generated a return of about 87.2% for the past one year.
Tingyi Holdings is a classic example of a turnaround situation for us, where we look for high-quality businesses that have just hit a temporary roadblock in their business cycle.
Jollibee Foods Corp. gets a BUY recommendation based on the analysis of financial statements, information on quick –service market, well-known stock analysts forecasts, and significant events for the period 2006 to 2016 (up to 30 September 2016).
In 1977, the late Tan Sri Dato’ Seri Lim Goh Tong has incorporated Asiatic Development Bhd. It commenced plantation activities with 13,700 hectares of estates in West Malaysia in 1980. Subsequently, in 1982, it was listed on Bursa Malaysia. In 2009, the listing name was officially changed to Genting Plantations Bhd, a name that is retained till today.
Since its listing, Genting Plantations Bhd has expanded its plantation assets to East Malaysia and Indonesia. 35 years later, Genting Plantations Bhd has become the third largest palm oil corporation listed on Bursa Malaysia in terms of market capitalization behind IOI Corporation Bhd and Kuala Lumpur Kepong Bhd currently.
In this article, I’ll cover 8 things you need to know about Genting Plantations Bhd before you invest.
Ticker Symbol: KLSE: GENP / KLSE: 2291
Market Capitalization: RM 8.19 Billion (2 October 2017)
Share Price: RM 10.30 (2 October 2017)
Industry: Palm Oil
Syariah Compliant: Yes
Genting Plantations Bhd has established an integrated business model that includes:
Genting Plantations Bhd has maintained its portfolio size of its palm oil estates in Malaysia at 59,000 – 60,000 hectares. From which, these estates has consistently produced 1.1 – 1.4 million MT of fresh fruit bunches (FFB) a year over the last 10 years.
Genting Plantations Bhd had started its planting activities in Indonesia in 2007. Beginning with 1,716 hectares in 2007, Genting Plantations Bhd has enlarged its size of palm oil estates in Indonesia to 131,159 hectares in 2016. These estates had produced its first fruits in 2010. Since then, the amount of FFB production had grown from 1,151 MT in 2010 to 479,334 MT in 2016.
FFB Production in ‘000 Metric Tonnes
Year | 2012 | 2013 | 2014 | 2015 | 2016 |
Malaysia | 1,311 | 1,339 | 1,349 | 1,289 | 1,135 |
Indonesia | 81 | 185 | 307 | 438 | 479 |
Total | 1,392 | 1,525 | 1,656 | 1,727 | 1,614 |
Source: Annual Reports of Genting Plantations Bhd
Genting Plantations Bhd has 10 palm oil mills. 6 mills are located in Sabah. 3 mills are located in Indonesia and the remaining one is in West Malaysia. Combined, these mills have total milling capacity of 490 metric tonnes per hour.
Genting Plantations Bhd is engaged in property development activities through Genting Property Sdn Bhd. It is currently engaged in development projects such as Genting Indahpura at Kulai, Johor and Genting Highlands Premium Outlets. In 2016, the property division has contributed RM 125.6 million in revenues. It remains a small division to Genting Plantations Bhd as it accounted only 8.5% of the company’s group revenues in 2016.
In 1969, Tan Sri Dato’ Lee Shin Cheng has established Industrial Oxygen Incorporated Sdn Bhd. Eleven years later, the company was listed under Industrial Oxygen Incorporated Bhd. In 1995, the listing name was officially changed to IOI Corporation Bhd, a name that is retained till today.
Since its listing on Bursa Malaysia, IOI Corporation Bhd (KLSE:IOICORP) has expanded its plantation assets through acquisition of palm oil estates. In the 2000s, IOI Corporation Bhd has ventured into downstream palm oil manufacturing activities. As such, IOI Corporation Bhd has grown into one of the leading integrated palm oil conglomerates in the world.
In this article, I’ll cover 9 things you need to know about IOI Corporation Bhd before you invest.
Ticker Symbol: KLSE: IOICORP / KLSE: 1691
Market Capitalization: RM 28.55 Billion (30 September 2017)
Share Price: RM 4.54 (30 September 2017)
Industry: Palm Oil
Syariah Compliant: Yes
IOI Corporation Bhd has established an integrated business model that involves:
In 2017, IOI Corporation Bhd has 90 estates with a total planted area of 174,396 hectares of palm oil plantations. It operates 15 palm oil mills with a total milling capacity of 4.75 million tonnes of fresh fruit bunches (FFB) per annum.
IOI Corporation Bhd has achieved lower yields from its plantation estates. This has resulted in lower FFB productions in 2016 and 2017. This, in turn, has caused the fewer production of crude palm oil (CPO) and palm kernel (PK) over the last 2 years.
Figures in ‘000 Metric Tonnes
Year | 2013 | 2014 | 2015 | 2016 | 2017 |
FFB | 3,409 | 3,507 | 3,542 | 3,145 | 3,156 |
CPO | 708 | 752 | 782 | 697 | 691 |
PK | 179 | 186 | 187 | 164 | 155 |
Source: Annual Reports of IOI Corporation Bhd
IOI Corporation Bhd has 3 business segments in its downstream activities. They are refining, oleochemical, and speciality oils & fats.
The refining segment receives CPO and PK from its CPO mills and would produce palm and palm kernel oil fractions. They will be sent to the company’s oleochemical and speciality oils & fats segment as feedstock. In 2017, the refining segment operates 4 palm oil refineries with total refining capacity of 3.3 Million MT per annum.
The oleochemical segment receives feedstock from its refineries to manufacture fatty acids, glycerine, soap noodles and fatty esters. These products are exported to over 60 countries worldwide. This segment operates plants in Penang and Johor with a combined production capacity of 740,000 MT per annum.
The speciality oils & fats segment receive feedstock from its refineries to manufacture fractionated oils & blends which are often used as ingredients in the processed food industry. This segment is carried out by IOI Loders Croklaan which has operations in the Netherlands, Malaysia, Canada, and the United States. These products are exported to over 85 countries worldwide.
Over the last 5 years, IOI Corporation Bhd has maintained its sales of oleochemicals and specialty oils & fats products at 500,000 – 600,000 MT and 700,000 – 800,000 MT per annum.
Figures in ‘000 Metric Tonnes
Year | 2013 | 2014 | 2015 | 2016 | 2017 |
Refineries | 3,052 | 2,707 | 2,591 | 2,427 | 2,415 |
Oleo | 561 | 584 | 586 | 596 | 582 |
Oils & Fats | 735 | 735 | 774 | 783 | 766 |
Source: Annual Reports of IOI Corporation Bhd
Bumitama Agri Ltd is a 31.8%-owned associate company of IOI Corporation Bhd. Listed on the SGX, Bumitama Agri Ltd is one of the fastest growing palm oil companies in Indonesia. In 2016, it has 175,243 hectares of palm oil estates and 13 CPO mills. For more details, please click Bumitama Agri Ltd.
IOI Properties Group Bhd (KLSE:IOIPG) is among the largest property development corporations in Malaysia. Its roots can be traced back to 1984. In that year, the IOI Group began its venture into property development by acquiring Bukit Kelang Development Sdn Bhd, Rapat Jaya Sdn Bhd and Eng Hup Industries Sdn Bhd.
In 1990, IOI Properties had commenced the development of Bandar Puchong Jaya. Today, it is one of the most comprehensive self-contained township developments in the Klang Valley. Ever since, it has expanded its presence southwards to strategic locations in Negeri Sembilan, Melaka, Johor and even down to Singapore.
From 2009 to 2013, IOI Properties operated as a subsidiary and the property arm of IOI Corporation Bhd. Subsequently, on 15 January 2014, IOI Properties was demerged from IOI Corporation Bhd and is listed under IOI Properties Group Bhd (IOI Properties). In this article, I’ll share 8 things you need to know about IOI Properties before you invest.
Ticker Symbol: KLSE: IOIPG / KLSE: 1635
Market Capitalization: RM 11.07 Billion (29 September 2017)
Share Price: RM 2.01 (29 September 2017)
Sector: Property
Syariah Compliant: Yes
Presently, IOI Properties derives income from three main business divisions. They are:
IOI Properties is positioned as a reputable township developer in Malaysia. It is capable of executing development projects where their land sizes are well beyond 100 acres. Its notable projects include Bandar Puchong Jaya, Bandar Putra Kulai, Bandar Putra Segamat, 16 Sierra, Bandar Putra Bangi and Bandar Putra Warisan.
In Singapore, IOI Properties is involved in high-end residential and integrated mixed developments. This includes Seascape and the Cape Royale in Sentosa Cove. Meanwhile, in China, IOI Properties has two projects. They are IOI Palm City and IOI Park Bay. Both projects are located in the Fujian Province, China.
This division is the largest income contributor to IOI Properties. In 2017, IOI Properties had derived RM 3.71 Billion and RM 1.18 Billion in revenues and operating profits from this division.
This division derives income from seven key investment properties. They include IOI City Mall in Putrajaya, IOI Mall Puchong, IOI Mall Kulai, 4 Blocks of 12-storey & 21-storey office buildings in Puchong Financial Corporate Centre, IOI City Tower 1 & Tower 2, One and Two IOI Square, and IOI Boulevard. It is the second largest income contributor to IOI Properties as this division contributed RM 302.1 Million and RM 126.5 Million in revenues and operating profits in 2017.
This division derives income from six hospitality properties. They include Putrajaya Marriott Hotel, Four Points by Sheraton Penang, Palm Garden Hotel, Palm Garden Golf Club, Palm Villa Golf & Country Resort and Le Meridien Putrajaya. In 2017, this division has made RM 161.8 Million and RM 15.4 Million in revenues and operating profits, making it the smallest division of IOI Properties.
Overall, IOI Properties has achieved growth in sales and shareholders’ earnings over the last 5 years. This is attributed to continuous growth in all of its business divisions during the period.
Returns on equity (ROE) has dropped marginally as the growth in shareholders’ equity of IOI Properties had outpaced its growth in shareholders’ earnings during the period. This is mainly because IOI Properties had substantially increased its shareholders’ equity by completing two separate rights issue exercises on 9 February 2015 and 28 March 2017.
Figures in RM Million
Year | 2013 | 2014 | 2015 | 2016 | 2017 |
Sales | 1,158.7 | 1,454.4 | 1,906.4 | 3,024.9 | 4,185.3 |
Earnings | 585.4 | 889.9 | 890.7 | 1,080.0 | 920.9 |
ROE | n/a | 7.94% | 6.63% | 6.80% | 5.05% |
Source: Annual Reports
Zhengzhou Yutong Bus Co., Ltd. is involved in the research and development, manufacturing and sale of large buses, namely urban buses, seat coaches, school coaches and other types of large passenger cars. The company also provides ground passenger transportation services. The company distributes its products both within China and in overseas markets, with its products sold in over 130 markets worldwide. It is the largest bus manufacturing company in the world. Its buses are typically used for public transportation, tour groups, and schoolchildren.
The company started as a bus repair ship in 1963, later moving into manufacturing in 1993 and going public on the Shanghai Stock Exchange in 1997. It is headquartered in Zhengzhou, the capital city of Henan province in China.
2016 revenues grew 14.9% YoY to reach RMB 35.8bn. Net profits grew 14.4% to reach RMB 4.04bn. 84% of its revenues are derived from domestic China sales, and the rest is derived from overseas sales.
Global competitors include BYD, Beiqi Foton Motor, and MAN SE. For comparison, Zhengzhou Yutong Bus sold 70,988 buses last year, compared to 39,800 and 15,000 for Beiqi Foton and BYD respectively.
The company is the largest player in the bus market in China, with 33% market share for medium-sized and large conventional buses, and 26% for new energy buses. As a large player, it is more resilient to industry downturns and subsidy cuts, which tend to have a more dire impact on smaller players that are more dependent on subsidies.
Zhengzhou Yutong Bus Co. is a clear technological leader, devoting a significant amount of its budget to R&D expenses. It has been working on self-driving buses, having debuted its first product in 2015 in a 20-mile test run between the cities of Zhengzhou and Kaifeng, in Henan province.
Zhengzhou Yutong Bus is known for its electric buses that are used throughout the Chinese market. Given China’s difficulties with combating pollution and the government’s dedication to clean energy, public bus adoption of electric vehicles is progressing faster than that of passenger vehicles, and the company’s strength in this field should help power sales going forward. The company has also seen high demand in Europe as well.
Zhengzhou Yutong Bus is benefiting from China’s Belt and Road Initiative, as export volumes to other developing countries rose by 56% YoY in the first quarter of 2017. The company received an order to sell 500 large buses to Myanmar. Buses have been sold to more than 40 countries included in the initiative, including Pakistan, Iran, Cuba, and Bulgaria. The company first began exporting products overseas in 2005 and its overseas business is a crucial part of the company’s strategy going forward. The company intends to compete in other developing markets as competition is less fierce than in developed markets.
Shandong Gold Mining Co., Ltd., better known as Shandong Gold, is a state-owned company that is involved in the exploration, mining and smelting of gold. The Company is also engaged in the purification, processing, manufacturing and distribution of precious metal, nonferrous metal products and gold jewelry. In addition, the Company is also engaged in the smelting of outsourcing gold.
The company was formed in 1996 and went public in 2003 on the Shanghai Stock Exchange. Today it is headquartered in Jinan city, located in Shandong province. It has 23,000 employees. In 2016 it produced 1.2mn ounces of gold, making it the second largest gold producer in China.
The company obtains nearly all of its revenues from gold products. Of its roughly RMB 50bn in 2016 revenues, approximately RMB 31bn was derived from the smelting of third-party gold; the rest was derived from gold that it mined itself, which carries a higher margin. 80% of its products are sold on the Shanghai Gold Exchange.
2016 revenues increased 28.9% YoY to reach RMB 50.2bn. Operating income grew 52.5% to reach RMB 1.99bn. Net profit grew 200% to reach RMB 1.29bn.
Peers include Zijin Mining Group (RMB 72bn market cap), Zhongjin Gold (RMB 35bn market cap), and Zhaojin Mining Industry Co. (RMB 20bn market cap).
The company has the lowest gearing level amongst peers at 14%; this allows the company to gain more favorable terms when obtaining equity or debt financing for acquisitions or development of new projects, such as the pending Veladero mine acquisition in Argentina.
Gross margins improved quarter on quarter in 4Q16 by 260 basis points to 10.2%, despite the declining price of gold. The company is taking efforts to improve efficiency. Since revenues are dictated by the market price of gold, cost efficiency measures are important to improving margins, as it helps distinguish itself from its peers.
In April 2017 Shandong Gold announced that it was planning to purchase a 50% interest in Barrick Gold’s Veladero mine in Argentina for US$960 million and also forming a partnership to explore joint development of the Pascua-Lama deposit. The Veladero mine has proven and probable reserves of 6.7mn ounces of gold, and indicated gold resources of 3.3mn ounces. It is expected to produce 770,000-830,000 ounces of gold in 2017. For comparison, Shandong Gold produced just 1.2mn ounces of gold in 2016. This indicates that the joint venture could substantially increase the company’s annual output.
Shandong Gold in March announced that it had discovered 382 tons of gold reserves at its Xiling mine in Shandong province. The company notes that the volume could reach over 550 tons, pending exploration over the next two years. This would make it China’s largest gold mine; it would have a life of over 40 years.
The company’s revenues are dependent on gold spot prices, which can fluctuate in the short run. Prices are often heavily influenced by macroeconomic factors, such as the raising of interest rates. Gold is often seen as a defensive asset, or a safe asset that investors flock to during bear markets.
There is the risk that the acquisition of the 50% stake in the Veladero mine falls through, which will impact future revenues. There is also the possibility that progress on other mining activities slows down due to unexpected reasons.
Today, Bumitama Agri Ltd (SGX:P8Z) (Bumitama) is one of the fastest growing palm oil companies in Indonesia. Its roots can be traced back to 1996. In that year, Lim Gunawan Hariyanto had formed Bumitama and acquired its first land bank in Central Kalimantan for palm oil plantation.
Since then, Bumitama has expanded rapidly. It began its planting activities in 1998, commissioned its first palm oil mill in 2003, and had surpassed 100,000 hectares of planted area in 2010. Subsequently, on 12 April 2012, Bumitama was listed on the Mainboard of the SGX.
In this article, I’ll present a detailed account on Bumitama’s success thus far and its outlook for the immediate future. They are:
Bumitama has established an integrated business model that involves:
Bumitama has grown its planted area from 107,502 hectares in 2010 to 175,243 hectares in 2016. Bulk of these estates are located in West and Central Kalimantan. The remainder of estates are situated in Riau, Sumatera. As such, fresh fruit bunches (FFB) productions had grown from 764,261 metric tonnes (MT) in 2010 to 2,185,440 MT in 2016. These fruits are supplied to its CPO mills for processing.
Bumitama has increased its number of CPO mills to 13 in 2016, up from 6 CPO mills in 2012. They receive FFB from its estates and process them into crude palm oil (CPO) and palm kernel (PK). In tandem with growing FFB production, Bumitama has reported production growth in both CPO and PK. CPO production has grown from 256,883 MT in 2010 to 701,304 in 2016. PK production has grown from 52,989 MT in 2010 to 138,175 MT in 2016.
In 2015, Bumitama has ventured into biodiesels. It owns a biodiesel plant in Gresik, East of Java. In November 2015, Bumitama has secured a contract to supply 20,000 MT of biodiesels to PT Pertamina (Persero) and thus, beginning to derive sales of biodiesels.
Still, contributions from this venture is relatively insignificant as Bumitama has generated 310 Million Rupiah or 4.7% of total group revenues from sales of biodiesels in 2016.
How did Robert Kuok, presently the richest man in Malaysia, earned his nickname, ‘The Sugar King’?
Here’s the story. Since 1952, Robert Kuok had began to acquire sugar plantations in Perlis through Kuok Brothers Sdn Bhd. Subsequently, Robert has established the Malayan Sugar Manufacturing Company (MSM) in 1959 and Perlis Plantations Bhd in 1968. Towards the end of the 1960s, Robert was controlling more than 10% of global sugar supply and thus, meriting his nickname, ‘The Sugar King’.
In 1972, Perlis Plantations Bhd was listed on the Kuala Lumpur Stock Exchange (KLSE). Since then, it has expanded and diversified into a wide range of businesses. In 2000, Perlis Plantations Bhd has changed its listing name to PPB Group Bhd (KLSE:PPB). As I write (17 September 2017), PPB Group Bhd is a matured conglomerate worth RM 19.9 Billion.
At core, PPB derives bulk of its profits from four different business segments. They include:
Presently, PPB Group Bhd is a substantial shareholder of Wilmar International Ltd (Wilmar) with 18.6% shareholdings. Listed on the SGX, Wilmar is among the largest agricultural-based conglomerates in Asia with three main business divisions: Tropical Oils (Palm Oil), Oilseeds and Grains, and Sugar.
In 2016, PPB has recognized RM 851.9 Million in profits from Wilmar. Thus, Wilmar is currently the largest income contributor to PPB. As I write, the market value of PPB Group Bhd’s shareholdings in Wilmar stands at RM 12.0 Billion (based on current exchange rate of RM 3.12 per S$ 1)
This division consists of grain trading, livestock farming, flour and animal feed milling. Let’s start with flour milling. PPB owns 80% interest in the FFM Group. The FFM Group has 9 flour mills with total milling capacity of 6,270 MT per day. Also, the FFM Group has 20% interest in 9 associates in China with a combined flour milling capacity of 12,550 MT per day.
In addition, PPB owns 5 feed mills with milling capacity of 145 MT per hour, a layer farm, and two breeder farms. The layer farm is capable of producing 20 million eggs per month while the two breeder farms are capable of producing 3.25 million day-old-chicks (DOC) per month. Combined, this division has contributed RM 267.2 Million in segment profits in 2016. It is the second largest income contributor to PPB.
PPB owns 100% interest in Golden Screen Cinemas Sdn Bhd (GSC). It is the largest film exhibitor in Malaysia with 305 screens across 33 different locations nationwide. It also has 40% interest in Galaxy Studio Joint Stock Company which operates the Galaxy brands of cinemas in Vietnam. In 2016, this division has contributed RM 59.1 Million in segment profits. Thus, it is the third largest income contributor to PPB.
This division is involved in marketing and distribution of fast-moving-consumer-goods (FMCG) such as packaged flour, bakery products, edible oil, frozen food, canned food, eggs, and a variety of beverage products to supermarkets, retail outlets and neighbourhood stores in Malaysia. In 2016, this division has contributed RM 22.0 Million in segment profits. It is the fourth largest income contributor to PPB.
Here, I’ll exclude Wilmar as I’ve written an article on it. Please click ‘Wilmar International Ltd’ for further details. As for PPB’s major subsidiaries, they have revealed several development plans to expand its businesses. They include:
PPB is constructing two new 500 MT per day flour mills. The first mill is at Ba Ria in Vietnam. The second mill is in Pasir Gudang. They are expected to commence operations by 2nd and 4th quarter of 2017 respectively.
In 2017, PPB is opening 3 new cinemas with 42 new screen in Malaysia. In addition, PPB is targeting to open 6 new cinemas with 37 screens and a 9-screen cinema in Cambodia.
In 1965, the late Tan Sri Dato’ Seri Dr. Lim Goh Tong (LGT) has founded Genting Highlands Bhd and initiated the construction of access road from Genting Sempah to the peak of the Ulu Kali Mountain. For the next 40 years, LGT has laid a solid foundation of the Genting Group, which resulted in Genting Highlands being one of the most popular gaming & tourist destinations in Malaysia.
In 2003, LGT has handed over the Chairmanship of the Genting Group to his son, Tan Sri Lim Kok Thay (LKT). It was the beginning of Genting’s transformation journey from a local player to become an international integrated resort operator. As I write, Genting Malaysia Bhd, a 49.3%-owned subsidiary of Genting Bhd, owns and operates major resort destinations in Malaysia, the United Kingdom, the United States and Bahamas.
Listed On Bursa Malaysia, I’ll cover 8 things you need to know about Genting Malaysia Bhd (KLSE:GENM) before you invest.
Genting Malaysia Bhd has four major resort properties. They include:
RWG remains as the trophy asset to Genting Malaysia Bhd. It has 6 hotels, theme parks, entertainment attractions, retail and dining outlets, international shows and business convention facilities. In 2016, RWG has recorded 20.2 million visitors with 29% of visitors were hotel guests. Out of which, RWG has derived RM 5.62 Billion and RM 1.89 Billion in revenues and EBITDA (Earnings before Interest, Taxes, Depreciation & Amortization) respectively.
Genting’s UK operations consist of 43 casinos and Resorts World Birmingham (RWB). This includes 4 prestigious brands such as Crockfords, the Colony Club, Maxims Casino Club, and the Palm Beach. Thus, Genting is currently the UK’s largest casino operator. In 2016, Genting UK has contributed RM 1.82 Billion and RM 288.0 Million in revenues and EBITDA.
Genting is the proud owner of Resorts World Casino New York City (RWNYC). It is equipped with over 5,500 video gaming machines and has attracted 8.2 million visitors in 2016. In Bahamas, Genting operates the Resorts World Bimini (RWB). Collectively, Genting’s US & Bahamas operations had contributed RM 1.37 Billion and RM 193.4 Million in revenues and EBITDA.
Overall, Genting Malaysia Bhd has reported growth in group revenues, up from RM 7.89 Billion in 2012 to RM 8.93 Billion in 2016. This was attributed to stable sales performance from RWG and higher sales contributed from RWB and RWNYC.
However, Genting Malaysia Bhd has recorded decline in shareholders’ earnings, down from RM 1.60 Billion in 2013 to RM 1.26 Billion in 2015. This was due to losses incurred from RWNYC and RWB during the 2-year period.
In 2016, Genting Malaysia Bhd has recorded RM 2.88 Billion in shareholders’ earnings. This is because, in that year, it has recognized an one-off gain of RM 1.27 Billion from the disposal of its interest in Genting Hong Kong Ltd. As such, I’ve excluded the one-off gain from the calculation of Return on Equity (ROE) for Genting Malaysia Bhd in 2016.
Click on the link to read the whole article.
Lenovo Group Limited (HKG:992) might be a company that is familiar to most of us. After all, the company is the largest PC manufacturer in the world. However, that might be all we know it to be. And how wrong we will be able it.
Lenovo Group has business segments across many products and services. Besides its PC, the company has a sizeable mobile smart phone business. It also produced a wide range of other smart devices such as tablets, storage devices and much more.
The company also has an attractive dividend yield of more than 6.2% now. Is it worth investing in? Listed in Hong Kong and part of the Hang Seng Index, Here are 7 things you must know about Lenovo Group Limited.
The company now segments its business unit into three main groups.
This is its traditional PC business. It also includes its other smart devices such as tablet and personal storage products. The segment contributed about 70% of its USD10.0 billion revenue in Q1 FY17/18. It was the only segment that was profitable. It produced a pre-tax income of US$291 million during the quarter.
Revenue was relatively flat year-on-year with a pre-tax income margin of 4.2%. The PC business continues to be a tough and brutal business to compete in for Lenovo and the company claimed to be the leading PC manufacturer with the highest margin.
Lenovo is one of the biggest mobile smartphone manufacturers in China. Its products are also exported globally and the company commented that sales are picking up for its Latin America and Western Europe markets. It generated about 17.5% of the group’s revenue from this segment. However, due to cost pressure, the segment saw a loss of US$173 million.
The company also serve the enterprise market with its data centre products. The segment produced a revenue of US$971 million, about 9.7% of the group’s revenue for the quarter. This segment also saw a loss of US$144 million for the quarter.
And here are some of the Asia-listed suppliers of Apple Inc that might be impacted by its new product ranges.
As the largest contract manufacturer in the world, Hon Hai Precision Industry Co. Ltd (TPE:2317), better known as Foxconn is a key assembler for Apple Inc. The company has grown together with Apple and currently employed more than 1.3 million people in its organization.
Listed in Taiwan, the company is currently trading around 13.4 times its earnings and offering a 3.9% dividend yield.
Apple products are as much about the hardware as it is about the software. And at the heart of the software is its processing microchip. On this end, Taiwan Semiconductor Manufacturing Company Ltd (TSMC) (TPE:2330), the largest semiconductor foundry in the world is also a key supplier to Apple. TSMC has been one of the performing stocks among the Apple suppliers in the past decade. Even from its peak price of TWD66.00 per share back in 2007, its share price now is more than 3 times at TWD 218.0 per share. Listed in Taiwan, the company is still only trading at 16 times its earnings and offering a 3.2% dividend yield.
iPhone prided itself as having one of the best imaging cameras for any smartphones available. In iPhone X, there are not just two but four cameras within the phone, with two 12MP back cameras, one 7MP front camera and an infrared camera front camera as well. This means that its camera supplier might have double the order from the same quantity of phone. One of its camera suppliers is Cowell E Holdings Inc (HKG:1415).
Listed in Hong Kong, Cowell E Holdings is now trading at 11.7 times its earnings and offers a 1.5% dividend yield to investors.
One of the fastest growing product for Apple is its Apple Watch. According to its keynote event last week, Tim Cook mentioned that Apple Watch is now the largest watch brand in the world, overthrowing the long-term crown, Rolex. It is also growing extremely fast, growing more than 50% in sales since last year. One of Apple Watch assembler is listed in Taiwan. It is Quanta Computer Inc (TPE:2382).
It is currently trading around 18 times its earnings and offering a 5% dividend yield for investors.
Sound quality has been very important for Apple. The iPhone has been focused on making a great sound. This is done with the help from one of its speaker manufacturer, AAC Technologies Holdings Inc (HKG:2018).
AAC Technologies Holdings Inc is listed in Hong Kong. It is trading around 30 times its earnings and offering a 1.1% dividend yield to its shareholders. Interestingly, the company has also been the target of a short seller attack back in May 2017. Gotham City Research claimed that the company has used “dubious accounting” method to overstate its profits and evade Apple’s labour standards.
Although nothing was proven from the attack, investors should be aware of this incident before investing in ACC Technologies.
Lastly, the iPhone X has changed its display to the OLED technology. This marks a sharp shift in the future of display technology for Apple. One of the companies that might benefit from it could be LG Display Co Ltd (KRX:034220), a key global leader in the OLED technology.
LG Display Co is listed in South Korea, with a price to earnings ratio of 5.2 times but only offers a 1.5% dividend yield.
These companies might have a skin in the game for the success of Apple. However, investors have to understand that due to Apple’s enormous pricing power over its suppliers, not all of its suppliers would benefit as Apple grows. Moreover, Apple has a history of switching suppliers when they change their components. The example of changing its display technology to OLED is one such example. If the suppliers are unable to change with Apple, it would be left behind.
If you ask a homemaker, a bag of rice may feed her family for a week. Ask a grocer, a bag of rice is a product that can be sold for a profit margin or commission. If you ask a brewer, a bag of rice is a raw material that can be processed into wine which could be sold at a value multiple times of the price of a bag of rice. As such, the true value of a bag of rice depends on who the user is and how the user intends to use it.
So, what is the value of S$ 100,000?
If you ask Mr. Kuok Khoon Hong and Pak Martua Sitorus, they would tell you that S$ 100,000 is the amount of paid-up capital for their first company, Wilmar Trading Pte Ltd in 1991.
Since then, the Wilmar International Limited (SGX:F34) is established and has matured into one of the largest agricultural-based conglomerates in the world with over 500 manufacturing plants worldwide worth S$ 20.7 Billion as at 16 September 2017. How often do you find someone who is able to turn S$ 100,000 in seed capital to S$ 20.7 Billion in 25 years?
It is now part of the Straits Times Index constituents in Singapore.
At the core, Wilmar International Ltd (Wilmar) has established an integrated business model that encompasses the entire value chain of the agricultural commodity business. This includes production, processing, merchandising, branding and distribution. All in all, Wilmar derives income from three main business divisions. They include:
Wilmar is among the largest palm oil plantation companies in the world with a total planted area of 241,892 hectares in 2016. In that year, Wilmar has produced 3.8 Million MT of Fresh Fruit Bunches (FFB). Almost 100% of its FFB production is supplied to its own plants where they were refined and processed into oleochemicals, speciality fats and biodiesel products.
Presently, Wilmar is also the largest processor and merchandiser of palm and lauric oil products in the world. Excluding its associates, Wilmar has 28 refineries, 19 oleochemical plants, 16 speciality fat plants, and 13 biodiesel plants with a total annual capacity of 28 million MT, 2 million MT, 2 million MT and 3 million MT respectively. In 2016, Wilmar’s Tropical Oils division has contributed US$ 689.2 Million in pre-tax profits and thus, remains as the largest income contributor to the overall group.
Wilmar is the largest oilseed crusher, flour and rice millers in China as it operates 52 oilseed crushing plants, 18 flour mills and 16 rice mills in the nation. Its products are distributed across China, India, Indonesia, Vietnam and several nations in Africa. In 2016, Wilmar’s Oilseeds & Grains division has contributed US$ 251.1 Million in pre-tax profits and thus, is the second largest income contributor to the overall group.
Wilmar is the largest sugar producer in Australia with 8 sugar mills and 2 sugar refineries in that country. In 2016, Wilmar produces 50% of Australia’s raw sugar and 75% of sugar requirements in Australia and New Zealand. In 2016, Wilmar’s Sugar division has contributed US$ 125.3 Million in pre-tax profits. It is the third largest income contributor to the overall group.
Cathay Pacific Airways Ltd (HKG: 0293) is the flagship airline in Hong Kong. Listed on the Hong Kong Stock Exchange, it carried 34.3 million people and moved 1.8 million tonnes of mail & cargo to some 197 destinations in 48 countries in the year 2016 alone!
Having been around since 1946 when it was founded, Cathay Pacific has moved millions maybe even billion of passengers and cargo over its long history. Is there still growth potential left in the company?
With that, here are 7 things you need to know about Cathay Pacific.
We looked through a SWOT analysis of the company.
Hang Seng Bank (HKG:0011) is one of Hong Kong’s largest listed companies that was founded back in 1993. In fact, the Hong Kong stock index is named after itself; the Hang Seng Index. The name of the bank carries significance as it means “ever-growing” and that’s exactly what they bank is trying to do.
Hang Seng is part of the HSBC group with the latter owning approximately 62% of the former. HSBC is one of the world’s largest banking and financial services organisation. Currently, Hang Seng has a market capitalisation of HK$335.15B.
With that, here are 7 things you need to know about Hang Seng.
Find out more about the strength, weakness, risk and opportunity of this company.
Learn more about its main shareholder, its valuation and its financials.
Passive investing is a term to describe investing in funds that simply track an index. An index is basically a collection of stocks chosen based on certain criteria, typically by its size, as used as a way to measure how the general market is doing.
In the past, indices such as the Straits Times Index, Hang Seng Index or the Kuala Lumpur Composite Index are just used to measure the performance of the general markets. Investors are rarely able to invest directly in the indices. Traditionally, fund managers are the ones who decide which stock and the timing to invest and sell an investment. These traditional funds are called active funds. Yet data is showing that 97% to 99% of fund managers underperformed the S&P Indices over the past 10 years.
This means that if you have just invested in a simple passive index fund that has no fund manager over the past decade, you most likely have earned more money than those high-paid fund managers.
These data show why should we pay extra billions in fees to stock market fund managers who consistently underperform? Even if you have no interest in research and investing in the stock market yourself, investing in a passive index fund just seem more logical and cost effective.
However, just choosing between passive index funds can be a challenge, given the largely available choices out there.
In order to make a smart decision on which index fund to invest in, we believe that you should still have a basic knowledge of what investing is about.
This basic knowledge includes:
Next, we have to know what are some of the more common passive index funds around. Here is the summary of a group of passive index funds that we have selected.
Most, passive funds are listed as Exchange-traded Funds (ETF) on the various exchanges. ETF are funds that are tradable on the exchange. It means we can buy this funds, like how we buy a stock, directly through our brokerage account.
Think of it as mutual funds that we can buy like stocks.
Vanguard is the largest passive fund manager in the world. One of its flagship funds is Vanguard 500 ETF. It is an ETF that tracks the performance of the S&P 500 index. This means it invests in some of the largest companies in the world like Apple Inc, General Electric, Exxon Mobil and others.
The fund is also one of the cheapest in the world, with an expense ratio of just 0.05%. This means that we are only paying 5 cents a year for every $100 you invested in the fund. If you compare that to the typical 1% to 2% expense ratio for a mutual fund and a 5% sales charge when you buy them, you might see why passive funds are so attractive and why mutual funds tend to underperform.
Hong Kong also has some large passive funds listed as ETFs.
For example, the Hang Seng H-Share Index ETF is a HK$40 billion index fund that tracks the H-Share index in Hong Kong. H-Shares are some of the largest China-based companies listed on the Hong Kong Stock Exchange. This includes companies like Ping An Insurance, Industrial and Commercial Bank of China and PetroChina.
For investors who are optimistic about the future of large corporation in China, it is a simple way to gain exposure to these companies. However, expense ratio in Asia still tends to be much higher than in the US Market. The Hang Seng H-Share Index ETF charges about 0.6% in total a year to its fund investors. You can download the factsheet to Hang Seng H-Share Index ETF here.
Another common index fund in Hong Kong is the Hang Seng Index ETF. It is an index fund that tracks the performance of the Hang Seng Index. Unlike the H-Share Index, Hang Seng Index includes some of the largest companies listed in Hong Kong, including China-based, Hong Kong-based or international-based companies.
Some of the companies it invested in are HSBC Holdings, Tencent Holdings, CK Hutchison Holdings and even the Hong Kong Exchanges & Clearing Limited. Since its establishment in 2004, the fund returned more than 160% in total to its investors.
You can download the factsheet to Hang Seng Index ETF here.
Singapore has a much smaller passive fund industry. However, to gain access to the Singapore market, the SPDR STI ETF might be a good option.
The SPDR STI ETF is a passive index fund that tracks the performance of the Straits Times Index (STI). The STI includes about 30 of the largest companies listed in Singapore. These are companies like Singapore Telecommunication, DBS Group Holdings, CapitaLand Limited and Keppel Corporation Limited.
Since its inception in 2002, the fund returned about 7.55% a year to its investors. And its expense ratio is quite low at just 0.3%. You can download the factsheet to SPDR STI ETF here.
Although Malaysia does have a number of passive index ETFs listed on Bursa Malaysia, most of them are very thinly traded. This means it is extremely hard to invest in them due to the lack of interests. Hopefully, that would change in the future.
The index fund market is clearly still massively underdeveloped in Asia. Looking at the growth this industry in the USA, it seems that Asia would continue to see growth in the passive funds market.
Although passive investing is not always perfect, some argued that it might lead to blind investing, creating a larger crisis in the future.
However, based on the poor performance of fund managers over the last decade, passive investing is gaining popularity as an alternative to paying a huge fee to fund managers who underperform 97% of the time.
IHH Healthcare Berhad (“IHH”) is the world’s 2nd largest listed healthcare operator by market capitalisation. It has more than 10,000 licensed beds in 50 hospitals across 10 countries (primarily in Malaysia, Singapore, Turkey and India).
The company was established in 2010 following the acquisition of Singapore’s Parkway Group and Malaysia’s Pantai Group. In 2012, IHH acquired Acibadem Holdings Group in Turkey and was subsequently dual listed on both the Main Markets of Bursa Malaysia and the Singapore Stock Exchange (“SGX”).
IHH also owns 35.74% of SGX listed Parkway Life REIT.
Here is what you must know about this huge healthcare group.
Fuelling Consumption Growth of Petrochemicals in Asia. Everyday, we use petrochemicals.
In the morning, we use soap and shampoo when we take a shower. In the afternoon, we are given food packed in a plastic container for our lunch takeaways. In the evening, we enjoy a nice stroll at the garden. If we look around, fertilizers are used to grow flowers and trees in the garden. These are just a few examples of how we consume petrochemicals on a daily basis.
As I write, Petronas Chemicals Group Bhd (PCG) is the largest integrated producer of petrochemicals in Malaysia and among the largest in Southeast Asia. Listed on 26 November 2010 on Bursa Malaysia, Petronas Chemicals Group Bhd is one of the five stocks where its major shareholder is PETRONAS, the national custodian of oil and gas assets in Malaysia. Here, I’ll cover seven key takeaways of PCG before investing into it. Other PETRONAS subsidiaries include PETRONAS Dagangan Berhad (KLSE:PETDAG) and Petronas Gas Berhad (KLSE:PETGAS).
Find out more about one of the largest chemical companies in Malaysia.
We did a SWOT analysis on the company and talked about its current valuation.
In the latest issue (Issue 13 – August 2017), it covers the stories of: |
Financial Crime Risk : Anti-Money Laundering Practices in Banking To understand anti-money laundering, we have to understand what money laundering is. Money Laundering is the process of converting illegal funds into seemingly legitimate assets with the purpose of concealing the ownership or original source of these funds. This makes it difficult for the authorities to trace the origins of the funds. To counter this, the banking sector has established a set of internal regulations and system known as anti-money laundering. These are legal controls taken by financial institutions to investigate suspicious transactions to help prevent money laundering activities within the banking sector. |
The Rise of Text Mining in Financial Markets The world is awash in data. Financial markets are awash in data. We are generating around 2.5 quintillion (2.5×1018) bytes of information every day, and there is an average of 4,000 brokerage reports a day comprising around 36,000 pages in 53 languages. As market participants try to maximize their competitive edge from the growing mountain of information, the nancial world increasingly feels there is a need to harness the power of big data and it has been shaping the way they acquire, analyze and utilize data. The recent development is the rapid expansion of text mining. Hence, this article will focus on the development of Text Mining technology as well as Text Mining technique. |
Title: A Resolution to the Problem of Multiple IRR: A Modified Capital Amortization Schedule (MCAS) Method for Non-Normal Cash flow (NNCF) to Obtain a Unique IRR
The problem of multiple IRR remained unresolved for almost a century. This problem is associated only with some of the non-normal net cash flow (NNCF) that wrongly includes reinvestment income as income or benefit stream. The reinvestment income, which is not a benefit from the investment or project under analysis, causes the multiple IRR problem. This is often misinterpreted as problem of IRR but its neither a problem with IRR nor NPV. It is a problem associated with some NNCF data and the failure to update the discounted cash flow (DCF) or capital amortization schedule (CAS) methods to handle such problem.
Using NNCF data, analyses are conducted with special emphasis on topics such as:
a. A modified CAS (MCAS) method that eliminates multiple IRR associated with NNCF data;
b. Multiple IRR problem and the Descartes rule of sign and Norstrom’s criteria;
c. A NNCF data with a unique IRR under DCF / CAS methods vs IRR by MCAS method;
d. Resolving the problem of multiple IRR by MCAS Method Versus MIRR; and
e. A critical review of the GIRR and AIRR Methods to Estimate NNCF.
The salient findings of the present analysis are:
a. The MCAS method, presented in this paper, identifies and eliminates the reinvestment income associated with NNCF investments (with positive opening balance in one or more years in the CAS) from the benefit stream;
b. This new method overcomes the multiple IRR problem and leads to a unique and real IRR; The effectiveness of MCAS to handle the NNCF data is illustrated with numerical analysis;
c. The assumption of reinvestment at IRR or at hurdle rate in NPV are false assertions in the cases of normal NCF and some of the NNCFs. However, such reinvestment is evident only with NNCFs with positive opening balance in one or more years under the CAS.
d. The reinvestment income under the benefit stream causes multiple IRRs and multiple NPVs too. As NPV is a static point estimate (at hurdle rate) the multiple NPVs are not exposed. Without eliminating the reinvestment income, none of the criterions viz. NPV, IRR or MIRR, is useful as a decision criterion. Neither NPV or MIRR is a preferred criterion, under such circumstances, as recommended in some published works.
e. The MCAS method is appropriate for both normal NCF and NNCF as illustrated in this paper. CAS or DCF method is appropriate only for normal NCF investments.
f. Even when there is no multiple IRRs with some NNCFs under DCF/CAS method, the MCAS method estimated IRR or NPV, without reinvestment income, are different from that of the DCF/CAS estimated IRR and NPV. For a consistent estimate of IRR and NPV, the MCAS method is most appropriate both for NCF and NNCF investments.
g. The generalized IRR (GIRR) and the Average IRR (AIRR) are also not appropriate estimates for NNCF and they are not NCF consistent as discussed in this paper. The problem of multiple IRR associated with the popular cases of NCF investments used in GIRR and AIRR, are also resolved now.
In conclusion, the MCAS method resolves the problem of multiple IRR and leads to a unique IRR that is real and NCF-consistent. Neither the NPV nor the MIRR could resolve the problem of multiple IRR.