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Kevin's blog

July 2009

Hot S Chip IPO market fuelling interest in S-Chips here......China XLX plans a Wilmar and sees its shares higher by 17% this morning

Tuesday 28 Jul 2009 @ 1:20 PM

The hot S-Chip IPO market up north and the strong support that the Wilmar share price received when it announced its plans to list in HK are underpining S-Chips listed in Singapore.  There is another huge IPO in China tomorrow and if it does well, the S Chip rally might well continue.

Comments(9)

Removal of SMRT from my stock pick / portfolio list

Tuesday 28 Jul 2009 @ 9:28 AM

SMRT went ex its final dividend of 6 cents yesterday.  Its shares corrected according to the quantum of the dividend.  I added the stock to my stock-pick or portfolio on 30 October 2008 when the share price was $1.57 for its defensive quality and yield.  At today's price, it still offers investors an annual running yield of 4.5%. There are other stocks such as the bank preference shares which offer a higher dividend yield so the 4.5% running is not sufficient for it to remain in the portfolio.

Comments(6)

Banks have underpinned the rally in the STI index......I asked our banking analyst whether a further rerating is possible .....

Tuesday 28 Jul 2009 @ 8:47 AM

The three local banks and the SGX account for about 40% of the STI Index.   One of them OCBC has been in my stock pick list since March 10, 2009 when the share was S$4.08.   Looking at their current price to book (from Bloomberg).  DBS was the cheapest at about 1.2 while UOB and OCBC were trading at 1.6 to 1.7 times.   I asked our banking analyst if DBS could go to 1.5 and OCBC and UOB to 2.0.

Comments(0)

Is the Singapore Government going to remove its under-writing of 80% of new corporate loans now that the economy and credit markets are improving ?

Wednesday 22 Jul 2009 @ 2:55 PM

While I was having lunch today, I met some local financial institutions.   Other than talking about the changes at Temasek, the big "rumour" was that the Singapore Government might remove its under-writing of new corporate loans because the economy is on the mend and banks are more willing to lend.   The key view was that if you are an SME or even a larger company and you want to benefit from this incentive you had better go and apply now before it is removed.

Comments(14)

AMD has just reported a terrible set of Q2-2009 numbers - its shares are down about 15% in post market trading......watch out for AMD exposed tech plays here

Wednesday 22 Jul 2009 @ 2:42 PM

AMD has just released its Q2-2009 numbers - revenue was flat at US$1.18bn with a net loss of US$330mn (this after it benefitted from an inventory reduction of US$86mn).  In Q1-2009, AMD made a loss of US$298mn.  However compared to the Q2-2008 loss of US$1.19bn.   The shares of AMD are now lower in post market trading (according to Bloomberg by 15%).   The 2009 over 2008 numbers are less important.  If Q2-2009 is flat compared to Q1-2009 then it means that AMD didnt benefit as much as Intel.....this kind of patchy tech recovery means stock selection of techs is important.

Comments(0)

Dow rises 68 points overnight in a volatile session......earnings season is neutral to positive

Wednesday 22 Jul 2009 @ 8:43 AM

The Dow had a volatile day yesterday being weak in the first half and then adding gains toward the close on the back of better than expected results from Caterpillar which itself accounted for about one third of the gains in the Dow.  Sentiment was boosted by positive comments from Fed Chairman Bernanke that interest rates would not be raised soon.  He however did say,  that the Fed is working on plans to raise rates so inflation isn't a problem. But the economy is too weak to start now.   If you put this into the context that short term rates are still near zero....its not surprising that the money will be flowing into stocks and commodities and out of the US$ and US assets such as 30-year Treasuries.   This is consistent with the view of Dr Doom - Marc Faber in last Saturday's presentation.

Comments(4)

Charles Goodyear quits two months ahead of taking up his position as CEO of Temasek.....

Wednesday 22 Jul 2009 @ 8:13 AM

I had a string of telephone calls last night about this announcement from Temasek which came out last night.   Most of the calls were about why there was a sudden change of mind and didn't they do sufficient checks about his strategy before deciding that he was the man to eventually helm Temasek later this year.  Read the official announcement on the Temasek website.   Fortunately, I wasn't one of the analysts that CNA contacted but refused to comment.  I do however hope that more clarity on the decision not to proceed with the appointment will be made in the growing spirit of transparency that Temasek and GIC have embarked upon.  This will avert the spread of unwarranted rumours on the decision which will not be healthy.

Comments(3)

China milk companies.....a trading idea given a change in import rules ? maybe a second look at China Milk !!

Tuesday 21 Jul 2009 @ 3:09 PM

A friend called me during lunch to tell me that the Chinese Government was doing something to restrict milk imports into China and asked me what my view was on China Milk.   We had written about China Milk on 30 June 2009.   I asked my analyst Chong Yi to check on this.

Comments(0)

Snippets from the presentations by Liew Mun Leong of Capitaland and Jonathan Larsen of Citibank Singapore

Monday 20 Jul 2009 @ 11:11 AM

There were some speakers at the morning session of the Asian Investment Conference and Exihibition 2009 - just after MInister Lim Hwee Hua's speech.

Comments(5)

My stock pick list.....weekly update

Monday 20 Jul 2009 @ 10:10 AM

There are currently ten stocks in my stock pick or portfolio.  Which has on a three and six month basis out-performed the FSSTI Index.   On  current performance its performance is 30.1 compared to 35.1 for the STI mainly because of the new additions - in particular Ellipsiz.    The average dividend yield of the porffolio is 3.5% mainly because two stocks did not pay a dividend in 2008 because of losses. However, one of the two companies is doing a share buy-back cancellation because their shares are trading at around 0.5 time book - which is both NTA and earnings accretive.  Stripping them out - the rest of the portfolio has a running historic dividend yield of 4.4%. 

Comments(5)

Have updated comments on Midas and BH Global Marine in my stock pick section and also included a performance table for the portfolio

Friday 17 Jul 2009 @ 8:47 AM

I have updated my views on Midas and BH Global Marine, two stocks currently in my model portfolio.  We have also just added a portfolio performance table which we intend to update at the end of each week for investors to check its performance and also to find out what stocks are in the list.

Comments(0)

Beware the Roubini rally.......US markets likely to close lower tonight so today is not the time to have an open trading position in the market

Friday 17 Jul 2009 @ 8:23 AM

US markets closed higher overnight with most major US indices higher by 1% - the Dow added 95.6 to 8711.8 and the Nasdaq higher by 22 to 1885.  The intra-day of the Dow below shows that US markets were generally directionless for most of the morning and started their move 1 hour after US "Dr Doom" economist was quoted as saying that the US recession would end by the end of 2009 which was significantly more bullish than what most more bullish economists were forecasting.

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There is currently no property stock in my portfolio because property has always recovered after the real economy.......but if you want exposure the stock to look at is....

Thursday 16 Jul 2009 @ 8:19 AM

I dont have any property stocks in my stock picks and portfolio mainly because the real property market has always rallied about one year after the real economy recovers.   The current exuberance in the Singapore property market seems to be in the mass market and supported 2:1 by HDB upgraders.  This strength is more of a surprse to me than the rise in the stock market because property involves a longer term commitment and is very dependent on job security.   I am personally not in the real property market because of my age.....for someone over 50 banks are reluctant to extend me a loan of more than 10 years with valuations of 50-60% of purchase price.   Maybe the latter will rise as sentiment improves.

Comments(6)

The recovery in the tech sector seems real but visbility remains poor.......how do you get exposure to this sector and manage the risks ?

Thursday 16 Jul 2009 @ 7:51 AM

The recovery in the tech sector in terms of demand seems to be real and is more than just inventory restocking.  This has been confirmed by global companies such as Seagate and more recently Intel.   But you shouldnt just go out and buy any tech stock for exposure.  A number of listed tech companies in Singapore are in financial difficulty because of receivable problems, ie their receivable days have been growing and if they have large exposure to a single client they may be facing solvency issues such as Westech and Memory Devices.  The first stage of the tech recovery seems to be in the consumables space, ie equipment companies because of the surplus capacity are still not seeing a turn yet.

Comments(0)

US bank earnings underpin recent rally.... where did the earnings come from - show me the money !! ....but Intel's positive guidance looks real

Wednesday 15 Jul 2009 @ 2:59 PM

Goldman reported a strong set of Q2-2009 earnings that beat analysts forecasts.  This triggered the current rally and reversed Monday's losses.   It is not unreasonable to expect other US banks which had access to the TARP money and have almost zero cost of capital to make good profits from spreads.   Goldman made net income of US$3.44bn in Q2-2009 65% higher than Q2-2008.  The growth in Goldman's top line is also not surprising given the collapse of a number of its competitors such as Bear Stearns and Lehman.  The key question here to me is "show me the money".   As I highlighted above, Goldman made exceptional profits with the benefit of tax-payers money (TARP) and the Fed guarantees.....and they are now ear-marking US$6.6bn in bonuses and compensation while US unemployment is rising.  This is a huge political issue that could impact the sustainability of earnings and which the Obama Administration quickly needs to resolve.  The second point which I noted from the wire services is that Goldman increased its risk taking to an all time high.  Its Value at Risk was US$245mn per day from US$184mn in 2008.   I have not gone into the details of whether they have held at bay the mark to market of toxic assets which could have boosted profits further.    So I am cautious about US banks but if you look at the Fed's bank stress tests......you at safer investing in those at the top in terms of capital which include Goldman and JP Morgan.  These banks also have a lower likelihood of fund raising via rights to strengthen their balance sheets or in having the Fed emerge as a shareholder both of which are dilutive for existing shareholders.

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Stock markets are holding on to recent gains.......with the jury still not out on where we are going......why dont you attend the Asian Investment Conference 2009...

Wednesday 15 Jul 2009 @ 9:09 AM

at Suntec City this weekend to find out more.  Asian Investments 2009 is organised by SIAS and I will be one of the panelist on Saturday afternoon together with Dr Doom Marc Faber, Vasu Menon of OCBC Bank and chaired by Melvin Yong of CNA.   There are many other speakers as well and it would be good for those who are trying to form a view on what will happen next to attend the Conference......I understand its free, to understand more about what different groups of people are thinking about the Global economy and stock markets.

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Singapore Q2-2009 advance GDP growth estimates is a better than expected contraction of 3.7% year on year

Tuesday 14 Jul 2009 @ 8:22 AM

The Ministry of Trade & Industry announced Singapore's advanced Q2-2009 GDP growth estimate this morning.  The figure was a contraction of 3.7% - which was better than forecasts for a contraction of 5-6%.   The MTI has also raised Singapore's GDP growth forecasts for 2009 from a contraction of 6-9% to a contraction now of 4-6%.

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Expect more volatility given the significantly lower market volumes.......dont forget we have advanced Q2-2009 numbers tomorrow for Singapore

Monday 13 Jul 2009 @ 12:44 PM

Global markets continue to be in a tentative stage as we await validation of the March 2009 rally.  US economic numbers continue to be weak and in some instances weaker than expected.  Last Friday the US Consumer Confidence figure for July came in at 64.6 well below expectations for a figure of 70.   This has added to concerns that the US markets could have run ahead of the economic recovery which while present is likely to be modest and benign, ie a "U" shaped recovery. 

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Cosco Corp announces the variation of another eight vessels by two European ship owners........ more downside ahead if negative news flow continues

Monday 13 Jul 2009 @ 9:43 AM

After the big under-valued rally to now a possible over-valued situtation, stocks and stock markets are now waiting for validation.  The thin volume is also another reason that I have stopped looking at index levels as well as a movement on very low volume of a component stock such as Sing Tel or the Jardine group can have a material impact on the index which may be contrary to the broader market.  At this stage, stock selection becomes more important as the so called easy money has already been made.

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Malaysia's June palm oil production rose 3.6% over May 2009 to 1,445,937 tonnes.......crude palm oil prices have started to ease...further

Friday 10 Jul 2009 @ 4:02 PM

Our analyst, Chong Yi,  called up the Malaysian Palm Oil Board and was told that the June 2009 CPO (crude palm oil) production data would be released at mid-day. The data showed that production for June 2009 was higher by 3.6% over May 2009 to 1,445,937 tonnes.  Inventory levels declined by less than 0.5%.  Production levels of CPO are expected to continue to rise month on month into Q3-2009 and are only likely, based on historical trends, to start easing off toward the end of the year.   This better than expected yields are expected to further soften crude palm oil prices.

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IMF confirms global recession is easing......but recovery is patchy and likely to be weak........Income tax amendment on investment property spooks investors yesterday.....

Thursday 9 Jul 2009 @ 11:09 AM

The IMF has lowered its 2009 Global GDP growth forecasts from -1.3% to -1.4% but has raised its 2010 Global GDP growth rate from +1.9% to +2.5%.   (read their report).  The downgrade for 2009 came mainly from Europe which now expected to contract by 0.6% more but was offset by a rise in growth for Asia in 2009 by 0.7% mainly from China.   2010 growth revision upwards came from the US, EU and Asia.   Bottom line, the green shoots are there but are likely to be more visible in 2010 rather than 2009. 

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Can I buy Golden Agri at these levels ? ....this question was posed to me earlier this week by

Thursday 9 Jul 2009 @ 10:04 AM

friends, fellow golfers and even my wife.   My response was you should read my Blog earlier Blog posts about palm oil prices.

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Concerns about the pace of the US and Global economic recovery.....helping markets to consolidate......key remains corporate earnings guidance for H2-2009

Wednesday 8 Jul 2009 @ 8:24 AM

The recent correction in stock markets has been over-due given the strong gains from the early March 2009 rally.   Concerns about the pace of the economic recovery given declining rates of decline for key economic indicators prompted many investors to believe that an economic recovery in the second half was likely.  Comments overnight that the US economy might need a second stimulus package, rising unemployment and rising credit card and mortgage defaults have caused investors to pause and wait for "validation" of recent stock market gains.

Comments(2)

Is the rally in palm oil prices over ??

Monday 6 Jul 2009 @ 5:56 PM

If you look at the STI Index stocks from January to July 2009, you will notice that plantation stocks or stocks with palm oil/plantation exposure dominated the top 5 gainers.  Jardine C&C was higher by 88.3% followed by Wilmar higher by 84.3% and Golden Agri higher by 56.3%.   These price gains were the result of a sharp rise in the price of palm oil which was then attributed to lower than expected supplies, lower than expected stock levels and expectations that demand for palm oil would rise because of the recovery in the global economy inline with firmer crude oil prices.

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Adding Broadway Industrial Group to my stock pick list.....as worldwide demand for hard disks comes in better than expected.....

Monday 6 Jul 2009 @ 2:57 PM

I have liked Broadway before this crisis especially after it acquired the remainder of Compart in July 2007.  This transaction increased the equity stake of its Chairman SS Wong to more than 30% and also made Compart, its most profitable division a wholly owned subsidiary from a 55% subsidiary before.

Comments(1)

The VIX index at 24 before last night's bad payroll data......may have been too optimistic

Friday 3 Jul 2009 @ 8:52 AM

Apologies for not having any Blog post for a ;week. Have been busy and also in and out of hospitals for check-ups. Something you should not over-look especially when you are older than Michael Jackson, like I am. 

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Hot Topics

Midas hit the big one - its associate NPRT has won three Metro rail contracts worth RMB3.5bn.......this could be the catalyst to break S$0.50 !?

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Midas hit the big one - its associate NPRT has won three Metro rail contracts worth RMB3.5bn.......this could be the catalyst to break S$0.50 !?(3)

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