Oxley retail bonds review (5%)

There has been much hype on this Oxley retail 5% bond, spanning over 4 years maturity. However, it is unrated and that means I can't rely on any Moody's analysis to discern whether it is a good deal a not.

I have to analyse on my own then. After studying its financial report and ripping it apart, below are my takeaways and humble thoughts.

Before I go to the financial jargon, I need to express that this is only my opinion and may not bear any truth at all. Analysis and thoughts are of personal opinions only. For every statement I make here, I will put 'I think'. (but it is up to you to discern what I say correct anot ;P)

1.Profit before tax dropped from FY14 to FY15 by a whopping approx. 62%

FY 2014: $377,367m
FY 2015: $142,705m
Oxley holdings has achieved very impressive profits in Year 2013 and 2012, when the property market in Singapore was booming.
However, after the cooling property measures were implemented, many developers are facing a lackluster response in its properties. It is no surprise that Oxley was badly affected by it too.
Oxley has plans to expand overseas aggressively instead but looking at its financials, I do not find them promising. (to explain later)

2. Marketing expense increased 99%

I think when you increase your marketing expenses by 99% but then your results decrease by 62%, it means:
A. Your marketing strategies CMI. (cannot make it)
B. You are not getting the response that you want, i.e, demand is not that good.
I think that it is option B because Oxley's marketing agents are mostly from Huttons and Huttons really produce impressive results in other properties previously. When you spend so much more on marketing yet get poor results, it just shows that your products are not as good.

3. Debt ratio and D/E ratio is high

I think it is high.
Debt ratio (Total liabilities/Total assets) = 0.85 approx
The industry encourages standard of about (0.3~0.6) only.

Debt/equity ratio (Debt/equity)= 5.807 approx.
Other companies are <1.......

I think Oxley has too much leverage and it is risky.This means that if their business fail, I think I will be in queue 1,000,000 to get back my money lor omg. (Just joking, queue no. is a fake anyhow say number)

Look at its fixed notes it previously issued:

I think those that were issued in Year 2013 were for its projects in Y2013/Y2014 which did receive resounding success. Oxley should be able to pay them.

But for notes issued now, the money I think will be used for its overseas projects venture moving on but this leads me to the next point.

4.No confidence in Oxley's overseas projects venture

Look at this:

Forget its FY2015 poor performance. I think future plans are very important and the strategies form the crux of whether the company is a good investment a not.

Looking at this table, I really do not think Oxley overseas projects are promising.

A. Projects in Cambodia
I go to Cambodia- Phnom Penh every single year (I'm not a Cambodian btw) and I have some close friends there. There is an association there which I am committed too and has a close relationship with. As such, I think I have some knowledge to really say how Phnom Penh is like. And this is what majority of Phnom Penh is:

1. Mud & uneven roads
2. Slums
3.Corruption
4. Poverty
5. Main language of the people is Khmer
6. More well off people work as factory garment workers
7. Less well off people open shops infront of their living area and sell the same stuffs that other shops sell too.
8. Children not wearing underwear and running around
9. many many other scenario depicting a 3rd world country

Phnom Penh has a very very long way to go for foreign investments. And to build high rise condominiums and to attract expats to stay there, well, I think, more likely they will become AirBnb.

I do not think that Oxely's property developments in Phnom Penh are promising although their first project there did receive a good response.

B. Projects in Malaysia
Exchange rate of those people who bought properties in Malaysia during year 2013 when the market is booming there: SGD 1: MYR 2.65

The exchange rate now: SGD 1: MYR 3.05

Exchange rate in future: ????

With a very questionable government, weak currency, poor security, I think the property market there is certainly not as attractive as in year 2013. As such, I do not think that projects there will receive good response.

Also, Setia Berhad, the leading property developer there, has much more competitive advantage in its home land as compared to Oxley.

Given that Singapore's developers are facing a weakening demand here, and Oxley's prime focus is shifting to overseas with such projects in such countries, I do not have the confidence in their ventures.

5. You can get 5% yield elsewhere too
5% yield capital guaranteed by AAA credit rating from Moody's is a must grab.

But when it is unrated and it has poor future strategies, then I think it will be better if you put your money into blue chip stocks or diversified reits- Probably 6% over 7 years horizon, your money is safer.

Conclusion

I will not buy Oxley's retail 5% bonds because the risk does not justify the returns.

Recent Action- Sold Capitamall Trust

I sold CapitaMall Trust today and as such, I will not be entitled to its dividends.(ex- dividend date 28.10.15) After factoring this opportunity cost, I still think that at $2.06, it has reached its potential. I shall reap my profits now and gain entry again perhaps next year.

Looking at its 3Qtr 2015 financial report, below are my takeaways:

1. Net property income dropped.
Net property Income has dropped again, consecutively since 2Qtr 2015. The drop is about 0.7%. I expect that it will continue to drop until the 3 malls which are not faring well now brushes up in its rentals.

2. 3 main properties facing a drop in rental income:
IMM
Rental was affected due to renovation works but a link bridge to Devan Nair Institute is completed. Only after all renovation works done and the mall is fully operating then the property income will increase.

JCube
This is a headache.. seriously.
With three shopping malls at Jurong East, west siders are spoilt for choice. Jcube is also very out of the way for shoppers and most of the time, I do not make any effort to go there at all as it is really inconvenient. Furthermore, the toilets stink. The most disgusting toilets are awarded to Jcube, like seriously. Lol.

Anyway, recently there is a revamp at Level 2- a mini Bugis street look alike. I find that appealing since there are many clothes to shop and it really belongs to a league of its own- teenagers. The ice skating rink is a good attraction too.

Clark Quay
After the liquor laws kick in, Clark Quay has become much quieter than before. Previous tenants like MOF are no longer operating. Some clubs are finding it tough to survive too.

Good news is that Zouk will be renting a place here but that will only start in June 2016.

I expect that the rental incomes of these 3 properties will only start to improve in 2016 onwards which translate to weaker income for 4th Qtr 2015 and 1st Qtr 2016. Before I see this stock price dropping, let me sell it first.

3. I expect Finance cost to increase.
Finance costs for YTD Sept 2015 was lower due to low interest rates in Aug 2014, Nov 2014 and Feb 2015. However, moving on to the next Qtr, I believe that the interest rates have risen quite a bit and that will translate to higher finance costs.

4. Good move to buy Bedok Mall
Bedok Mall's business is buoyant and there is high human traffic. However, I do not think that this mall alone will be able to salvage the other three dropping incomes.

5. Better opportunities for my $
Frasers Centre Point trust is certainly doing much better. Almost all of the surb-urban malls enjoy good human traffic. The recent financials are good too.

I will accumulate my war chest by cashing out CMT and divest to other better performing stocks now.

As for CMT, let it sort out the ailing 3 mallsand I will make an entry again probably next year.

Will I buy stocks now?

Just a very quick Q&A..

1. Why did the STI drop so much this week?

The main reason was due to China' slowdown in economy with China's manufacturing activity falling to the lowest level in 6 years.

2. Are there any signs that China's economy is improving?

No.  As someone working in the Metal commodity industry, I have first hand knowledge of China's metal prices such as in Iron Ore, finished products and scraps. The prices are dropping so much that it is really rather depressing. It is still dropping now and then.. I am afraid that this quarter's performance may even be more dismal.

Chinese construction market is slowing and it has an obvious effect on its metal prices. Working backwards, I can only believe that China is facing a negative demand brought about by a slowing economy. I can see the correlation in China's metal prices and China's economy and China's stock prices and Singapore's economy and Singapore's stock prices..(You get it).

3. Will I buy stocks now?
The short answer is No. I believe that prices have yet to hit rock bottom and metal commodity prices are not showing any sign of improvement.

4. Will I sell my stocks now?
No. Warren Buffet says 'If you can't hold a stock for 10 years, then do not think of holding it for 10 minutes"

My stocks are for long term and I still firmly believe in the companies that I have chosen.

And really, there is no reason why I should be selling at a loss!!

These are really my humble thoughts. Feel free to leave a comment. Thank you!

My actions in this bear market

Here's what I have strategized during this horrible bear market.

1. Console myself that STI annual returns was about 8-9% throughout the past 28 years.

Here's the chart:

From year 1987 to Aug 2015 now, the returns was 265.62%, over 28 years annualize as 9.48%.

STI has fluctuated many many times but the general trend is upward. One should treat stock investments as a long term serious commitment, and have the patience to ride out the rocky waves from time to time. My investment horizon is 10 years at least, not 10 months or 10 days.

This brings out to my next point:

2. Be patient, hold my stocks.
I read somewhere about the psychology of most investors and why majority lose money in stocks. Credits to the rightful owner of this picture (which I do not have the source).

Are you selling your stocks now? are you selling it at a loss?
Why are you selling it at a loss when you should be selling it at a profit?
Is it because your stocks are junk? wait, if you stocks are junk, why have you bought them??

This brings about to the next point again.

3. Look at the fundamentals

Although one should treat investment as a long term horizon, it is also very important to look at the financial statements of the company periodically. I have great interest and excitement whenever I look at the company's financials!

Is the company doing reasonably well and having a decent growth rate? how is the industry doing? how is the management? what have they conveyed as their growth strategies?

If the company does not seem to be doing well either because the company is lacking in groove, lacking in management leadership or generally because the industry has slowed down and show no signs of improving, then yes, it is time to cut your losses.

Other than that, if the company has strong fundamentals, it is best to HOLD and not sell at FEAR. pls omg.

4. Dollar cost averaging
'Dollar cost averaging' is an investment term used to describe the purchase of unit trusts. However, the principle can be applied when buying stocks.

It generally means that one can buy stocks gradually, inching bit by bit when stock prices changes.
Meaning:
500 lots at STI ETF $3.02
500 lots at STI ETF $2.80 ( if it really goes this low)
and then buy again when it drops further till when it finally starts going up.

This will mitigate the loss as the stock price is averaged out. Eventually (perhaps years later) when the stocks go up again, that's where the profits can be seen.

That being said, I am going to buy STI. I do have other blue chip stocks in mind that I think are really undervalued but I will not be sharing it here.

Till then, I will also not be logging into POEMS to check my portfolio. x.x

My portfolio in this terrible market

Omg the stock market has fallen from a high of STI 3500 during its Peak to the current 3195 now.

No idea when is the bottom. However, my portfolio has remained relatively 'unscathed'.

To recap, this was how my portfolio looks like and I explained briefly here.

The majority of my stocks are Trust  & Reits and as they are more stable, they form a good backing for my overall portfolio. I am still gaining a net positive in these Reits and as a result, they mitigated the loss in my blue chip and growth stocks.

My reits stocks: AIMS AMP, Keppel DC
My trusts stocks: Capitamall (waiting for a better price to sell), FrasersCentre point trust
My blue chip stocks: Keppel, StarHub, Raffles Medical
My growth stocks: Q&M, Amtek Engineering, Hyflux, Alibaba

Sigh. If only entire portfolio is made up of Reits right? Yeah.. during a downturn, I think that way. But when it is bullish, things go the opposite way and I contemplate why I didn't buy more growth stocks. (lol)

Reits, bullish or bearish, they are relatively stable.

Ezra Review- What's wrong with this company??

The very 'hot' stock recently is Ezra. Not that it is bulling in hotness, but boiling in danger and facing so much uncertainty that it is so hot. Someone very close to me is vested in it and is very troubled, so here I am, trying to offer a little advice.

Today's financial results- 10th July was released.

Oh my.. So many things that I conclude (purely based on my very humble thoughts, may not be factual so pls don't send me a lawyer's letter)

Pls read this with discretion and kindly note these are just what I THINK*

1. Company seems to show that they do not know how to control expenses
Revenue dropped by 3%. By right when revenue drops, one should see a drop in Expenses such as income/administrative. However, for Ezra, their expenses increased by so much.

Wow, cannot cut pay of high mgmt.? don't wish to retrench people? cannot control expenses? MNCs will come out with drastic cost cutting measures, including cutting high salaries of top mgmt. and board wide retrenchment. I don't see it in Ezra.

If it needs to be done, it has to be.

Which leads me to the next point.

2. Operating profit dropped 81%

Erm. That's like so close to having a negative profit already. The company still tried to sugar coat the announcement that their revenue maintained despite such challenging environment.

Pls open your eyes big big and look at the financial statements.

3. Offering rights to repay perpetual securities

I *think* this means that the company might be unable to pay off their debts, so they have to offer rights to raise money.

Not that they are raising money to fund growth. They are using it to pay their perpetual securities and bonds!

Which means.. more debt?

Conclusion: My advice
1. If you are not vested: Good for you, pls do not buy. Wait until the Saudi Arabia and the shale oil producers in USA have worked out a win win situation for the oil price to start climbing up. Otherwise, oil price is likely to remain low for a few years more.

2. If you are vested:
1. Have you bought the rights?
If yes: If you bought the rights at $0.1, you should sell it when trading commence, of course at a higher price.
If no: wait and observe today's price, since you have a week more to buy the rights.

Understanding stock price support levels of Starhub & M1

Hello,

In my previous blog post here about how StarHub was such a good buy on 29th June at $3.70, I received a comment that M1 trading at $3.23 now might be a good buy too even though I have missed SH's boat.

However, I would like to explain in detail about the concept of price support levels and how it is important in investing.

1. What is 'Support' and 'Resistance' in stock price?
Pls see figure 1.

As quoted from Investopedia, "Support is the price level through which a stock or market seldom falls (illustrated by the blue arrows). Resistance, on the other hand, is the price level that a stock or market seldom surpasses (illustrated by the red arrows)."

2. Therefore, one should buy at Support level and sell at Resistance!

3. Why StarHub was a better buy than M1 at $3.70

 

SH price support level since 2014 was at $4.00. At $3.70, it has broken the price support level and it is a rarity to drop by 7.5% of this support level on 29 June.

 

 

On the other hand, M1 at $3.23 (current price now), this price support level was already broken through in June, before the greekexit crisis. On 29 June, M1 reached its lowest at $3.16, a drop of only 1.85% of its support level.  At this price level, there is no 'rarity' in its pricing.

4.  Time value of money

 

If I had bought SH at $3.70, it was as good as buying the same stock in June 2013, this was the selling price 2 years ago.

 

However, at $3.23 for M1 now, it is only as good as buying this stock in Jan 2014.

 

If both were to maintain the same earnings as compared to previous years, by 'time travelling' to the stock price of SH 2 years ago, it is a much better buy.

 

Conclusion:

 

Understanding Price support and resistance levels is useful when discerning when to buy and sell.

 

Market sentiments seem to regard SH as a better stock due to its stronger price support levels, although M1's financials might be better.