Singapore Savings Bonds

I guess many are looking forward to Singapore Savings Bonds. While much has been discussed, I would like to just share some of my thoughts.

On surface, this is an very attractive and 'almost risk-free' investment tool. If you compare it against Fixed Deposit, the Bonds will deliver higher return (guidance effective 2-3% pa) if you keep it to maturity. However, if you redeem it earlier, the effective interest rate could be lower than the normal Fixed Deposit.

10 years is a long period of time. A few scenario could happen. The interest rate could rise, stay the same or fall (though the downside room is limited). The investor may need the cash back earlier and not able to keep it maturity.

This brings to the important point. Unlike other bonds which can be traded openly, this bond can only be sold back to MAS at par value plus accrued interest. The biggest disadvantage of this is that you lose the market mechanism to price it accurately to reflect its future earning (step up interest). Imagine after you hold the bond for 5 years at low interest rate, you need the money, but this is when the interest rate starts to step up. If this were to be an openly traded bond, all else equal, the bond price will be higher than par.

Biosensors AGM 24/July/2015 @ Suntec

I attended this year Biosensors AGM.

Just to capture some key Q&A.

1. Dividend - Several shareholders asked the Board about dividend. One shareholder actually requested the Board to declare a dividend after the AGM. Another requested the Board to give a special dividend for the Pioneer in celebration of SG50 :)

2. Product roadmap - Concern was raised that as a technology company, Biosensors does not have a pipeline of new products.

3. Visibility in product approval - No sight of light even after 5 years of trying to win approval in China. The Board mentioned that China policy and personnel continue to evolve over time, making the process difficult.

5. Corporate governance - One raised concern that the Board of 10 is too large. Also there should not be an Executive Chairman, the CEO should be the sole person responsible and accountable for the operation of the company.

6. Competition - The Board mentioned that no way they would all who also in the process of seeking approval for competitive product. But their agent Terumo seems to be able to produce and market an OEM version in relatively short period of time.

Anyone there also attended?

Hotung - Amazing Race to each destination

Since my posting 06/Nov below, everything was on track. MStar was IPO on TWSE on 24/DEC. Hotung share price also increases substantially from USD0.105 to close at USD0.140 on 28/DEC, a 33% rise in less than 2 months.

What is even more spectacular is the volume activity.

The two shareholders are rushing towards each destination, directly opposite each other. The major shareholder, Tai Lung Capital, has bought a few % of share in past one week, whereas another substantial shareholder Third Avenue has also sold a few %.

However, the volume today is 158M share, representing around 14% of Hotung share.

Who is the buyer?? It can't be Tai Lung or any other existing substantial shareholders since no announcement is made. What's the buyer strategy here? How can such high volume purchased without creating a substantial shareholder?

Who is the seller?? It can't be Third Avenue, as it only owns 68M shares as of 23/DEC. Could it be short-seller? Who is behind the scene? Why they want to keep the price at USD0.140?

Any one has seen this type of activity before? Pls share your experience with us.

I hope we can see things clear up soon. And of course more importantly, the price continue to rise.

Invest in MStar before IPO through Hotung Investment

Ok, now I would like to share a way to invest in MStar before its IPO through a SGX proxy, ie Hotung Investment.

Before I proceed, I would like to declare that I have invested in Hotung. And below is my opinion based on my understanding and certain assumption. Please make your own study before making any decision. Of course I welcome your questions or comment here.

Hotung has 2 key business groups, (1) venture capital investment, and (2) fund management. Now, Hotung owns about NT$668 million as valued end of 2009.

I would not go into the detail analysis of Hotung valuation analysis, rather I will use a quite conservative way to evaluate Hotung as an effective proxy of a high potential company, MStar.

If you look at the table below, Hotung today owns about USD$0.084 of cash, and USD$0.020 of MStar share. The USD$0.020 was the valuation end of Dec 2009. In other words, Hotung is worth $0.104 just based on cash and MStar shareholding. Well, you may ask, if MStar is not IPO yet, how sure are we on the MStar worth? My take is this:
a) the valuation is based on end 2009, and since then the semiconductor (in which MStar resides) has grown tremendously
b) Hotung knows that MStar is going to IPO this year, therefore the fair value estimate should not be too far off

The share price of Hotung as of last trading day 04/Nov/2010 was USD$0.105. Can you see the significance? It means that your investment in Hotung is fully accountable by just cash and MStar shareholding!

What makes it even more attrative is this:
1) Don't forget Hotung still has a fund management business
2) Hotung still has shareholding in more than 170 companies, estimate worth around USD$0.12. Assuming 50% of them fail, and the rest just retain their value without growth, they would still worht USD$0.06, thus bring the value of Hotung share to $0.165, more than 50% growth from current price.

MStar Chairman elected as member to GSA AP Leadership Council

Well, this does not mean MStar will therefore be a very profitable company. However, it has at least shown that, the company is in good hands of an experienced veteran in the industry.

---- Extract ----

SAN JOSE, Calif. (September 1, 2010) – The Global Semiconductor Alliance (GSA), the voice of the global semiconductor industry, today announced the addition of four new members to the GSA Asia-Pacific Leadership Council, which serves as advisors to the GSA Board of Directors on regional issues. The new members added to the council include:

• Dr. Youm Huh, chief executive officer, president and chairman of the board, Silicon Mitus, Inc.
• Dr. Tetsuya Iizuka, chief executive officer and founder, THine Electronics, Inc.
• Wayne Liang, founder and chairman, MStar Semiconductor, Inc.
• Dr. Sung-Wook Park, executive vice president and chief technology officer, Hynix Semiconductor, Inc.

“The addition of these extraordinary leaders to the Asia-Pacific Leadership Council extends the council’s diversity of knowledge and industry experiences. GSA is devoted to identifying the best and brightest global leaders who have a passion for this organization. I feel honored to have these outstanding leaders’ participation,” said Jodi Shelton, co-founder and president of GSA. “I would especially highlight Dr. Iizuka san, our first Japanese representative on the council. His support will help us to achieve one of GSA’s major goals in 2011 and beyond of expanding mutual collaboration between Japan and the global semiconductor industry.”

:

:

Mr. Liang served several key positions in wafer foundry sales and marketing functions with companies such as TSMC, WSMC and Winbond Electronics prior to Mstar. MStar, a fabless IC design company focused on the display and communication products, was founded in 2002 by Mr. Liang and several partners. He was VP of sales and marketing at WSMC before WSMC was merged with TSMC.

:

http://www.gsaglobal.org/news/article.asp?article=2010/0901

MStar chipset is used in highend Lamborghini handphone

According to this report, MStar chipset is used in highend Lamborghini handphone. Compared to past few reports, the significance here is that at least, MStar is not solely competing on price, but also on differentiation of quality and capability.

Indirectly vested.

MStar请来的重要客户——深圳高威尔（Gowell）的一个成功案例，更是证明了MStar有这个实力。Gowell总裁王操在会上透露，他们下面的一个子公司Legenda已将MStar的MSW8535N做进了兰博基尼品牌手机，“最低价的一款卖13800元，最高价的一款售20万元一台，全球限量版仅一万台。兰博基尼总共订了10万只。”他还特别补充道，“你们不要小看这10万只，这可是奢侈品牌啊。”

接下来，王操还特别介绍了下MSW8535N是如何进入兰博基尼品牌手机的。王操解释：“刚开始，客户是采用的MTK6239平台，但是前前后后设计了一年多，客户都不满意。后来，Legenda替换到8535N平台，客户一次性就满意了。特别是8535N平台强大的视频能力，如高清MP4格式D1分辨率录像、多格式D1高清播放、3D加速引擎等以及最大可支持到WVGA的屏等功能。”他接着透露，“我们目前正在与LV等其它奢侈品牌洽谈。”这个做DVD起家的Gowell和沃尔玛有着紧密的合作，在海外市场网络很牢固。“目前印度有十大品牌厂商都在采用Mstar的方案了。”他称。

http://forum.esm-cn.com/BLOG_ARTICLE_3078.HTM

MStar to increase China 2G handset chipset mkt share from 7% to 20%

According to this report, MStar market share in China 2G handset chipset will increase from 7% to 20% in 2011.

Mediatek: 70% -> 50%
Spreadtrum: 25% -> 30%
MStar: 7.5% -> 20%

Indirectly vested.


11月1日消息，据台湾媒体报道，联发科于10月初启动的新一波价格战，暂时缓解了其在中国手机芯片市占率下滑的压力，今年第4季度联发科市占率将守稳7 成附近，而展讯市占率将升至25％，晨星则有机会拿下5-7.5％。至于明年市况如何？目前已有业者大胆预估，联发科的占有率将掉到5成，展讯扩大为3 成，晨星则可以拿下2成，中国手机芯片“三分天下”态势将确立。

http://laoyaoba.com/ss6/?action-viewnews-itemid-134860

MStar has 65% FP TV chipset market share in Mainland China

According to this report, MStar dominates China FP TV chipset market. And in my opinion, the explosive demand in China would at least carry its momentum for another 2 to 3 years.


Indirectly vested.

Extract of report -----

The global TV market has mainly the following manufacturers, like Sony, Panasonic, Sharp, Samsung, LG, Philip and TTE. In the era of CRT, Sony was the top TV brand with all its IC developed independently. In the era of panel TV, Sony lagged behind. It started to compete with low prices with all its IC for TV outsourced. Samsung and Sharp are the loyal clients of Trident, while LG depends on Genesis, Trident and Broadcom. Philip relies on NXP. Only Panasonic develops all its IC independently. The manufacturers in Mainland China are eager to adopt the products of Media Tek and MStar Semiconductor. Nearly all the flat panel TVs of Konka adopts MStar Semiconductor's IC, while TTE and Changhong prefer Media Tek. However, MStar Semiconductor enjoys 65% of the flat panel TV market share in Mainland China. Currently, Media Tek is entering the U.S. market through the TV OEMs in Taiwan, but the progress is not as smooth as MStar Semiconductor's exploitation in mainland market.

http://www.techzone360.com//news/2010/05/06/4771846.htm

MStar Semiconductor to IPO

Not many people are familiar with this company, let alone to evaluate the opportunity. I will be publishing more related information for sharing.

Indirectly vested.

MStar Semiconductor files for primary listing on Taiwanese stock exchange

By Kevin Chen  /  STAFF REPORTER

MStar Semiconductor Inc (晨星半導體), an IC design house registered in the Cayman Islands, has filed an application with the Taiwan Stock Exchange Corp (TWSE, 台灣證交所) for a primary listing, the exchange regulator announced on its Web site on Friday.
MStar, which industry analysts have viewed as a likely competitor to local fabless chip designer MediaTek Inc (聯發科), is headquartered in Hsinchu, with a sales office in Taipei City’s Neihu District (內湖). It mainly provides mixed-signal IC solutions for consumer electronics applications.

Source
http://www.taipeitimes.com/News/biz/archives/2010/08/23/2003481104

First look at Food Junction

While I enjoy food, I do not like F&B stocks in general. I feel that the upside surprise would always be capped due to rising cost such as rental cost. At the same time, there is no protection against downside. So this is the first time I look at Food Junction, not vested at the moment.

From 2005 till mid 2008, Food Junction hovered between $0.6 to $0.7. It is now $0.255. Lippo owns about 58% of Food Junction through APG.

Food Junction seems to be in an uptrend, trading above the 20MA and 50MA, however the volume does not seem to suggest a big accumulation. There isn't any announcement of any trading by major shareholders.

Profit margin continues to decline from 19.7% in FY2006 to 8.7% in FY2009. Operation in China, which contributes 10.8% revenue, is still not profitable.

EPS FY2009 is 3.34 cents, translating to a trailing PE of 7.6. NTA is 18.66 cents.

Lacking potential upside, it is just not align to my strategy yet.

DBS - A bank keeps making mistakes?

Just last year, DBS attributed the mis-sale of H5 note to 'clerical mistake'. The customers were expected to spot it.

http://mycroeconomics.blogspot.com/2009/09/dbs-apparent-mistake.html

Today, DBS CEO apologized 7 days after a 7-hour failure in the bank IT system, attributed it to a 'procedural error'. IBM is probably expected to spot it.

http://www.dbs.com/sg/pages/announcement.aspx

Even though the CEO said the bank takes full responsibility of the event, I see no mention of DBS IT. The message keeps mentioning IBM, but where exactly is DBS IT?

The way the bank handles errors may be an error itself.

PUB refinances bond one year ahead?

Based on this announcement, PUB issues $400million bonds in July 2010 to refinance a bond expiring Aug 2011.

It is not stated whether the 2011 bond was called. If it is not, PUB would be paying more than $12million interest ($400million x 3% = $12million) to get the fund available one year ahead of time. Quite expensive? Or PUB foresees the cost of fund to increase significantly over next one year?




http://business.asiaone.com/Business/News/Story/A1Story20100712-226601.html

PUB launches issuance of $400 million fixed rate bonds


Mon, Jul 12, 2010
AsiaOne


PUB, Singapore's national water agency, has launched the new issuance of $400 million 12-year fixed rate bonds.

The issue date for the 12-year bonds, which has a coupon rate of 3.012% per annum payable semi-annually in arrear, is July 12, 2010.

These are issued in denominations of $250,000 and offered to investors pursuant to exemptions under Sections 274 and/or 275 of the Securities and Futures Act, Chapter 289 of Singapore.


DBS Bank Ltd will serve as the lead manager for the bonds, whose approval-in-principle has been granted on July 7 by the Singapore Exchange Securities Trading Limited for the listing and quotation of the 12-year bonds on the SGX-ST.

Proceeds from the issue of the 12-year bonds will be used to refinance the bonds of PUB that are maturing in August 2011.

Qin Shi Huang vs Google Inc

Let's start with some history ...

More than two thousand years ago, Qin Shi Huang unified China, and became the first emperor of China. In between 213 to 206 BCE, he ordered burning of books, except those from his chancellor Li Si's school of thoughts. Hundreds of scholars were also buried alive. This incident is probably one of the earliest illustrations of how important it is to manage and control information and knowledge.

Now come back to 2009. Google Inc has a wonderful idea to scan and digitize books around the world to build a e-library online. This is exactly the opposite of what Qin Shi Huang did. In my opinion, this project matches that of Qin Shi Huang in terms of its scale and impact to the world, of course more towards the benefit of mankind in this case. Could you imagine any books at your fingertips? Could you imagine all knowledge being properly stored and managed generation after generation?

But of course, Google is still a profit-seeking entity, it does this for its own benefit. Just imagine when reading a book, all sorts of Google advertisements related to the content line up readily for you. That must be a cash cow for Google.

There are still a lot of legal and copyright issue to be addressed for the project to be successful. As a consumer, I wish Google all the best.

Right issue - What you see is not what you get

In some restaurants, live fish or crabs are displayed. Customers can pick the ones they like. The staff will weigh the live seafood in front of you, quote you a price, before sending it to the kitchen. Everything seems reasonable and fair. But have you ever wonder what happens in the kitchen? I heard that some unscrupulous restaurants would replace your chosen one with a frozen one. Of course, the frozen one is far cheaper than the live one. In other words, you are charged at the 'live' price, but actually what you get is the 'frozen' one.

Now come back to the investment world. Recently there are quite a number of companies issuing rights to raise cash. While each of them has their own reasons and merits, what puzzles me is the way that they promote the rights. They all claim to provide the shareholders 'an opportunity to subscribe for new shares at a discount'. Now the question is, is the per share value the same before and after the right issue? The share value will be diluted with the right issue! While you get the new share at a lower price, the value of your existing shares will be eroded.

The values are no longer the same, so how can you claim that there is a discount of the right share price as benchmark to current price? Isn't this an outright misrepresentation?

It somehow reminds me of the restaurants' trick, what you see is not what you get. Unfortunately in this case, the authority does not seem to be concerned of this misrepresentation.


** Quote from Genting Singapore's press release **
The Rights Issue will provide Genting shareholders with an opportunity to subscribe for new shares at a discount of 32.8 per cent to the closing price of S$1.19 yesterday.

Full press release here http://info.sgx.com/webcoranncatth.nsf/VwAttachments/Att_EA9853457589A4744825762D00138631/$file/GSPLC_PressRelease.pdf?openelement

Extreme Ice

The documentary on Channel Okto the other night gave me a real impactful impression. It was actually a Discovery Channel documentary, titled 'Extreme Ice'. In the documentary, it showed ice on mountain, at polars, melting.

Well, we all heard about global warming for a long time. But seeing the iceberg melting is far more convincing than all the theories on paper. I, for one, really feel the shock watching it.

It said that the ice is melting faster than previously believed based on scientists' models. And that at this speed, the sea level will rise by 1 meter in 100 years time, and many areas on earth would be flooded.

Just how is this going to affect our life? If this is true, we should see significant impact in next decade, maybe. This would really be a disaster. Imagine lands being flooded, millions being replaced, how is this going to impact the economy, the social stability, and eventually the investment and asset value?

A rise of 1 meter in sea level would almost spell a doom for island countries like Singapore. Talking about this, maybe there is reason for 99 years lease hold afterall.

p/s: please spend a few minutes checking out this

http://www.extremeicesurvey.org/

Nonconsequentialist Reasoning

I am reading the book 'Irrational Exuberance' by Robert J. Shiller, and come across this interesting term 'Nonconsequentialist Reasoning', originated by psychologists Shafir and Tversky. I quoted the description here, people cannot decide until the events actually occur.

I believe this psychological effect is experienced by many investors. In fact, in my blog, I have recorded at 2 such events.

One was when FSL reduced its distribution, and the price held up for several days before going south. The investors could not decide until they see the next distribution in sight is reduced. On the other hand, when Rickmers cut its distribution immediately, you see that the price went south immediately.

The other one is on Chartered Semiconductor. With the latest player Globalfoundries into the competition space, bloodbathing is logically expected. But the investors seems like cannot decide what to do, they may want to wait till they see blood.

On a bigger picture, I think this also explains why Technical Analysis is working in many cases. If market is efficient, and any information is digested immediately and fully reflected on the price, there is no way TA will work.

So, as an investor, we must remind ourselves to make rational decision ... timely.

DBS - Apparent Mistake

First of all, let's be clear, I am neither pro nor anti DBS. In fact, I think investors should bear some risks and responsibility in making any investment decision.

However, the way the lawyer representing DBS defended the case amused me a lot. In essence, the lawyer argued that, as there was such an apparent error in the document, anyone who read it carefully would detect it, and therefore 'turn on its head'.

My first intuitive questions are:
1) If the error is so apparent, shouldn't DBS employees, who sold the products, detected it when they went through the document with the investors?

2) And if they detected it, why didn't they inform DBS to correct it?

3) Or did they go through the document with the customers at all? If they didn't, isn't this the best evidence of mis-selling?

There is mistake, but it is not so apparent to me who made the mistake.


** Partial quote **

An obvious clerical error, says DBS of "credit event" calculation
By Cheow Xin Yi, TODAY | Posted: 01 September 2009 0633 hrs

SINGAPORE: There was an error in the formula that investors were told would be used to calculate any remaining value in their investments should there be a "credit event".

But, DBS Bank is arguing, this was such "an obvious clerical mistake", that it would be apparent to any investor who had read his or her documents thoroughly.

The bank responded on Thursday to a suit by more than 200 investors who had bought into the now-worthless Lehman-linked DBS High Notes 5 (HN5).

More on
http://www.channelnewsasia.com/stories/singaporebusinessnews/view/1002036/1/.html

Watch out, negative interest rate may be a reality

I think this news did not get the exposure it deserved here. Swedish Riksbank has introduced negative interest rate on bank deposit, a world first. Bankers around are watching and monitoring this closely.

The motivation of the Swedish bank is to force liquidity. Apparently many banks still do not want to lend out the money. This is quite different from the impression we have seen in Singapore, where money seems like flowing fearlessly, both in stock market and property market.

However, if the move is proven working, I believe many bankers would be ready to be a copycat, as reported in the article.

What would the impact to depositors? A negative interest would mean that you pay the bank to help keep the money. In other words, the time value of money becomes negative. Will it encourage immediate spending and booast credit growth? Will it bring inflation? Or will it be time that we keep money in MILO tin?


http://edition.cnn.com/2009/BUSINESS/08/27/sweden.subzero.interest.ft/index.html

** Partial extract **

Bankers watch as Swedish interest rates goes subzero

August 28, 2009 -- Updated 0352 GMT (1152 HKT)

For a world first, the announcement came with remarkably little fanfare.

But last month, the Swedish Riksbank entered uncharted territory when it became the world's first central bank to introduce negative interest rates on bank deposits.

Even at the deepest point of Japan's financial crisis, the country's central bank shied away from such a measure, which is designed to encourage commercial banks to boost lending.

NTU research on insurance

I read with interest on The Straits Times article that said NTU Associate Professor David Yee research showed that Singaporeans are grossly under-insured. I felt that the article did not come with sufficient details and data to support the claim, so I went to NTU website and did a search there. What I found was simply the Straits Times article again (NTU website: http://www3.ntu.edu.sg/CorpComms2/Documents/2009/Aug/ST_090821_B22_Sporeans%20grossly%20under-insured.pdf).

So I will make my comment on the article itself.

As a University report, I would expect that AP David Yee at least told us how he conducted the research, what are the underlying assumptions? How many people did he survey? How did he reach a conclusion that average Singaporean needs $495k insurance? What is the purpose of the research and who fund it?

Don't get me wrong, I think insurance is important. But without looking at individual needs and their actual situations and wealth portfolio, a blanket statement that $495k is needed is highly questionable. I am puzzled how the University allowed such under-research report be published? And worst still, put it on its website.

I suspect by now, most insurance agents in Singapore would already put that article in their briefcase ...

Pizza Hut pasta, anyone?

You must have watched the latest Pizza Hut advertisement. It is about a group of 80 diners tasting Pizza Hut pasta, without knowing it's from Pizza Hut. Many of them gave comments like, 'it is authentic', 'taste like that from xxx restaurant', etc.

Well, it is really a good idea by Pizza Hut to prove that their pasta is as good as any others, including those priced a few times higher.

Normally we would say that, well rental is a big part of the cost, so if you eat at a high class restaurant, obviously a big percentage of the price is towards paying the rental.

Let's look at it from demand side, and from a financial perspective. I believe many of us are aware of the term 'time value of money'. Basically what it means is that as money travels along the dimension of time, its value increases. In layman terms, money got to earn interest.

Now, think about it, what about 'money value of time'. As time travels across the dimension of money, does its value change? Put simply, at a particular point of time, does money change the value of that moment? Imagine you are in a romantic (and expensive) restaurant, would spending $30 for a plate of pasta makes you happy (value to you)? Or you rather just drink plain water and go for a $6 Pizza Hut pasta (proven just as tasty) later?