Sunday, October 30, 2011
This market has its own uniqueness because of a big majority of them are vegetarian, no-no to beef, very diverse cuisines and fast food is considered as “junk food”. Eating out begins to get popular because of urbanization. People begin to accept eating out because lack of time. The targeted market segment is middle upper class.
A lot of eateries are run by mom-and-pop shop just like many Asian countries. Modern fast food chains begin to gain tractions when Darshini, Food Court as well as international chains like KFC, McDonald, Barista Coffee begin to become popular with office goers and students. For more detail you can read this in Wikipedia here
McDonald has about 170 outlets and KFC is lagging behind, 105 outlets only. KFC entered the Indian market in the early 90s after the economic liberalization policy. McDonald entered the market later, in the mid 90s by joint venture with two local companies, Hardcastle Restaurants Pvt. Ltd. and Connaught Plaza Restaurants Pvt. Ltd.
Judging from a big market with almost 1 billion people, the number of outlets are way too small. The growth rate has been very slow though the growth potential is enormous. I don’t have all the information on year by year growth evolution, so I will have to go for simple average. Average store opening/year for McDonald is 11 and KFC was even more pathetic, 5 only. It takes a long time for them to breakeven – some say 10-14 years but some say you need about 30-40 outlets to breakeven.
Let me go back to KFCH. Based on a research report by RHB research, the average revenue per outlet for an outlet in Malaysia is about RM 3.5 million but in India is only about RM 600 k. Geez ….. tough market. Indian market has always been tough, perhaps even tougher than China market. They crushed prices down to the ground with Nano Tata car, less than US $ 50 tablet, etc. I certainly do not want make a mistake by projecting the same revenue per outlet in Malaysia to Indian market.
KFCH has about 10 outlets there and here are their growth targets
end 2011 – 15 to 17 outlets
2012 – 25 outlets
2013 -30 – 35 outlets
Judging at their aggressive target, I would think KFCH will not be a dividend yield play but rather a growth play. KFCH’s EPS has been growing at the rate of 9-10%. I think we are looking at about 0.20/share for 2011. If we are willing to roll over the valuation to 2012 which is about 0.22 and peg it at about 15X PE(since contribution from India is negligible), the stock worth about RM 3.3/share - RM 3.5 with dividend yield of about 1.6 ~ 1.7%.
Guys, gals, time’s up. I got to go bed now because I will need to wake up very early to catch a flight to middle kingdom. I will be there for a week which means I will not be able to post anything. Take care.
Saturday, October 29, 2011
I have friends over there. I have been following their updates from time to time. Each update is worse than the previous update. Looks like inner Bangkok defence is also breaking down.
One of my friends lost his whole factory. All his production equipment submerged under the water. His years of blood, sweat and tears went under, just like that………just like that. I felt very bad for him.
Another friend of mine would probably have no income for next few months because his customers went under! He told me he has saved up a bit to face unexpected rainy days like this. Though he was cheerful when I talked to him on the phone, I know he was crying inside.
Another friend of mine told me the property loss is sad but that was not his greatest concern. What is killing him and others are the psychological torture. The stress level is unbearable. You feel so helpless, sitting and watching the water level to rise……either to decide to evacuate or not to evacuate…..or……watching your properties get damage bit by bit like a slow death. You fear that you might be out of job because of permanent factory or business closure(excellent excuse, for people sitting in ivory tower, to consolidate factory when demand is weak). You worry about hungry snakes and crocodiles want their shares of retribution!
These are heart wrenching stories. All I can offer was to listen. Listen emphatically. But I suppose by just listening is not good enough.
A while back, Al Gore was care enough to warn the world that we got to do something. He was trying to raise public awareness through his documentary film An Inconvenience Truth. The very sad part is there are whole bunch of people threatened to sue to him. They accused him the creator of global warming hoax. Watch this.
They accused him of anti-progress, pedalling backwards. All I can say to those people is FUCK YOU! Increased of CO2 will have NO impact on weather or what so ever? Warming and cooling of earth planet is just a natural cycle? FUCK YOU one more time, this time with two middle fingers UP!!!!!!
We got to reduce our carbon foot prints. Period!
If you mess around with the mother nature, they will come back to haunt you bunch of so called professional scientists aka idiots. They sad part is, innocent people paid the price for the sins that they did not commit.
Friday, October 28, 2011
Bears got drowned by good news. I enjoy myself very much watching the best poker game on earth. No detail announcements by EU leaders but they starved off a melt down by merely threatening the market players with the old poker game strategy. Going-All-In. Till today, we have not seen what was the card but the opponents already folded their cards.
What is the probability of 9 planets in the Milky Way aligns in one straight line?
That lady's luck is so good. In the midst of ole..ole...ole partying, the US GDP came in with 2.5% growth. The economists have adjusted their numbers for the last few sessions as they see the improvement of the economic data. As a result, Dow closed at 12,208, S & P 1,284 and NYA 7,813.
With the financial markets turnaround, people making easy peasy money, that may improve consumer sentiments and hopefully people will spend a bit more money during coming Christmas seasons. I do hope the demand will improve because I have seen businesses turned sour beginning of this month. I just got back from the US and customers are telling me inventory are very high. If the demand does not take off, it will be a disastrous 2012.
It takes balls to play in the next leg of rally. As I grow older, my balls shrink. Instead of keep guessing when the markets are going to top, I can sleep soundly every night with lots of cash under my pillow.
Thursday, October 27, 2011
It's time for me to rewind. Nothing more satisfying than enjoying Johnny Walker Blue Label. I like it on the rocks - just one pack with 4-5 ice cubes. Shake the glass a little like what James Bond like his Martini -- Shaken, not Stirred. Watch the ice intermingling with the whisky. Then take a sip. Hold it a little while in my mouth before letting it flowing down to my throat. Aaaaaaah..........heavenly.
Enjoy the rally. Good night.
Wednesday, October 26, 2011
I told you that I'm going to spend more time to look into company reports. YTL Power is on my list. YTL Power hit a 3 year low at the beginning of the month. Stock price going back to depressed level of 2008/2009 was really mind boggling. What the hell is happening to this company? Yeah, we have some problems at the macro level but do we need to over-exaggerate the problems as bad as 2008/2009?
I sent Mr. Nosey to go sniff around the neighborhood. Well, well, well. 4G network program was the culprit. As of June 30, their mobile network unit has RM 280 million losses. 280 million losses is a big number babe! I almost wanted to hit shut down button on my computer, have a few packs of whisky and call it a day.
May be not so soon. I decided to give it a second chance since the price has come down by almost 30% and at one point it was almost 40% way down. Found a piece of old news that mentioned YTL is going to spend as much as RM 3 billion over the next 5 years. They probably have spent close to RM 1 billion already.
A lot people have expressed that the mobile internet is getting very crowded. How big is the market? It's kind of difficult to find out the market size as not many analysts talk about them. So, I'll have to put together the jig saw puzzles from various annual reports from TM, Axiata, Maxis, Digi. Digi mentioned there are 4 million mobile internet users. When I added up the numbers from Celcom(857k), Digi(??), Maxis(594k), it was well short. May be they referred to fixed broadband as well. TM has 1.68 million subscribers which I presumed most of them are fixed line broadband users. Adding TM subscribers to mobile broadband is getting closer to 4 million users. Assuming APRU of RM 60/month, the estimated market size is about RM 3 billion. Broadband penetration is about 50% now and assuming we go to 100% in 5 years time, this is probably a RM 6 billion market.
YTL Power plans to get about 400 k subscribers, that will translate to about RM 326 mln revenue based on APRU of RM 68/month. That will be almost 10% market share. Yes I know what you are thinking this is a growth market. Let's assume they capture 20-25% market share 5 years down the road, the revenue will be around 1.2-1.5 billion. At that kind of revenue, it may be able to make a decent margin of 20%. A quarter million 4-5 years down the road? Long gestation, big risk, hyper-competitive market, worth the troubles? I can understand why most people dump their shares. But wait.
Don't the market participants know that YTL Power has a very diversified stream of earnings? Earnings from Malaysia, UK, Indonesia, Singapore, Australia come to nothing? Together, it has about RM 13 billion revenue and RM 1.3 billion net profit before they launch the broadband business. Even we build in the losses, the company will still have RM 1 billion net? I don't see how their dividend of RM 0.12 - RM 0.13/share is going to affected.
Now, putting the bad news aside, how much YTL Power is worth? CIMB tagged a price of RM 2.8/share but RHB thinks it's only worth about RM 2/share.
The key difference is CIMB assigned higher value to Wessex operations -- 1.5X EV/RAB(Enterprise value/regulated asset base). They argued that market is around 1.4X. This premium may be easier to justify during good time. Let's say we don't assign any premium like what RHB did, RM 2/share would be a very fair price.
Tuesday, October 25, 2011
It's a day to remember goodness thrashed darkness. It's a remembrance day that good guys will always win at the end, just like the nice ending in the super hero story.
Dwali has something for non-Hindus too. I want to take today as an opportunity to say something --- to spew out something has been cloaking inside my heart. Before I proceed, I want you to read this.
MIDDLE EAST, INDIA, March 28, 2011 — After twenty centuries all that can be said of Christianity is that it is the world’s largest religion with over 2 billion followers. Its influence on men’s hearts and minds as the truth is highly debatable.
Mahatma Gandhi is perhaps the best example of someone who was discerning enough to reject Christianity not Christ. He was deeply hurt by his experiences with apartheid and “Christians” during his time in South Africa, and it obviously stymied his relationship with Christ.
Like Gandhi millions have been unable to see the Christ obscured by Christianity.
Gandhi was shrewd enough to tell missionaries, “I like your Christ; I do not like your Christians. Your Christians are so unlike your Christ.” When asked why he did not embrace Christianity, Gandhi said it offered nothing he could not get from his own religion, observing, "…to be a good Hindu also meant that I would be a good Christian. There is no need for me to join your creed to be a believer in the beauty of the teachings of Jesus or try to follow His example."
Read the rest here: http://communities.washingtontimes.com/neighborhood/no-2-religion-yes-2-faith/2011/mar/31/gandhi-glimpsed-christ-rejected-christianity-false/
I'm not going to make a case of salvation by works or salvation by faith. I'm no theologian. The relevant point that I want to make is to remind everyone not to be fooled. Beware of wolves in sheep's' clothing, someone who will call you brother or sister. Someone who you will invite with open arms into your house. Someone who you will never raise any sign of suspicion without realizing he has a knife at the back ready to stab you. The wolves are driving people away from Christ.
It does not mean that we need to snatch the knives from the wolves and start a gladiator fight. Gandhi is a wonderful student of Christ. He hit the nail right on the head.
That's the heart of Christianity. F-O-R-G-I-V-E-N-E-S-S.
That was how the passive resistance philosophy was born. No wonder Gandhi is considered as a genius in Steve Jobs's book. You let the other person to continue to beat you up to a point his conscience tells him that is the wrong thing to do. Gandhi truly forgives his enemy up to seventy-seven times. Hopefully, the violence will stop. When violence stops, verbal or physical, the world will be a much more serene place to live.
1. YTL Power. $ 1.72
2. KFC. $ 3.31
3. JTI. $ 6.16
4. Boustead. $ 5.21
Since then, the prices keep surging and narrowing fast. Another 5-7% jump from yesterday closing will get back to the level of pricing before the market brokedown. The incentive for me to get back to the market is really very little. I cannot get back to the market just because I've missed the boat on the first week of October. If I jump back with both feet, it's like making a mistake that I sold a huge block of my holdings 3 weeks ago.
I believe the market is overbought now. Even the sleepy stocks from the forbidden city surged? Give me a break!
The rational thing to do is DO NOTHING and wait for the next boat. The boat may come tomorrow, next month, six month or even one year later. I'll sit here and wait.
Saturday, October 22, 2011
This is a big f****** son of the gun. I kept shaking my head in disbelief that I was going to drive a real SUV on the American soils. It's a 5.3L V8 engine. Big engine!!!! Forget about the guilt of polluting the green mother earth. Step on the gas, the sound of Vroooooom.....Vrooooom.......................... will drive you absolutely nut. It's a pure joy of driving. Though V8 engine sounds impressive(350 plus hp with 300 plug lb-ft torque) but I did not feel it was quick enough. Granted, it's a car to tow boat, ferry a big family, etc. It's not a race car.
My next follow up trip? It's kind of like my bucket list, I hope to complete as many drives as possible on this National Geographic Drives of a lifetime.
My next trip is to conquer California's Pacific Coast Highway. Yeah, the description of the twisting and cliff-hugging sounds extremely thrilling to me. But then, the trip is meant to be driven leisurely. Well, may be I can drive with short burst of devilish raw power of a car. Well what car shall I pick?
Possibly a Boxster.
Friday, October 21, 2011
It's beginning of fall here. Trees chlorophyl production begin to shut down in preparation of winter. Streets filled with dry maple leaves. Chilled and strong winds sweeping through the leaves can transmit some kind homesick waves into my spine. But thanks to a bunch of American friends here. They're still jovial though the world is not so bright. They never complaint about life. They'll keep on debating and finding solutions to many problems. They really put a lot of pressures on you. They want you to confront the reality and find solutions to problems or how you can make things better. They will force you to move out of your comfort zone to make difficult decisions.
Americans are pretty tough people. Will they ever get out from this mess? I mean this is a country that has great education institution and dynamic global companies. This was a country with high saving and invested very prudently the past. Every where I go, I see people will hold a book or iPad, notebook or whatever reading materials. I find that Americans are hardworking. I remember during my junior days working with the Americans colleagues, I have to wake up late nights to call them. Now that they know the growing Asia importance, they did the other way around. They answer your e-mails too, over the weekend. These people move very fast and very pragmatic.
They, however, for being too pragmatic and compromised certain principles got them into troubles again and again. I hope they can really fix the issues because the capitalism of America in the recent years do not seem to work. The income gap is growing. Their middle class income has been stagnant. Their country fiscal position and unfunded liability is getting larger.....They don't like Obama but the alternatives are no good either. My friends have been making comments like the circus can't operate without animals. There are whole bunch of animals out there now. They think it's pretty scary but then this country has been able to overcome adversity and came out on top. I hope America will reinvent themselves, one more time.
Friday, October 14, 2011
Recent market rebound added 1.3% gains to portfolio. Now stood at 9.3% gains through Oct 13, 2011. At the peak of the market, my Turtle portfolio gain only 20%, so I am not upset about it. I estimated that I can pick up another 2 more points when market is having less bad news.
I guess I shocked many from time to time but this time would be a Richter 8 quake shocked. Some reacted more than others but I believe these are good people. Those care enough will voice out their opinions. Thank you for everyone concern. I have not lost my minds nor I have been capitulated.
I see a number of stocks got bashed down a lot more than the index got bashed down. I know I have sold many strong fundamental stocks. I am thankful for that because it is precisely they are strong I did not suffer much, not like 50-60% down from the peak.
I believe a lot of people regretted that they sold their stocks two weeks ago, when they saw the markets accelerated sharply right after the hair pin turn, the got panic and rushed back to buy crazily.
Bad macro news from time to time will flush out the weak holders. With plenty of cash now, I am going to focus on my next few steps. It is time to identify the most mis-priced stocks now. Don't get me wrong that I want to jump back to market now. All I am saying is our time now should be devoted to look at companies rather than macro pictures. Macro big picture is a done deal, it will continue to drift for a while.
Have a nice weekend.
Thursday, October 13, 2011
I was wondering if people ever consider risk and reward other than thinking of going for a quick flip. It's like going to Jenting casino. I'm going to do the last bet, if I win I will go home. Most people rarely stick to his/her promise and end up going home empty handed with sappy eyes.
I have a quiz question for today:
I assign the targets and probability arbitrary but I think they are right directionally. I cannot understand why people want to take a small pay off of 1-5% for 50-50% chance.
The pay-off is a better at higher targets but the odds are less than 50% in short term(1 year or less). Some may want to challenge me saying I assign low probabilities in the latter scenarios. I am sure many can agree with me that the economic conditions are going to be weaker, 3-6 months from today, why should we then assign higher probabilities for less favourable conditions?
I rather step aside when risk and reward situation is not compelling. Why risk our money for a small gain but with larger downside potential?
Wednesday, October 12, 2011
More headwinds ahead of us.
1. Indonesia cuts interest raise is an act of acknowledging of slowing down. The rest of South East Asian countries are launching stimulus spending. I applaud their efforts. It is good to be proactive.
2. US is acting stupidly but hopefully in a more controlled manner. The senate passes a bill allowing them to raise import duties from China. Protectionism is bad for global trade. Childish act!
3. Alcoa is missing the analysts' estimate. Not a big deal and nothing wrong with Alcoa, just the stupid analysts are being too optimistic.
I noticed local retail investors made up almost 30% of daily trading in the recent weeks. This number is high by historical standards.
Tuesday, October 11, 2011
Surprisingly too the markets are zooming up Fast and Furiously. Changing my stance now will make me look like a clown.
It's a powerful counter rally is going on now. There are truly a number of contrarian indicators in favor of bulls.
(1) The capitulatation indicator done by BCA Research shown that they are pretty close to the past market bottoms but no where near to extreme events or extreme bearish market like '74.
(2) Equity dividend Yield is better than 10-year yield. I mentioned this anomality before.
However, despite of all the rallies here and there, the markets are still stuck in a range bound. London FTSE and German DAX to represent European markets are in ping pong bounce.
S&P has not reached the resistance level of the upper range bound. May be still has a bit more to go.
I need to see a breakout from the range bound to be convinced to participate in the short term. Or else we will be like a dog chasing its own tail, keep chasing the wrong direction. Bought at the resistance level and sold at the support level.
Monday, October 10, 2011
She writes every piece beautifully and thoughtfully. The English is superb. I like her writing styles. She writes like a novelist, poet, philosopher and Freud psychoanalyst.
Her writings will stimulate your minds to think a lot. About many things. She questioned a lot about the purpose of our existence. In school of philosophy, we called it existentialism. To understand more about this subject click on this link
She has another advantage, being a woman, she can express more openly compared to men. She will expose your irrationality, your fantasies, your dark secrets, etc. She can peel layer by layer of your defensiveness and travel deep inside your subconscious level. Understanding your subconscious minds will help you to deal with a lot of problems. A lot of times, many problems are solved by itself, by just surfacing the unconsciousness.
My track record of picking blogspot has been terrible. She thought of closing her blog many times but I hope her blog will be in business for a longtime.
Sunday, October 9, 2011
This time round, the portfolio stood at $ 44 k. If I were to get it wrong. If the markets were to drop another 15-20%, this portfolio can suffer losses of $ 8 - 9 k. It will make it more difficult for me to recover or improve my return.
The following chart show 2 obvious stages for bull run after bottomed out in March 2009. The first stage delivered almost 50% gain within 5-6 months before went sideways to make way for the second phase of bull run. The second stage delivered additional 30% gain but went sideways for most of the time. To win big, I must make sizable bets after the market has a huge decline. The window is quite small and that is why I am willing to forgo some technical rebounds and prefer cash instead.
There are a few developments concerned me. Hang Seng Index entered bear market around August 2011 and suffered about 30% decline when it topped out from 25,000 level. Usually the index can fall by another 20-30% after it entered bear market.
Our market usually lagged behind more risky markets about 2 - 3 months due to the perception of safe haven.
There are a lot of people argued that about the US market is just short of 1% to enter bear market and followed by key reversal day have caged the bears, for now. But I believe these bears will not give up easily. It's a matter of time they will revisit the previous low again.
Two. Huge breakdown in the copper market really concern me. It's a strong indication of China market is slowing down.
Three. The European sovereign debt issues have stolen the limelights. The worry of slowing down or possible of a recession was not discussed much by the media yet. Soon, instead of watching political theatrical plays in Opera London, people will buy a few tickets to watch Broadway shows in New York.
Four. I believe the authorities are running out of policies options to tackle anaemic growth problem. The emerging economies have to slow down so that it can reduce growth in exchange for friendlier commodities price. Falling commodities price will lend to slower inflation rate. Taming inflation will, then, only giving them some rooms to ease their interest rate.
Five. The big bears are not out there yet. When these big bears start to appear on TV regularly. When big bears running their bad news windmill at full speed. That will reinforce the downward spiral.
Six. Possible Malaysia GE may bring some cheers but it's a double edges sword. If they lose in next GE or deliver some nasty negative news post GE. The downside risk will be tremendous.
Seven. This is not a concern but I think the possibility of year end Santa rally will make people feel at ease, cheering the bull markets are here to stay. The bears are dead. The complacent market participants may get slaughtered later. Will Santa rally turns into a Trojan Horse troy?
Saturday, October 8, 2011
Malaysia boleh. As your responsible gomen, we will cut our defit to 4.7% of GDP. Errr.........How?
We keep our expenditure roughly the same like this year and raise our revenue assumption and GDP growth. What if they are wrong? Despite of having a good year for 2011, yet our deficits have gone up to 5.5%. I believe 2012 deficit will stay at elevated level of 5-6%.
I won't forget his promise to reduce our budget deficit by 50% by 2015 when he took over the PM office. 2.8% he promised. It's fast approach 3 years. Are you still on track, Mr. PM? Or you wish I don't have such a good memory?
Our hero Teh Hong Piow echoed that GDP growth of 5-6% is achievable. Come on Dato. I believe you must be reading canned script prepared by our gomen. You just want to do a bit of PR sucking up to the gomen. If this is true, you make me feel less worry. If not, my knees are growing weak. How can I count on you to take care of Public Bank when you talk like that one? Sell Public Bank, buy Hong Leong is increasingly getting louder to me now.
Read the rest here
On a second thought, may be it is good to let the gomen to have their own delusions. When the slow down is here. And they are in the middle of election. The heat of discontent will add more tailwind to already growing momentum for opposition party to take over. That will be game over for our gomen.
Friday, October 7, 2011
I felt very strange when I looked at my earlier scorecard. How come my book value was 50 k but but my portfolio gain was only 3 k plus. It's either I overstated my assets or I under-recorded my investment gains. Tried to trace my records but finally gave up. I resorted to rebuild the whole portfolio from ground up by using old fashion way -- Double Entry. Finally got the book balanced. See this trial balance. A lot of works but worth it. Very satisfied now.
Since it's only involving a few simple accounts, I can do it with Excel. If I can get accounting software will be great but I think it's quite costly.
Never I anticipated this simple tracking has evolved into more and more complex as time grow. Not sure how my cash was overstated by almost 7k. Luckily the rest of the stuffs were correct. My cash now stood at 33 k.
Thursday, October 6, 2011
Tuesday, October 4, 2011
Saturday, October 1, 2011
The only certainty in the market is V.
V for volatility.
I follow Mark Hulbert column regularly.
In his latest write up he discovered a very unusual phenomena.
Since 1958, dividend yield of DJI has never gone below 10-treasury yield. Since 2008-2009 financial crisis, this is the second time dividend yield is higher than 10-yr treasury yield.
This phenomena was a norm from 1929 crash to 1957. The market volatility was a lot higher prior to 1958 because there was persistent memories of Great Depression, two world wars, etc…… Investors are/were demanding for a lot higher dividend yield during high volatility period.
If you want to read this article, click here
After read this article, it prompted me to consider the following strategies:
1. Make friend with volatility. Buy on support and sell on resistant.
2. Never fully invested. I am contemplating to raise cash for my Turtle portfolio(long term portfolio). Cash will not earn me money but when opportunities arise, it can be very useful.
3. Buy high dividend yield stocks. These companies preferably make things that people use everyday.
4. Invest in hard assets but invest sparingly in property counters.
5. When commodities stocks are depressed, don’t be gun shy, pull out some money and BUY!