Sunday, October 28, 2012

Not all IPO you can make the money!

 Recently received few query about Astro IPO (initial public offering) many seem not understand why Astro share price could fall below IPO price (something similar to Face Book IPO). In fact, no one can guarantee that IPO will always make money. Someone also make a joke, IPO seem equal to “It's Probably Over-Valued”.

Why so many people chase for IPO? In fact, strike IPO is similar to strike a lottery, you wouldn't know how much going to make. However, base of past record, many IPOs were actually very successful, hence investors could make quick easy money. That's why there's always interest in IPO.

In fact, for those company who opt to raise fund through IPO, there are a set of stringent guidelines that the company must follow. The Securities Commission (SC) is the body responsible to monitor the public listed company follow the rules and guidelines. Usually, there's one document call “Prospectus” the company need to issue and if you read carefully, they have listed all the possibly event that could go wrong with listing, including risk for IPO investors. (so that you could't blame them, they already told you the fact!)


Investment Banks are the one who handle the initial distribution of shares during IPO. They will try to sell shares to local and regional investors. That's why they need to create story to tell the public, usually telling all the good points (if not, who is going to buy the shares?) and make the story look good and feel good. If the investors believe their story, then the stocks coming out and being bid up multiple times, they call it over subscribe, the news will be published on major news paper. (to show off that the shares sales like hot cake) The Investment will make millions of profit for every successful IPO.

Once the shares listed on the market, supply and demand for the stocks will drives the price up and down. For Astro's case, though the shares were over subscribed, it's not indicator that the price would not fall below the IPO price. (I told my clients to sell the Astro shares on first day of listing, as later there always a chance to buy cheap)

After the event, many scratch their head,Who are those selling Astro shares? (you may click on the link to view the details of Star Article) Those experience know the stock price is driven by supply and demand, also the buyer can become seller if the trend change, see the below story.

Eddie, is a Fund Manager who subscribed the Astro shares. On first day of listing, his plan was to push the stock price go little bit higher (so can clear holding at higher price, remember the purpose of the Fund is to make money), however the selling pressure was so huge, after several attempt, the stock price seem to go south every hour. (he did contact other fund managers as well to understand their view) At last, the team respect the trend, so they changed the plan and decided to sell first then buy later... in the end, Eddie may still holding Astro stocks later, but they already “squeeze” some money out from the market, compare with those who still hold the loosing stock from the IPO.

Next time, if you want to play the IPO stock, try to guess when to buy and when to sell. Unless you are long term investors (must also consider if the stock suitable for long term or not), else think as if you strike lottery, how big or small amount doesn't matter. Most important is when you look back, don't regret if never take any action! This is one of the most important lesson if you were to consider IPO shares in the future.
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Thursday, October 11, 2012

Portfolio Review - Oct 2012


The purpose of BC portfolio is to receive stable income (hence seldom buy or sell, and we selected the stable stocks) and at the same time making comparison against my friend's single stock position and the one who park the fund in Bank's FD. The is how we manage risk by creating a portfolio to protect our capital against choppy market.

We started with RM242,000 on 19 Jun 2011, purchase only three stocks:






NameCost Price
(RM)
Total shareMarket Value
(RM)


Maybank8.809,00079,200.00

Maxis5.5014,80081,400.00

Arreit0.9189,20081,172.00

Total

241,772.00







As of 4 Oct 2012, the position look like this:







NameMarket Price
(RM)
Total shareMarket Value
(RM)


Maybank9.059,00081,450.00

Maxis7.0014,800103,600.00

Arreit0.9389,20082,956.00

Total

268,006.00








On the income side (total dividend):








Dividendsen


Fr last Q

26,144.00

Maybank6/4/1236.005,328.00

Maxis9/28/128.007,136.00

Maxis6/29/128.007,136.00

Arreit10/8/121.801,605.60

Arreit6/29/121.811,614.52

Total

48,964.12








Comparison with my friend's Single Stock:














NameMarket Price
(RM)
Total shareMarket Value
(RM)


NameMarket Price
(RM)
Total shareMarket Value
(RM)


Jobst2.3686,430203,974.80

Maybank9.059,00081,450.00







Maxis7.0014,800103,600.00







Arreit0.9389,20082,956.00







Total

268,006.00












With this BC portfolio, the capital is almost protected and we manage to grow it from RM242,000 to RM268,000. Whereas holding a single stock of Jobst, due to market down trend the capital now only worth RM203,974.80. Though our intention is not to sell any stocks in near future, however, if we were need to do that due to what ever reason, we can liquidate more funds with our BC portfolio.


Let look at the total dividend received comparison for Single stock and BC portfolio:













Dividendsen RM



DividendsenRM

Fr last Q
4,321.50


Fr last Q

26,144.00

6/29/121.501,296.45


Maybank6/4/1236.005,328.00

9/28/121.501,296.45


Maxis9/28/128.007,136.00


Total6,914.40


Maxis6/29/128.007,136.00







Arreit10/8/121.801,605.60







Arreit6/29/121.811,614.52







Total

48,964.12












The BC portfolio's dividend is almost 7x highest than single stock holdings.

The other friend who put the money in Bank's FD, his return is only RM7,744 (principal of RM242,000 with 3.2% FD rate p.a.).

Future plan: We intend to purchase additional shares of the 3 stocks if market drop, or add one more stock to further diversify our holding of stable income portfolio.



Monday, October 8, 2012

Malaysia Budget 2013

Last week, PM announce the latest Malaysia Budget 2013, below are some of the goodies highlight:

1. One month bonus for 1.4 million civil servants.

2. One off RM500 for household income less than RM3,000 and RM250 for single with income less than RM2,000

3. Special incentive RM200 per month for all military personnel.

4. One off RM1,000 for former member of armed force who did not receive any pension.

5. RM100 to all primary and secondary students and book voucher RM250 to all form six and tertiary students.

6. Individual income tax cut by one percent.

7. RM200 debate for aged group 21 to 30 who purchase of 3G smartphone.

8. Oil & Gas - Companies with investment activities in the refinery of petroleum products will be provided with tax allowance of 100% for the period of 10 years.

So, which company will gain in terms of profit?
Personally, I think all the Telco's will doing very good, then company like Dialog, SkPetro and CBIP will doing very good in next coming year due to tax incentive.
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Monday, October 1, 2012

Can you retire with one million?


Today, I came across an interesting article in The Star, “Can you retire with one million?” Just click here to read the full article.

According to the writer, he assume a person with 55 now, having one million in the pocket and have a life time for another 25 years (about 80 years old) He use simple math to divide 1,000,000 by 25 then divide further to come out $3,333 a month. With this, he concluded that life would be tough, hence one still need to work after 55 as $3,333 might not enough to cover the expenses.

Oh no... how can the writer did not know in the world we have something call Investment. One can invest in property, stock market, bond or even business to generate income. For example, he can buy 5 or 6 houses with each value at around $200,000 and collect the rental income. (we don't talk about borrow money, but just use all the cash in his pocket) Assume each house generate $900 of net rental, with 5 or 6 houses, you can simply collect $5,400 per month. Don't forget, after 5 or 6 years, all these houses will appreciate in value, meaning one million will become 2 million quite easily. Thanks to the inflation, you may also revise the rental rate as well, meaning 5 years later, the rental may increase to $10,000 per month.

Another option, one can buy the REIT (Real Estate Investment Trust), with current average return of 7 to 8%, one can expect $70,000 per year if invest with one million, or the dividend of $5,833 per month without worry about collecting the rental and don't need to pay tax. Since the main objective is to receive regular income here and capital appreciation would just be a bonus over the year. Similarly, REIT's rental would increase year after year.

Of course, there are many other ways to generate profit income with one million if you know how to set up a business with reasonable risk. However, if you don't want to take extra risk, the above two conservative way to invest the fund are more than enough to support you living. From the above example, you don't need to kill the chicken, but just sell the golden egg which generate by the chicken every month, how nice! Who say one million just can survive for 25 years?