Tuesday, October 24, 2017

105 - The New Mercury

105 - The New
Mercury



Sometimes there are not much details or informations of a particular stocks that investors can have access to other than the occasionally announcements. Even then, the informations are also not easily understood by the average man on the streets.

Take for example, one of my early favourite stocks : Mercury Industries Berhad. It has successfully changed into a pure construction player exiting its car paint business. But I couldn't gather enough clear details from its announcements and I was left wondering how the new Mercury is progressing and how its financial positions would be.

Early birds readers who have been reading my every blogs would know that Mercury was one stock that I dared readers to walk the talk with me. (Refer back to my blog : Walk The Talk with Mercury Industries Berhad With Me. Dare You? It was dated : September 3, 2013).

At that time of "challenging readers invest with me together" this Mercury stock, it was on the premise of its easy to understand business of being in the car paint business. It was principally involved in the manufacture and trading of automotive paints and other related products used in the auto refinish business.

The automotive paint business is deemed resilient since there would be constant requirement of vehicles to repaint their car after several years on the road. Besides total vehicles sales were constantly in the range of 600,000 units per year.

It is a business that is easily understood by any investors. It is that reason why I invested in. Besides another plus point is its consistent dividends which is above bank's fixed deposit rates.

Then two years ago, out of the blue, Mercury began its journey to become a pure construction player. I decided to stick with its' new business venture to see how it pan out. But not much was understood by investors as Mercury is a rather low profile stock that is hardly covered by analysts.

As such, it didn't attract much investing attention and its volume is hardly traded  most of the time. Even so if there is, it is just a few lots changing hands.

But in the September issue of The Edge Weekly dated September 25, 2017, a good detailed coverage of Mercury Industries Berhad seemed to have a magic spell on its stock. The clear write up of the latest strong financial standings and its plans to grow its business by acquiring construction-related companies must have scored high marks.

Demands for its usually thinly traded shares spiked up the following weeks and from its last traded price of RM1.27 on Sept 21 (before The Edge Weekly issue on Sept 25), Mercury saw its shared surging days after days. It reached its 52-week peak (or perhaps its last six year high) at RM2.08 on Oct 11. Since then, it has been hovering at RM1.90 plus minus.

From what I am able to digested or understood from The Edge Weekly article is that Mercury is officially a cash rich company with RM10.5 million. While this cash amount is peanuts compared to other construction big boys, one must note that Mercury is a small based company with only 40,182.000 shares.

Also it is now more clear with its earnings visibility as it bends on acquiring small construction-related companies to strengthen its business.

So far its first half year 2017 net profit of RM11.6 million (thanks to RM9 million gain from the sale of the automotive paints division) has put it into a nice net cash position. Although it is unlikely to match its second half profits to its first half, as long as there is decent profits to be made, investors can confidently look forward to another good dividends of at least a six sen payout.

Besides, there might be a possibility of bonus issue or share split exercise as early as next year according to its managing director, Datuk Tiong Kwing Hee.

I also like to stress that I am still holding on to my 36,000 shares of Mercury even though it is now a completely different kind of company. Even though the share price has soared quiet substantially from my purchasing prices.

I am still walking the talk with the new Mercury. What about you?





Thursday, October 5, 2017

104 - Beware of bumper dividends

104 - Beware of
bumper dividends





Companies announcing an unexpectedly bumper dividends are always a sweet wonderful music to shareholders. The more dividends, the sweeter the music will be. After all, as shareholders of any company, any bumper dividends are always welcome and will add in more ringgit to the purse to spend or keep.

Normally an unexpectedly announcement of a bumper dividends will have a spike of interests on its share price immediately on the next trading day. Investors who wish to buy the shares to be able to qualify for the dividends are willing to pay a higher price than the previous day's closing price while those already owning the share would not be that stupid to sell at the same closing previous day price.

It is like a bumper dividends has caused more buying than selling interests among investors. One should note that once the dividends has been ex-dated, the share price will automatically re-adjust itself the next day to reflect a new fair opening price again.

What caused a company to pay out an unexpectedly bumper dividends? There are many reasons. The reasons could be a sale of a subsidiary business that resulted in excess cash, a change of policy of dividends payout ratio, say for example, company has been earning an average of 50 sen for many years and has been regularly paying just a miserly dividend of 5 sen, decided to change its policy to pay at least 80% of its earnings, the dividends would be 40 sen and that would spark a rush for its share price.

But while bumper dividends are good for all shareholders, the more under-mining issue is still the consistent earnings every year of the company concerned. As a shareholder, I would not be concerned at all of the share price if my invested company pays bumper dividends and still continue to make reasonable consistent profits.

There are  two cases I would like to share. Take the case of Harrisons Holdings (M) Bhd. Harrisons announced a sudden bumper dividends of 25 sen for financial year 2016 (previously 15 sen for financial year 2012 - 2015).

When it announced the 25 sen dividend on April 12, its share price closed at RM3.44. It closed 23 sen higher at RM3.67 the next day. Then on its ex-date June 23, it closed at RM4.28, yet the next day the share fairly dropped to close at RM4.04 (to reflect an adjustment of 25 sen dividend).

Since then, Harrisons has maintain its share price around RM3.90-RM4, still far ahead of its prior announcement of 25 sen dividends price of RM3.44 on April 12.

Why didn't Harrisons share price drop back to its RM3.44 after its dividends pay out. The reason is simple, Harrisons has announced better results for its first half this year, a total dividends of 18.28 sen. On an annualised basis, the eps would be a whopping 36.56 sen and most probably Harrisons would at least pay another 25 sen dividend for Financial Year 2017 in 2018. Who knows Harrisons might be generous enough to even pay out 30 sen dividends next year?

At the time of posting, Harrisons share price closed at RM3.99 on Oct 5, 2017.

Keep your fingers crossed for the coming two quarterly results of Harrisons. It will give you an early indication of how much dividends will be paid out by Harrisons.

Another high dividends paying stock is Apollo Food Holdings Berhad. Apollo is due to pay a 25 sen dividend too,  on Jan 9, 2018. The ex-date is Dec 8, 2017. After Apollo announced this dividend on June 23, its share price fluctuated between RM5 to as high as RM5.48 during the next several weeks.

Since then, Apollo has retreated back to its RM5 range. If this price of RM5 continues to hover until after the ex date on Dec 8, the newly adjusted price on Dec 9 will be RM4.75 and then it is left to market's supply and demand situation.

Now why has the share price not been able to stay at least 20 sen higher at RM5.20 since the announcement of the 25 sen dividend?

To find out why, let us track back to its last seven quarters of earnings per share of single digit only. Prior to these, its last eighth and ninth earnings per share was double digits.

It showed Apollo was experiencing difficulties in several areas and resulted in subsequence quarters of poorer earnings. Only last year, Apollo share price touched a high of RM6.33 on Oct 17, but that was before the ex date (Dec 8, 2016) of a bumper dividend of 30 sen payable in January this year.

Since then, after the dividend, the share price has been trending down in tandem with its poorer results. Although there is the coming 25 sen dividend with the ex date of Dec 8, one should note with caution to see of it can maintain back to its share price of RM5 or it will trade lower than its after ex date price.

Amanahraya Trustees Berhad of Skim Amanah Saham Bumiputera has been selling almost every days since the release of its last quarter results. Amanahraya Trustees Berhad is the second largest shareholders of Apollo (with 14,950,000 shares / 18.69% stakes) and its daily aggressive selling could suggest it is either seeing the future is not so bright or perhaps for other undisclosed reasons.

Whatever it is, yours truly has already decided to sell my only 1,000 shares on July 18 at RM5.37. As I said earlier when I sold, my concerns were Apollo might report lower and lower profits in the coming quarters and such high dividends might not be sustained in coming years.

Again this is my decision and if you are holding Apollo shares, please make your own judgements. Apollo could just prove me wrong later with improving results. At the time of posting, Apollo share price closed at RM4.96 on Oct 5, 2017, incidentally it is also its 52-week low.





Tuesday, September 19, 2017

103 - Mostly Right, Less Wrong

103 - Mostly Right,
Less Wrong






According to multiple sources on the Internet, the average amount of remotely conscious decisions an adult makes each day equals about 35,000. In contrast, young children only make about 3,000 decisions each day.

Consciously or not, our brains are constantly in action making decisions most of  the times. Mostly, most decisions are not that particularly serious irrespective if the decisions are right or wrong or perhaps we can term is as harmless decision.

Take an example, a person is thinking of buying KFC as dinner for his family on his way home from work, but in the last minute there, he changes his mind and buy Nasi Kandar instead. To his family, a KFC or a Nasi Kandar dinner is still a dinner after all.

Of course there will also be other important decisions to make that one hopes to make correctly. The consequences could have a impact on us if our decisions  turn out to be a poor one.

If one is an investor at Bursa Malaysia, one is constantly making decisions to buy, sell or hold. We can never be right all the times. But if we are  able to make more right decisions than wrong decisions, then the chances of winning money from the stock market is brighter than the chances of losing.

One only has to reflect back on his previous shares transactions to determine if most of his previous decisions was mostly right or wrong ones.

In the past, I was able to make mostly right decisions especially the last decade till end of 2015. Not only that, those mostly right decisions were major ones that resulted in profits of over 100% or more than RM1.

When I did some analysis back, I realised most of my decisions NOT to sell too early (profit of between 10% to 30% range) were very decisive ones. Most of my friends and followers had already sold off. If I had sold off early, it would still be a right decision, but the profit would just be nothing compared to a profit margin of over 100% or above RM1.

So sticking to a pre-target profit-taking range is vital. If I had aimed for a profit range of 10-30%, my profit margin would be at that range. But because I DECIDED that my profit-taking range is much more than that (and also daring to hold and hold each time it rises more than it succumbed to mild profit-takings sessions in between), the end result is a big difference.

But then again, not every time my decision to only realised profits after it touched a 100% or RM1 level (whichever comes first or both) is always correct.
Readers would know by now how much I missed out for not taking profits when Focus Lumber Berhad rose over 100% and RM1 level as well over a space of one year plus after my initial and subsequences purchases again.

Many of my friends and followers were already exiting the counter when it was rising above the RM2 levels. When it rose above the RM3 level, it coincided with  its just concluded 10 sen dividend. Perhaps that 10 sen dividend coupled with the earlier interim of 5 sen dividend CHANGED my mind to keep this stock for the longer term.

Being a dividend lover, I reckoned that if it can pays a total of 15 sen dividends a year, the stock should stay at least at RM3. Well, I was wrong especially when its subsequent quarterly earnings posted lesser profits.

This proved that my decisions are not always right, but so far the decisions have been MOSTLY RIGHT and luckily LESS WRONG. This made a very big difference between winnings bigger and smaller profits.

Lately, especially since I started Kassim's Basket of Defensive stocks beginning on Dec 17, 2015, my usual decisions (for margin of 100% or RM1) has hardly see the light of the day.

Except for Harrisons Holdings (M) Berhad (which crossed the RM1 level profit margin), the rest are mostly in negative positions instead! Though several of the stocks actually went up as much as between 10-20% range, (meaning profits could have been realised) but I had already decided that was NOT my target profits.

Those decisions have now turned to be MOSTLY WRONG ones, those stocks with 10-20% range profits in hand are now in negative areas. Berjaya Sports Toto Berhad is the worst one, having dropped to an unbelievable 10-year low!

The good thing about this Kassim's Basket of Defensive Stocks is most of the chosen stocks are paying dividends and soon we will see the gradual increasing amounts of dividends received over the time.









Saturday, August 26, 2017

102 - Over promise and under deliver

102 - Over promise
and under deliver



"Over promise and under deliver" or "Under promise and over deliver" are two famous age-old business adages that everyone must have heard of and as well experienced the real meanings personally.

Let us get into the first adage that is "Under promise and over deliver" as an example. If a business states a product will be dispatched in five working days and it is despatched in three working days instead, it has performed better than it promised to. Customers are delighted to receive their products earlier than expected and is likely to feel satisfied and likely buy more products from the company in future.

On the other hand, an example of "Over promise and under deliver" happening  situation could be a potential buyer is promised of extensive wide coverage of after sales warranty package. But after buying and facing a defect problem, he discovered the warranty package has many hidden strict Terms and Conditions (which wasn't explained in details properly by the seller to the buyer in the first place) and his claim is rejected.

Once the client is not happy with this failed warranty claim, he is most probably not going to buy any future products from this company again.

In our every daily lives, we encountered either one adage each time we have a "transaction" done with any person or a company.

One of the most prevalent of "Over promise and under deliver" happenings can be found especially in the insurance and investment industry. (My apology, I don't mean to say the people or the company from insurance and investment are dishonest, but it is usually the related agents and consultants that tends to misrepresent a colour picture of over promise returns that attract potential buyers/investors).

Personally I have my fair share of such over promise and under deliver encounters. Many years back, I was inside a bank enquiring something about my current account at the customer's service desk. When the teller or rather customer service assistant checked my account and discovered I had some money in it, she shared with me their latest insurance cum investment plan that promised higher returns over a period of 20 years that fixed deposit rates could not match.

Mind you, she even wrote down that amount of return on a piece of paper that is simply too enticing to say no. What she didn't know was that I had some experience in insurance industry before, so I innocently expressed I would buy the plan, but out of curiosity if such plan comes with a proper policy, she said yes. Then I further said that amount of return (after a period of 20 years) would be stated in the policy, she bravely said yes.

But when I said if after signing up and discovered the policy didn't state the amount of return as mentioned by her, how? This put her back nervously suddenly and she "pretended" that she will confirm with her superiors immediately.

Several minutes later, she came back (no longer confident anymore herself) and said that the amount would not be stated in the policy. Then how would I know I would be receiving that amount you mentioned earlier? I further asked her how did you get that amount of figure when the policy didn't even mention any amount of return?

At this point, she knew she has been "caught" selling me a product that in a very misleading way by someone with knowledge in insurance and investment. She then explained that the amount of return is based on the "projected" rate of return of investments over the years.

She further elaborated that normally the "projected" rate of return is based on three levels, i.e. low (about 2-3%), medium (about 4-5%) and high (6-8%) return. Then I asked which level is her "projected" rate of return for my case and guess what? Mine is on the "projected" rate return of the high side (6-8%).

See, she was daring enough to sell me a policy with a projected rate return of 6-8% over the next 20 years! If I have been a simple layman with no knowledge of insurance and investment, I would have been misled and bought the policy with high hopes only to know the real rate of return in 20 years time!

By then, when the so-called projected rate of return is not achievable, do you think I could still find her and seek any justice? She might even be no longer in this job or had moved to some where else!

There must be many naive people who bought such misleading plans from such misleading agents/consultants. I came across many such clients who were not aware that the policies they bought were based on projected rate of return of the high side over the next 20 years!

A few even claimed that their agents/consultants are their good and trusted friends and would not misled them. It was only when they found out from their policies that there were no such confirmed printed "promised" amount of figure that they realised that I was actually talking the truth.

Even up to this days, this kind of misleading selling ways are still in the market here and there. This year alone, I was approached several times by agents/consultants selling the same misleading ways during their companies' road shows at various shopping malls.

This brings us the questions of why are they selling this way?

One, agents/consultants are under pressure to sell to fulfil their required quotas or they will be out of job for failing to meet sales targets requirements. As such the pressure to sell in any ways by hook or crook tend to happen.

Two, the commission is roughly 20-30% over the next few years and is quiet attractive if one is able to sell many policies.

Three, many people tends not to understand the technical details of how insurance and investment work and are easily misled by those attractive "projected" rate of returns. So we all know the human nature of greed, the more  returns, the better.

There was even one agent who told me during a roadshow at a mall that such plan is offered for a limited time or whenever the quotas are taken up! I was advised not to miss such a good investment opportunity. When I asked him personally did he buy such plan for himself or any from his family, he could not answer truthfully from the way he responded to my unexpected question.

Many agents/consultants are not in this career for the long haul. Many are young graduates, most probably trying out this insurance/investment selling for the first time and will see how it goes from there. That is why most of us must have bought policies from previous agents/consultants only to discover months or years later they are no longer in the industry anymore.

So the next time you are approached by agents/consultants selling such insurance/investment plans anywhere, remember to be cautious especially over the overly promised return rate for the next many years. It is just a projected rate of return only.

As we all know, nothing is guaranteed when it comes to investment. There is always the element of risk involved.

Meantime, have a nice Merdeka celebration day!


A question from
Lucas Lee on August 4, 2017:

Please enlighten if there are any other food/ consumer counters worth investing at the moment.

My reply : I personally think many food/consumers stocks are facing compressing margin erosion pressure. Besides the stiff competitions from one another, the subdued economy has prompted many to shop thriftily as many companies are forced to raise their prices due to a weakening ringgit and rising raw materials.

Of course there are a few doing good exceptionally, but their share prices are not at attractive valuations to buy.

I am still searching for the next ..... Hup Seng Industries Berhad?


Thursday, August 3, 2017

101 - Not So Titanic After All

101 - Not So Titanic
After All



According to orddictionaries.com, there were several definitions of the meaning of TITAN. But one of them is being described as noun A person or thing of very great strength, intellect, or importance.

Most of us would have been impressed if we come across any person or company with the name of Titan being part of it. A scroll over the thousands of companies listed on Bursa Malaysia could only yield one company with such name with the word Titan.

By now if you still have no clue which "Titan" I am referring to, then let me refresh you again. Yes, I am referring to this most popular Titanic stock, Lotte Chemical Titan Holding Berhad (LCT) that is currently sending shivers down the spin of those investors who thought anything below its IPO price of RM6.50 is a bargain buy!

There has been hardly such dramatic actions of such comeback-re listing mega giant stock such as LCT. Right from its pre-IPO exercises that were under-subscribed and instant immediate working round the clock co ordinations between the promoters, corner stone investors and others to ensure a much reduced price IPO of RM6.50 (from RM8 initially) and also at a reduced numbers of shares.

Further hints of how bad things to come was when it traded below its IPO price at its debutant day (although it touched as high as RM6.53 at one stage). and from there the selling pressure was absorbed by Maybank Investment Bank (Maybank IB) buying the LCT shares as part of its exercise to stabilise the share price of the integrated petrochemical firm. (Maybank IB is allowed to buy up to 27.77m shares, equivalent to a 4.8% of the total number of shares offered under the IPO).

But once Maybank IB announced it has ceased its stabilising exercise because it has bought the numbers of shares required, LCT saw its price trending near its RM6 base.

I am quiet convinced many investors were waiting to see how its share price perform by itself (without the Maybank IB's support) and should it stabilised at that RM6 range for sometimes, it seemed quiet a safe entry point to enter.

I admit I was amongst those waiting to look for a safe entry point to enter too.   But then when LCT announced its quarterly results on July 31, 2017, its poor earnings of just 6.58 sen (Quarter on Quarter / Year on Year - 71.88% down), there was only one way the share price would head and i.e. south all the way.

LCT dropped as much as RM1.40 (opened at RM6.10 and closed at RM4.70 on that historical titanic day!) Since then, its share price has been hovering around the RM4 plus range (as low as RM4.14).

Now the whole fiasco of this crumbling LCT stock raised a lot of many questions  of how the episode has been scripted out right from the start. Some pointed out that the promoters were very anxiously to list its shares at whatever cost while the opportunities are there.

And its initially over-priced IPO price of RM8 was indeed very luckily under
-subscribed  for those initial eager investors. But if they thought they had a good bargain at a reduced price of RM6.50, they or anyone else (perhaps other than the promoters themselves who should have privy informations of the progress of LCT of the last few months) didn't expect the coming scripts to be that way.

Few days after its IPO debut, LCT coincided the occasion with its very poor April to June 2017 quarterly results and the rest is history! Since then, LCT has been struggling to stay just above the RM4 mark.

The whole titanic saga has once again raised many doubtful questions of the level of transparency of public listed companies. 

Now if this set of poor results had come out just before its pre-IPO exercise of RM8, do you think the subscription rate would receive any response from anyone especially the corner stone investors? By then, it is a foregone conclusion that LCT will have to reprice its IPO to most probably as low as RM4 per share (to justify this kind of just 6.58 eps).

Or similarly shouldn't LCT practices good governance at least by issuing a pre-statement of how its operation has been affected by a water disruption that caused its plant to shut down for a total of 13 days in April 2017 and caused a decline in production volume of 75,000 tonnes and also higher consumptions costs.

All this has a very serious effect on its share price. Now those retailers or any fund managers who bought from the open market must have felt disgusted and realised why the IPO was urgently listed at RM6.50 once the take up rate for its  earlier initial IPO price of RM8 flopped.

What about the corner stone investors? The fund managers or their investment experts or their research teams must have done a poor job not knowing about this too. If the fund managers themselves didn't know or have any access to this disruption water issue, then the only one who knows is the company themselves. And when you are armed with informations other don't, the advantages are there for those who have.

It is even worse for those retailers who won't even know anything other than what is being written about the prospects of the company. And I am always cautious about these kind of  promoters of any going to be public listed company.

If the promoters don't paint a nice rosy picture ahead, the take up rate will be under-subscribed  and they might lose a client and future business. It is either my survival than your interest.

So beware again of future mega listed public listed companies. Sometimes it is better to invest in those smaller ones that are managed by the founders themselves, companies such as Hup Seng Industrial Berhad where not only the founders are helming the key positions, their immediate relatives are in too and their interests at stake is much more than our meagre numbers of shares invested.

Selling Apollo Food Holdings Berhad shares at RM5.37 on July 18, 2017.

Yours truly decided to sell snack confectionary maker Apollo Food Holdings Berhad at RM5.37 on July 18, 2017.

A regular good dividends stock bought at RM 2.45 on May 24, 2006, the dividends received since that day amounted to RM2,500.00 which is more than my original capital invested.

Normally I do not like to sell such regular paying dividend stock, but the last few quarters of results looked not promising for Apollo. Hence I am worried if such trend continues, it will report lower profits and future dividends will be less. Already it has earned less than for Financial Year 2017 than 2016 which is reflected also in its dividends payout from 30 sen to 25 sen respectively.

But this is my decision and if you are holding Apollo shares, please make your own judgements. Apollo could just prove me wrong later with improving results. At the time of posting, Apollo share price is traded at RM5.18 on August 3, 2017.