Neratel makes money from 3 main segments:
Payment Solutions: Lease or sell POS terminals to clients and charge them rental/maintenance/percentage fee for every transaction made. This is recurring revenue, and growing due to rise in initiative to go cashless. It makes up about ~28% of their revenue now. Order in take went up to $50.4M from $41.3M.
Network Infrastructure: Cloud Services,IP/Optical/Broadcast Networks. Order in take went up to $95.5M from $84.4M.
Telecom: Mobile/wireless network coverage, radio transmission, 3g data offload and network performance systems. They plan to build up mobile coverage in major buildings in Indonesia to drive recurring revenue. Order in take went up to $71M from $67M YOY.
More Info from Fifth Person
Market Price (2015-3-28) = $0.65
*Based on full year 2014 earnings.
Earnings
Approx. EPS: $0.0448
Approx. DPS: $0.04
Payout Ratio: 89.3%
Total Revenue: $183M
Ratios
P/E: 14.5
Yield: 6.15% (Historical yield 5 to 10%)
Profitability
ROE: 25.53% [Avg for SG blue chips is 11.8%]
Asset Turnover: 1.28 [Avg for SG blue chips is ~0.5]
Gross Margin: 33.1%
Net Income Margin: 8.9%
Balance Sheet
Current Ratio: 1.61
Debt To Equity: Net Cash Position ($24M cash, $4.7M loan)
NAV: $0.1684 (Not an accurate measure for a service company)
Free Cash Flow: 9878 - 7411 = 2467
Additional Info
Biannual distributions in Apr/Aug. $0.04 dividends sustained for the past 5 years.
Personal Opinion:
+ It passes all the criteria of a dividend machine, except being a smaller cap company.
+ Better book order, flat profit but price went down 20% due to "dividend hit".
+ Strong ROE and robust cash flow, riding on the retail boom.
- It does not have a "true and strong economic moat" yet. There are high switching costs, but it does not yet have a wide enough distribution network.
- Management has expressed strong competition from all sectors in the future.
I think I might take a nibble once it stabilizes...
References:
OSK DMG
Saturday, March 28, 2015
Friday, March 27, 2015
My Investing Philosophy
Received my bonus! In addition, the stocks I owned (especially Super) have rallied greatly, causing quite a move in my portfolio.
If I exclude emergency funds, my allocation is currently around 30% equities, 70% cash. Is it too conservative? Perhaps.
At the same time, I am also extremely wary of the seemingly unstoppable bull market. Brian, one of my favourite bloggers, have noted this as well and sold off part of his Frasers stock. This makes it even harder for me to buy.
I realize now that I am really quite unhappy when I see the prices go up, even for stocks I own.
Am I mad? Aren't I "losing money"? No.
Let me put it this way. Let's say you like to eat Mcdonalds, and you're gonna eat it many many more times in your lifetime. Are you happier if the price of the burgers go up or down? Down of course!
The same actually applies to stock. If you are going to be a net-buyer of stock for the rest of your lifetime, you should be praying for it to go down, so that you can get more at cheaper prices.
---
Then of course, the prerequisite is that the company you brought is a 'tennis ball' and not an 'egg'. A tennis ball always bounce back when it hits the floor. An egg simply shatters.
It might sounds weird, but I buy stock praying it will hit lower so that I can buy more. As of result of my investment philosophy, I have to keep a large cash allocation.
Now, what about selling?
Should I sell my FCT now that even Brian thinks it's heading into overvalued territory? I thought really hard about this.
How do I come up with a concrete plan that is predominately based on long term investment, while having the benefit of capitalizing on short term volatility when opportunity arises?
I thought about everything I have learned from the past year, and consolidate them into this.
My Investing Model
1. Buy Good Companies
This cannot be summarized easily, but it mainly got to do with these: Strong economic moats, strong balance sheet, positive free-cash flow, recurring revenue sources, stable and predictable dividends.
Do your homework during good times so you know what these companies are.
2. But Don't Overpay
Of course, the ideal case is buy them when they are undervalued, but this is not possible most of the time. The next best case is buy them for a fair value.
But NEVER overpay.
Easy to say, but extremely hard to attain. How to know the fair price? Do your homework, then add in a margin of safety. If you think $1 is fair, try to buy it for 80 cents. Never pay $1.20 for it.
3. Always Nibble, Always Have More Bullets. (Buying Down)
NEVER be greedy and go all in. Even if you have 90% win rate, one wrong move and you will lose everything. Always nibble, nibble, nibble.
If you buy $1000, make sure you have $5000 behind. What is lower can go lower. You can never predict how low the price can go.
If it goes lower, nibble down. If it goes even lower, start biting. Down EVEN MORE? Bring out the artillery.
*Make sure it is a good company that you are confident in, and never put everything into a single basket.
4. Option To Sell If It Becomes Overvalued
Again, this is a controversial step. How do you know it's overvalued?
You buy at $1 and it goes to $1.20. It may head higher to $1.50, $2.
If you sell and it keeps going up, it may be a long time before you can get it back into your portfolio again.
The bottom line though, is that it is never bad to sell for a profit. This is an option that you can execute if you really think it's overvalued, and put your money in another company that you can nibble down on.
Quote from Brian: "Even though the objective is to focus on fundamentals for the long term, it would be pretty foolish not to consider selling at some point should the market over react by providing opportunities for investors to take profits."
Otherwise, hold on, keep calm and collect dividends!
---
As you can see, my investing model is simple.
Keep loads of cash and nibble on good companies at reasonable prices. If it goes down, you get to accumulate more. If it goes up, you have the option to lock in profits.
This is the essence of how I invest. No speculating on short-term market movements. No risky leverage.
Finally, let me end this post with some advice from one of my favourite blogger, the dividend god AK:
a) Make sure that you are always prudent with your personal finance matters.
b) Get the necessary insurance coverage, but don't overpay.
c) Know what are needs and wants. Delay gratification.
d) Go for low hanging fruits.
e) Invest in income producing assets to supplement your earned income.
f) Be an opportunist and buy more when assets are on sale.
g) To do that, have a war chest ready always.
At the same time, I am also extremely wary of the seemingly unstoppable bull market. Brian, one of my favourite bloggers, have noted this as well and sold off part of his Frasers stock. This makes it even harder for me to buy.
I realize now that I am really quite unhappy when I see the prices go up, even for stocks I own.
Am I mad? Aren't I "losing money"? No.
Let me put it this way. Let's say you like to eat Mcdonalds, and you're gonna eat it many many more times in your lifetime. Are you happier if the price of the burgers go up or down? Down of course!
The same actually applies to stock. If you are going to be a net-buyer of stock for the rest of your lifetime, you should be praying for it to go down, so that you can get more at cheaper prices.
---
Then of course, the prerequisite is that the company you brought is a 'tennis ball' and not an 'egg'. A tennis ball always bounce back when it hits the floor. An egg simply shatters.
It might sounds weird, but I buy stock praying it will hit lower so that I can buy more. As of result of my investment philosophy, I have to keep a large cash allocation.
Now, what about selling?
Should I sell my FCT now that even Brian thinks it's heading into overvalued territory? I thought really hard about this.
How do I come up with a concrete plan that is predominately based on long term investment, while having the benefit of capitalizing on short term volatility when opportunity arises?
I thought about everything I have learned from the past year, and consolidate them into this.
My Investing Model
1. Buy Good Companies
This cannot be summarized easily, but it mainly got to do with these: Strong economic moats, strong balance sheet, positive free-cash flow, recurring revenue sources, stable and predictable dividends.
Do your homework during good times so you know what these companies are.
2. But Don't Overpay
Of course, the ideal case is buy them when they are undervalued, but this is not possible most of the time. The next best case is buy them for a fair value.
But NEVER overpay.
Easy to say, but extremely hard to attain. How to know the fair price? Do your homework, then add in a margin of safety. If you think $1 is fair, try to buy it for 80 cents. Never pay $1.20 for it.
3. Always Nibble, Always Have More Bullets. (Buying Down)
NEVER be greedy and go all in. Even if you have 90% win rate, one wrong move and you will lose everything. Always nibble, nibble, nibble.
If you buy $1000, make sure you have $5000 behind. What is lower can go lower. You can never predict how low the price can go.
If it goes lower, nibble down. If it goes even lower, start biting. Down EVEN MORE? Bring out the artillery.
*Make sure it is a good company that you are confident in, and never put everything into a single basket.
4. Option To Sell If It Becomes Overvalued
Again, this is a controversial step. How do you know it's overvalued?
You buy at $1 and it goes to $1.20. It may head higher to $1.50, $2.
If you sell and it keeps going up, it may be a long time before you can get it back into your portfolio again.
The bottom line though, is that it is never bad to sell for a profit. This is an option that you can execute if you really think it's overvalued, and put your money in another company that you can nibble down on.
Quote from Brian: "Even though the objective is to focus on fundamentals for the long term, it would be pretty foolish not to consider selling at some point should the market over react by providing opportunities for investors to take profits."
Otherwise, hold on, keep calm and collect dividends!
---
As you can see, my investing model is simple.
Keep loads of cash and nibble on good companies at reasonable prices. If it goes down, you get to accumulate more. If it goes up, you have the option to lock in profits.
This is the essence of how I invest. No speculating on short-term market movements. No risky leverage.
Finally, let me end this post with some advice from one of my favourite blogger, the dividend god AK:
a) Make sure that you are always prudent with your personal finance matters.
b) Get the necessary insurance coverage, but don't overpay.
c) Know what are needs and wants. Delay gratification.
d) Go for low hanging fruits.
e) Invest in income producing assets to supplement your earned income.
f) Be an opportunist and buy more when assets are on sale.
g) To do that, have a war chest ready always.
Thursday, March 26, 2015
The Lure of Quick Money
Met up with a couple of friends today and the topic on 'investing' came up.
People were sharing about how they made few thousand bucks on a single trade, and up to hundred of thousands a month. Some even quit their jobs to trade full time.
I would be lying if I say I wasn't the least tempted. Who doesn't want easy money?
In their opinion, I was too 'conservative' with my capital allocation. I should take the chance to "compound" my net-worth quickly by trading and speculating using margins.
Is it really that way? Can I really not feel seduced by the lure of "easy money"? When they are talking about how they can earn your annual income in a month by speculating?
...
I kept thinking about it on the way home.
That's when I finally understood what Warren Buffett, Benjamin Graham and the other greats meant by the "irresistible lure of quick money".
I never met the devil until today. And I pray I can resist selling my soul to it. I guess I consider myself lucky to not succumb to it.
When I first started investing, I was exposed to long term value/growth/income investing. The friends I knew use portfolio balancing, dollar cost averaging and other 'conservative' methods of investing.
I followed the likes of dividend warrior and Brian who are mostly advocators of long term investing. I learned about the importance of keeping a war chest/armageddon funds. I learned about defensive stocks with recurring incomes.
I am 'psycho' daily by Motley Fool and Fifth Person about the risks of speculation and leverage, and the benefits of long term investing (how you never lose money over 20 years).
I idolized AK, an ordinary Singaporean who built up his portfolio brick by brick and is now making $120k per year in dividends alone. I was introduced to the art of 'nibbling' and starting my own dividend machine.
...
I guess all the above help ingrained in my brain the dangers of speculation, and the benefits of the long term. It's slow. It's unexciting. You can't boast about your accomplishments.
Is it a blessing or a missed opportunity? Only time will tell.
There may come a day when these friends are sitting on big cars and bunglows while I am still collecting a puny dividend per month. Or maybe one day they will be burnt badly and what I have learned are proven to be right?
People were sharing about how they made few thousand bucks on a single trade, and up to hundred of thousands a month. Some even quit their jobs to trade full time.
I would be lying if I say I wasn't the least tempted. Who doesn't want easy money?
In their opinion, I was too 'conservative' with my capital allocation. I should take the chance to "compound" my net-worth quickly by trading and speculating using margins.
Is it really that way? Can I really not feel seduced by the lure of "easy money"? When they are talking about how they can earn your annual income in a month by speculating?
...
I kept thinking about it on the way home.
That's when I finally understood what Warren Buffett, Benjamin Graham and the other greats meant by the "irresistible lure of quick money".
I never met the devil until today. And I pray I can resist selling my soul to it. I guess I consider myself lucky to not succumb to it.
When I first started investing, I was exposed to long term value/growth/income investing. The friends I knew use portfolio balancing, dollar cost averaging and other 'conservative' methods of investing.
I followed the likes of dividend warrior and Brian who are mostly advocators of long term investing. I learned about the importance of keeping a war chest/armageddon funds. I learned about defensive stocks with recurring incomes.
I am 'psycho' daily by Motley Fool and Fifth Person about the risks of speculation and leverage, and the benefits of long term investing (how you never lose money over 20 years).
I idolized AK, an ordinary Singaporean who built up his portfolio brick by brick and is now making $120k per year in dividends alone. I was introduced to the art of 'nibbling' and starting my own dividend machine.
...
I guess all the above help ingrained in my brain the dangers of speculation, and the benefits of the long term. It's slow. It's unexciting. You can't boast about your accomplishments.
Is it a blessing or a missed opportunity? Only time will tell.
There may come a day when these friends are sitting on big cars and bunglows while I am still collecting a puny dividend per month. Or maybe one day they will be burnt badly and what I have learned are proven to be right?
Saturday, March 21, 2015
Stock Enlightment
Been investing for almost a year now.
Despite setting the goal to increase my dividend income, I don't want to rush into things and risk making mistakes. Good companies are getting more expensive and I really want to evaluate them before "nibbling", a term I caught on from some of my favourite bloggers.
Anyway, I have compiled the essence of what I have learned. Gonna jot them down here:
- Invest for the long term. Don't be afraid of volatility. Volatility works in long term investors favor. The market is a voting machine in the short term, and weighing machine in the long term.
- The easiest way to destroy your portfolio is to think you can time the market with frequent trading. Patience is your greatest asset. The toughest thing about investing is doing nothing.
- Diversify to reduce your risk. Don't pay huge fees to fund mangers. Don't use leverage.
- Cash to a business is like oxygen to a person. You don't think about it when it's present, but you will die when you don't have it. Always have emergency cash to capitalize on opportunities, and act as buffer against bad situations.
I also came across an article on when to sell a stock. Here are some signs:
- A shockingly high P/E (i.e I would classify that as above 50)
- Its economic moat (aka competitive advantage) is in danger.
- A drastic change in leadership, business model, direction.
- A stalling/falling revenue, and profit margin/earnings.
- It recently cuts dividends.
Despite setting the goal to increase my dividend income, I don't want to rush into things and risk making mistakes. Good companies are getting more expensive and I really want to evaluate them before "nibbling", a term I caught on from some of my favourite bloggers.
Anyway, I have compiled the essence of what I have learned. Gonna jot them down here:
- Invest for the long term. Don't be afraid of volatility. Volatility works in long term investors favor. The market is a voting machine in the short term, and weighing machine in the long term.
- The easiest way to destroy your portfolio is to think you can time the market with frequent trading. Patience is your greatest asset. The toughest thing about investing is doing nothing.
- Diversify to reduce your risk. Don't pay huge fees to fund mangers. Don't use leverage.
- Cash to a business is like oxygen to a person. You don't think about it when it's present, but you will die when you don't have it. Always have emergency cash to capitalize on opportunities, and act as buffer against bad situations.
I also came across an article on when to sell a stock. Here are some signs:
- A shockingly high P/E (i.e I would classify that as above 50)
- Its economic moat (aka competitive advantage) is in danger.
- A drastic change in leadership, business model, direction.
- A stalling/falling revenue, and profit margin/earnings.
- It recently cuts dividends.
Sunday, March 15, 2015
Stock Analysis 8: ARA Asset Management
Market Price (2015-3-15) = $1.56
*Based on full year 2014 earnings.
Earnings
Approx. EPS: $0.1035
Approx. DPS: $0.05
Ratios
P/E: 15.07
Yield: 3.2%
Profitability
ROE: 28.87% [Avg for SG blue chips is 11.8%]
Asset Turnover: 0.16178 [Avg for SG blue chips is ~0.5]
Net Income Margin:51.189
Operating Cash Flow ($101M) - Capex ($1.2M) = $101M Free Cash Flow!
Balance Sheet
Current Ratio: 1.88
Debt To Equity: 0.099
NAV: $0.4024
Additional Info
Biannual distributions in Aug/Dec. Management committed to $0.5 dividends every year. (They have done this for the past 3 years)
Personal Opinion:
This stock is in the business of asset management. They manage REITs and private funds. It has been on a downtrend for sometime, despite good earnings.
+ Amazing ROE and net income margin.
+ Proven track records, with steady dividends since 2008.
+ Bulk of revenue (management fees) are recurrent in nature and provide stable base.
+ Relatively solid balance sheet with $64M in cash and $34M borrowings.
+ At its 52 week low...
- Rising interest rates might cause the downtrend to continue.
Not at its current valuation... If the P/E drops to around 14 (in line with STI)...
*Based on full year 2014 earnings.
Earnings
Approx. EPS: $0.1035
Approx. DPS: $0.05
Ratios
P/E: 15.07
Yield: 3.2%
Profitability
ROE: 28.87% [Avg for SG blue chips is 11.8%]
Asset Turnover: 0.16178 [Avg for SG blue chips is ~0.5]
Net Income Margin:51.189
Operating Cash Flow ($101M) - Capex ($1.2M) = $101M Free Cash Flow!
Balance Sheet
Current Ratio: 1.88
Debt To Equity: 0.099
NAV: $0.4024
Additional Info
Biannual distributions in Aug/Dec. Management committed to $0.5 dividends every year. (They have done this for the past 3 years)
Personal Opinion:
This stock is in the business of asset management. They manage REITs and private funds. It has been on a downtrend for sometime, despite good earnings.
+ Amazing ROE and net income margin.
+ Proven track records, with steady dividends since 2008.
+ Bulk of revenue (management fees) are recurrent in nature and provide stable base.
+ Relatively solid balance sheet with $64M in cash and $34M borrowings.
+ At its 52 week low...
- Rising interest rates might cause the downtrend to continue.
Not at its current valuation... If the P/E drops to around 14 (in line with STI)...
Sunday, March 08, 2015
Stock Analysis 7: Boustead Singapore
Market Price (2015-3-06) = $1.67
*As a project-oriented business, I used FY2014 for earnings instead of latest quarter.
Earnings
Approx. EPS: $0.139 (for FY2014)
Approx. DPS: $0.07
Ratios
P/E: 12.1
Yield: 4.2%
Profitability
ROE: 20.7% [Avg for SG blue chips is 11.8%]
Asset Turnover: 0.75 [Avg for SG blue chips is ~0.5]
Net Income Margin: 12.3
Balance Sheet
Current Ratio: 1.79
Debt To Equity: 0.425
NAV: $0.684
Additional Info
Biannual distributions in Aug/Dec. Management committed to paying out at least 50% earnings as dividends
Personal Opinion:
+ Diverse business in Energy (~35%), Real Estate (~40%), Geo-Spatial (~20%) and Water (5%) in 84 countries
+ Long history with 12 consecutive years of dividend payout through crisis periods.
+ Fortress balance sheet: Net cash position of 160+M, Current Assets can cover ALL Liabilities.
+ At its 52 week low...
- Management has expressed "extremely challenging" business climates for oil & gas, real estate sectors.
A stock I learned and read up on over the weekend. I think they will benefit greatly in the future with all the Smart Nation stuff coming up in Singapore. Problem is they are looking to diverse the Real Estate sector into a separate business and I am not sure what is the impact. I will probably wait for that to happen before deciding if I want to jump in.
*As a project-oriented business, I used FY2014 for earnings instead of latest quarter.
Earnings
Approx. EPS: $0.139 (for FY2014)
Approx. DPS: $0.07
Ratios
P/E: 12.1
Yield: 4.2%
Profitability
ROE: 20.7% [Avg for SG blue chips is 11.8%]
Asset Turnover: 0.75 [Avg for SG blue chips is ~0.5]
Net Income Margin: 12.3
Balance Sheet
Current Ratio: 1.79
Debt To Equity: 0.425
NAV: $0.684
Additional Info
Biannual distributions in Aug/Dec. Management committed to paying out at least 50% earnings as dividends
Personal Opinion:
+ Diverse business in Energy (~35%), Real Estate (~40%), Geo-Spatial (~20%) and Water (5%) in 84 countries
+ Long history with 12 consecutive years of dividend payout through crisis periods.
+ Fortress balance sheet: Net cash position of 160+M, Current Assets can cover ALL Liabilities.
+ At its 52 week low...
- Management has expressed "extremely challenging" business climates for oil & gas, real estate sectors.
A stock I learned and read up on over the weekend. I think they will benefit greatly in the future with all the Smart Nation stuff coming up in Singapore. Problem is they are looking to diverse the Real Estate sector into a separate business and I am not sure what is the impact. I will probably wait for that to happen before deciding if I want to jump in.
Sunday, March 01, 2015
Stock Analysis 6: CMP 2014 Full Year
Market Price (2015-2-27) = $1.06
Converted using $1HKD to $0.18SGD.
Earnings
Approx. EPS: $0.16
Approx. DPS: $0.07 (Plus bonus shares!)
Ratios
P/E: 6.6
Yield: 6.6%
Profitability
ROE: 11.6% [Avg for SG blue chips is 11.8%]
Asset Turnover: 0.139 [Avg for SG blue chips is ~0.5. Not a good measure because asset heavy company]
Net Income Margin: 36.6
Balance Sheet
Current Ratio: 3.2
Debt To Equity: 0.36
NAV: $1.07
Additional Info
Biannual distributions in May/Oct. Management committed to paying out at least 50% earnings as dividends
Personal Opinion: HOLD/BUY
They are giving 1 for every 20 share bonus issue, ON TOP of a 3.5 cents dividends! That means I am going to get 5 lots for 'free'!
Unless any policy change occurs, this will be a very strong income stock for many years to come.
Converted using $1HKD to $0.18SGD.
Earnings
Approx. EPS: $0.16
Approx. DPS: $0.07 (Plus bonus shares!)
Ratios
P/E: 6.6
Yield: 6.6%
Profitability
ROE: 11.6% [Avg for SG blue chips is 11.8%]
Asset Turnover: 0.139 [Avg for SG blue chips is ~0.5. Not a good measure because asset heavy company]
Net Income Margin: 36.6
Balance Sheet
Current Ratio: 3.2
Debt To Equity: 0.36
NAV: $1.07
Additional Info
Biannual distributions in May/Oct. Management committed to paying out at least 50% earnings as dividends
Personal Opinion: HOLD/BUY
They are giving 1 for every 20 share bonus issue, ON TOP of a 3.5 cents dividends! That means I am going to get 5 lots for 'free'!
Unless any policy change occurs, this will be a very strong income stock for many years to come.
Stock Analysis 5: Super Group 2014 Full Year
Market Price (2015-2-27) = $1.195
Earnings
Approx. EPS: $0.0617 (Down from $0.0896)
Approx. DPS: $0.031
Payout Ratio: ~50
Ratios
P/E: 19.4
Yield: 2.6%
Profitability
ROE: 14.2% [Avg for SG blue chips is 11.8%]
Asset Turnover: 0.877 [Avg for SG blue chips is ~0.5]
Net Income Margin: 12.7 [Comparable]
Balance Sheet
Current Ratio: 3.2
Debt To Equity: 0.21
NAV: $0.4462 (Up from $0.4187)
Additional Info
Biannual distributions in May/Aug. Management committed to paying out 50% earnings as dividends
Personal Opinion: HOLD
A growth stock showing signs of recovery. However, I am kind of cautious that its "recovery" is due to one time asset disposal instead of increase in operating income. This is something I need to take note of in the next result.
Overall, I think it's still a solid company with good profitability ratios and good balance sheet. I brought it at too high a price, so it's gonna be a while before it recovers.
Earnings
Approx. EPS: $0.0617 (Down from $0.0896)
Approx. DPS: $0.031
Payout Ratio: ~50
Ratios
P/E: 19.4
Yield: 2.6%
Profitability
ROE: 14.2% [Avg for SG blue chips is 11.8%]
Asset Turnover: 0.877 [Avg for SG blue chips is ~0.5]
Net Income Margin: 12.7 [Comparable]
Balance Sheet
Current Ratio: 3.2
Debt To Equity: 0.21
NAV: $0.4462 (Up from $0.4187)
Additional Info
Biannual distributions in May/Aug. Management committed to paying out 50% earnings as dividends
Personal Opinion: HOLD
A growth stock showing signs of recovery. However, I am kind of cautious that its "recovery" is due to one time asset disposal instead of increase in operating income. This is something I need to take note of in the next result.
Overall, I think it's still a solid company with good profitability ratios and good balance sheet. I brought it at too high a price, so it's gonna be a while before it recovers.
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