A Tale of Two Cities

I have read and watched so much about China's rapid development and growth over the years, a recent chat with a ex-colleague from Shanghai has made me appreciate more how it impacts and what it means to average white collar on the street.

Yu, a Chinese IT professional working in Shanghai and drawing about RMB10k a month back in 2006 when he was in his early 30s, was very concerned about the rising property price in Shanghai then, bought a medium size apartment in Shanghai for less than RMB 2 million. Over the years, he continued to buy 2 more properties with leveraging on debts, 1 in Hangzhou and another at his hometown ( tier 3 city). He is now in his early 40s and told me that he and his wife are planning for early retirement just to take care of their little daughter ( just turn 2 years old)...oh yes, the wife also has 2 more properties in her own name!!

He told me that his properties if sold at market value and after settling all bank loans, he probably would have around RMB10 million. So they can stay in one of the properties belong to the wife and life should be quite comfortable.



Lee, a Malaysian IT professional working in Kuala Lumpur and drawing about RM 5k a month in 2006 when he was in his early 30s and bought a double storey house in Cheras for about RM300k.
He has also bought another apartment for about RM300k few years later. I believe the market value of the properties he owned has more than double now, but that does not provide him with sufficient wealth to retire now.


Let's put other factors aside (eg too subjective to compare quality of life), I see 2 young professionals - the average white collar in 2 different cities having about the same back ground and similar career path but ended up with enormous difference in amount of wealth accumulated mainly due to one big factor - wealth "created" by a country's economic success.


Whether in property or stock investment or even a career opportunity, we should encourage our next generation to have a wider horizon and look beyond where we are now. A short 10 years could bring a vast difference in life if we are at the right place at the right time and of course, make the right decision and just need to ride on it without having to do a lot.
Yes, I should or could have...........well, nothing is too late.

Masters are Everywhere..

Over the weekend Dr Neoh Soon Kean, dubbed as the father of Value Investor of Malaysia, spoke at InvestSmart Fair 2017 and shared his "secret" tips of success.  Some of his "tips" that includes one must be prepared to lose 100% in a particular stock and the importance of diversification, diversified into 30 stocks. Many forumers and stock investors/traders have commented and expressed different views.
Looking at his impressive return over the very long term, I am sure there are many things we can learn from him and adapt the approach to our own situation eg if we do not have large capital, I reckon trying to buy into 30 stocks may sound a bit challenging. I believe the notion "be prepared to lose 100%" is just a statement to instil courage to go ahead with a stock if you are confident about it, but at the same time we must acknowledge that nothing is guaranteed in investment and we could be wrong at times. If one is to follow the yardstick on basic financials and fundamental, chances of losing 100% is very slim, though it is still possible. Below is the image of Dr Neoh's book "Stock Market Investment in Malaysia and Singapore", it is definitely worth reading if you can find it.    



As usual, there is no "one size fits all" approach in whatever field, even in stock investment. A young professional whom I met in a Investment forum recently told me that his return for 2014-2016 was at average 30% per year and 2017 so far is a little exceptional, more than 100%..wow..  He is now trying to impart his skills and knowledge of his impressive stock picks strategy. I believe there is something I can learn from him too. 


Value Investing, though sound simple - buy something that's worth more than what they are selling, but involves many subjective judgement, especially to determine how much it is worth, what's more - the soft skill : patience and discipline, overcoming the fear & greed in us. Hence, it is easy to learn but very difficult to master. Continuing education and adaptability is important to sharpen our skills of value investing from time to time, whether that is from fundamental analysis, chart analysis or price momentum/action analysis. There are so many masters around whom we could always learn one or two things from, we may only need to tweak a little to achieve something much bigger, why not?

Asia File - no end to ASB's selling?

Asia File has registered a big drop in FY17 profit, from FY16's Rm76.5 mil to FY17 Rm55.9 mil ( about 30% lower) and its share price dropped approximately 40% from more than Rm5 at beginning of 2016 to around Rm3 now. I believe the fall mainly due to its not so promising prospect in document filing products where the company specialises, it is made worst when its second largest shareholder ASB is leading the disposal now.


Further check shown that a few institutional investors have reduced their shareholdings according to 30 largest shareholders listing as at 20 Jun 16 and 19 Jun 17.. They are ASB -its 2nd largest shareholder reduced from 24.1% to 22.9%(sold about 1.7 mil shares), EPF (sold 1.3 mil shares) and Kumpulan Wang Persaraaan (sold about 800k shares).


ASB had further reduced it to 21.56%(42 mil) per latest announcement as at 9 Oct 17. Asia File has total 195 mil no of shares and 30 largest shareholders already owned 89% of the company, hence its shares are quite tightly held. It took ASB 15 months to divest 2.4% and the share price has fallen from 4.2 to 3.07 now (almost 30%)

Being a substantial shareholder made it harder for ASB to sell at "good" price as it needs to announce to the whole world when it buys or sells shares. Since everyone knows it is selling down heavily,  buyer is not in the hurry to buy or accumulate unless its financial performance shows a strong rebound. But even then, that may just provide a better exit price for ASB. 


While I like Asia File for its strong cashflow and dividend, the existing business of filing products may be facing an industry wide contraction. The management response to that challenge, it is venturing out into disposable food wares and tries to maximise return on its cash reserve by investing in auto callable equity linked investment related to 3 China stocks (though nothing wrong with trying to get more return, personally, I always prefer company to focus on core business and leave the other income with more stable and less complicated source) to enhance its profit.The aggressive selling by ASB though presents a golden opportunity for potential investors but I am still waiting for ASB to launch a mega sale, if the price is low enough, Asia File could be a good dividend stock.

Biggest FEAR when market crash...

Most stock markets have experienced bull run after recovering form the Global Financial Crisis in 2007-2008 and for some stock markets, this is the longest bull run in history. Will the bull continue to run ? Will the market turn to slow growth instead? Or will there be a crash coming soon? When will that be ?  Frankly, I don't think anyone has an answer for this billion dollar question.
I have taken a short break from reading all the market news for 2 days and trying to plan ahead for 2018, from holiday, things to achieve and of course, my stock portfolio. So, a tough question that I am struggling with is - what is my biggest fear if /when stock market crash (of course it may or may not happen, it may be only a minor correction or could be another bull run next year). I am not going to predict what will happen but just to prepare myself if there is a crash, what could sink my emotion?
I started to list down the possible scenarios that could happen to my stocks, and I basically see it from 2 aspects, emotion and real financial impact :-


1. Company goes bankrupt and I lost all my investment - though the risk is there but I see stocks in my portfolio have relatively less bankruptcy risk as either they are in net cash position or lowly geared companies with sound financial position. But if that happen, I am emotionally affected and worst, financially hit as my assets are lost and cashflow from dividend is affected. I believe I have mitigated this by selecting only companies with healthy financial position and a diversified portfolio.  
2. A painful paper loss - as long as the companies I invested in are profitable with healthy cash flow and also dividend paying company, I am not overly worried though still get affected emotionally 
3. Unrealised gain wipe out - similar to 2 above but emotionally not that bad ( I guess)
4. I have too little cash to buy cheap stocks during carnival sale - I hate missing out great opportunity to buy good companies when they are selling real cheap.


No 1 is my biggest FEAR, hence I spent most of my time reviewing my portfolio to minimise the total loss of capital. I reckoned I am prepared for 1 to 3 but not 4, so my next course of action will be focusing on 4 by realising some gain to increase further my cash holding. If that opportunity comes, I would be very happy and if it doesn't, I suppose my opportunity cost won't be too high.


    

Jaycorp - more info please

This smaller furniture maker caught my attention lately, not because of its impressive profit growth or high dividend yield(latest around 7% based on its price of 1.57) but the announcement of changes in shareholdings of some directors and shareholders.

	2012	2013	2014	2015	2016	2017
Revenue (Rm'000)	236,612	209,281	236,327	247,907	289,457	312,824
Net Profit (Rm'000)	10,261	5,086	8,625	7,993	20,982	24,766
EPS(sen)	7.5	3.72	6.31	5.84	15.34	18.11
Dividend (Sen)	3.5	3.5	3.5	4	10	11

In FY 16, the company has ventured into engineering and construction via a JV and target to get a slice of the Rm12.6 billion Sabah Pan Borneo highway project and also to develop its 400 acres of land in Bongawan, Sabah.


According to its FY16 Annual Reports, there were mainly 2 substantial shareholders:-
1. Jawala Corp with 23.24% (31.787 mil shares) belong to Khan family & Chee Ah What(not sure about their proportion in Jawala)
2. Central Glamour with 22.14% (30.275 mil shares) belong to Yeo family respectively. 
   
On 25 Sept, 2 members of Khan family and Chee Ah What ceased to have deemed interest in Jaycorp via Jawala and 6 Oct, 3 members of Yeo family ceased to have deemed interest in Jaycorp via Central Glamour. While they have complied with the Companies Act and Bursa requirements to make the necessary announcements, but that does not provide any clarity as to who are the "buyers" of their shares in Jawala and Central Glamour. Do note that there is no announcement with regards to Executive Chairman's interest in Jawala and Managing Director's interest in Central Glamour, hence the 2 most critical personnel of Jaycorp are still controlling the company.   
Is it just a restructuring between these 2 families? Is it realignment of their ultimate interest in Jaycorp due to new business undertaking? Is there new shareholders emerged? Is there disagreement between family members on business direction and hence some exiting the business (of course no company will announce this openly)? 
The fact that they have not resigned and no new appointment being made to board as yet, it seems this could just be an internal shareholding realignment, but that is just a wild guess.
In my personal opinion, as they are also the key management personnel(Executive Director) in Jaycorp, I believe it is important to give more information eg via press release to provide reasoning with regards to this sort of announcement to avoid any speculation, not merely to comply with minimum requirement of law. Unlike any institutional investors or any person who has substantial shareholding in a PLC that just need to comply with Bursa requirement to announce changes in their shareholding as they do not involve in the management of the company. 


My wish is more controlling shareholders in PLCs give more thought and consideration to the interest and rights of minority shareholders, including the rights to fair share of information. Can the law support minority shareholders to lift more corporate veil please?