Saturday, April 22, 2017

95 - Harrisons - The King of dividends

95 - Harrisons
- The King of dividends




The trading house division is one sector I have always like to pay attention to it especially every reporting session of each quarter. The recent closing Financial Year 2016 for the three main listed players : DKSH Holdings (M) Bhd, Harrisons Holdings (M) Bhd and Yee Lee Corporation Bhd. is one I like to compare each other with particularly their earnings and how much dividends they reward their respective shareholders.

These trio of companies more or less are agencies that are mainly involved in distribution of products produced by all those multinationals companies in Malaysia and also from other parts of the world.

All these companies continued to do well in Financial Year 2016 despite the tough challenging marketing environment. Worse still, the weakening ringgit did not help at all and resulted in dearer imported goods for an already subdued consumer market.

Nevertheless, these three companies still posted profits that are considered commendable in such trying times. DKSH, Harrisons and Yee Lee recorded earnings per share of 32.01 sen, 29.75 sen and 23.78 sen respectively for Financial Year 2016.

Despite the tight close range of their earnings between 23.38 sen to 32.01 sen, their share prices differ as much as a RM1 range. Currently Yee Lee is traded at RM2.73 while Harrisons is at RM3.87 and the biggest brother DKSh is at RM4.75.

If one is to use Price Earnings ratio as a comparison, then DKSH, Harrisons and Yee Lee is trading at PE of 15, 13 and 11.5 respectively. At this juncture, using PE as a gauge, Yee Lee is considered the cheapest of the trio while DKSH is considered the most expensive while Harrisons stand in between.

But using PE is just a figure guide and not a realistic one. In investment, one should look beyond the PE guide and in this instance, DKSH must have the better growth prospects (in the eyes of investors)  in years to come, hence the higher PE accorded is fair and justified.

There are also reasons why Yee Lee is accorded with the lowest PE. Admittedly Yee Lee's business is not as much as DKSH and Harrisons and as such might need to consistently maintain such yearly earnings in the longer term to convince investors to invest.

Traditionally all these three companies continue to be consistent dividends paymasters over the years without fail. While DKSH has consistently maintained its 9.5 sen dividend for the last three years, Yee Lee has slowly inched up its dividends from 3.5 sen for Financial Year 2014 and 2015 and raised it to 4.5 sen for Financial Year 2016.

Harrisons which has been consistently paying 15 sen dividends from Financial Year 2012 to 2015 were expected to declare the same amount for Financial Year 2016. But instead declared an above expectation dividends of 25 sen which surprised many investors including yours truly. I have to say such nice kind of above expectations surprise dividends announcement is definitely a wonderful dose for the days.

Such high dividends is amounting to almost 85% of its 2016 earnings. A check on its financial statement revealed a rather healthy balance sheet for Harrisons ended December 2016.

Harrisons has a total of RM520 million (Inventories RM181 million, Trade & Other Receivables RM242 million and Deposits RM97 million) against RMRM300 million (Trade and Other Payable RM175 million and Borrowings RM125 million).

Assuming Harrisons chooses to liquate its business totally (sorry, this won't happen  at all, this assumption is just used as a calculations basis only), then there is a positive figure of RM220 million. When one considers Harrisons has only a share base of just 68,476.00, it literally translates into a possible RM3 for each share.

Regular readers would have recalled Harrisons is one stock I have written several times (you can termed me as a "Harrisons Crusader", ha ha).

My first posting was on April 11, 2014 titled : Harrisons - The Kingpin of East Malaysia and the second one on Nov 11, 2014 titled : Harrisons - The Kingpin Strikes Back. My latest posting about Harrisons was on Oct 8, 2016 titled : Harrisons - A stable high dividend yield stock.

Its consistently good dividends (rising in tandem with its earnings as well) over the decades has prompted me to add Harrisons into my long term portfolios of dividends-paying stocks. So far its dividends payout has not disappointed me at all.

Even if the share price maintains its RM3 to RM4 range over the next several years together with its just conservative dividends of 15 sen, I would be more than happy enough than ever.

My total 15,000 shares of Harrisons (especially the 10,000 shares bought on Dec 7, 2004 and the subsequence purchase of 3,000 shares and 2,000 shares years the last few years) remains one of my core holding portfolios investment which I can classified as BORING INVESTMENTS but profitable ones.

Well, dividends lovers, the ball is in your court now.






Sunday, April 2, 2017

94 - Buy low, sell high and hibernating



94 - Buy low,
sell high and
hibernating




Investors are constantly bombarded with so many good advices by many top stock masters or sifus these days.

The popular ones are buy low, sell high, when others are greedy, we should be fearful and sell vice versa. But there is one particular advice that is to try to buy near its low and sell near its high.

I think this buy near its low and sell near its high is more easier to follow if one really practise it although there is no guarantee it will always ends up profitably.

What is exactly buy near its low? To me, if a particular good fundamental stock has seen dramatic fall in its share price due to many reasons, especially if the share price keeps touching new 52-week low or several year low, then entering at this point can be construed as buying near its low because the risk has been hugely discounted off.

I like to share three stocks, Thong Guan Industries Bhd, Supermax Corporation Berhad and YSP Southeast Asia Holding (YSP Sah) which I had the privilege to experience buying near its lows and selling near its high.

After my purchase of Thong Guan at RM1.86 on Dec 12, 2014 (having fallen from as high as RM3 plus some six months earlier), Thong Guan even went down a bit more before stabilising around my purchase price for several months.

But once it resumed back its growing profitable quarters, its share price continued to ascend from time to time. Luckily Thong Guan is one share I have been holding on steadily and refusing to sell even when it went all the way to as high as RM4.87 recently.

Granted one is seldom able to sell at its highest peak or even near its high. In fact it is quiet for sure many who would have bought at below RM2 would have taken profit when it hits RM3 levels and there would even be more selling when it hits the RM4 levels.

I personally think Thong Guan is still a very attractive stock to keep for longer terms as it is continuously expanding its business in many areas. Its eps of 54 sen for Financial Year 2016 suggests its current price of RM4.50 + level is not expensive or over-valued in my very frank opinion.



Supermax on the other hand has just rebounded back the previous day from its 52-week low done which I entered at RM1.67 on Dec 16, 2014. It was trading slightly above RM3 in early January 2014.

I was actually lucky enough to sell off Supermax a year plus later in January 2016 at its almost 5 year high at RM3.50 +. (At that time of selling, I was just merely taking profit without regards to whether the fundamental is still going strong there or not).

Since then, Supermax share price has been trending all the way down since the last four quarterly results (its average eps of 2.5 sen for last four quarters can hardly been considered as good one, right?).

Its current share price of just merely at RM1.98 is at its 52-week low. So jestingly speaking, its it time to buy into Supermax at this point since it is at 52-week low and the risk can be considered as lower already?

You decide yourself.

 
The above two investments demonstrated it was genuinely cases of  buying near its low although it is different when coming to selling. As I said, my selling of Supermax at near its almost 5-year peak is merely luck or good timing and nothing to do with any skill.

What about selling near its high? Well, there is one stock YSP Southeast Asia Holding (YSP Sah) which I could claim as selling near its high.

YSP Sah was one stock I bought in June 2012 at RM1.05. YSP Sah was actually hibernating for several months at this tight range price of RM1 - RM1.10 levels.

When a stock has been hibernating for long months, is it safe to enter? I don't have a clear answer, it depends on individual's perception. For me, it means the short term or contra players have been weeded out hence the tight range price situation. Unless of course, a new development that will have an impact on its share price surfaces.

I sold off YPS Sah in July 2015 at RM2.95. Again there is no particular reason why I decided to sell other than just to enjoy some real cash profits.

After I sold off YSP Sah, it went up to touch a new high of RM3.49 within the same month before eventually profit taking and a string of rather disappointing quarterly results plunged its share down to below RM2. Currently YSP Sah is trading at RM2.20 + levels.


Sunday, March 26, 2017

Investing is boring



Investing is boring




A recent blog about whether investing is boring or not caught my attention  with great interest. To many different types of investors, boring can be for some or not or even a very subjective word.

To those who love to ply their activities frequently especially going for short term gain, they will not find investment boring. The thrills of going in and out hoping for some quick gains will excite them more than any other activities of the day can match.

These types of investors are most likely be busy focussing on investment apart from their daily works. They would be checking on the movement of share prices now and then easily as most phone users are connected with data plans.

Such type of investors are unlikely to win big in the market as their focus is only making a small quick gain each time an opportunity arises.

But the real type of investors who are able to win big in the market are the one who finds investment boring. They focus on good quality stocks and are willing to ignore short term price volatility most of the times.

They are happy and contended to receive dividends now and then and are  willing to stay long with their stocks for years. As such, these type of investors are not active players most of the times. Remisers are likely to run out of business if most of their clients are boring investors.

Personally, I also find the stock market boring with no major happenings that affect the movement of prices. I didn't even pay attention to share price most of the times or even discuss at all. There are days I only read the business news pages to find out if there is any major corporate movements and totally ignore the share price pages.

The other day, my spouse casually asked me why I didn't mention anything or any news about stock market for quiet some time.

My reply was it is business as usual with no major issues happening, hence most of the shares should be trading within an expecting range. Of course there could be sudden wild fluctuation of prices, but normally a good quality stock would bounce back within a reasonable time.

If one wants to win big in the stock market, one must be prepared to hold on to those good quality stocks that are growth earners or consistently consistent with profits.

Many of my friends do not invest in the long term most of the times when I checked with them. Therefor, it is not a surprise to me at all that most of such short term investors do not record significant profits in their trading careers.

As usual, life is a matter of choices in many circumstances. No right no wrong, but I choose to invest and have a boring time with my investment allowing them to grow slowly over the period of time and then it is never to late to harvest the matured fruit slowly from the tree.


Selling all my 3,000 shares of
Cycle & Carriage Bintang Berhad (CCB)
on March 10, 2017 at RM2.88

CCB  reported a very dismal 4th Qtr 2016 results. It earned only a meagre earning per share of 1.63 sen. In fact, it is the third straight decline of quarterly results, from 19.53 sen in 2nd Qtr to 8.22 sen for 3rd Qtr 2016.

This is despite the sales of Mercedes-Benz vehicles achieving another stellar performance in 2016, with the brand achieving an all-time record sales figure of 11,779 vehicles, a nine percent improvement over the 2015 total of 10,845 units.

Yet its continuos declination of quarterly profit is not in tandem with its robust sales of vehicles. What could be the reason for this? Is it due to stiff competition that resulted in huge rebate and discount being given out that caused its profit margin to get lesser and lesser?

One sure reason is because CCB sold most of its cars sold were due to the sales of lower-margin vehicles, such as C-Class. Besides, it is believed distributors such as CCB and Hap Seng Star Sdn. Bhd. earn an average of only 4-5% on car sales and Mercedes-Benz Malaysia Sdn. Bhd. (MBM) controls the sales margin.

At times especially towards the end of the year, most distributors will even try to sell their cars with hefty rebates (or even at a loss) to clear the stock.

I have decided to sell off my shares in CCB and switched to Affin Holdings Berhad again.

Buying 3,000 shares of
Affin Holdings Berhad
on March 10, 2017 at RM2.86

Affin reported a commendable 4th Qtr results of 8.82 sen. For Financial year 2016, its total earning is 29.03 sen. At current price, it is trading at a price earning ratio of ten which is among the lowest in the banking industry.

If it can sustain such earnings in the coming quarters, I believe Affin would not be traded at such low PE anymore. As such, I had decided to purchase another 3,000 shares at RM2.86 which is near its new 52-week of RM2.89.

How ironically that I sold my CCB at near its 52-week low and used the proceeds to buy Affin which is near its 52-week high.