Accountants are good in personal finance and stock investments?
We recently had a conversation on how accountants have an upside over us normal human beings in that by training they have to be acquainted with numbers much better than us
Able to interpret financial statements
For one, we have a problem interpreting balance sheets. I took a module in university so I am a little privileged, but for many friends it looks daunting for them.
The ability to interpret statements will go in a long way to recognize the fundamental nature of what officially the company declared.
You will be able to pick out profit and loss, cash flows and whether the company is overly leveraged
Sampling your life as a balance sheet
I also think that since they learn about this in tertiary or secondary education, it puts them on a good footing of not getting into debts, able to recognize that they are overleverage and to build up good assets
Not always the case
So my friend was telling us that this is not always the case. He has a friend who believes Jurong Technology, to him a blue chip, will always do well. Well Jurong Tech went on some really good runs, and to be honest when you see such a 2-3 years sustain runs supported by good profits you will think that way.
Well the story ends that he continued to stay invested right up to when its share price fell from dollar plus to near zero and got delisted.
Another accounts train fella got invested in Chartered Semi conductor which we all know was a Temasek holding (big brother won’t let them die right?) . Chartered went the same way as Jurong and the person probably loss a huge portion of their investments
What do you think? What about the accountants around you?
To me, fundamental reading is only part of the game, these guys fell into the trap of forming a picture that large and blue will always stay that way. Cutting losses are painful but if you have the skill to evaluate that the business proposition is failing or is not what you thought to be, you better do the same thing.
I have my own experience in thinking Interroller (Pteris) was a good blue chip paying dividend stock. When the management leaves, all hell broke lose. The business never recovered. My stock went from what I purchased at 80 cent to 13 cents currently (And I bought after a massive drawdown)
You guys should have encounter your fair share of accounts train people. Do they do well in their personal finance or manage their portfolio well? We would like to hear your stories.
Sembcorp Industries– One to look out for in this drawdown
If there are some blue chip stocks that I would snap up in a further draw down, Sembcorp Industries (SCI) would be one of them.
For a bit of its total return history you can view it here.
Sembcorp is undergoing some sort of mini transformation. It owns 60% of SGX listed Sembcorp Marine (SMM), which builds oil rigs and drill ships. This have become its main profit generator and made it a darling among speculator.
In recent years, Sembcorp have aggressively try to build up its utilities portfolio. What happens is that SMM generates the cash flow, pays out the dividend to SCI, SCI leverages on this to build and develop utilities around the world.
Utilities are probably more recurring in cash flow, and perhaps they are preparing for the inevitable when the oil rig craze die down.
The recent 2 quarters have evidently show the cash flow from the utilities coming in. So much so that its full year utilities profit should be able to pay for its existing dividend. The dividend payout ratio is around 30%.
That is rather good. And probably more utilities coming online.
Debt wise we know that that SMM is net cash, this utilities assets is estimated to amount to 3.3 bil and their net debt is 1.1 bil. This make their debt to asset ratio of 33%. This is much lower than many utility and infrastructure plays such as MIIF, SP Ausnet and Cityspring on my dividend stock tracker which typically hovers around 50-60%.
Its trading at a PE of 10 times. really undemanding for a blue chip. Although the dividend yield is low, we view SCI as a growth stock, which will give the odd special dividend.
The upside of this switch to utilities, is that in the future, these utilities may be spin off into infrastructure or utility trusts, which SCI will further stand to benefit from.
Do a bit of homework into this to see if you agree with me.
I have added SCI to my dividend stock tracker as well, so you guys can tune in daily to its change in valuation and yield.
I run a free Singapore Dividend Stock Tracker . It contains Singapore’s top dividend stocks both blue chip and high yield stock that are great for high yield investing. Do follow my Dividend Stock Tracker which is updated nightly here.
Straco delivers 65% rise in Q1 2012 profits
Here is one Singapore stock often mistaken as a S-Chip listed on the SGX. STRACO is a developer and operator of tourism-related attractions. It operates 2 main attractions, Shanghai Ocean Aquarium (SOA) and Underwater World Xiamen (UWX).
This sounds like a shitty investment
- 4.1% yield
- 9.43 times PE or 10.6% earnings yield
- 59% of asset in cash, 51% of market cap in cash
- Its interest from its huge cash holdings pays for the capex!
- Free Cash Flow 13.4%
- The dividend payout is 30%
You can view the Q1 results here.
I have a rather small stake here as I thought tourist attractions do not have a strong moat. But the results are proving other wise.
AmFraser have some seriously optimistic cash flow projections for MIIF
Macquarie International Infrastructure Fund is a 9% yielding infrastructure stock listed on the SGX. I am invested in this and talked about my sweet and sour relationship with this stock a fair bit (read here)
MIIF just announced their latest quarter results. There are some good news in that the tax issues of Taiwan Broadband Communications (TBC) have been settled and the expected losses are immaterial.
However, it was still not clear how the expected moderation by the Chinese government over toll charges for Hua Nan expressway (HNE) will affect MIIF. I have asked for a sensitivity analysis from the Investor Relations but judging by their record they should not do anything about it.
I am positively surprise by the surge in traffic for HNE. Still the level of debts in this stock can be crazy and what we know is that most are not amortized which means that somewhere down the line, earnings by TBC and HNE may need to scale down to pay the massive debts or to get them refinanced.
Still, I read this report from AmFraser with their projection on how the cash flow of the 3 major assets will progress to.(read report here) I find them a tad optimistic. I would rather estimate based on the worst case scenario.
MIIF probably need 75 mil from the 3 assets since they need 65 mil to distribute the 5.5 cents annual dividend. The closest projection is 43 mil + 22 mil + 6 mil equating to 71 mil. We are still a bit short there but not that big of an issue since MIIF still have a cash horde.
Still I will watch this stock closely since the management in the past have made some rather questionable moves, its underlying have debts that could cripple distributions.
I run a free Singapore Dividend Stock Tracker . It contains Singapore’s top dividend stocks both blue chip and high yield stock that are great for high yield investing. Do follow my Dividend Stock Tracker which is updated nightly here.
Vicom with a good set of Q1 2012 results
One dividend stock that I missed out on was really vehicle inspection and general testing company VICOM
- A strong business model that is based on something always needed
- Zero debt
- 43% of balance sheet is in cash, 16% of its market cap is in cash
- Yield has went down to 3.4%
- One of the few stocks that have been resilient in the GFC
- Have been raising dividend payout yearly
- PTB is around 3.8 times indicating that return on assets should be pretty high
- PE of 14 times or 7% earnings yield
Vicom announced their results today again. View it here. Once again it’s the same old story, Profit up 13%, adding more cash.
I waiting for it to correct to add in. I missed my chance. This is a stock that have very strong moat, low capex and very cash flow generating.
Which would I invest in? A REIT at 6-7% yield or VICOM? I believe VICOM stands out. Even though its yield is lower, but its earnings yield is unlevered compared to the REITs and very defensive. The only thing is the price we pay is high from the historical perspective. Not much safety. Definitely a grower.
