Wednesday, February 18

Emotions and Investing

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Recently, some of my colleagues were discussing about stocks and investment. The topic mainly revolved around how the economy seems to be spiraling downwards with no end in sight and how this is affecting the stock market, which was also plunging downwards. I can sense the fear in them as most of them planned on not buying any stocks.

Usually, I will try my best not to get involved in any discussion on stocks and investments for reasons which I will blogged in my subsequent posts even though I am rather passionate about it. However, I went in ahead to join the discussion as I was rather tempted and I went ahead to share my opinion on how one should buy stocks now given that the stock market have plunged down by a huge percentage and stocks were at a very low valuation. After the discussion was over, one of them seems rather impressed by what I have shared and I also offered my recommendation on the blue chip stock purchase on a particular fundamentally strong company that was undervalued.

True enough, he followed on my recommendation and went in to buy the stock of that particular company. Unfortunately, within a few days of the purchase, the stock price of that company fell by 10%. Even though there was a significant downwards price movement, the fundamentals of this company are still sound. When I met him the next time round, he told me that he had sold the stock. I was rather surprised so I asked him why. The reason he gave was that he panicked when the stock price start to fall and he was fearful that it will plunge even more. Moreover, he felt uneasy holding on to this stock and as a result, he often check the stock price frequently and the changes in the price movement made him felt even more uneasy. Thus, he decides to sell off the stock.

Investing requires a lot of effort indeed. One will have to spend hours looking at the financial statement of the company, compiling the data into an Excel spreadsheet and crunching the numbers before coming up with a conclusion on whether the company is fundamentally sound and below valuation. However, that is not the end. One must also have the tenacity and be mentally prepared to stomach any possible drop in share price after the initial purchase. After all, it is unrealistic to expect the share price to increase immediately after the purchase. In fact, if one have faith in their own analysis, they should not be fearful and they should even be prepared to make more purchases to average down the buying price of the stock. It is these attributes and how one controls their emotions that determines whether the investor can be profitable.
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Monday, February 16

1st Adsense Payout

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I finally received my 1st Adsense cheque from Google. Although the sum, which is around $100 USD is not a lot, it will go a long way in defraying the cost of running this site. Besides, the main motivation for blogging is not to monetize my blog but it is to use this site as a platform to post my views on financial matters and basically anything that involves money. Google Adsense is a online advertising program and all you have to do is simply display the adversitements on your site to earn advertising revenue. The advertisements can be seen at the right hand side of this site.

Banking this cheque was a headache though. This is because the bank I went to, which is UOB, charges a minimum of $10 SGD or 0.125% of the amount I wish to bank in and there may be other transcation cost for processing on the other side. To add on to this, I will need to state the source of this fund and explain why Google is giving me this cheque. And that's not all. I will have to wait around 3 to 4 weeks for the cash to be deposited in this account. The next time, I guess I will wait for my advertising revenue from Adsense to reach perhaps $1000 before I get them to send me a cheque but that means I will have to wait a very long time.

Saturday, February 14

OPC car scheme changes

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Off-peak car scheme to get a tune-up

Govt to replace paper permits, relook rebate system and restricted hours
By Christopher Tan, Senior Correspondent

IT COULD soon become more attractive for would-be car buyers to consider off-peak cars (OPCs), and for existing motorists to switch to such cars.

The Government will look into enhancing the scheme in three areas.

Firstly, the supplementary day licence, currently a cumbersome paper permit that is prone to tampering, will be replaced.

Head of the Government Parliamentary Committee for Transport Cedric Foo, a strong OPC advocate, suggested an electronic system like London's camera-based congestion charging system.

As street cameras are already widely deployed here, details of the cars can be readily captured when they are on the road. The owners can then pay up by cash or direct debit within 24 hours, Mr Foo suggested.

'Our OPC system must be made more robust and tamper-proof,' he said.

Transport Minister Raymond Lim concurs. He said in Parliament yesterday that the Land Transport Authority will look at how an electronic charging system can be applied.

Secondly, the Government will look into granting cash rebates to motorists who convert their normal cars to OPCs. This, Mr Lim said, will be more attractive an incentive than the current system, where car owners can realise the rebates only when they finally scrap their vehicles.

Lastly, the Government will relook the restricted hours that OPCs can ply without charge.

Currently, these red-plated cars can be used only from 7pm to 7am on weekdays, and after 3pm on Saturdays, and for the full day on Sundays and public holidays.

Over the years, the Government had received 'numerous feedback' from OPC owners, with many asking for free use for the whole of Saturdays.

Minister Lim hinted that free use for the whole of Saturdays could be possible, but there would be commensurate adjustments to the tax breaks that OPCs are accorded.

Today, OPCs get a one-off $17,000 rebate on their registration taxes.

Mr Lim said the OPC scheme 'is something we should encourage'.

'It provides an alternative and a lower-cost means for people to own cars, and as its name suggests, helps to alleviate peak-hour congestion on our roads,' he added.

He pointed out that there are about 42,000 OPCs today, eight times more than the 5,000 back in end-2005. They make up about 7.7 per cent of Singapore's car population.

Motor Traders Association president Tan Kheng Hwee said 'we look forward to more details regarding the improved OPC scheme'.

'We hope the announcement on OPC will be made soon,' she added. 'Otherwise, those who are considering an OPC may be unsure whether they should commit now or wait until the new scheme is announced.'

OPC owners welcome the proposed improvements. Student Cynthia Elizabeth Tang, 27, said the electronic charging system 'is a good move'. She said it would be more 'hassle-free' than today's paper coupon system.

'There have been times when I tore the wrong date, and it's $20 gone,' the owner of an off-peak Nissan Sunny said.

She also said extending the free use to full day on Saturdays would make the scheme more attractive to would-be owners - even if the $17,000 tax break is adjusted. 'It makes sense, as more people work a five-day week now,' she added.
This definitely bodes well for the OPC scheme. I am just surprised that the government is finally making a move on extending the OPC hours limit on Saturday to free usage perhaps. This suggestion is finally been heeded by the government and I think it makes sense since there is less traffic congestion on Saturday and furthermore, the official working week is 5 days now.

However, given the low COE prices now, it would not be a good choice to buy a OPC car. This is because effectively, the car will have no scrap value. In short, you will not get any cash back if you scrap your car. Perhaps, I should elaborate on this subsequently in my future posts.

Thursday, February 12

SPH's dividend yield

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A friend of mine was asking me about whether I know about the dividend of SPH. I went to check on how much dividend did SPH distribute last year. In 2008, SPH distributed $0.27 worth of dividend per year. SPH is currently trading around $2.7 and as of today, it closed at $2.65. Thus assuming that SPH will still distribute $0.27 worth of dividend for this year and the buying price of $2.65, the dividend yield is around 10.9%. At this yield, SPH definitely looks very attractive to me.

Of course, some might argue that given that this year is such a bad year for the economy, the profits of SPH may drop. If you read the annual report for 2008, it may seem to give you the impression that the profits for SPH may drop indeed since it has a lower EPS in 2008 than 2007. I did not study the financials of SPH in detail but a quick glance at the financials of SPH reveals that the drop in EPS is mainly attributed to investment. However, the business operations is still profitable with a higher revenue for 2008 as compared to 2007 and this is significant and the main source of revenue which is advertisement, is still increasing in 2008 despite the economic recession. To add on, SPH has a policy of paying dividends based on their recurring profits i.e. profits from their business operations. Thus I believe there is a good chance that SPH will be maintaining the same amount of dividend this year. Even if the dividend drops, I don't think it will drop that much. Even if the dividend drops to $0.20 per share, the dividend yield is still at around 7.4%.

Tuesday, February 10

Capitaland Rights Issue

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Capitaland is doing a rights issue and will offering its shareholders one right share for every two shares that they are holding at an issue price of $1.30. It is at a discount of around 40 percent from the closing price last Friday. Someone on the Channelnewsasia forum has summarize the important things that you should take note.
From now until 18 Feb
Shares trade cum-rights (CR). It's just an indication that a rights issue exercise is ongoing. Whoever is still holding Capitaland shares as of end trading day 18 Feb will be entitled to apply for the rights shares at a ratio of 1 rights share per 2 existing mother shares. For example, if you are holding 2 lots (2000 shares), you will be entitled to apply for 1 lot (1000 shares). If you have 1 lot, then your entitlement is 500 shares.

19 Feb
Shares trade ex-rights (XR). The price will be adjusted to reflect the inclusion of your rights shares. For example, if it closed at $2.36 on 18 Feb, the fair price when trading starts today will be $2.01 (rounded).

23 Feb
If you were holding any mother shares before 19 Feb, the ownership will be registered in CDP by this date. Based on this record, you will receive your nil-paid rights (also called renounceable rights). These will be deposited into your CDP account before 26 Feb. Nil-paid rights give the owner the choice to accept the rights shares at the issue price of $1.30. You do not have to pay for your nil-paid rights, and they are yours to trade (sell) starting from 26 Feb.

26 Feb to 6 Mar
Trading of nil-paid rights begin. Because it's a 1 for 2 exercise, the smallest lot size will be 500 shares. So on top of a Capitaland_R, a Capitaland_R500 counter will be set up for trading. For shareholders who do not wish to pay more money to convert his/her rights shares to mother shares, this time window allows you to sell away your nil-paid rights. For shareholders who wish to round up odd lots, they may also choose to do so through nil-paid rights purchases here. For investors who were not holding any mother shares previously but now wish to participate in the rights issue exercise, they can buy these nil-paid rights. Theoretically, nil-paid rights will cost the amount of (mother share price - rights issue price). For example, if the mother share now trades at $2, the nil-paid rights should be trading at $2 - $1.3 = $0.70.

12 Mar
Those holding nil-paid rights have to pay up by this date ($1.30 per share) to apply for the rights. If you do not wish to subscribe, make sure you sell away your nil-paid rights between 26 Feb and 6 Mar. If you still have them as of this date, for whatever reason, pay up and apply for the rights issue. Don't be an *censored* and hold on to your nil-paid rights and not apply for the rights! You may pay up either via post (using bank drafts or money order, no cheques accepted) or ATM (CDP account should be linked, but note down your CDP account number for keying in manually just in case)

This is also the date by which excess rights applications must be submitted. If you are holding odd lots, my advice is to apply for the excess rights. Priority in excess rights allocation is always given to holders with odd lots.

23 Mar
You may begin trading your rights shares today. You will see them in your CDP account as normal Capitaland shares (code C31). To know the allocation results in advance, check your CDP account on 22 Mar, they should already be in by then.
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