By revealing some of my best and worst investment decisions to date, I hope to provide invaluable insights for property investors just starting out and those already in the game.
Below is a summary of a section in my book that covers what I believe to be the 10 most commonly made faux pars by first-time investors. Avoid these stumbling blocks and you'll have a far better shot at becoming a profitable property investor.
1. Strategy (or lack of):
Strategy involves having a game plan, an idea of where you're heading and how you intend to get there. Without a coherent plan of attack to create a property portfolio, you are almost certainly setting yourself up for failure.
Put pen to paper and consider your approach to investing, including whether you’ll go for income or capital growth, negative or positive gearing, new or established housing, short or long-term investment, houses or units or perhaps a combination of all of the above.
Whatever your method may be, you must plan your action and then action your plan.
2. Analytical, Not Emotional:
First time home buyers will make a purchasing decision based on 90 per cent emotions and only 10 per cent logic. As an investor, you must reverse this ratio and make judgments based on 90 per cent logic or analysis and 10 per cent emotion.
When you talk yourself into desperately wanting a particular property because you have formed an emotional attachment to it, you will be far more likely to pay too much and over-capitalise on your investment.
You have a greater chance at nabbing a bargain if you can detach yourself from the entire buying process (and the property in question) and cease negotiations at your pre-determined "walk away" price, knowing there will always be another opportunity around the corner.
Separate your emotions from the hard financial facts and you will make far better investment decisions.
3. Headlong Rush or Dithering Fence-Sitting:
There are two extremes with many property investors: those that rush out after being inspired by a book or seminar and buy the first property they come across (often paying too much and buying the wrong type of investment in the process), and those who attend seminar after seminar and over-analyse the investment journey to the point of complete inaction.
The former at least make a start and may learn from their mistakes, whereas the latter never overcome their fears long enough to actually make that initial purchase. Try to find a happy medium; avoid the headlong rush or the fence-sitter stance and you'll be making one less investment mistake.
4. Profit Impatience:
Property investment will not make you a millionaire overnight, rather it is a long-term prospect that lacks the volatility in values of other commodities such as shares.
This is the strength of bricks and mortar - its ability to provide a steady gain in value over time. To be successful in property investing, you need to allow the power of compounding to work for you; whereby your money will earn more money and your interest will accumulate more interest.
Let's look at a scenario where you're given the choice to receive $20,000 a day for 30 days or just 1 cent on day one that doubles every subsequent day for the same timeframe. After day 10, that one cent is worth $10.23; after day 20 it's worth $10,475.52 and by day 30 it has compounded into $10,737,418 - far more than the $600,000 you would have gained by taking the $20,000 per day option.
The lesson being you will make more money on your investments when you let time be your ally and patience your friend.
5. Improper property selection:
The logic here is simple. Don't buy an apartment in the outer suburbs where family homes are most in demand and vice versa. Being close to amenities such as schools, shops, sporting and medical facilities can often increase your profits, but don't buy right on their doorstep as this often makes a property less liveable.
6. Insufficient Research:
Glancing through the local paper to get a rough idea on property prices in an area is not enough. Talk to real estate agents, the Real Estate Institute in your state, neighbours, the local council, the water authority, body corporate managers if applicable and the tenants and property manager if the home is currently let.
The bottom line is don't skimp on research - it's far too valuable.
7. Overestimating Income and Underestimating Expenses:
If you fail to plan, you plan to fail, particularly where dollars and cents are concerned and you'll have no one to blame but yourself.
Gain an idea of how much rental income you can expect to achieve by seeking median rental figures from the relevant Real Estate Institute and local property managers. Attend open homes to see how much the market is willing to pay for properties similar to the one you're considering. On the flipside, ensure you allocate enough funds for all potential expenses you'll incur whilst holding the property.
You are far better off over-estimating than under-estimating here, so consider a vacancy rate for about double the average, allow 10 per cent more for every outgoing including council and water rates, land taxes, insurance, management and strata fees, maintenance and interest charges because these will often increase unexpectedly.
Examine each potential investment analytically and ensure you make adequate allowances. By underestimating your income and overestimating your expenses you're more likely to avoid any nasty surprises.
8. Inappropriate Financing:
Look for the longest term, lowest overall cost loan with a fixed rate - don't focus on the interest rate alone. Remember that this is a long-term purchase of a long-term asset and as such, needs to be financed adequately.
You should also consider how accommodating your lender will be when you're ready to make your next investment purchase.
9. Property Inspections:
During the initial inspection you conduct on a property, you should not only be examining the home itself, but looking for clues as to the vendor's personal situation. For instance, if there are family photos displayed, yet only signs of one occupant, the seller may be going through a separation or divorce.
Although it may sound a little callous, this gives you an opportunity to buy a bargain whilst giving the previous owner a chance to move on with their lives. Examine the property carefully both inside and out. Are there any signs that work has been done to cover up a more serious problem, such as cracks that have been plastered over?
Thoroughly inspect all rooms taking note of paintwork, floor coverings, indications of damp or peculiar smells. Turn taps on to test water pressure and test appliances for any faults. In general, get a feel for what it would be like to live in the property so you know how your tenants might find it. Are they going to be comfortable in the home and if not, what would you need to do to make it more accommodating?
Be thorough and always do a second or third inspection at different times of the day to gauge how the property looks in different light and how its surrounds could impact on it, such as nearby road noise, etc.
Take photographs of the interior and exterior to assist when you come to conduct your final inspection, which you are entitled to do within seven days prior to settlement under the General Conditions for Sale of Land. During this visit you should ensure that everything is as it was when you purchased the property and that no fixtures noted in the Contract of Sale have been removed. It's also crucial to obtain professional building and pest inspections as a condition of your offer so you know exactly what you're buying. They may cost you in the vicinity of $300 to $400, but it's well worth the investment.
10. Self Managing Properties:
Some investors believe that paying a property manager to look after their investments is throwing away income that could be lining their pockets.
I certainly did. I started out thinking I could do it all myself. Then as I added to my portfolio, the everyday nuisance of dealing with tenants became more of a burden than a blessing. Worrying about the little things that concerned my tenants was eating into precious time that I could have been utilising to further my investment goals.
It can be difficult to find appropriate tenants and with the laws governing rental properties constantly changing, the risk of being sued is far greater than ever. If you have the time, energy and patience to devote to self managing your investments, then go for it. But think of how much money you could make pursuing other opportunities rather than unblocking a sink or waiting on a tradesman to show up.
How much better could your lifestyle be knowing that you have a professional on your team, whose full time job is looking after your property?
So there you have it. Hopefully this list has opened your eyes to some of the potential problems that can really put a spanner in the works if your property investment career if not adequately addressed.
Saturday, July 31, 2010
TAS Offshore revenue up 155pc to RM139m
I have TAS on my portfolio but are still losing money....in RED region...hope the news will have some positive effect on the stock....Cross my finger
Shipbuilder Tas Offshore Bhd recorded a 154.8 per cent increase in turnover for its financial year ended May 31, 2010, at RM139.9 million from RM54.917 million the previous year. Its pre-tax profit jumped 63.8 per cent to RM11.36 million from RM6.969 million previously. "The current encouraging crude oil price range of US$75 to US$80 per barrel is deemed favourable for the oil major to expand their offshore deep sea projects and production activities. "The demand for offshore support vessels is expected to increase as the Malaysian national oil company, Petronas, and other oil majors award out the contracts. This augurs well for our shipbuilding arm," it said in a filing to Bursa Malaysia today. "Next year remains to be challenging as the global recovery is still uncertain due to the shaky economic situation in several European countries and the United States. "However, we believe 2011 will be a better year and the board will continue to cautiously work towards securing better projects and profits for the shareholders," it added. -- BERNAMA
Shipbuilder Tas Offshore Bhd recorded a 154.8 per cent increase in turnover for its financial year ended May 31, 2010, at RM139.9 million from RM54.917 million the previous year. Its pre-tax profit jumped 63.8 per cent to RM11.36 million from RM6.969 million previously. "The current encouraging crude oil price range of US$75 to US$80 per barrel is deemed favourable for the oil major to expand their offshore deep sea projects and production activities. "The demand for offshore support vessels is expected to increase as the Malaysian national oil company, Petronas, and other oil majors award out the contracts. This augurs well for our shipbuilding arm," it said in a filing to Bursa Malaysia today. "Next year remains to be challenging as the global recovery is still uncertain due to the shaky economic situation in several European countries and the United States. "However, we believe 2011 will be a better year and the board will continue to cautiously work towards securing better projects and profits for the shareholders," it added. -- BERNAMA
Wednesday, July 28, 2010
WCT : Proposes RM600m bonds, 1-for-8 warrant issue -- Underperform
News Update
- WCT has proposed the issuance of RM600m nominal value of 5-year serial fixed rate bonds and 181.1m new warrants of which 121.1m will be offered to existing WCT shareholders on a 1-for-8 basis and 60m to senior management of WCT at an issue price to be determined later.
- Based on our calculation, at an indicative strike price of RM3.00, the new warrants will dilute WCT’s existing fully-diluted FY12/11 EPS by another 2.9% that is immaterial.
- We are neutral on the exercise that represents part and parcel of WCT’s day-to-day financial management.
- Fair value is RM2.30. Maintain Underperform
- WCT has proposed the issuance of RM600m nominal value of 5-year serial fixed rate bonds and 181.1m new warrants of which 121.1m will be offered to existing WCT shareholders on a 1-for-8 basis and 60m to senior management of WCT at an issue price to be determined later.
- Based on our calculation, at an indicative strike price of RM3.00, the new warrants will dilute WCT’s existing fully-diluted FY12/11 EPS by another 2.9% that is immaterial.
- We are neutral on the exercise that represents part and parcel of WCT’s day-to-day financial management.
- Fair value is RM2.30. Maintain Underperform
Scomi Marine (RM0.51; Not Rated; SMB MK)
The following are highlights from our company visit after
SMB announced the disposal of its marine logistics business
to PT Rig Tenders Indonesia (PTRT) for US$171.8m
(c.549.8m). PTRT is currently a 80.5%-owned subsidiary of
Scomi Marine Services (SMS). Upon the completion of the
disposal exercise, SMS’ stake in PTRT would be reduced to
24.6%. The following are key points of the disposal
exercise:
- PTRT will acquire SMS marine logistics business for a
total consideration of US$171.8m;
- PTRT will fund the acquisition via US$100m bank
borrowings and the remaining through a rights issue;
- SMS will renounce its entitlement to the rights issue to
Portside Offshore Inc (POI), a special purpose vehicle
backed by privately managed fund;
- POI would then emerge as the majority shareholder in
PTRT at 62.8% after the completion of the disposal
exercise.
We understand that upon the completion of the disposal,
SMB would be in a net cash position of RM484m or
RM0.66/share. SMB would also realise a loss on disposal of
c.RM432m upon taking into account SMB’s full investment
cost and acquisition profit on the marine logistics business.
Management has yet to decide on the next course of action
from the disposal proceeds. We believe it could be one of
the following 3 options: - (1) capital repayment; (2)
reinvestment with the remaining proceeds to be distributed
as special dividend; and (3) new asset acquisitions. We
believe that scenario 2 would likely be the preferred choice
as SMB would be able to reinvest for future growth, while
at the same time utilise part of the proceeds to reward
existing shareholders.
After the disposal, SMB would derive bulk of its earnings
locally while still maintain its core operations in marine logistics
and offshore support services. SMB has 2 AHTS (5,000 bhp)
vessels under its 51%-owned subsidiary, Marineco Limited,
which are on charter to Shell currently. SMB is also among the
5 operators undertaking Tenaga coal logistics requirement
under its wholly-owned subsidiary, Trans Advantage.
We understand that SMB intends to grow these two divisions
by acquiring more assets. At this juncture, details remain
sketchy although deepwater assets for offshore support
services could be on the cards. We expect annual net profit to
moderate to RM10-15m upon the completion of the exercise
SMB announced the disposal of its marine logistics business
to PT Rig Tenders Indonesia (PTRT) for US$171.8m
(c.549.8m). PTRT is currently a 80.5%-owned subsidiary of
Scomi Marine Services (SMS). Upon the completion of the
disposal exercise, SMS’ stake in PTRT would be reduced to
24.6%. The following are key points of the disposal
exercise:
- PTRT will acquire SMS marine logistics business for a
total consideration of US$171.8m;
- PTRT will fund the acquisition via US$100m bank
borrowings and the remaining through a rights issue;
- SMS will renounce its entitlement to the rights issue to
Portside Offshore Inc (POI), a special purpose vehicle
backed by privately managed fund;
- POI would then emerge as the majority shareholder in
PTRT at 62.8% after the completion of the disposal
exercise.
We understand that upon the completion of the disposal,
SMB would be in a net cash position of RM484m or
RM0.66/share. SMB would also realise a loss on disposal of
c.RM432m upon taking into account SMB’s full investment
cost and acquisition profit on the marine logistics business.
Management has yet to decide on the next course of action
from the disposal proceeds. We believe it could be one of
the following 3 options: - (1) capital repayment; (2)
reinvestment with the remaining proceeds to be distributed
as special dividend; and (3) new asset acquisitions. We
believe that scenario 2 would likely be the preferred choice
as SMB would be able to reinvest for future growth, while
at the same time utilise part of the proceeds to reward
existing shareholders.
After the disposal, SMB would derive bulk of its earnings
locally while still maintain its core operations in marine logistics
and offshore support services. SMB has 2 AHTS (5,000 bhp)
vessels under its 51%-owned subsidiary, Marineco Limited,
which are on charter to Shell currently. SMB is also among the
5 operators undertaking Tenaga coal logistics requirement
under its wholly-owned subsidiary, Trans Advantage.
We understand that SMB intends to grow these two divisions
by acquiring more assets. At this juncture, details remain
sketchy although deepwater assets for offshore support
services could be on the cards. We expect annual net profit to
moderate to RM10-15m upon the completion of the exercise
Tuesday, July 27, 2010
AmResearch fair value for Ivory Properties at RM1.75
KUALA LUMPUR: AmResearch has accorded a fair value of RM1.75 per share to Ivory PROPERTIES [] Group Bhd (Ivory) which will be listed on Wednesday, July 28.
The research house described the company as an established developer with a strong track record in Penang.
“The initial public offer price is RM1.00/share. Our fair value stands at RM1.75/share pegged to a 35% discount to our estimated NAV of RM2.70/share,” it said in a recent report.
AmResearch said Ivory has strong localised knowledge and an impeccable execution track record, with quick turnaround times. It is at the forefront of urban renewal in Penang.
The redevelopment of the Escoy tin smelter into prolific Penang Times Square is a good case in point - it provides Ivory bargaining leverage to negotiate future redevelopments. Ivory will be accelerating presales from RM500mil in FY10F to RM750mil in FY11F.
“We are forecasting earnings of RM36mil in FY10F, rising by 51% to RM54mil in FY11F and a further 30% to RM70mil in FY12F - putting its 3-year earnings CAGR at a solid 63% off an earnings base of just RM17mil in FY09.
“Balance sheet is strong, with net gearing of 10% in FY11F. We see scope for transformational growth from large NAV-accretive land deals under negotiation. The IPO is attractively priced - at just 3.4x FY11F's earnings, and at a steep 63% discount to our NAV of RM2.70/share. It is also trading at deep discount to its small-cap peers - despite Ivory's stronger earnings growth,” it said.
The research house described the company as an established developer with a strong track record in Penang.
“The initial public offer price is RM1.00/share. Our fair value stands at RM1.75/share pegged to a 35% discount to our estimated NAV of RM2.70/share,” it said in a recent report.
AmResearch said Ivory has strong localised knowledge and an impeccable execution track record, with quick turnaround times. It is at the forefront of urban renewal in Penang.
The redevelopment of the Escoy tin smelter into prolific Penang Times Square is a good case in point - it provides Ivory bargaining leverage to negotiate future redevelopments. Ivory will be accelerating presales from RM500mil in FY10F to RM750mil in FY11F.
“We are forecasting earnings of RM36mil in FY10F, rising by 51% to RM54mil in FY11F and a further 30% to RM70mil in FY12F - putting its 3-year earnings CAGR at a solid 63% off an earnings base of just RM17mil in FY09.
“Balance sheet is strong, with net gearing of 10% in FY11F. We see scope for transformational growth from large NAV-accretive land deals under negotiation. The IPO is attractively priced - at just 3.4x FY11F's earnings, and at a steep 63% discount to our NAV of RM2.70/share. It is also trading at deep discount to its small-cap peers - despite Ivory's stronger earnings growth,” it said.
Oil Falls a Second Day After U.S. Supplies Gain, Consumer Confidence Drops
Oil fell for a second day in New York after an industry report showed U.S. crude inventories rose and the Conference Board said confidence among the nation’s consumers fell, signaling growth and energy demand may falter.
Oil dropped the most in more than three weeks yesterday as the confidence index declined to the lowest level in five months. The gauge was at 50.4 from a revised 54.3 in June, the New York- based private research group showed. It was forecast to drop to 51, according to a Bloomberg News survey. Crude supplies rose by 3.08 million barrels, the American Petroleum Institute said.
“Sentiment really hasn’t improved,” Ben Westmore, a minerals and energy economist at National Australia Bank Ltd. in Melbourne, said by telephone. “There was a sell-off in the crude market because of a fall in U.S. consumer confidence. The fundamentals are still weak.”
Crude oil for September delivery dropped as much as 62 cents, or 0.8 percent, to $76.88 a barrel in electronic trading on the New York Mercantile Exchange. It was at $77.13 at 10:15 a.m. Sydney time. Yesterday, the contract fell $1.48, or 1.9 percent, to $77.50. Futures have declined 3 percent since the start of the year.
U.S. crude oil inventories rose to 356.3 million, the Petroleum Institute said yesterday. Gasoline stockpiles climbed 877,000 barrels to 222.3 million, the report showed.
Government Report
A government report today may show U.S. oil inventories dropped to a four-month low, according to a Bloomberg News survey. U.S. stockpiles probably fell 1.73 million barrels in the seven days ended July 23 from 353.5 million the week earlier, according to analysts surveyed by Bloomberg.
The Petroleum Institute collects stockpile information on a voluntary basis from operators of refineries, bulk terminals and pipelines. The government requires that reports be filed with the Energy Department for its weekly survey.
Gasoline demand rose 1.7 percent last week, as U.S. motorists bought an average 9.51 million barrels a day of the motor fuel in the week ended July 23, according to MasterCard Inc.’s SpendingPulse report yesterday. The gain was the second in a row and the sixth in seven weeks.
Oil touched $79.69 a barrel in intraday trading yesterday, the highest level since May 6, as global equities gained before the consumer confidence report.
Estimates for consumer confidence ranged from 46 to 55.5 in the Bloomberg survey of 73 economists after a previously reported 52.9 reading in June. The Conference Board measure averaged 98 during the expansion that ended in December 2007.
Brent crude for September settlement fell 28 cents, or 0.4 percent, to $75.85 a barrel on London’s ICE Futures Europe exchange at 10:25 a.m. Sydney time. Yesterday the contract fell $1.37, or 1.8 percent, to settle at $76.13.
Oil dropped the most in more than three weeks yesterday as the confidence index declined to the lowest level in five months. The gauge was at 50.4 from a revised 54.3 in June, the New York- based private research group showed. It was forecast to drop to 51, according to a Bloomberg News survey. Crude supplies rose by 3.08 million barrels, the American Petroleum Institute said.
“Sentiment really hasn’t improved,” Ben Westmore, a minerals and energy economist at National Australia Bank Ltd. in Melbourne, said by telephone. “There was a sell-off in the crude market because of a fall in U.S. consumer confidence. The fundamentals are still weak.”
Crude oil for September delivery dropped as much as 62 cents, or 0.8 percent, to $76.88 a barrel in electronic trading on the New York Mercantile Exchange. It was at $77.13 at 10:15 a.m. Sydney time. Yesterday, the contract fell $1.48, or 1.9 percent, to $77.50. Futures have declined 3 percent since the start of the year.
U.S. crude oil inventories rose to 356.3 million, the Petroleum Institute said yesterday. Gasoline stockpiles climbed 877,000 barrels to 222.3 million, the report showed.
Government Report
A government report today may show U.S. oil inventories dropped to a four-month low, according to a Bloomberg News survey. U.S. stockpiles probably fell 1.73 million barrels in the seven days ended July 23 from 353.5 million the week earlier, according to analysts surveyed by Bloomberg.
The Petroleum Institute collects stockpile information on a voluntary basis from operators of refineries, bulk terminals and pipelines. The government requires that reports be filed with the Energy Department for its weekly survey.
Gasoline demand rose 1.7 percent last week, as U.S. motorists bought an average 9.51 million barrels a day of the motor fuel in the week ended July 23, according to MasterCard Inc.’s SpendingPulse report yesterday. The gain was the second in a row and the sixth in seven weeks.
Oil touched $79.69 a barrel in intraday trading yesterday, the highest level since May 6, as global equities gained before the consumer confidence report.
Estimates for consumer confidence ranged from 46 to 55.5 in the Bloomberg survey of 73 economists after a previously reported 52.9 reading in June. The Conference Board measure averaged 98 during the expansion that ended in December 2007.
Brent crude for September settlement fell 28 cents, or 0.4 percent, to $75.85 a barrel on London’s ICE Futures Europe exchange at 10:25 a.m. Sydney time. Yesterday the contract fell $1.37, or 1.8 percent, to settle at $76.13.
Stocks to watch: Ivory Properties, Chuan Huat, Globetronics, Petronas Dagangan
KUALA LUMPUR: Blue chips are expected to trade in a tight range on Wednesday, July 28 after the S&P 500 snapped a three-day winning streak on Tuesday.
Mixed earnings reports and a fall in consumer confidence weighed on the broader index, according to Reuters but analysts said US stocks were taking a breather and the rally could pick back up.
Economic data was mixed. Home prices rose in May, but labor-market worries took July consumer confidence to its lowest since February.
The Dow Jones industrial average added 12.26 points, or 0.12%, to 10,537.69. The Standard & Poor's 500 Index dipped 1.17 points, or 0.10%, to 1,113.84. The Nasdaq Composite Index shed 8.18 points, or 0.36%, to close at 2,288.25.
Stocks to watch on Bursa Malaysia include Ivory PROPERTIES [] Bhd, which will make its debut. Other counters include CHUAN HUAT RESOURCES BHD [], GLOBETRONICS TECHNOLOGY [] BHD [] and PETRONAS DAGANGAN BHD [].
Also other counters which could see trading activity with downside pressure include MUDAJAYA GROUP BHD [], STAMFORD COLLEGE BHD [] and Kenmark Industrial Co (M) Bhd.
Ivory Properties, an established developer with a strong track record in Penang, will be listed at an offer price of RM1.
AmResearch’s fair value is RM1.75 per share pegged to a 35% discount to its estimated net asset value of RM2.70 per share.
“Our fair value implies a forward PR of 7 times, backed by strong three-year earnikng CAGR of 63% over FY10F to FY12F,” it said.
Chuan Huat proposed a corporate exercise which includes a bonus issue, renounceable rights issue and increase in authorised share capital. The bonus issue would involve one bonus shares for every three shares held,
The proposed renounceable rights issue of 41.78 million five-year warrants 2010/2015 on the basis of one warrant for every four shares held after the proposed bonus issue at an issue price of 2 sen per warrant.
Chuan Huat said it planned to increase the authorised share capital from RM100 million comprising 200 million shares to RM500 million comprising one billion shares by the creation of an additional 800 million shares.
Globetronics Technology Bhd net profit jumped 108% to RM7.59 million for the second quarter ended June 30, 2010 from RM3.64 million a year ago, due to mainly to continuous higher volume loadings from its key customers.
Revenue rose 31% to RM69.11 million from RM52.61 million, it said on Tuesday, July 27. Earnings per share rose to 2.87 sen from 1.39 sen a year earlier.
For the six months ended June 30, revenue rose by 41.8% to RM129.32 million from RM90.68 million, while net profit was up 2.6 times to RM13.74 million from RM3.84 million in 2009.
Petronas Dagangan is allocating close to RM500 million as capital expenditure for this year, the large chunk of which be invested in its retail segment. About 75% to 85% of the capex will be channelled towards the retail segment.
The retail and commercial segments contribute around 46% to 47% each to the group's revenue, with 5% coming from the liquefied petroleum gas (LPG).
Stamford College, which saw RM6.2 million erased from its market capitalisation on Tuesday after its share price fell to the lowest since May 31 when Bursa Malaysia Securities rejected its revamp plan.
The company, which faces suspension on Aug 3. On Monday, the company said Bursa Securities had rejected its application for the proposed regularisation plan which involved steel manufacturing.
Mudajaya also could see trading interest as investors await more details from the company following the recent news reports about it being under investigation by the Securities Commission.
Kenmark faces suspension on Monday, Aug 9, after its application for more time from Bursa Malaysia Securities to issue the audited financial statements for FY ended March 31, 2010 (AFS 2010) was rejected.
Mixed earnings reports and a fall in consumer confidence weighed on the broader index, according to Reuters but analysts said US stocks were taking a breather and the rally could pick back up.
Economic data was mixed. Home prices rose in May, but labor-market worries took July consumer confidence to its lowest since February.
The Dow Jones industrial average added 12.26 points, or 0.12%, to 10,537.69. The Standard & Poor's 500 Index dipped 1.17 points, or 0.10%, to 1,113.84. The Nasdaq Composite Index shed 8.18 points, or 0.36%, to close at 2,288.25.
Stocks to watch on Bursa Malaysia include Ivory PROPERTIES [] Bhd, which will make its debut. Other counters include CHUAN HUAT RESOURCES BHD [], GLOBETRONICS TECHNOLOGY [] BHD [] and PETRONAS DAGANGAN BHD [].
Also other counters which could see trading activity with downside pressure include MUDAJAYA GROUP BHD [], STAMFORD COLLEGE BHD [] and Kenmark Industrial Co (M) Bhd.
Ivory Properties, an established developer with a strong track record in Penang, will be listed at an offer price of RM1.
AmResearch’s fair value is RM1.75 per share pegged to a 35% discount to its estimated net asset value of RM2.70 per share.
“Our fair value implies a forward PR of 7 times, backed by strong three-year earnikng CAGR of 63% over FY10F to FY12F,” it said.
Chuan Huat proposed a corporate exercise which includes a bonus issue, renounceable rights issue and increase in authorised share capital. The bonus issue would involve one bonus shares for every three shares held,
The proposed renounceable rights issue of 41.78 million five-year warrants 2010/2015 on the basis of one warrant for every four shares held after the proposed bonus issue at an issue price of 2 sen per warrant.
Chuan Huat said it planned to increase the authorised share capital from RM100 million comprising 200 million shares to RM500 million comprising one billion shares by the creation of an additional 800 million shares.
Globetronics Technology Bhd net profit jumped 108% to RM7.59 million for the second quarter ended June 30, 2010 from RM3.64 million a year ago, due to mainly to continuous higher volume loadings from its key customers.
Revenue rose 31% to RM69.11 million from RM52.61 million, it said on Tuesday, July 27. Earnings per share rose to 2.87 sen from 1.39 sen a year earlier.
For the six months ended June 30, revenue rose by 41.8% to RM129.32 million from RM90.68 million, while net profit was up 2.6 times to RM13.74 million from RM3.84 million in 2009.
Petronas Dagangan is allocating close to RM500 million as capital expenditure for this year, the large chunk of which be invested in its retail segment. About 75% to 85% of the capex will be channelled towards the retail segment.
The retail and commercial segments contribute around 46% to 47% each to the group's revenue, with 5% coming from the liquefied petroleum gas (LPG).
Stamford College, which saw RM6.2 million erased from its market capitalisation on Tuesday after its share price fell to the lowest since May 31 when Bursa Malaysia Securities rejected its revamp plan.
The company, which faces suspension on Aug 3. On Monday, the company said Bursa Securities had rejected its application for the proposed regularisation plan which involved steel manufacturing.
Mudajaya also could see trading interest as investors await more details from the company following the recent news reports about it being under investigation by the Securities Commission.
Kenmark faces suspension on Monday, Aug 9, after its application for more time from Bursa Malaysia Securities to issue the audited financial statements for FY ended March 31, 2010 (AFS 2010) was rejected.
Monday, July 26, 2010
Saturday, July 24, 2010
Digi : No surprises ------Outperform
2QFY10 Results/Briefing Note
- Digi's reported 1H10 net profit of RM556.7m came in within our and consensus expectations.
- Management highlighted that the net debt:equity ratio in end-2Q10 was affected by timing differences and it would go back up in the subsequent quarters.
- Management continues to target revenue growth of “above industry”, with key revenue drivers being mobile internet and mobile broadband. In terms of margins, management believes EBITDA margin will remain stable, as management expects revenue growth, coupled with ongoing cost-saving measures, would help offset the impact of increased handset subsidies.
- While the new termination rate is expected to have a slight negative impact on its top line, Digi expects the reduction in revenue to be more than offset by the reduction in interconnect cost.
- No change in our DCF-derived fair value of RM25.70 and Outperform recomemndation on the stock.
- Digi's reported 1H10 net profit of RM556.7m came in within our and consensus expectations.
- Management highlighted that the net debt:equity ratio in end-2Q10 was affected by timing differences and it would go back up in the subsequent quarters.
- Management continues to target revenue growth of “above industry”, with key revenue drivers being mobile internet and mobile broadband. In terms of margins, management believes EBITDA margin will remain stable, as management expects revenue growth, coupled with ongoing cost-saving measures, would help offset the impact of increased handset subsidies.
- While the new termination rate is expected to have a slight negative impact on its top line, Digi expects the reduction in revenue to be more than offset by the reduction in interconnect cost.
- No change in our DCF-derived fair value of RM25.70 and Outperform recomemndation on the stock.
$35 tablet from India looks to be worth every paisa (video)
We've seen some janky tablets over the years, and to be honest this latest one out of India hardly looks posh. But, for the price, it could be pretty amazing: $35. That's what India's Human Resource Development Minister, Kapil Sibal, is saying this device will cost at retail. It's a sort of tablet and, while we don't know full specs, is said to have 2GB of RAM memory, run Linux, be able to connect to the internet over WiFi, open PDFs, and even play YouTube videos, meaning you can watch Shahrukh Khan tribute videos wherever you want. Confusingly, two separate devices were shown and we're not sure which is the final design (if, indeed, either is), but the Indian government plans to subsidize their sale to students such that they'll cost only $20. The goal is to have them selling for as little as $10 in the future. Exciting? Yes, but let's just say we've had our hearts broken by supposed $10 Indian laptops before.
Elpida and Spansion move from 'it's complicated' to 'engaged,' look to conquer NAND universe
The more the merrier, right? Cutesy sayings aside, the world is gearing up to say "hello" to yet another player in the NAND flash memory market, as Japan's own Elpida Memory (which currently specializes in DRAM) will be joining the fray in the coming months. Said outfit stated this week that it has entered into an alliance with Spansion (the former flash memory joint venture between Fujitsu and AMD), with Spansion licensing its NAND flash intellectual property to Elpida as part of the deal. If all goes to plan, Elpida will begin producing flash chips at its western Japan plant "as early as next year," with some of the output being funneled directly to Spansion. 'Course, with the explosion in smartphone popularity, it's not shocking to see a DRAM stalwart looking for ways to dip its toes in that high-demand NAND stuff, and as consumers, you certainly won't find us kvetching about the competition.
Thursday, July 22, 2010
Tanjung Offshore bidding for RM1b projects
Fatt lioa if this is real
TANJUNG Offshore Bhd, a Malaysian oil-and-gas services provider, is bidding for more than RM1 billion of projects, managing director Omar Khalid told reporters in Kuala Lumpur today.
Its current order book stands at RM800 million, he said.
With Ekuiti Nasional Bhd’s stake in Tanjung, the company hopes to bid for more projects such as those from Petroliam Nasional Bhd, he said. - Bloomberg
Read more: Tanjung Offshore bidding for RM1b projects http://www.btimes.com.my/Current_News/BTIMES/articles/20100723122116/Article/index_html#ixzz0uTqnPyiy
TANJUNG Offshore Bhd, a Malaysian oil-and-gas services provider, is bidding for more than RM1 billion of projects, managing director Omar Khalid told reporters in Kuala Lumpur today.
Its current order book stands at RM800 million, he said.
With Ekuiti Nasional Bhd’s stake in Tanjung, the company hopes to bid for more projects such as those from Petroliam Nasional Bhd, he said. - Bloomberg
Read more: Tanjung Offshore bidding for RM1b projects http://www.btimes.com.my/Current_News/BTIMES/articles/20100723122116/Article/index_html#ixzz0uTqnPyiy
Tuesday, July 20, 2010
RHB Capital (RM6.15; Buy; Price Target: RM7.30; RHBC MK)
Completion of the acquisition of Bank Mestika extended
RHB Capital Bhd (RHB Cap), together with PT Mestika Benua
Mas (the vendor of PT Bank Mestika Dharma), had mutually
agreed to extend the long-stop date for the acquisition of
PT Bank Mestika Dharma to 19 April 2011.
Recall that RHB Cap had pushed forward the timeline from
2Q10 to 3Q10 previously. Essentially, we think this round of
extension of time would not have a significant impact on
RHB Cap’s earnings. Based on Bank Mestika’s profit track
record of RM60-65m p.a., we expect Bank Mestika to
contribute c.4% to RHB Cap’s earnings, assuming it does
complete by FY11. Bank Mestika’s earnings contribution has
not been factored in our forecasts at this juncture.
RHB Cap is a laggard play, trading at 1.1x FY11 PBV vs
sector average for Malaysian banks of 1.8x. Our TP is based
on the Gordon Growth Model with the following
assumptions: 15% sustainable ROE, 4% long term growth
and 10.7% cost of equity. Maintain Buy.
RHB Capital Bhd (RHB Cap), together with PT Mestika Benua
Mas (the vendor of PT Bank Mestika Dharma), had mutually
agreed to extend the long-stop date for the acquisition of
PT Bank Mestika Dharma to 19 April 2011.
Recall that RHB Cap had pushed forward the timeline from
2Q10 to 3Q10 previously. Essentially, we think this round of
extension of time would not have a significant impact on
RHB Cap’s earnings. Based on Bank Mestika’s profit track
record of RM60-65m p.a., we expect Bank Mestika to
contribute c.4% to RHB Cap’s earnings, assuming it does
complete by FY11. Bank Mestika’s earnings contribution has
not been factored in our forecasts at this juncture.
RHB Cap is a laggard play, trading at 1.1x FY11 PBV vs
sector average for Malaysian banks of 1.8x. Our TP is based
on the Gordon Growth Model with the following
assumptions: 15% sustainable ROE, 4% long term growth
and 10.7% cost of equity. Maintain Buy.
Monday, July 19, 2010
Tanjong Offshore
HI ,Ekuinas seem to goreng Tanjong offshore.....up and up......lucky i bought TGOFF-WA at 0.874 sen ..... for 65lot.... Will consider sell it if it touch 1.2 sen....hope is does.......
At least 4 suitors for Time?
KUALA LUMPUR: UEM Group Bhd has received at least four bids or offers to purchase its stake in Time Engineering Bhd, with prices ranging from 20 sen to 40 sen a share, sources said.
It is not clear how much of its 45.03% equity interest UEM is looking to part with, but a sale of more than 33.3% could trigger a mandatory general offer, if a waiver is not obtained.
The sources said the internal deadline for UEM to make a decision on the stake sale had been pushed back to the end of this month or early August.
Time Engineering officials declined to comment on the planned sale when contacted by The Edge Financial Daily.
A source said the bidders included an ICT company, which is interested in Time Engineering’s 27.1% stake in Time dotCom Bhd (TdC).
Last Thursday, Time Engineering announced that it had disposed of some 40.3 million TdC shares for RM20.83 million, which works out at about 51.7 sen apiece.
Time Engineering had received its shareholders’ mandate in July 2009 to sell its entire stake in TdC at no less than 48 sen a share.
The TdC shares are at present pledged to Bank Pembangunan as security for loan stocks issued by Time Engineering to satisfy some RM342 million of debt to the bank.
As at end-March this year, Time Engineering owed Bank Pembangunan some RM305.61 million, according to the company’s balance sheet.
TdC’s share price has been steadily rising, hitting a 28-month high of 54.5 sen last Friday.
UEM has denied that an announcement about the sale of its stake in Time Engineering will be made this week, refuting news reports last week.
According to its announcement to Bursa Malaysia last Friday, Time Engineering itself, responding to an article in The Edge Financial Daily, said it had not received any “formal notification” from UEM regarding the disposal of the latter’s 45.3% stake in the company.
Time Engineering, once the high-flying ICT arm of the debt-ridden Renong Group, saw its fortunes dwindle after the group was forced to dispose of its assets to UEM in a controversial rescue of the ailing conglomerate.
The company subsequently fell into PN17 status in 2008, resulting in many quarters writing it off. However, a subsequent turnaround in 2009 caught many by surprise.
Time Engineering restructured its debts, started securing projects overseas and managed its costs, resulting in a small profit in 2009.
Much of these improvements were attributed to current CEO Steven Lim Kee Seng.
Time Engineering paid a cash dividend for the first time in 13 years this year, raising hopes of investors that the worst is behind it.
In terms of valuation, Time Engineering’s key assets include the Dagang.Net group of companies, which has been appointed the service provider to develop the country’s National Single Window trade facilitation system by the finance ministry.
The source told The Edge Financial Daily that Time Engineering had received a bid to sell its 71.25% stake in Dagang.Net for RM90 million, but that was turned down, as the bid was too low.
Time Engineering’s stake in TdC is also seen as a valuable asset, particularly now as the latter’s share price has been rising.
At last Friday’s price of 54.5 sen per share, Time Engineering’s 27.3% stake or 685.9 million shares was worth RM373.8 million.
Time Engineering also has about RM100 million in cash, and no debts, except for the loan stocks issued to Bank Pembangunan.
The source said the valuation of the tangibles alone would price the company at between 20 and 30 sen, but this does not take into consideration the future revenue of the company.
Time Engineering is also understood to have amassed an orderbook of some RM1 billion, silently and steadily bagging jobs abroad.
Given the stiff competition and rapid changes in the ICT industry, UEM has never been able to realise the Time Engineering group’s potential.
In view of improving conditions and suitors at its doorstep, could this now present the right opportunity for UEM to finally dispose of the Time Engineering group, in line with the government’s asset disposal plan?
It is not clear how much of its 45.03% equity interest UEM is looking to part with, but a sale of more than 33.3% could trigger a mandatory general offer, if a waiver is not obtained.
The sources said the internal deadline for UEM to make a decision on the stake sale had been pushed back to the end of this month or early August.
Time Engineering officials declined to comment on the planned sale when contacted by The Edge Financial Daily.
A source said the bidders included an ICT company, which is interested in Time Engineering’s 27.1% stake in Time dotCom Bhd (TdC).
Last Thursday, Time Engineering announced that it had disposed of some 40.3 million TdC shares for RM20.83 million, which works out at about 51.7 sen apiece.
Time Engineering had received its shareholders’ mandate in July 2009 to sell its entire stake in TdC at no less than 48 sen a share.
The TdC shares are at present pledged to Bank Pembangunan as security for loan stocks issued by Time Engineering to satisfy some RM342 million of debt to the bank.
As at end-March this year, Time Engineering owed Bank Pembangunan some RM305.61 million, according to the company’s balance sheet.
TdC’s share price has been steadily rising, hitting a 28-month high of 54.5 sen last Friday.
UEM has denied that an announcement about the sale of its stake in Time Engineering will be made this week, refuting news reports last week.
According to its announcement to Bursa Malaysia last Friday, Time Engineering itself, responding to an article in The Edge Financial Daily, said it had not received any “formal notification” from UEM regarding the disposal of the latter’s 45.3% stake in the company.
Time Engineering, once the high-flying ICT arm of the debt-ridden Renong Group, saw its fortunes dwindle after the group was forced to dispose of its assets to UEM in a controversial rescue of the ailing conglomerate.
The company subsequently fell into PN17 status in 2008, resulting in many quarters writing it off. However, a subsequent turnaround in 2009 caught many by surprise.
Time Engineering restructured its debts, started securing projects overseas and managed its costs, resulting in a small profit in 2009.
Much of these improvements were attributed to current CEO Steven Lim Kee Seng.
Time Engineering paid a cash dividend for the first time in 13 years this year, raising hopes of investors that the worst is behind it.
In terms of valuation, Time Engineering’s key assets include the Dagang.Net group of companies, which has been appointed the service provider to develop the country’s National Single Window trade facilitation system by the finance ministry.
The source told The Edge Financial Daily that Time Engineering had received a bid to sell its 71.25% stake in Dagang.Net for RM90 million, but that was turned down, as the bid was too low.
Time Engineering’s stake in TdC is also seen as a valuable asset, particularly now as the latter’s share price has been rising.
At last Friday’s price of 54.5 sen per share, Time Engineering’s 27.3% stake or 685.9 million shares was worth RM373.8 million.
Time Engineering also has about RM100 million in cash, and no debts, except for the loan stocks issued to Bank Pembangunan.
The source said the valuation of the tangibles alone would price the company at between 20 and 30 sen, but this does not take into consideration the future revenue of the company.
Time Engineering is also understood to have amassed an orderbook of some RM1 billion, silently and steadily bagging jobs abroad.
Given the stiff competition and rapid changes in the ICT industry, UEM has never been able to realise the Time Engineering group’s potential.
In view of improving conditions and suitors at its doorstep, could this now present the right opportunity for UEM to finally dispose of the Time Engineering group, in line with the government’s asset disposal plan?
Proton wants consolidation
In a cover story of The Edge, Proton was reported to want a
merger with Perodua. Proton cited excess capacity and cost
savings as key reasons, including the consolidation of c. 100
vendors. But Perodua was cool to the idea.
We do not agree with this proposal because we see no
synergies with Perodua, though Proton aims to create a winwin
situation. We believe a merger between Proton and
Perodua only benefits Proton. Auto manufacturers have
high R&D costs when building new models. But Proton does not sell enough vehicles to spread this capex in order for it
to price its vehicles competitively. Perodua on the other
hand, sources its platforms from shareholder Daihatsu, and
hence has lower operating costs.
We agree with the Malaysian Automotive Association
(MAA) that the problem of excess capacity is really that of
Proton’s alone, and hence, we argue that Proton has to
resolve its own problems. Proton has capacity to produce a
combined 350k vehicles p.a. from its Shah Alam and
Tanjong Malim plants, but only manages to sell c. 180k
units (c. 50% utilization rate). In comparison, Perodua is
efficiently churning out 190k units p.a. from its 250k unit
capacity facility, and thus has a more superior utilization of
c. 76%.
From an industry perspective, a merger with Perodua would
result in the “removal” of a major competitor for Proton.
This could potentially enable Proton to dominate the market
again, a position it lost to Perodua since 2006. Though
Proton argues that it can lower costs and therefore, reduce
the prices of vehicles, we think a merger that does not bear
synergies could be messy, resulting in higher costs. As such,
we think the prospect of cheaper vehicles from a merged
entity is slim.
Nevertheless, we retain our BUY call on Proton with a TP of
RM4.85 (0.45x CY11F NTA) and MBM Resources with a TP
of 4.05 (6x FY11F PE).
merger with Perodua. Proton cited excess capacity and cost
savings as key reasons, including the consolidation of c. 100
vendors. But Perodua was cool to the idea.
We do not agree with this proposal because we see no
synergies with Perodua, though Proton aims to create a winwin
situation. We believe a merger between Proton and
Perodua only benefits Proton. Auto manufacturers have
high R&D costs when building new models. But Proton does not sell enough vehicles to spread this capex in order for it
to price its vehicles competitively. Perodua on the other
hand, sources its platforms from shareholder Daihatsu, and
hence has lower operating costs.
We agree with the Malaysian Automotive Association
(MAA) that the problem of excess capacity is really that of
Proton’s alone, and hence, we argue that Proton has to
resolve its own problems. Proton has capacity to produce a
combined 350k vehicles p.a. from its Shah Alam and
Tanjong Malim plants, but only manages to sell c. 180k
units (c. 50% utilization rate). In comparison, Perodua is
efficiently churning out 190k units p.a. from its 250k unit
capacity facility, and thus has a more superior utilization of
c. 76%.
From an industry perspective, a merger with Perodua would
result in the “removal” of a major competitor for Proton.
This could potentially enable Proton to dominate the market
again, a position it lost to Perodua since 2006. Though
Proton argues that it can lower costs and therefore, reduce
the prices of vehicles, we think a merger that does not bear
synergies could be messy, resulting in higher costs. As such,
we think the prospect of cheaper vehicles from a merged
entity is slim.
Nevertheless, we retain our BUY call on Proton with a TP of
RM4.85 (0.45x CY11F NTA) and MBM Resources with a TP
of 4.05 (6x FY11F PE).
iPad hitting nine more countries this Friday
I want buy one....but need to wait for next version to come out
Apple has just let word out that it'll be bringing its super-selling slate to nine new markets. The Netherlands, Austria, Belgium, Hong Kong, Ireland, Luxembourg, Mexico, New Zealand and Singapore are all getting their hands on the device this Friday, July 23. We were just remarking on how the iPad's sales pace had slowed down recently, but this expansion in markets should move things along toward rounding the next milestone. Local pricing hasn't yet been revealed, but it's not like there's long to wait now. "Many" more countries are promised before the end of the year, so don't despair if your local Apple Store isn't stocking the iPad just yet.
Axiata Group divests 89% of Multinet Pakistan for US$15m
KUALA LUMPUR: Axiata Group Bhd has divested its entire 89% stake in Multinet Pakistan (Private) Ltd to its second largest shareholder, Adnan Asdar Ali, for US$15 million.
Axiata said on Monday, July 19 the divestment to Adnan, who owns 11% of Multinet, was part of its strategy to focus on mobile communications.
It said Multinet, which provides a wide range of non-mobile telecommunications services with a focus on the Business to Business (B2B) segment of the market, represents one of Axiata’s non-mobile investments.
A facility based operator with a 100% digital fibre optic network across Pakistan, Multinet supports fibre-optic connectivity, long distance international (LDI) originations /terminations and co-location services.
Axiata president & group chief executive officer Datuk Seri Jamaludin Ibrahim said Axiata had always expressed its intention to exit its non-core businesses and concentrate on its primary business of mobile communications.
"The divestment of Multinet reflects this new strategic direction, allowing us to focus on our core areas. Since our initial investment in 2005, Multinet has grown into an established fibre infrastructure company, the first company to launch a 5,000 km long nationwide fibre network," he said.
Under the agreement, Adnan will also repay Axiata the shareholders advances provided to Multinet amounting to PKR973.3 million, as part of the agreement.
In addition, AA will also obtain the release of all guarantees and financial support provided to Multinet in relation to banking facilities totaling US$65.0 million.
The divestment of Multinet is not expected to have any material financial impact on Axiata’s consolidated earnings for the financial year ending Dec 31, 2010.
Axiata said on Monday, July 19 the divestment to Adnan, who owns 11% of Multinet, was part of its strategy to focus on mobile communications.
It said Multinet, which provides a wide range of non-mobile telecommunications services with a focus on the Business to Business (B2B) segment of the market, represents one of Axiata’s non-mobile investments.
A facility based operator with a 100% digital fibre optic network across Pakistan, Multinet supports fibre-optic connectivity, long distance international (LDI) originations /terminations and co-location services.
Axiata president & group chief executive officer Datuk Seri Jamaludin Ibrahim said Axiata had always expressed its intention to exit its non-core businesses and concentrate on its primary business of mobile communications.
"The divestment of Multinet reflects this new strategic direction, allowing us to focus on our core areas. Since our initial investment in 2005, Multinet has grown into an established fibre infrastructure company, the first company to launch a 5,000 km long nationwide fibre network," he said.
Under the agreement, Adnan will also repay Axiata the shareholders advances provided to Multinet amounting to PKR973.3 million, as part of the agreement.
In addition, AA will also obtain the release of all guarantees and financial support provided to Multinet in relation to banking facilities totaling US$65.0 million.
The divestment of Multinet is not expected to have any material financial impact on Axiata’s consolidated earnings for the financial year ending Dec 31, 2010.
Sunday, July 18, 2010
Why REITs should be the choice of investment
KUALA LUMPUR: Real estate investment trusts (REITs) offer many advantages to investors who are keen to invest in the property market.
Axis REIT Managers Bhd chief executive officer Stewart LaBrooy said what was important now to REIT players was to educate them on the benefits on investing in REITs.
“We need to educate them as most of them are not really aware of the advantages, such as having a higher yield compared with some other investments,” he said yesterday at the Investor Insights into Malaysian REITs in 2010.
As a result of the lack of awareness on REITs, he said, the participation from Malaysians in REITs was still small compared with other countries.
“We have 13 REITs now listed on Bursa Malaysia that cover all types of industries. With a high dividend yield of about 7% annually, low entry cost and support with higher corporate governance, REITs should be the choice of investment,” he said, adding that the size of assets of Malaysian REITs was now about RM16bil.
In REITs, a pool of money from investors is invested in properties such as office buildings or shopping malls and the investment is managed by REIT managers.
LaBrooy said another advantage of investing in REITs was the tax efficiency where investors were taxed only once.
“Apart from that, it is easy to invest in REITs as you can buy it today and sell the unit tomorrow, similar to equity stocks. Plus, REITs are a hedge against inflation,” he said, adding that they were low risks and a passive type of investment.
He said the way REITs did its business was to make sure about 90% to 100% of its retained earnings before tax were given back to investors.
“Last year, despite facing a global economic crisis, Malaysian REITs were still giving back about 70% to 80% of its retain earnings to investors,” he said.
Meanwhile, touching on the outlook of residential and office market in Malaysia, CB Richard Ellis (M) Sdn Bhd executive chairman Christopher Boyd said overall, both markets were still stable.
“For the residential market, we are still in the safe net as in Malaysia, developers are still using the method of sell-first-before-build. If you build first then sell like what is done by some other countries, then you will risk yourself of not getting buyers if suddenly problems arise, such as the economic downturn, ” he said.
Axis REIT Managers Bhd chief executive officer Stewart LaBrooy said what was important now to REIT players was to educate them on the benefits on investing in REITs.
“We need to educate them as most of them are not really aware of the advantages, such as having a higher yield compared with some other investments,” he said yesterday at the Investor Insights into Malaysian REITs in 2010.
As a result of the lack of awareness on REITs, he said, the participation from Malaysians in REITs was still small compared with other countries.
“We have 13 REITs now listed on Bursa Malaysia that cover all types of industries. With a high dividend yield of about 7% annually, low entry cost and support with higher corporate governance, REITs should be the choice of investment,” he said, adding that the size of assets of Malaysian REITs was now about RM16bil.
In REITs, a pool of money from investors is invested in properties such as office buildings or shopping malls and the investment is managed by REIT managers.
LaBrooy said another advantage of investing in REITs was the tax efficiency where investors were taxed only once.
“Apart from that, it is easy to invest in REITs as you can buy it today and sell the unit tomorrow, similar to equity stocks. Plus, REITs are a hedge against inflation,” he said, adding that they were low risks and a passive type of investment.
He said the way REITs did its business was to make sure about 90% to 100% of its retained earnings before tax were given back to investors.
“Last year, despite facing a global economic crisis, Malaysian REITs were still giving back about 70% to 80% of its retain earnings to investors,” he said.
Meanwhile, touching on the outlook of residential and office market in Malaysia, CB Richard Ellis (M) Sdn Bhd executive chairman Christopher Boyd said overall, both markets were still stable.
“For the residential market, we are still in the safe net as in Malaysia, developers are still using the method of sell-first-before-build. If you build first then sell like what is done by some other countries, then you will risk yourself of not getting buyers if suddenly problems arise, such as the economic downturn, ” he said.
Saturday, July 17, 2010
Japan’s Consumer Confidence Improved In June
Japan’s consumer sentiment rose to 43.5 in June, from 42.8 in May and a low of 37.6 in December last
year. This was the sixth straight month of improving and the highest level in more than two years, suggesting
that consumers are feeling more upbeat, on the back of a sustained increase in exports. As a result, consumers
expect job market to improve and income to rise. Indeed, consumers have turned more optimistic in buying
durable goods during the month. As a whole, an improvement in consumer confidence will help to support the
country’s consumer spending.
year. This was the sixth straight month of improving and the highest level in more than two years, suggesting
that consumers are feeling more upbeat, on the back of a sustained increase in exports. As a result, consumers
expect job market to improve and income to rise. Indeed, consumers have turned more optimistic in buying
durable goods during the month. As a whole, an improvement in consumer confidence will help to support the
country’s consumer spending.
Portugal’s Credit Rating Cut, But Euro Held Up Relatively Well
Portugal’s credit rating was cut two notches to A1 by Moody’s Investors Service on prospects for weak economic growth
and the government’s weakening financial strength. The cut widened the yield premium investors demand to buy the
Portuguese bond over comparable German debt by 4 basis points to 284 basis points compared with a high of 349 basis
points in May. This was despite the Portuguese government having announced plans to raise taxes and cut spending
earlier in an attempt to rein in its budget deficit, the fourth-largest in the region. Portugal recorded a budget gap of
9.3% of GDP in 2009 and it plans to trim its deficit to 7.3% in 2010 and 4.6% in 2011. “Even if Portugal makes good
on their pledge, its debt burden as a proportion of GDP will probably continue to grow over the next two to three years,
reaching almost 90% of GDP”, Moody’s said. On 2 July, Portugal said that its debt ratio will start declining in 2013 to
84.8%, from 85.9% in 2012 and 2011. Also, it aims to narrow its budget deficit faster than forecast previously and meet
the 3% limit in 2012, a year earlier than in a previous plan. Indeed, high-deficit nations such as Portugal and Spain
have already adopted austerity measures after Greece’s near-default led their borrowing costs to surge and prompted
the European Union (EU) to adopt a €750bn (US$941bn) emergency stabilisation fund.
The euro reacted negatively initially and it slipped to US$1.253/euro at 9:20 a.m. in London on 13 July, from US$1.260
a day ago. However, it recovered to US$1.2716/euro at 4:03 p.m. in New York, after Greece’s debt was oversubscribed.
Although the yield on the bonds was 10 basis point higher than April’s auction, the fact that Greece filled an auction at
a reasonable rate has encouraged investors that the nation will not default.
Meanwhile, EU officials said banks must try to raise money themselves before seeking state support if stress tests by
regulators reveal vulnerabilities. EU regulators are examining the strength of 91 banks in an attempt to reassure
investors about the institutions’ resilience to potential losses as the debt crisis hit the bonds of Greece, Spain and Portugal.
The stress-test results are scheduled to be released on 23 July.
and the government’s weakening financial strength. The cut widened the yield premium investors demand to buy the
Portuguese bond over comparable German debt by 4 basis points to 284 basis points compared with a high of 349 basis
points in May. This was despite the Portuguese government having announced plans to raise taxes and cut spending
earlier in an attempt to rein in its budget deficit, the fourth-largest in the region. Portugal recorded a budget gap of
9.3% of GDP in 2009 and it plans to trim its deficit to 7.3% in 2010 and 4.6% in 2011. “Even if Portugal makes good
on their pledge, its debt burden as a proportion of GDP will probably continue to grow over the next two to three years,
reaching almost 90% of GDP”, Moody’s said. On 2 July, Portugal said that its debt ratio will start declining in 2013 to
84.8%, from 85.9% in 2012 and 2011. Also, it aims to narrow its budget deficit faster than forecast previously and meet
the 3% limit in 2012, a year earlier than in a previous plan. Indeed, high-deficit nations such as Portugal and Spain
have already adopted austerity measures after Greece’s near-default led their borrowing costs to surge and prompted
the European Union (EU) to adopt a €750bn (US$941bn) emergency stabilisation fund.
The euro reacted negatively initially and it slipped to US$1.253/euro at 9:20 a.m. in London on 13 July, from US$1.260
a day ago. However, it recovered to US$1.2716/euro at 4:03 p.m. in New York, after Greece’s debt was oversubscribed.
Although the yield on the bonds was 10 basis point higher than April’s auction, the fact that Greece filled an auction at
a reasonable rate has encouraged investors that the nation will not default.
Meanwhile, EU officials said banks must try to raise money themselves before seeking state support if stress tests by
regulators reveal vulnerabilities. EU regulators are examining the strength of 91 banks in an attempt to reassure
investors about the institutions’ resilience to potential losses as the debt crisis hit the bonds of Greece, Spain and Portugal.
The stress-test results are scheduled to be released on 23 July.
Thursday, July 15, 2010
Prices of sugar, petrol, LPG, diesel to go up Friday
Subsidy removed for RON 97 petrol
Government No Money LIOA....
KUALA LUMPUR: From Friday, the subsidies for sugar, petrol, liquefied petroleum gas and diesel will be cut as part of the gradual subsidy rationalisation programme, according to a statement from the Prime Minister’s office on Thursday.
The price of sugar will go up 25sen to RM1.75 per kg; LPG will go up 10sen to RM1.85 per kg; petrol RON95 will be up 5sen to RM1.85 per litre and diesel will be up 5sen to RM1.75 per litre.
RON 97 will no longer be subsidised. It will be subjected to a managed float, where the price will be determined by the automatic pricing mechanism, the statement said.
The details of these changes are now available on the PMO and PEMANDU websites, at: www.pmo.gov.my and www.pemandu.gov.my.
On May 27, Minister in the Prime Minister’s Department Datuk Seri Idris Jala had said that Malaysia would be bankrupt by 2019 if it did not cut subsidies and rein in borrowings.
He had said that Malaysia's debt would rise to 100% of GDP by 2019 from the current 54% if it did not cut subsidies.
Meanwhile, In ALOR SETAR, Prime Minister Datuk Seri Najib Tun Razak said that when implementing the subsidy rationalisation plan, the Government would seek not to burden the people.
He said the rationalisation move was necessary to reduce Government expenditure and strengthen the financial position of the country.
“It will help reduce the fiscal deficit so that world and local markets will have more confidence in the national economy,” he told newsmen after opening the Kuala Kedah Umno division meeting here on Thursday.
He added that the Government was reviewing all types of subsidies.
The full press statement from the Prime Minister’s office is below:
1. To help Malaysia maintain the strong growth it has achieved, the Government has implemented difficult but long-needed economic reforms that will help Malaysia become a developed and high-income nation. In this regard, the Government has begun a planned and fair reform of a subsidy regime that for too long has been ineffective in helping those who need it most and, over time, has become a barrier to Malaysia’s progress.
2. The Government has made bold economic decisions over the past two years. Two stimulus packages were introduced, promoting growth, even as the global financial crisis spread. Important sectors of our economy further liberalised were opened to new investment.
The Government cut spending by RM24 billion, by reducing waste and inefficiency. As a result, the country’s economy has been reinvigorated, with 10.1% growth in the first quarter of 2010, Malaysia’s best performance in a decade. Although there is still instability in the global economy, Malaysia is well positioned for the future – not by chance, but by the choices we have made together.
3. As set out by the Prime Minister when he announced the 10th Malaysia Plan, Malaysia’s national goals cannot be achieved by simply managing through a crisis. Malaysia’s ambition is to be a high-income nation, with opportunity for all.
4. In the New Economic Model, the Prime Minister set out plans for further investment in key strategic sectors, upgrading our infrastructure, creating additional private sector investment opportunities and realizing higher levels of GDP growth.
However, growth alone will not allow us to meet our goals. As the Government has consistently said over recent months, we must also implement subsidy reforms that will remove distortions in the marketplace and enable us to better target our resources on those most in need, and on investments that will provide lasting benefits for Malaysians.
5. With these priorities in mind, the Cabinet has decided that, effective 16 July 2010, subsidies for fuel, specifically petrol, diesel and liquefied petroleum gas (LPG), as well as sugar, will be reduced as the first step of a gradual subsidy rationalisation programme.
Subsidies for RON 95 and diesel will be reduced by 5 sen per liter. LPG will be reduced by 10 sen per kilogram. RON 97 will no longer be subsidised. It will be subjected to a managed float, where the price will be determined by the automatic pricing mechanism. For sugar, the upward price adjustment will be 25 sen per kilogram. The details of these changes are now available on the PMO and PEMANDU websites, at: www.pmo.gov.my and www.pemandu.gov.my
6. These minimal changes will help Malaysia achieve a position of fiscal responsibility and put us on a path toward reducing our deficit. To meet these objectives, we have chosen to make adjustments to our subsidies. Even after these changes, the Government will still spend an estimated RM 7.82 billion on fuel and sugar subsidies in 2010. The prices of fuel and sugar in Malaysia will still be among the lowest in the region.
7. This subsidy rationalisation will, according to estimates, allow Malaysia to reduce Government expenditure by more than RM 750 million in 2010.
8. The decision to reduce subsidies for fuel and sugar is based on the fact that reducing fuel subsidies will have the greatest impact on government spending and reducing sugar subsidies will allow us to promote healthier lifestyles. The decision is also grounded on three main concerns:
a. First, these subsidies also benefit foreigners and wealthier Malaysians, who can well afford to pay unsubsidised prices. Our focus should be on helping the family sharing a motorcycle or Kancil to get to work and school, but instead our spending on subsidies has provided the same benefits to those driving imported luxury cars.
The sugar subsidy disproportionately benefits industries, not families. Businesses have been using almost twice as much subsidised sugar as Malaysian households.
b. Second, highly subsidised prices often lead to illegal smuggling of these goods. Because subsidies make these products the cheapest in the region, in 2009 alone smugglers were caught heading out of Malaysia with more than 200 metric tonnes of sugar to be sold across borders.
Also, subsidised diesel continues to go to the black market or across our borders, instead of to those we meant to assist. Law enforcement have been doing their best to prevent smuggling, with 109 sugar related arrests last year. This is the tip of the iceberg. As long as there are big price differences, smuggling will continue. And:
c. Third, unless we reduce our consumption of fuel and sugar, we face potentially serious consequences as a nation. We are quickly depleting our domestic fuel resources. It is vital that we rationalise our fuel use – as well as develop new energy technologies - as a matter of economic, energy and national security.
In this regard, we have implemented a number of policies to protect the environment. We must also reduce our sugar consumption. 40 percent of Malaysians are now either overweight or obese.
Incidents of diabetes are rising quickly. Statistics show that the percentage of Malaysians with diabetes now exceeds that in the United States. We must, as a matter of urgency, take every step available to tackle what is clearly a public health issue for our nation. Reducing sugar consumption, among our children in particular, is a step in the right direction.
9. These are among the reasons why the Government has chosen to focus on sugar and fuel subsidies. Subsidies for education and health care will continue. These are areas of importance for our economy and our society where the Government should be investing.
These include, providing support to develop skills, training the knowledge based workforce of the future and improving the well-being of the nation.
10. The Government arrived at this decision following robust consultations with the people. Thousands of Malaysians participated in the policy labs, Open Day and an unprecedented public feedback process.
As with subsidy reform, the budget, the Government Transformation Program and now the National Key Economic Areas, the Government has made a determined effort to engage the public, listen and learn, and then act in the best interest of the nation.
11. These measures are designed to have a minimal impact on individual families, but long-term benefits for the nation. The reduction in expenditure from these reforms will allow us to better use resources for families, communities and business growth.
Measures such as the 1Malaysia clinics, the 1Malaysia mobile clinics, as well as the scholarships for all 9A+ and deserving students, specifically those who have done well, but come from lower income families, are made possible by such reforms.
Similarly, by reducing expenditure on subsidies we will be able to continue strengthening such initiatives as the price standardisation project, which seeks to harmonise prices of essential goods between urban and rural areas in Sabah and Sarawak.
12. The Government has made a difficult, but bold decision. By choosing to implement these modest subsidy reforms, we have taken a crucial step in the right direction towards meeting our commitment to reduce the fiscal deficit, without overburdening the Malaysian people.
These measures are a demonstration of our fiscal responsibility. They will enhance Malaysia’s financial stability, while also protecting the Rakyat.
Prime Minister’s Office
Putrajaya
15 July 2010
UMW Holdings (RM6.21; Hold; Price Target: RM6.30;
To assemble Camry and higher 91k unit sales
UMW plans to produce Toyota Camrys at its Shah Alam plant
in 2 years, with a budget of RM100m. We see negligible
impact on the selling price from this development versus
importing from Thailand because of the minimal tax imposed
under a free trade agreement between Malaysia and Thailand.
In support of Malaysia’s National Automotive Policy (NAP)
however, producing Camrys here opens the opportunity for
UMW to use more local content.
With regards to 2010 sales, UMW now targets 91k units,
which is slightly higher than an earlier forecast of 88k. This is
driven by good response to its new Vios variant. Assuming this
new sales target would have minimal 2% upside to our
forecast net profits and sum-of-parts price target. As such, we
are keeping our Hold call on UMW with a sum-of-parts price
target of RM6.30. We see no near term catalyst for the time
being, but are concern about the risk of further delays in UMW
signing leases for its Naga 2 and Naga 3 rigs (within its O&G
division).
UMW plans to produce Toyota Camrys at its Shah Alam plant
in 2 years, with a budget of RM100m. We see negligible
impact on the selling price from this development versus
importing from Thailand because of the minimal tax imposed
under a free trade agreement between Malaysia and Thailand.
In support of Malaysia’s National Automotive Policy (NAP)
however, producing Camrys here opens the opportunity for
UMW to use more local content.
With regards to 2010 sales, UMW now targets 91k units,
which is slightly higher than an earlier forecast of 88k. This is
driven by good response to its new Vios variant. Assuming this
new sales target would have minimal 2% upside to our
forecast net profits and sum-of-parts price target. As such, we
are keeping our Hold call on UMW with a sum-of-parts price
target of RM6.30. We see no near term catalyst for the time
being, but are concern about the risk of further delays in UMW
signing leases for its Naga 2 and Naga 3 rigs (within its O&G
division).
Wednesday, July 14, 2010
Gamuda, MMC eye tunnel works
PETALING JAYA: Gamuda Bhd and MMC Corp plan to bid for the RM14bil tunnelling works if their joint-venture mass rapid transit (MRT) system proposal is accepted by the Government, said Gamuda group managing director Datuk Lin Yun Ling.
“The tunnelling or underground works cover about 30% of the whole project involving 26 stations, mostly located in the city centre out of the total of 90-plus new stations in the MRT prosposal.
“If the proposal goes through, we only hope to be given a chance to fairly bid for the underground works. The Government will have the right to compare us with other bidders which are all expected to be from outside Malaysia.
Datuk Lin Yun Ling ... ‘We only hope to be given a chance to fairly bid for the job.’
“This is because there is no other company in Malaysia that has the track record involving such works,” he told StarBiz, adding that the proposed project could be divided into three major phases where the development would be stretched over 10 years.
The RM36bil joint MRT proposal by Gamuda and MMC is now under feasibility studies by two government-appointed independent consultants that will be concluded in three months.
Lin said both Gamuda and MMC were also interested in overseeing the whole project.
But even if they were “chariot master”, they wanted to be given a chance to bid for the project (in this case only the tunnelling works) but the Government could put the bid to a Swiss challenge.
Swiss challenge means a private sector participant submits an unsolicited proposal and draft contract principles for undertaking a project to the Government and competitive counter proposals are invited.
On funding of the project, Lin said the Government would have its own way to come up with the funding.
“In my point of view, if we look at the bigger picture, the RM36bil or RM43bil (inclusive land acquisition and rolling stocks) cost for the MRT is close to our fuel subsidy of RM50bil for six years.
“But the difference is that this RM43bil MRT project will not only benefit us but also our future generation,” he said.
Asked on how Gamuda and MMC had come out with the idea for the project, Lin said MRT was the way forward for Kuala Lumpur to be at par with other major cities in the region in terms of public transport usage.
“Our Klang Valley public transport usage is now at 16% whereas other major cities in the region have exceeded 40%.
“And for Greater Kuala Lumpur, 40% to 50% of public transport usage is sufficient as our road network is also quite good.
“In our proposal, we could achieve that level by 2020 and that will translate into 2 million passengers on rail daily compared to about 400,000 now,” he said.
More importantly, Lin said, the “wheel and spoke” network system of the proposed MRT would provide easy and less costly development of future expansion.
The wheel and spoke MRT network system is also used in Berlin, Moscow and Singapore.
“The tunnelling or underground works cover about 30% of the whole project involving 26 stations, mostly located in the city centre out of the total of 90-plus new stations in the MRT prosposal.
“If the proposal goes through, we only hope to be given a chance to fairly bid for the underground works. The Government will have the right to compare us with other bidders which are all expected to be from outside Malaysia.
Datuk Lin Yun Ling ... ‘We only hope to be given a chance to fairly bid for the job.’
“This is because there is no other company in Malaysia that has the track record involving such works,” he told StarBiz, adding that the proposed project could be divided into three major phases where the development would be stretched over 10 years.
The RM36bil joint MRT proposal by Gamuda and MMC is now under feasibility studies by two government-appointed independent consultants that will be concluded in three months.
Lin said both Gamuda and MMC were also interested in overseeing the whole project.
But even if they were “chariot master”, they wanted to be given a chance to bid for the project (in this case only the tunnelling works) but the Government could put the bid to a Swiss challenge.
Swiss challenge means a private sector participant submits an unsolicited proposal and draft contract principles for undertaking a project to the Government and competitive counter proposals are invited.
On funding of the project, Lin said the Government would have its own way to come up with the funding.
“In my point of view, if we look at the bigger picture, the RM36bil or RM43bil (inclusive land acquisition and rolling stocks) cost for the MRT is close to our fuel subsidy of RM50bil for six years.
“But the difference is that this RM43bil MRT project will not only benefit us but also our future generation,” he said.
Asked on how Gamuda and MMC had come out with the idea for the project, Lin said MRT was the way forward for Kuala Lumpur to be at par with other major cities in the region in terms of public transport usage.
“Our Klang Valley public transport usage is now at 16% whereas other major cities in the region have exceeded 40%.
“And for Greater Kuala Lumpur, 40% to 50% of public transport usage is sufficient as our road network is also quite good.
“In our proposal, we could achieve that level by 2020 and that will translate into 2 million passengers on rail daily compared to about 400,000 now,” he said.
More importantly, Lin said, the “wheel and spoke” network system of the proposed MRT would provide easy and less costly development of future expansion.
The wheel and spoke MRT network system is also used in Berlin, Moscow and Singapore.
Trading of Kumpulan Jetson shares halted
PETALING JAYA: Trading of Kumpulan Jetson Bhd shares were halted from 9am and resumed trading at 10am today after announcing a director had retracted his resignation.
In a filing to the stock exchange this morning, Kumpulan Jetson said independent non-executive director Mohd Najib Abdul Aziz had retracted his resignation which the company had accepted earlier.
The resignation was announced to Bursa Malaysia on July 7.
The company said a board meeting which had earlier been scheduled to take place on Thursday, July 15, to discuss various matters would also now discuss the implications of Mohd Najib’s resignation and retraction.
“Where required, a further announcement on this matter will be made after the meeting,” it added.
Kumpulan Jetson shares slipped 8 sen to RM1.25 with 63,800 shares traded.
In a filing to the stock exchange this morning, Kumpulan Jetson said independent non-executive director Mohd Najib Abdul Aziz had retracted his resignation which the company had accepted earlier.
The resignation was announced to Bursa Malaysia on July 7.
The company said a board meeting which had earlier been scheduled to take place on Thursday, July 15, to discuss various matters would also now discuss the implications of Mohd Najib’s resignation and retraction.
“Where required, a further announcement on this matter will be made after the meeting,” it added.
Kumpulan Jetson shares slipped 8 sen to RM1.25 with 63,800 shares traded.
Options In Focus: Stock Substitution
The trend, so they tell us, is our friend. But when conditions permit, a more reliable ally for bulls (or bears) are options that look to be a stronger fit for positioning than holding shares of a particular holding.
In late trade Tuesday, with the CBOE Volatility Index or "VIX" down about 1% at 23.80%, a better-suited way to ride the market's nascent uptrend or bear market rally, depending on whom one talks with, is likely through a stock substitution strategy.
A stock substitution strategy is a fancy way of saying you've done the hard work of accruing profits, maybe over the past three or four sessions for instance, and are now looking to lock in those returns with an absolute guarantee not subject to any pesky and unwanted price gaps.
When option premiums are affordable, as they currently are by and large, stock substitution for bulls can simply mean selling out shares and putting a percentage of those winnings into a certain amount of long calls.
As the strategy typically employs at or out-of-the money options at initiation, gains will likely trail results if we simply held stock on the initial move. But if shares continue to rally above the purchased strike, we could wind up a bigger winner than we would otherwise.
This profit phenomenon is sometimes possible despite less capital being put to work due to an option's leverage. Leverage, particularly with at and out-of-money options and when premiums are affordable / cheap, can allow for greater contract sizing relative to shares. And on a sizable and favorable move in the underlying, the result is the implemented call or stock substitution position, can dwarf the profits of the stockholder.
Options In Focus: Stock Substitution
To illustrate this principle, we'll use IBD 100 and NASDAQ 100 component Altera Corp (ALTR). Shares broke out from a fairly nice cup-shaped base with handle last Wednesday as the market signaled a somewhat suspect follow-through day. Let's suppose a trader purchased 300 shares and continued to hold the position over the next four sessions.
With shares up two points from the proper breakout point, the trader has net profits of $600 with which to work but is only willing to sacrifice 50% of those gains. Checking the board and one idea which keeps slightly more than $300 of the trader's profits and would eventually outperform holding the long stock position are 4 August 30 calls priced for just under $0.70 per contract.
Truthfully, the upside outperformance of this call position with under 40 days to go, isn't likely to occur. However, profit-taking isn't could always make an appearance. And on that defensive note, a stock substitute compromise on one's own terms is an idea worth consideration.
In late trade Tuesday, with the CBOE Volatility Index or "VIX" down about 1% at 23.80%, a better-suited way to ride the market's nascent uptrend or bear market rally, depending on whom one talks with, is likely through a stock substitution strategy.
A stock substitution strategy is a fancy way of saying you've done the hard work of accruing profits, maybe over the past three or four sessions for instance, and are now looking to lock in those returns with an absolute guarantee not subject to any pesky and unwanted price gaps.
When option premiums are affordable, as they currently are by and large, stock substitution for bulls can simply mean selling out shares and putting a percentage of those winnings into a certain amount of long calls.
As the strategy typically employs at or out-of-the money options at initiation, gains will likely trail results if we simply held stock on the initial move. But if shares continue to rally above the purchased strike, we could wind up a bigger winner than we would otherwise.
This profit phenomenon is sometimes possible despite less capital being put to work due to an option's leverage. Leverage, particularly with at and out-of-money options and when premiums are affordable / cheap, can allow for greater contract sizing relative to shares. And on a sizable and favorable move in the underlying, the result is the implemented call or stock substitution position, can dwarf the profits of the stockholder.
Options In Focus: Stock Substitution
To illustrate this principle, we'll use IBD 100 and NASDAQ 100 component Altera Corp (ALTR). Shares broke out from a fairly nice cup-shaped base with handle last Wednesday as the market signaled a somewhat suspect follow-through day. Let's suppose a trader purchased 300 shares and continued to hold the position over the next four sessions.
With shares up two points from the proper breakout point, the trader has net profits of $600 with which to work but is only willing to sacrifice 50% of those gains. Checking the board and one idea which keeps slightly more than $300 of the trader's profits and would eventually outperform holding the long stock position are 4 August 30 calls priced for just under $0.70 per contract.
Truthfully, the upside outperformance of this call position with under 40 days to go, isn't likely to occur. However, profit-taking isn't could always make an appearance. And on that defensive note, a stock substitute compromise on one's own terms is an idea worth consideration.
Monday, July 12, 2010
Scomi Marine active, down in early trade
KUALA LUMPUR: SCOMI MARINE BHD [] shares were actively traded on Tuesday, July 13 after the company proposed a sale of its assets to its Indonesian subsidiary PT Rig Tenders (PTRT) for US$171.8 million (RM550 million), an exercise that will leave the company principally as a cash-rich shell.
At 9.05am, there were 2.3 million Scomi Marine shares traded. The counter fell two sen to 41 sen.
Under the corporate exercise, Scomi Marine will see it disposing of its coal transportation business to become a marine logistics player.
At 9.05am, there were 2.3 million Scomi Marine shares traded. The counter fell two sen to 41 sen.
Under the corporate exercise, Scomi Marine will see it disposing of its coal transportation business to become a marine logistics player.
IJM hopes talks on JV Selangor flood project can conclude soon
PETALING JAYA: Radiant Pillar Sdn Bhd, a 50:50 venture between IJM Land Bhd and Kumpulan Europlus Bhd (K-Euro), which is undertaking the proposed development of the 2,500-acre Canal City land in Selangor, is negotiating with a state government agency to mutually settle the termination of the flood mitigation project for Canal City.
“Hopefully the negotiation can be wrapped up soon,” IJM Land managing director Datuk Soam Heng Choon told StarBiz.
Under an earlier agreement with the previous state government, the deal involved a flood mitigation project in the form of an 18km-canal linking Sungai Klang and Sungai Langat. In return the company will be awarded the land for development.
'This is a good window period to launch higher margin products' says IJM LAND BHD MD DATUK SOAM HENG CHOON
However, the new state government, which took over after the March 8, 2008 general election, has decided that there is no need for the flood mitigation project.
It is understood the settlement potentially includes the outright purchase of the land from the state government.
Radiant Pillar has started part of the work and a settlement has to be worked out with the state government.
IJM Land’s parent, IJM Corp has a 25% stake in K-Euro.
A source revealed that the state government preferred the joint venture company to buy the land outright.
If it materialises, the land, located directly behind the matured Kota Kemuning township, will turn IJM Land into one of the leading township developers in the Klang Valley.
For the financial year ended March 31, 2010 (FY10), IJM Land turned in record sales of RM1.25bil against RM733mil registered in FY09. The company has lined up RM1.5bil worth of projects for launch in the current financial year.
With gross development value of RM6bil, The Light project in Penang is the largest in IJM Land’s portfolio
Soam said IJM Land would leverage on its strong property sales to launch more higher end projects in the coming months.
“With the prevailing low mortgage rates and stronger market sentiment, this is a good window period to launch higher margin products,” Soam said.
He said the company would remain vigilant of any change in market sentiment, especially in the external front, and would implement the necessary strategies to stay competitive.
In the last two years, its projects in Penang were the major contributors to property development earnings, accounting for more than 30% of group earnings.
The major earnings driver going forward will be its flagship waterfront development, The Light, featuring residential, entertainment, business and hospitality facilities in one hub.
With gross development value (GDV) of close to RM6bil, the 152-acre mixed residential and commercial development is the largest project (in terms of development value) in IJM Land’s portfolio. The project will be developed over the next 12 to 15 years.
Since its launch last year, RM280mil in sales have been registered from The Light.
In Johor, IJM Land owns 1,188 acres in Kota Tinggi, near Desaru, which is being developed under the Sebana Cove resort-cum-residential project. Planning is now in progress to transform it into an upmarket eco-friendly and health-cum-lifestyle themed residential and marina resort development.
The 10-year project is expected to have its maiden launch in the later part of 2011.
Soam said IJM Land was also targeting the growing Kota Kinabalu market and planned to launch an exclusive condominium project, with a panoramic view of Likas Bay and Kota Kinabalu city centre later this year. The 8-acre project has a GDV of RM160mil.
Soam said that under the company’s long-term strategy, it was looking to venture into new markets such as Vietnam, China and Indonesia.
However, contribution from overseas would not be significant in the next three years.
“Initially, we will take on small and more manageable sized projects and will expand gradually according to market needs.”
IJM Land’s maiden offshore project will be a mixed development in Vietnam comprising four blocks of high-rise residential apartments and retail and commercial property on 2.85 ha in Phu Hoi commune, Nhon Trach city centre in Dong Nai Province.
Last month, it acquired a 70% stake in Sova Holdings Sdn Bhd which is undertaking the US$150mil joint-venture development with Thai Duong Company-Sunco, a Vietnam state-owned company.
Piling work for the initial phase is currently in progress and the sales launch is expected to be in the third quarter of this year.
In China, the company has a RM500mil upmarket residential and retail development in Changchun, the capital city of Jilin province in northeast China.
“We are in the plan submission stage now and is working towards launching the project next year,” Soam said
“Hopefully the negotiation can be wrapped up soon,” IJM Land managing director Datuk Soam Heng Choon told StarBiz.
Under an earlier agreement with the previous state government, the deal involved a flood mitigation project in the form of an 18km-canal linking Sungai Klang and Sungai Langat. In return the company will be awarded the land for development.
'This is a good window period to launch higher margin products' says IJM LAND BHD MD DATUK SOAM HENG CHOON
However, the new state government, which took over after the March 8, 2008 general election, has decided that there is no need for the flood mitigation project.
It is understood the settlement potentially includes the outright purchase of the land from the state government.
Radiant Pillar has started part of the work and a settlement has to be worked out with the state government.
IJM Land’s parent, IJM Corp has a 25% stake in K-Euro.
A source revealed that the state government preferred the joint venture company to buy the land outright.
If it materialises, the land, located directly behind the matured Kota Kemuning township, will turn IJM Land into one of the leading township developers in the Klang Valley.
For the financial year ended March 31, 2010 (FY10), IJM Land turned in record sales of RM1.25bil against RM733mil registered in FY09. The company has lined up RM1.5bil worth of projects for launch in the current financial year.
With gross development value of RM6bil, The Light project in Penang is the largest in IJM Land’s portfolio
Soam said IJM Land would leverage on its strong property sales to launch more higher end projects in the coming months.
“With the prevailing low mortgage rates and stronger market sentiment, this is a good window period to launch higher margin products,” Soam said.
He said the company would remain vigilant of any change in market sentiment, especially in the external front, and would implement the necessary strategies to stay competitive.
In the last two years, its projects in Penang were the major contributors to property development earnings, accounting for more than 30% of group earnings.
The major earnings driver going forward will be its flagship waterfront development, The Light, featuring residential, entertainment, business and hospitality facilities in one hub.
With gross development value (GDV) of close to RM6bil, the 152-acre mixed residential and commercial development is the largest project (in terms of development value) in IJM Land’s portfolio. The project will be developed over the next 12 to 15 years.
Since its launch last year, RM280mil in sales have been registered from The Light.
In Johor, IJM Land owns 1,188 acres in Kota Tinggi, near Desaru, which is being developed under the Sebana Cove resort-cum-residential project. Planning is now in progress to transform it into an upmarket eco-friendly and health-cum-lifestyle themed residential and marina resort development.
The 10-year project is expected to have its maiden launch in the later part of 2011.
Soam said IJM Land was also targeting the growing Kota Kinabalu market and planned to launch an exclusive condominium project, with a panoramic view of Likas Bay and Kota Kinabalu city centre later this year. The 8-acre project has a GDV of RM160mil.
Soam said that under the company’s long-term strategy, it was looking to venture into new markets such as Vietnam, China and Indonesia.
However, contribution from overseas would not be significant in the next three years.
“Initially, we will take on small and more manageable sized projects and will expand gradually according to market needs.”
IJM Land’s maiden offshore project will be a mixed development in Vietnam comprising four blocks of high-rise residential apartments and retail and commercial property on 2.85 ha in Phu Hoi commune, Nhon Trach city centre in Dong Nai Province.
Last month, it acquired a 70% stake in Sova Holdings Sdn Bhd which is undertaking the US$150mil joint-venture development with Thai Duong Company-Sunco, a Vietnam state-owned company.
Piling work for the initial phase is currently in progress and the sales launch is expected to be in the third quarter of this year.
In China, the company has a RM500mil upmarket residential and retail development in Changchun, the capital city of Jilin province in northeast China.
“We are in the plan submission stage now and is working towards launching the project next year,” Soam said
Sunday, July 11, 2010
Dubai World property arm sells off Malaysia stake
DUBAI, United Arab Emirates: A property arm of struggling state conglomerate Dubai World is backing out of a plan to build luxury homes in Malaysia as it looks to shore up its finances.
The cash-strapped company's Limitless division is selling off its stake in a partnership with Malaysia's Bandar Raya Developments to develop waterfront land in the southern city of Nusajaya.
Limitless will generate about US$23.8 million in the deal, according to a regulatory filing on Malaysia's stock exchange.
Limitless said in a statement Sunday that it continues "to review our business activity to reflect market conditions."
The company's parent Dubai World needs cash as it works to pay back $23.5 billion in debt. - AP
The cash-strapped company's Limitless division is selling off its stake in a partnership with Malaysia's Bandar Raya Developments to develop waterfront land in the southern city of Nusajaya.
Limitless will generate about US$23.8 million in the deal, according to a regulatory filing on Malaysia's stock exchange.
Limitless said in a statement Sunday that it continues "to review our business activity to reflect market conditions."
The company's parent Dubai World needs cash as it works to pay back $23.5 billion in debt. - AP
Thursday, July 8, 2010
Scomi Marine to announce big deal
Scomi Marine Bhd, a Malaysian marine transport company, said it will announce a “very substantial” transaction involving the disposal of some subsidiaries.
The shares will remained suspended today, it said in an exchange filing. -- Bloomberg
The shares will remained suspended today, it said in an exchange filing. -- Bloomberg
Wednesday, July 7, 2010
Paul the Octopus Prediction: Germany vs. Spain
I know many of you have been waiting for the latest prediction by Paul the Octopus to see if he picked Germany or Spain. I’m sure there are some of you that don’t know who Paul the Octopus is and rather than me having to make the introduction once more it’s easier if you read this post about Paul the Octopus that I published before the Germany vs. Argentina game.
There has been an insane amount of comments on the previous post and it seems like everyone has been waiting for the next prediction.
With that being said I am not going to let you wait any longer. The picture of Paul the Octopus’ latest prediction can be found below. Yes, he picked SPAIN. Let’s see if he is going to be right again.
If you want to challenge Paul’s prediction you can post your own in the comment box below.
There has been an insane amount of comments on the previous post and it seems like everyone has been waiting for the next prediction.
With that being said I am not going to let you wait any longer. The picture of Paul the Octopus’ latest prediction can be found below. Yes, he picked SPAIN. Let’s see if he is going to be right again.
If you want to challenge Paul’s prediction you can post your own in the comment box below.
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