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  • Can Mapletree Greater China Commercial Trust Continue To Outperform?

    13 Nov 2017
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    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/.

    Distribution Income

    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

    Revenue

    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

    Net Property Income (NPI)

    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.

    Occupancy Rate

    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

    Rental Reversion

    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

    Footfall and Tenant Sales

    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.

    Balance Sheet

    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

    Portfolio Value

    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.

    Strength

    Growing DPU

    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%

  • How We Made 87.2% In A Non-Tech Company In A Year

    13 Nov 2017
    351
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    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.

  • What I Learned Listening To Tony Fernandes Of AirAsia Berhad

    13 Nov 2017
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    It is no secret that I am a big fan of AirAsia Berhad and its founders; Tony Fernandes and Kamarudin Meranun. So when Tony Fernandes was in Singapore to launch his autobiography, “Flying High” (Almost the same launch period as our book), I jumped at the opportunity to go to the event.

    I also bought his book a few days before and was able to read through it in one reading. It talked about his life story from his boarding school experience in the UK to how he started AirAsia and where it is going.

    How He Made The Impossible Possible

    One story in particular that stuck with me is the story of him trying to buy a house in the UK while he was still studying. He has no income and would only be able to get a house with a mortgage. Although it is clearly an irrational idea to most of us that you would be able to get a mortgage with no income, it does not stop him from trying. He went to talk to hundreds of banks and mortgage specialists and amazingly he did secure his mortgage and bought his first home. Talk about doing the impossible. That was the first “out-of-this-world” type of deal he made in his life.

    The Future Of AirAsia

    Another comment that he made that spike my interests is how he describes the future of AirAsia. He felt that AirAsia should become more of a data company rather than just an airline. Given that more than 73 million passengers fly with AirAsia every year, he believed that the data that they have gotten on all these passengers could be very valuable in the future.

    This is something similar to what the Chief Executive of Ryanair, Michael O’Leary has shared as well. Michael once said that air ticket could be free in the future, with airline making money through other opportunities like sharing revenues with airports. So in turn, budget airlines would become the platform to bring people into airports and the tourism industry at large.

    Does that mean that we could fly for free in the future and AirAsia would partner with other tourism providers to offer us other related services and they just earn on affiliate sales or advertising? It is still unclear but the idea of pushing airfares down to zero could really boost the tourism industry.

    Consolidation For AirAsia?

    Tony Fernandes also mentioned that the parent company of AirAsia, Tune Group, has many other businesses and that has created some issues with AirAsia. So they might be thinking of consolidating their operations under AirAsia Berhad. He did not clarify what does he mean by.

    Does it mean that other Tune Group’s businesses, including listed ones like Tune Protect Group Berhad, could be privatized into AirAsia Berhad? Or does it mean that other associates of AirAsia Berhad, including listed associates like AirAsia X Berhad, would be privatized into AirAsia?

    AirAsia and its related parties currently have three listed companies on Bursa Malaysia; AirAsia Berhad, AirAsia X Berhad and Tune Protect Group Berhad. It is too early for us to be sure of anything but it could mean we might expect some consolidation happening going forward, whichever way it might turn out to be.

  • 8 Things You Must Know About Genting Plantations Bhd If You Are Investing In It

    16 Oct 2017
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    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.

    #1: Stock Symbol

    1

    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

    #2: The Business

    Genting Plantations Bhd has established an integrated business model that includes:

    • Palm Oil Plantations

      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

    • Palm Oil Mills

      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. 

    • Property Development

      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.

  • The 9 Things You Need To Know About IOI Corporation Bhd Before Investing

    16 Oct 2017
    234
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    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 MalaysiaIOI 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.

    #1: Stock Symbol

    1

    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

    #2: The Business

    IOI Corporation Bhd has established an integrated business model that involves:

    • Upstream Activities

      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

    • Downstream Activities

      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

      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.

  • 8 Things To Know About IOI Properties Group Bhd

    16 Oct 2017
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    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.

    #1: Stock Symbol

    1

    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

    #2: The Business

    Presently, IOI Properties derives income from three main business divisions. They are:

    • Property Development


      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. 

    • Property Investment


      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. 

    • Leisure & Hospitality

      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.

    #3: The Financials

    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

  • Things To Know About The World Largest Bus Maker: Zhengzhou Yutong Bus Co., Ltd.

    02 Oct 2017
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    Business Overview

    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.

    Key Strengths

    Largest player in China bus market

    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.

    Superior technology

    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.

    Key Opportunities

    Increasing demand for electric buses

    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.

    Belt and Road Initiative

    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.

  • Want To Invest In Shandong Gold Mining Co. Ltd, The 2nd Largest Gold Producer In China?

    02 Oct 2017
    213
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    Business Overview

    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).

    Key Strengths

    Strong balance sheet aids acquisition financing

    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.

    Adept at cost cutting

    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.

    Key Opportunities

    Joint venture with Barrick Gold

    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.

    Xiling mine in Shandong province

    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.

    Key Risks

    Volatility of gold prices

    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.

    Slower than expected progress on acquisitions

    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.

  • 7 Things You Must Know About Bumitama Agri Ltd Before You Invest

    02 Oct 2017
    272
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    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:
     

    #2: The Business

    Bumitama has established an integrated business model that involves:

    1. Palm Oil Plantations

      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. 

    2. CPO Mills

      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. 

    3. Biodiesel

      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.
       

  • Why You Should Take A Look At PPB Group Berhad

    02 Oct 2017
    312
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    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.
     

    The Business

    At core, PPB derives bulk of its profits from four different business segments. They include:

    1. Wilmar International Ltd

      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)

    2. Grains & Agribusiness

      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. 

    3. Film Exhibitions

      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.

    4. Consumer Products

      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.

    Growth Plans

    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:

    1. Grains & Agribusiness

      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.

    2. Film Exhibitions

      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.

    3. Consumer Products
      PPB has secured distribution rights from Reckitt Benckiser Malaysia Sdn Bhd for Dettol, Strepsils, Durex, Gaviscon, Harpic, Vanish, Optrex, and Shieldtox in Northern Malaysia (Penang, Perak, Kedah and Perlis).
  • 8 Things To Know About Genting Malaysia Bhd Before You Invest

    02 Oct 2017
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    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.
     

    #2: The Business

    Genting Malaysia Bhd has four major resort properties. They include:

      1. Resorts World Genting (RWG)

        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. 

      2. Genting United Kingdom (UK)

        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 in the United States & Bahamas

    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.

    #3: The Financials

    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.

  • 7 Things You Must Know About Lenovo Group Limited Before Investing

    24 Sep 2017
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    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.‚Äč

    The Business

    The company now segments its business unit into three main groups.

    PC and Smart Device

    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.

    Mobile Business

    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.

    Data Center Business

    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.

  • 3 Industries That Could Change Forever And How Should We Invest

    24 Sep 2017
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    Disruption seems to be the buzz word nowadays. In last year’s National Day Rally, PM Lee Hsien Loong spoke at length about disruption and how it is the “defining challenge of the economy”. He stressed that Singapore has to embrace changes, raise the level of technology adoption among companies, and train workers to upskill. In essence, disruption should be seen not as a threat, but an opportunity to transform industries to remain relevant and competitive.

    According to the online Cambridge Dictionary, to disrupt means ‘to prevent something, especially a system, process, or event, continuing as usual or as expected’. There is even a specialised definition in the business context: to change the traditional way that an industry operates, especially in a new and effective way.

    Right now, we are seeing the full impact of disruption being played out in Singapore particularly in 3 sectors: taxi, telecommunication, print media.

    Taxi

    Let us first look at taxi segment. The emergence of Grab and Uber have single-handedly revolutionalised the way we consume taxi services and pulling us away from the traditional taxi operators. They started by offering a new channel of taxi booking applications, then moved on to carve out a new avenue of private taxis. Then came throngs of new drivers offering transport services using their private cars, competing directly with taxi drivers. Now we are seeing Grab implementing a new electronic payment system which could pay for daily purchases. Essentially they are creating a whole new commercial ecosystem anchored by taxi services with a complementary offering in e payment that brings about consumer stickiness.

    ComfortDelgro Corporation Limited (SGX:C52) has been adversely affected by Grab and Uber. In the most recent quarter, its revenue and operating profit dropped 3.4% and 9% respectively. The taxi segment saw its revenue dropped 11%. The market has responded by pushing its share price down to around $2.2 which is at a multi-year low.

    Telecommunication

    Telecommunication is another sector that is facing disruption. However, it is not caused by a new business model offering alternative services, but instead the entrance of a new player into an oligopolistic industry that has remained status quo for a long time. TPG Telecom, an Australia fixed network company, has successfully bidded to be the fourth mobile telecommunication company in Singapore, muscling its way into the field occupied by Singapore Telecommunications Ltd (SGX:Z74), Starhub Ltd (SGX:CC3) and M1 Ltd (SGX:B2F). Under regulations, it is required to roll out nationwide 4G services by Oct 2018.

    When there is a new player entering an industry with matured players and stable dynamics, chances are the new player will resort to aggressive price tactics to wrestle customers away and gain market share. It is highly probable for Singapore with a small market and a mobile penetration of 150%. Existing telcos, to defend their market share, would need to up their offerings with innovative products and attractive pricing to retain customers. A case in point: the return of unlimited-data mobile plans recently.

    Arguably, M1 as the smallest telco would be the worst affected. It is heavily dependent on Singapore’s mobile market, with less diversified operations and smallest customer base. Expenses will rise in marketing, recruitment, handsets subsidies to retain customers. In its latest quarterly results, its handset cost of sales rose by 17%, while its EBITDA margin for service revenue shrank from 40.3% Q2 last year to 35.9% this year.

    It’s share price? Currently trading at around $1.80, also a multi-year low unseen since the Global Financial Crisis.

  • Apple iPhone X And Its 7 Asia-Listed Suppliers

    24 Sep 2017
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    And here are some of the Asia-listed suppliers of Apple Inc that might be impacted by its new product ranges.

    The iPhone

    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.

    The Chip

    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.

    The Camera

    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.

    The Apple Watch

    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.

    The Speakers

    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.

    The Display

    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.

    Value In Focus

    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.

  • 7 Key Things You Ought To Know About Wilmar International Limited

    24 Sep 2017
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    What is the value of a bag of rice?

    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:

    1. Tropical Oils

      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. 

    2. Oilseeds & Grains

      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. 

    3. Sugar

      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.

  • 4 Things We Discovered From The AGM Of SIA Engineering Company

    04 Sep 2017
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    SIA Engineering Company Limited’s (SIAEC) (SGX: S59) annual general meeting (AGM) was held on 20 Jul 2017. Our team went to the meeting to find out more about how the business is doing. The meeting turned out to be very informative, with the management team being candid on the Group’s current challenges and how it plans to drive the company forward over the next few years.
    If you are unfamiliar with the business of SIA Engineering Company, you can view our analysis of the company right here.
    From the AGM, here are four key takeaways we discovered during the meeting:
     

  • Here’s What You Need To Know About Cathay Pacific Airways Ltd Before You Invest

    04 Sep 2017
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    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.

  • What You Must Know About Hang Seng Bank Before Investing

    04 Sep 2017
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    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.

  • Here’s Why Passive Investing Might Be Perfect For You

    04 Sep 2017
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    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.

    Are Active Fund Managers Doing Their Job?

    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.

    US Market

    Vanguard 500 ETF (NYSEARCA: VOO)

    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.

    The Hong Kong Market

    Hong Kong also has some large passive funds listed as ETFs.

    Hang Seng H-Share Index ETF (HKG:2828)

    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 InsuranceIndustrial 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.

    Hang Seng Index ETF (HKG:2833)

    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.

     The Singapore Market

    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.

    SPDR STI ETF (SGX: ES3)

    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.

    The Malaysia Market

    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.

    Passive Or Not To Be

    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.

  • Is IHH Healthcare Berhad Worth Investing In?

    04 Sep 2017
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    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.

  • Is AIMS AMP Capital Industrial REIT Worth Investing In?

    04 Sep 2017
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    Is AIMS AMP Capital Industrial REIT Worth Investing In?

  • 7 Things To Know About Petronas Chemicals Group Bhd Before You Invest

    04 Sep 2017
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    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.

  • 7 Things You Need To Know About SPH REIT Now

    04 Sep 2017
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    7 Things You Need to Know About SPH REIT Now
  • Is Kuala Lumpur Kepong Berhad The Best Palm Oil Company To Own?

    02 Sep 2017
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    Is Kuala Lumpur Kepong Berhad The Best Palm Oil Company To Own?