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.