AerCap Holdings N.V. (AER): Intrinsic Value and Trailing PEG


AerCap Holdings NV is an aircraft leasing company. Its major activities include leasing, financing, sales and management of commercial aircraft and engines. It operates in Mainland China, Hong Kong, Macau, USA, the Netherlands, and few other countries. They also provide aircraft asset management and corporate services to securitization vehicles, joint ventures, and other third parties. Through its subsidiary, the group also provides engine leasing, certified aircraft engines, airframes, and engine parts.

  • AerCap Holdings Is A Value Investor’s Dream Stock (read here)
  • AerCap Holdings (AER): Owned by savvy investors (read here)
  • Mohnish Pabrai Buys AerCap (read here)

I was surfing the web, and the name AerCap kind of popped up. I was curious about this company/stock’s fundamentals and decided to do a quick study.

It is listed in the New York Stock Exchange.

As per its financial fundamentals (see below), it is not perfect.


Looking at the above figures:

The Good points:

  1. In terms of valuation, P/E (7.37) and Price/book ratio (0.94) is low.
  2. The PEG is also below 1 which is good.

The Bad points:

  1. In terms of Management effectiveness, the figures are not great. Eg. ROE is not greater than 20%.
  2. Balance sheet-wise: There is a lot of debt. After subtracting the cash, there is a net debt of USD25.55 Billion.
  3. Nevertheless, the current ratio at 1.19 is too high. A high current ratio can be a sign of problems in managing working capital. (Acceptable current ratios vary from industry to industry and are generally between 1.5 and 3 for healthy businesses).
  4. The current ratio at 1.19 is low. (Acceptable current ratios vary from industry to industry and are generally between 1.5 and 3 for healthy businesses).
  5. There is no dividend yield to speak of.

Seems like there are more bad points than good.

Trailing PEG and Intrinsic Value
Let’s do a quick study on the current share price of USD 49.90 – via Trailing PEG and Intrinsic Value.

1) Trailing PEG

P/E: 7.87
Dividend Yield (%): N.A.
10 years EPS compound growth rate: 10.65


The trailing PEG will be 7.87/10.65 = 0.74. Which is good (below 1).

2) Intrinsic Value

I am going to use 2 methods to calculate the intrinsic value.

Method 1

First, let’s look at the estimated 10 years earning growth which is 10.65%. Let’s assume a 20% discount, the figure will be 8.52%.

F = P(1+R)N

  • F = the future EPS
  • P = the starting (present) EPS (USD 6.32)
  • R = compound growth rate (8.52%)
  • N = number of years in the future (5)

Estimated future EPS: 9.51

I will be estimating the future PE of AerCap to be 8.64.

Average of the PE from 2007 to 2016.


Future Stock Price


  • P = future stock price
  • EPS = future EPS
  • PE = future PE

Hence future stock price of AerCap is 9.51 x 8.64= USD 82.1664

Intrinsic Value


  • P = present (intrinsic) value
  • F = future stock price (82.1664)
  • R = MARR (15% or 0.15)
  • N = Number of years (5)

Hence, the intrinsic value of AerCap Holdings N.V. (AER) is USD 40.9

Given the current stock price of AerCap Holdings N.V. (AER) on 22 Sept 2017 is at USD 49.90, there is a NO margin of safety base on the estimated intrinsic value.

Method 2

However, if we factor in Risk-Free Rate, Equity Risk Premium, Beta, Operating Cash Flow and Total number of Shares Outstanding, the intrinsic value of AerCap Holdings N.V. (AER) is USD 73.54 (see below).


Given the current stock price of AerCap Holdings N.V. (AER) on 22 Sept 2017 is at USD 49.90, using this 2nd method there is a margin of safety (around 32%) base on the estimated intrinsic value.

In gist

I was initially curious to know about the intrinsic value and trailing PEG value of this stock.

However, upon looking at the financial fundamentals, this company is not as perfect as I thought it to be.

The trailing PEG and method 2 of the Intrinsic Value seem to suggest that the stock is undervalued. However, I am not comfortable with its high debt level and low management effectiveness (eg. ROE) and no dividend yield.

Posted in US Stocks | Leave a comment

Timing (TalkMed and Chipotle Mexican Grill)

AAEAAQAAAAAAAA1YAAAAJDE1NzM4Y2YzLTljMmEtNGU4Zi05MmYzLTRmOTBjMDNhZjY4MA.jpgMaybe the title should be “Mistiming”. I have a long history of having a bad timing in buying shares.

I was reading the recent article in the Sunday Times (see below).

  • The best investors sit on plenty of cash (read here)

One statement resonates deeply with me: “But holding cash can be very painful financially since it earns me virtually nothing.”

It doesn’t help when you read about others with much bigger portfolio (heavily invested) in the upmarket reaping record high dividends. On track for their yearly dividend payout target. Somehow, the notion of a sharp market downturn does not faze them. No risk no gain.

I haven’t invested much since mid-2015. Sold some shares in 2017.

However, I did dip into 2 counters some time back. First is TalkMed, and the second is a US counter, Chipotle Mexican Grill. Both saw sharp drops in their share prices prior to when I bought their shares.

I see them as situational distress declines. Even though this does not totally ‘eliminate’ the risk of further drops (as shown by TalkMed), especially if there is a worldwide market crash …. but it I do hope the majority of the issues have been factored in the price which I bought them in.

Actually, I am kind of anticipating a crash anytime soon (but I am still invested)….



I have previously done the intrinsic values of their share prices and studied these companies business before thinking about buying their shares. The share prices which I bought the stocks were near or below the intrinsic values calculated then.

Of course, things have changed. TalkMed CEO was suspended for 8 months (which resulted in the sharp drop), while Chipotle was hit by reports of rats, norovirus at its restaurants.

In the near term, all these will have the material impact on their earnings and performance. In fact, someone (in InvestingNote) has mentioned that TalkMed share price should be SGD 0.35 given the CEO suspension and its consequential impact to its earnings.


However, I am looking way beyond that …… frankly currently I am waiting for share prices to drop further (or weighing if I should wait for a crash and build up my war chest more). Perhaps here I am taking a more bottom-up approach in these 2 cases. Hope they are not value-traps hahahaha.. been there.

Back to why I still invested (even though I am anticipating a crash or correction)… I dunno. For one, I suck at market timing. Sure, I could sell now, wait for the crash and buy later when market trend up… if only life is that simple. There is always this psychological barrier as to when is the right price to buy (won’t it go lower?)….

I basically see myself as a collector of stocks (you know like collecting stamps… always have the album with stamps inside). Just keep collecting, and buy when prices are low. Just stick to the values you have calculated.

Over time, I have also paid more attention to the dividends I received (though I am not really a true blue dividend investor). Hope, it (the number of shares) would keep increasing regardless of market conditions (anyway, I can’t predict the market).

FYI, I am sitting on quite a significant unrealized loss for the TalkMed counter, given the continued drop in its share price (even after the initial knee-jerk drop after the announcement of the suspension). Talk about “bad timing”… :p

Actually, quite a number of stocks have taken a beating (QAF, Singapore O&G, Raffles Medical, Colex, 800 Super, Isoteam, Dutech, CEI Ltd, Sarine Technologies….)

Some of them are low liquidity stocks – which means that their stock price fluctuations can be quite extreme. In the case of Colex, its share prices are basically little changed for many days before taking a huge drop recently.

While the US Market S&P500 is reaching new highs, the Singapore STI has kind of went the other way. :p

Posted in Healthcare Stocks, US Stocks | 2 Comments

Moya Holdings Asia Limited – 4 Things You Need to Know Now


Moya Holdings Asia Limited is a stock that has come out of nowhere and has won many investors’ hearts.

Just look at the chart below. The stock was trading at SGD 0.029 on 18 Feb 2016. On 18 Aug 2017, the stock price was SGD 0.107. That is an almost 270% increase in approximately 1.5 years.

By the way, in Jan 2016, Moya Holdings Asia issued a 5 for 4 rights issue (see below).

  • Moya Asia: 5 For 4 Renounceable Non-Underwritten Rights Issue At S$0.033 Each. (read here)


What could be behind this astonishing good stock performance?

“As I look back on it now, it’s obvious that studying history and philosophy was much better preparation for the stock market than, say, studying statistics.” Peter Lynch

Moya Holdings Asia is a penny stock. Before I continue, my post here is basically about the business and fundamentals of the company (behind the stock price). It is not a technical analysis of the stock price movement, or even about the price itself.

If your intention is to speculate on this penny stock, this post is not for you.

Moya’s business is based in Indonesia. And its primary business (water treatment solutions) is way beyond my circle of competence. Frankly, if one is viewing this stock as a mid to long-term investment, I reckon it would be advisable to first know more about the company and the management, rather than look at the stock price. For me, I would much rather err on the side of caution if I am placing good money in this stock. I neither know their service/product or know about the business and government policies in Indonesia pertaining to water treatment.

A lot of what I have gathered in this post is from what I have read. It is also questionable how reliable some of these online sources are. However, again, if you are to invest in this stock, please do your own research first (convince yourself).

  • Warren Buffett: The Difference between Investing, Speculating and Gambling (read here)

So what is the business of Moya Holdings Asia about?

Moya Holdings Asia Limited, an investment holding company, engages in the investment and development of total water solutions in Indonesia. The company offers a range of water treatment solutions to government, including commissioning, operation, and maintenance of various water treatment plants on design, build, operate, and transfer arrangements. The company was incorporated in 2013 and is based in Singapore. Moya Holdings Asia Limited is a subsidiary of Tamamris Infrastructure Pte. Ltd.


Until recently, it was a just small water play based in Indonesia. Moya Holdings has three 25-year Build-Operate-Transfer (BOT) projects in Bekasi Regency, Tangerang and Makassar, which were secured in August 2011, February 2012 and August 2013, respectively.

1) The Indonesian Tycoon Factor


  • MOYA HOLDINGS ASIA: Salim Group takes control of Indonesian water play (read here)

This is an over-simplification of the transformation, but generally speaking, with Mr Anthoni Salim’s involvement, Moya Asia is now part of a chain of companies and is suddenly given a cash hoard (that is until recently till the acquisition of Acuatico Pte. Ltd.).


Note: Tamaris Infrastructure (whereby Mr Salim is a controlling shareholder) is part of an Indonesian-based group which is presently principally engaged in the investment, development, construction, and operation of hydroelectric power plants.

“Mr Salim’s involvment is through a  series of companies. Firstly, he is the controlling shareholder of PT Tritunggal Intipermata which, in turn, is a controlling shareholder of another company. 
And so it goes for another six companies until we reach Tamaris Infrastructure, in whose name the Moya Holdings shares are held.
So in the space of less than a year Moya Holdings finds itself with loads of cash in hand from, mainly, a change of controlling shareholders.”


Source: Moya Holdings Asia Second Quarter Results HY2016 dated 11 Aug 2016

A bit about the multi-billionaire Anthoni Salim:

  • Regional magazine GlobeAsia ranked him as the second richest Indonesian in 2016, with $11 billion in net worth, just below the wealthiest Indonesians;
  • The net worth of Salim’s shares in PLDT, Metro Pacific Investments Corp., Philex and Meralco alone is about $4.5 billion. That would make him — if Forbes ranked him among the country’s richest — No. 3 richest magnate in the Philippines, the only foreigner in the list. 
  • Salim who is a foreigner in the Philippines, became the country’s media mogul despite the fact the Constitution there prohibits even a single coin of foreign money invested in the press.
  • Salim’s main sources of wealth in the Forbes and GlobeAsia listings have always been reported as Indofood (the world’s biggest noodle maker) and First Pacific.
  • Anthony Salim is a crony of Suharto (second President of Indonesia).


  • Was the Indonesian Salim Aquino’s biggest crony? (read here)
  • The newest, yet hidden, Philippine oligarch isn’t even Filipino: Anthoni Salim (read here)
  • Water privatisation in Jakarta (read here)

2) Surge in profitability




Enough said. :p

3) The Fish that Swallowed a Whale


“Singapore-listed minnow Moya has swallowed Acuatico, a rival developer with nearly ten times its revenue.”-Read here

On 11 June 2017, Moya announced that it has acquired Acuatico Pte Ltd for US$245.18 million (sum of the Purchase Consideration of approximately US$92.87 million + refinanced Acuatico existing loans in the principal amount of approximately US$152.31 million) (read here and here).

Maybe to put it in context… The revenue & net profit of Moya Holdings Asia in FY 2016 was SGD 19.3 mil & SGD 2.967 mil respectively. It has three 25-year Build-Operate-Transfer (BOT) projects. Its peers in the Singapore Stock Market consist of China Everbright Water (Revenue (ttm): SGD 359.68 mil) and Citic Envirotech (Revenue (ttm): SGD 553.25 mil).

Acuatico’s audited net profits for FY2016 is, approximately S$35.57 million (as compared to Moya FY2016 S$2.967 mil). That (Acautico’s profit) is almost 12 times Moya’s profit.

Yes, improving Profitability + strong Tycoon backing + Synergy with related companies. However, still, Moya is a small fry before the acquisition.

Now a bit about Acautico Pte Ltd (read here):

  • Acuatico is the number one largest water firm in Indonesia (by the way, Indonesia is ranked no. 4 among the top 10 countries with the most population in 2017).
  • Acuatico produces nearly 10,000 liters/second and caters to more than 2.8 million customers, some 90% of them in its concession area of East Jakarta. Palyja, an abbreviation of PT PAM Lyonnaise Jaya, is a close second in size to Acuatico, with about 8,500 liters per second, covering West Jakarta.
  • Acuatico, operating under the brand Aetra in Jakarta, is known formally as Acuatico Pte Ltd, a Singapore company. The Acuatico business covers the entire system from the water processing plant to billing customers.

Now, what struck me about this acquisition are 3 things:

  1. The Price. US $245.18  million (9.5 x FY16 pretax profit of US$25.76 million). The P/E ratios (ttm) of China Everbright Water, Citic Envirotech and Sanli on 18 Aug 2017 are 25, 20.43 and 10.71 respectively. At 9.5 times, for the No. 1 water firm in Indonesia (4th most populous country in the world) , it does appear to be a huge bargain. The Tycoon connection perhaps?
  2. A reverse takeover, RTO (aka Back-door listing) rather than IPO. Yes the RTO of Acuatico does bypass the lengthy and complex process of an IPO exercise – and may results in cost savings. But still, Singapore RTO listings in recent times, do appear to perform poorly as compared to their IPO counterparts – in terms of share price performance.
  3. Post deal, the group will flip from net cash position of $58.5m to net debt of $302.9m, with 2.5x net gearing.


  • RTOs, IPOs performing differently on SGX (read here)
  • Initial public offerings versus reverse takeovers: A Singapore perspective (read here)

4) Is the Whale, a Whale of Cash Flow or a Whale of Debt?

Acautico Pte Ltd is a private company, hence, I was unable to obtain free copies of their historical financial data. Nevertheless, I read what I can find online.


a) Debt:

In the acquisition announcement (read here), in the small print, the below was stated:

The aggregate consideration given for the Transactions was approximately US$245.18 million  (“Total Consideration”), being the sum of the Purchase Consideration of approximately US$92.87 million and the Assignment of approximately US$152.31 million (as described in section 6 of this announcement).


In Section 6 of the article, the below was stated:

The Target Group (eg. Acautico) has in effect refinanced its existing loans in the principal amount of approximately US$152.31 million via the assignment to the Purchaser (eg. Moya) (the “Assignment”). The Assignment utilized the Purchaser’s banking facilities arrangement….


Simply put, Acautico has debts. Note: Net tangible liabilities of approximately US$133.71 million as at 31 December 2016.

b) Questions on how Acautico derives its Revenue:

As per this article:

The Jakarta concessions are based on an unusual financial arrangement. It consists of water tariffs collected by the private operators (eg. Aetra which is a subsidiary of Acuatico Pte. Ltd) on behalf of the provincial government of Jakarta, which is separate from water charges paid by the government to the private operators. The original idea was that tariffs billed to customers would be higher than charges paid to the private operators. The resulting surplus would have allowed the government to pay back the debt owed to the central government resulting from international loans.

Deficit between water tariffs and water charges. There are two problems with this charging system:

First, the water charge is indexed to inflation and is supposed to be automatically increased every six months, while water tariff increases have to be approved by the City Council.  In the aftermath of the East Asian Crisis, the City Council froze the water tariff, thus creating a deficit for the government-owned Asset Holding Company (PAM Jaya) as early as the second half of 1998.

Second, the more poor people were connected the lower the average tariff collected would become because of the tariff structure and the greater the deficit of the public holding company (PAM Jaya) would become since for each new poor customer it (PAM Jaya) had to pay a charge to the private companies (eg. Aetra) than was higher than the tariff paid by the customer.

Basically, the above system, to me appears unsustainable. Near the end of the article, it mentioned the following (emphasis mine):

Aetra’s (which is a subsidiary of Acuatico Pte. Ltd) 2010 profit was Rupiahs 142 billion (USD 16 million). However, these profits are based on the assumption that the unpaid water charges billed to PAM Jaya will be fully paid to the operators. Actually, these charges are not being paid and writing off these unpaid bills, as it may become necessary, would significantly reduce the profits shown on the financial statements of the companies.

As per this article, it states that PAM Jaya and the Jakarta administration will accumulate a staggering  Rp 18.2 trillion (SGD 1.82 billion / USD 1.33 billion) in debt if their contracts with PT. Palyia and PT. Aetra of Acautico, continue until 2022.

download (1).jpg

c) Court Case against Privatization (since 2013)

On 24 March 2015, the Central Jakarta District Court ruled that the terms of the privatization of Jakarta’s water violated the common right to water guaranteed by Article 33 of the Constitution of Indonesia. The government of Indonesia and the private operators lodged an appeal against the court decision. The concessions remained in place pending a final court decision. In February 2016, the appeal court reversed the district court decision on the ground that the claimants did not have the standing to bring the claim. The claimants brought an appeal to the Supreme Court.

  • Jakarta Court cancels World’s biggest Water Privatisation after 18 year Failure (read here)
  • High court rules in favor of Jakarta water privatization – PressReader (read here)


So, these left me wondering about Acautico’s audited net profits for FY2016, which is approximate S$35.57 million. Will it be sustainable in the long term? 

And how much of these profits are on PAM Jaya’s books. Will the Audit company question the charges not paid by PAM Jaya? Can a Singapore listed company controlled by Indonesian Salim Aquino demand the pay back from Indonesian government-owned PAM Jaya?

What if the appeal to the Supreme Court against privatization of Jakarta’s water is successful? 

You decide for yourself.

What do I know? I just invest in a rubbish collecting company, deathcare company…etc.


“There seems to be an unwritten rule on Wall Street: If you don’t understand it, then put your life savings into it. Shun the enterprise around the corner, which can at least be observed, and seek out the one that manufactures an incomprehensible product.” Peter Lynch

Posted in Moya Holdings Asia Limited | 2 Comments

Raffles Medical, TalkMed, Singapore O&G – The 2 Things these Stocks Taught Me Now

You know, it was only recently that many of the above-mentioned healthcare stocks were darlings of the Stock Market.


The allure of healthcare is easy to understand: With an aging population, rising affluence of the middle class here and abroad, and a business that appears immune to the economic cycles/downturn…. what can go wrong?


1) When the Singapore Market Rises, It Doesn’t Raise All Boats (and Vice Versa)

Let’s look at the recent Stock Price performance of the 3 stocks over a one year period.

Raffles Medical Group Ltd.

Over a period of one year (from 11 Aug 2016 to 10 Aug 2017), the share price has dropped from a high of SGD 1.55 to SGD 1.13. That is an approx. 27% drop.


TalkMed Group Ltd

Over a period of one year (from 11 Aug 2016 to 10 Aug 2017), the share price has dropped from a high of SGD 0.89 (on 24 April 2017) to SGD 0.64 on 10 Aug 2017. That is an approx. 28% drop. 



Singapore O&G Ltd

Over a period of one year (from 11 Aug 2016 to 10 Aug 2016), considering the stock-spilt (1 for 2) on 15 May 2017, the share price has dropped from a high of SGD 0.71 (27 April 2017) to SGD 0.49. That is an approx. 31% drop. 


So how did the STI fare anyway?

From 10 Aug 2016 to 10 Aug 2017, the STI Index has risen from 2875 to 3323, that is a 15.6% rise.

And the peak was on 27 July 2017, at 3354. So the price dropped only slightly since then to 3323 eg. 0.7%.


If your portfolio has only these 3 stocks, I would not be surprised, if you thought that we are currently having a stock market correction/crash or recession, etc… Seriously, what happened? Aren’t healthcare stocks suppose to be resilient, defensive?

People stop falling sick? Need less healthcare? Someone found the fountain of youth?

2) A Lot Of Investors Forgot (or Did Not Know) Why They Bought The Stocks In The First Place

I do not want to go into the specifics, but I do understand that the recent quarter earning reports of Raffles Medical, TalkMed and Singapore O&G were anemic (if not poor).

Raffles Medical:

The net profit after tax attributable to owners of the Company increased by 0.5% from S$16.7 million in Q2 2016 to S$16.8 million in Q2 2017. Revenue growth of the Group was offset by higher staff costs and consumables used.

Singapore O&G:

The Group’s net profit after tax attributable to shareholders decreased by S$0.29 million or 6.4%.

The decrease could be attributed to:

  • Dermatology segment, however, felt the impact of lower medical tourism dollars and it saw a decline of S$0.41 million, a decrease of 9.4% over the same period last year.
  • Employee benefits expense increased by S$0.41 million or 7.9% from S$5.22 million in 1H 2016 to S$5.63 million in 1H 2017.


The 2nd Quarter revenue decreased by $1.53 million or 8.8% YOY. The Group recorded profit after tax of $7.88 million in Q2 2017 as compared to $9.86 million in Q2 2016.
The decrease of $1.98 million or 20.1% was mainly due to a decrease in revenue, higher operating expenses offset by a decrease in the share of loss of associate.


Before I continue, just FYI, I am vested in TalkMed. Hence, I might be bias in my opinion.

Among the trio, the worst hit would probably be TalkMed. In terms of earnings, it had the worst quarter results among the 3.

In addition, on 28 June 2017, TalkMed’s chief executive officer (Ang Peng Tiam) and main revenue contributor of Catalist-listed TalkMed Group, was given an eight-month suspension by the Singapore Medical Council after a failed appeal against a misconduct conviction (read here).

In fact, TalkMed stock price has already been trending down prior to the announcement of the suspension. Of course, it did drop sharply after the annoucement.


Business wise, what has changed? Nothing.

The macro trend of the aging population, falling birth-rate and rising middle class did not change as well.

True, in their earning reports (all these 3 stocks), there was always this mention of the softening of the medical tourism. However, that should not come as a surprise (given the high valuation of the Singapore currency) and the competition from cheaper healthcare providers in neighboring countries. These are known facts.

Earnings have dropped because of expansion, as in the case of TalkMed (eg. Higher overhead expenses incurred by a subsidiary, Stem Med Pte. Ltd. (“Stem Med”) of $0.34 million) and Raffles Medical (new hospitals and extension to existing hospital)… plus other factors like rising staff costs, legal fees, etc.

But What About TalkMed Dr Ang’s eight-month suspension?

In the case of TalkMed, I did a post on TalkMed and Singapore O&G recently (in April 2017), see below:

  • TalkMed Group Ltd vs Singapore O&G Ltd (read here)

In it, I mentioned the following “However, from the point of view of an investor, there is also a certain risk in choosing a company that is highly dependent on the competency of a few highly qualified (and highly paid) professionals.”

Doctors are humans, and being humans, there is always this unpredictable aspect — humans err, humans leave or quit, etc. That is the risk one should expect before buying the stock. Yes, the risk is low, but there is always a possibility it would happen. Some people call it the “Known Unknown”.

I am sure many investors when they bought at the high price a few months back (and at a high PE), they would have been aware of the risks. If I can think of it, I am sure many others would have thought so too. So it is a known risk. And it could happen to any of the healthcare provider stocks. One of their star doctors could make a blunder or quit.

Now that it has happened… will earnings and revenue be impacted… of course it will. In the short term.

However, in the long term (and I mean Buffett’s definition of long term eg. 10 yrs)…Will the earnings be adversely affected by Dr Ang’s one singular mistake? I like to think not so much.

It is a mistake by Dr Ang, and when it is pertaining to lung cancer, it is literally a fatal mistake…… in the near term. However, sometimes, people forget what Dr Ang has achieved over the years (read here), when all the news are talking about the charges. Both of these (the blunder & his achievements) are facts.

Peter Lynch once mentioned that he finds it amazing that people will spend more time researching a holiday than they will researching an investment. “Investing without research in like playing poker without looking at the cards.

Many times, we invest without an understanding of the company and its business (and the stock price valuation). And often when questioned, we do not know why we bought it in the first place, other than the fear of missing out. That is fine when things are rosy, stock prices are going up… but it is only when the tide change, do we realize this fact.

I was watching this old video clip of a talk by Peter Lynch (watch here, fast forward to 1.27). Think that portion is relevant here (even after all these years).

There have been a lot of discussion on the above-mentioned healthcare stocks. Many investors are cutting loss, and fearing that the prices will drop further (since valuations aren’t really cheap). Really? Were they ever cheap, recently…in recent months, years?

I have been tracking Raffles Medical for years, and I have yet to find it ‘cheap’. Singapore O&G and TalkMed have relatively a short history, as listed stocks, and unless you bought their stocks during the IPO, I think it is hard getting them at cheap valuations given the fact that their stock prices have risen significantly during their short ‘history’.

I don’t particularly like to just look at the P/E when evaluating stocks, but was looking through their historical P/E ratios below.


The last time when Raffles Medical had a P/E of less than 20 was in 2008. I am assuming it is ‘expensive’ with reference to 2008 valuation? Wonder how many of us have held the same stocks for close to 9 or 10 years.


Singapore O&G has a really short ‘history’ (as a listed stock), actually it was never really cheap in my opinion, just looking at the P/E. In fact, the P/E valuation now is even lower.


TalkMed has a really short ‘history’ as well… the P/E is higher recently, probably due to the poor earnings in recent quarters. But still, it is not way off from the S&P 500’s P/E, Singapore O&G and Raffles Medical’s P/E.

Healthcare stocks are known to have higher valuations in comparison to the broader market. So I really doubt, one can really get these stocks cheaper than the broader market (well I could be wrong)…

  • Are Singapore Stocks Expensive Or Cheap Currently? (read here)

According to the article above dated 1 June 2017:

  1. As of 31 May 2017, the SPDR STI ETF has a PE ratio of 13.1. 
  2. The long-term average PE ratio: The Straits Times Index’s average PE ratio from 1973 to 2010 was 16.9.
  3. An instance of a high PE ratio for the Straits Times Index: Back in 1973, the index’s PE ratio hit 35.
  • 3 Things to Know about Singapore’s Stock Market Barometer (read here)

According to the article above dated 7 August 2017:

  1. As of 4 August 2017, the STI ETF was trading at a price-to-earnings ratio of 12.4 and had a dividend yield of 3%.

Given that the above figures, I reckon these healthcare stocks will be ‘expensive’ most of the time when taken in comparison to the broader Singapore Market/STI, and solely looking at P/E. And now is no exception.


Look, nobody makes money in every stock they have invested. And there is nothing wrong with losing money… what is wrong is not knowing what you are buying. I do hope that for current investors of these stocks, to question why they bought the stocks in the first place, and why at that price.

I mentioned the following in one of my posts before, but I think it is worth mentioning it here again:

I was watching a video on an interview with Mohnish Pabrai, I was reminded of the Funeral Houses again (click here – you can forward to 31.20 min). He was using the case of SCI  to show how irrational the market can be. Case in point, the Dow was down 300 points for that day, and the shares of all kinds of businesses were consequently marked down including SCI which was down 2% that day. Whatever the reason that caused the Dow to go down 300 has no effect on the business of SCI (did not increase human life expectancy) yet SCI shares were down by 2%.

Posted in Healthcare Stocks, Raffles Medical | Leave a comment

Raffles Medical Group Ltd – 4 Things You Need To Know Now


1) Sudden drop in Share Price

The once mighty Raffles Medical share price seems to be suffering from a bout of flu. For the past one year, its share price has steadily declined from a high of SGD 1.55 to SGD 1.16, representing a 25% drop.


And in the recent month, there was a sudden drop in its share price from SGD 1.29 (31 July 2017) to SGD 1.16 (8 Aug 2017), a more than 10% drop!


“Generally, the greater the stigma or revulsion, the better the bargain.” 

— Seth Klarman


2) Poor Earnings

Earnings in general for the recent and past quarters have been anemic (if not lower) mainly due Raffles Medical’s expansion. And in the recent quarter, there was a hint in the slowing medical tourism.

Earnings per share for the 2nd quarter was at 0.96 Singapore cents, unchanged from previous year’s corresponding quarter.

The company attributed its performance to lower income from the healthcare services division, as well as softer-than-expected demand from foreign patients.

The increase in turnover was offset by higher staff costs which grew 3 per cent year-on-year to $61.7 million. The company attributed this to the recruitment of more specialists, consultants, management and clinical staff ahead of the opening of an extension to Raffles Hospital in North Bridge Road, which will start operating in the last quarter of this year.

  • Raffles Medical Group Ltd’s Latest Earnings: What Investors Need to Know (read here)
  • Raffles Medical Group’s Q2 profits marginally higher (read here)

This anemic performance was also seen in the 1st quarter 2017 results. For instance, revenue was down 1.7% YOY, while earnings per share was down 1.1% YOY.

The Group’s profitability then was affected by the lower wage credit received in Q1 2017 of S$0.7 million as compared to S$1.9 million in Q1 2016.

  • Highlights of Q1 2017 Performance – Raffles Medical Group (read here)

For the FY 2016 performance, revenue was up 15.4% YOY while earnings was again down 0.2% YOY.

The reasons were again similar (as per recent quarter’s) – but increase in staff costs was due to the new medical centre in Raffles Holland V: “The strong revenue performance was offset by greater staff costs, operating expenses and consumables. The increase in staff costs was due to manpower recruitment to cater for expanded business operations and the new medical centre in Raffles Holland V.”

  • RafflesMedicalGroup Announces Record Revenue for FY 2016 (read here)
  • Raffles Medical Group reports 1.3% rise in FY2016 net profit as costs increase (read here)


3) Healthy Cash Position despite Expansion


  1. RafflesHospital Extension: Contribute an additional 220,000 square feet in
    gross floor area. To be completed in 2017.
  2. RafflesHospital Shanghai: 400-bed hospital. To be operational by second half 2019.
  3. RafflesHospital Chongqing: 700-bed international tertiary hospital. To be operational by second half 2018.
  • RMG investments in MCH, RafflesHospital Shanghai (400-bed) and RafflesHospital Extension amounted to S$45.6 million in 2015.
  • RMG investments in RafflesHospitalShanghai and RafflesHospital Extension together with capital expenditure for business expansion amounted to S$14.4 million in Q1 2017.
  • FY 2016: Cash position of S$111.9 million
  • Q1 2017 : Cash position of S$119.4 million
  • Q2 2017: Cash position of S$112.4 million



4) Is the Current Stock Price Cheap?

The stock price as of Raffles Medical Group Ltd on 8 Aug 2017 is SGD 1.165. So is this price undervalued? To give us a clue of that, let’s look at the Trailing PEG and Intrinsic Value of the stock.

a) Trailing PEG 

Trailing P/E: 29.12
Trailing annual dividend yield (%): 1.69


The trailing PEG will be 29.12/(1.69+8.01) = 3. Which is not good (above 1).

b) Intrinsic Value

First, let’s look at the estimated 10 years earning average growth which is 8.01%. Let’s assume a 20% discount, the figure will be 6.4%.

Given EPS and a PE ratio, stock price can easily be calculated for any company. Using the below formula.

F = P(1+R)N where:

  • F = the future EPS
  • P = the starting (present) EPS (0.04)
  • R = compound growth rate (6.4)
  • N = number of years in the future (5)

Estimated future EPS: 0.0545

I will be estimating the future PE of Raffles Medical to be 25.12 (See data from Morningstar below) Average of the PE from 2007 to 2016.


Future Stock Price


  • P = future stock price
  • EPS = future EPS
  • PE = future PE

Hence future stock price of Raffles Medical Group Ltd is 0.0545 x 25.12= 1.369

Intrinsic Value


  • P = present (intrinsic) value
  • F = future stock price (1.369)
  • R = MARR (15% or 0.15)
  • N = Number of years (5)

Hence, the intrinsic value of Raffles Medical Group Ltd is SGD 0.68.

Stock price of Raffles Medical Group Ltd on 8 Aug 2017 is SGD 1.165.  There no margin of safety.

The Trailing PEG and Estimated Intrinsic Value seem to suggest that the current stock price is still not undervalued (not cheap) despite the sharp fall in the price recently.


In gist

Well, business wise, the group is doing well in expanding. A slowdown in Medical Tourism and capital expenditure for expansion could be just a hiccup (from a long term view).. but a prolong depressed earnings performance might cause the share price to be lowered further and present a better buying opportunity.

Investors, in general, do not like unpredictability. The recent expansion and subdued earnings due to expansion seem to suggest that. As demonstrated by the recent share price decline.

“As Graham, Dodd and Buffett have all said, you should always remember that you don’t have to swing at every pitch. You can wait for opportunities that fit your criteria and if you don’t find them, patiently wait. Deciding not to act is still a decision.” 

— Seth Klarman

Posted in Healthcare Stocks, Raffles Medical | Leave a comment

4 Small Cap Stocks with min. ROE 20% (Straco, Colex, Nordic, CEI Ltd) – What Is Their Trailing PEG & Intrinsic Value Now.


These 4 Singapore stocks are small (market capitalization ranging from $300 million to about $2 billion), but if you spend some time going through their annual reports, you would be impressed by their earnings performance.

And their Return on Equity (ROE) is at least 20%.



Market cap: SGD 722.7M

The company develops and operates tourism-related facilities in the People’s Republic of China. The company develops and operates cable car facilities, aquatic related facilities, and dolphin and sea lion performances. It also provides management and consulting services, and project management services to third parties; and creative and artistic content, as well as is involved in the production and management of shows.
Trailing P/E 15.27
ROE 20.26%
Total cash 167.85M
Total debt 58.9M
Total debt/equity 22.95
Current ratio 6.82
Trailing annual dividend yield 2.98%



Market cap: SGD 59.64M

The company primarily engages in the provision of waste disposal services for domestic, commercial, and industrial waste; the sale and rental of equipment; and the repair of waste compactors. It also offers recycling, refuse disposal, and contract and general cleaning services. Colex Holdings Limited provides its waste disposal and recycling services for various clients, including commercial offices, shopping complexes, food courts, cineplexes, residential buildings, and warehouses.
Trailing P/E 9.38
ROE 20%
Total cash 13.82M
Total debt N/A
Total debt/equity N/A
Current ratio 3.58
Trailing annual dividend yield 1.10%



Market cap: SGD 165.11M

The company provides automation systems integration solutions for the marine and offshore oil and gas industries primarily in China, Korea, Singapore, and internationally. It operates through System Integration; Maintenance, Repair and Overhaul (MRO) and Trading; Precision Engineering; and Scaffolding Services segments.
Trailing P/E 12.73
ROE 20.14%
Total cash 32.65M
Total debt 26.02M
Total debt/equity 37.46
Current ratio 2.11
Trailing annual dividend yield 3.10%



Market cap: SGD 97.97M

CEI Contract Manufacturing Limited provides contract manufacturing services to industrial equipment market in the United States, Europe, and Asia Pacific. The company provides printed circuit board and box-build assembly services, as well as equipment design, cable harness assembly, and manufacturing services; and value-added services, such as materials management, circuit layout, prototype and development engineering, metal stamping, cable harnessing, and precision machined components. It also designs and manufactures its own brand of proprietary equipment for the semiconductor industry.
Trailing P/E 11.08
ROE 21.96%
Total cash 11.89M
Total debt 2.5M
Total debt/equity 6.23
Current ratio 2.13
Trailing annual dividend yield 1.24%




A) Trailing PEG

If value is less than 1, it is good.

Trailing P/E Dividend Yield EPS compound growth rate (5 yrs) Trailing PEG
Straco 15.27 2.98% 23.1 0.66
Good (Less than 1)
Colex 9.38 1.10% 34.36 0.27
Good (Less than 1)
Nordic 12.73 3.10% 48.84 0.26
Good (Less than 1)
CEI 11.08 1.24% 20.14 0.55
Good (Less than 1)

Looking at the trailing PEG values, seem like all these stocks appear to be undervalued. Nevertheless, let’s go deeper and study their intrinsic values.

B) Intrinsic Value

First, let’s look at the estimated 5 years earning growth. We are going to use a time-frame of 5 years from now for this purpose. Given EPS and a PE ratio, the stock price can easily be calculated for any company. Using the below formula.

F = P(1+R)N where:

  • F = the future EPS
  • P = the starting (present) EPS
  • R = compound growth rate (Using the 5 yrs CAGR with EPS. However let’s take a 20% discount, as I am not really sure if growth can be maintained.)
  • N = number of years in the future (5)
P = the starting (present) EPS R = compound growth rate  (Which is 20% less than 5 yrs EPS growth rate) N = number of years in the future (5) F = P(1+R)N
Straco 0.05 18.48 5 0.12
Colex 0.04 27.49 5 0.13
Nordic 0.03 39.07 5 0.16
CEI 0.10 16.11 5 0.21

Future Stock Price

P = future stock price
EPS = future EPS
PE = future PE

Future PE of Straco: Average of PE from 2007 to 2016 (see below) = 13.44


Future PE of Colex: Average of PE from 2009 to 2016 (see below) = 10.66


Future PE of Nordic: Average of PE from 2010 to 2016 (see below) = 9.02


Future PE of CEI Ltd: Average of PE from 2007 to 2016 (see below) = 9.79


EPS PE Future Stock Price
Straco 0.12 13.44 1.61
Colex 0.13 10.66 1.39
Nordic 0.16 9.02 1.44
CEI 0.21 9.79 2.06

Intrinsic Value

P = present (intrinsic) value
F = future stock price
R = MARR (15% or 0.15)
N = Number of years (5)

P = present (intrinsic) value F = future stock price R = MARR (15% or 0.15) N = number of years in the future (5) Stock Price on 4 Aug 2017 % Margin of Safety
Straco 0.80 1.61 15 5 0.84 N.A.
Colex 0.69 1.39 15 5 0.45 53.3
Nordic 0.72 1.44 15 5 0.42 71.4
CEI 1.02 2.06 15 5 1.13 N.A.


In gist

Using intrinsic value and trailing PEG is one way of judging if the current stock price of the listed company is undervalued (or not). However, it is not a fool-proof way. One need to know the business of the company well (is it cyclical, does it have an economic moat etc)….

Nevertheless, it is good to keep these numbers in mind.

It does appear that Colex and Nordic stocks appear to be undervalued.

Posted in CEI Limited, Colex, Nordic Group Limited, Straco | 3 Comments

Bike Sharing and ISOTeam – 3 things you need to know now


If you haven’t heard about it…ISOTeam is joining the bike-sharing craze.

  • ISOTeam jumps on bike-sharing bandwagon | The Edge Markets (read here)

My initial reaction seems to be that the move appears to be ‘de-worsification’. What has a firm specializing in the maintenance and upgrading of public housing estates got to do with bike-sharing?

My original reason as to why I invested in ISOTeam, is due to its boring and stable business (which is maintenance and upgrading of public housing estates). I hoped that the company can build upon its strength in providing a strong recurring income.

However, bike-sharing to me isn’t boring and stable. And I have no idea if such venture is profitable at all – I have no access to the balance sheets or income statements from the numerous bike sharing companies here or aboard.

Yes, these bike sharing start-up companies are a favorite among the many high net worth investors and venture capital firms. However, it doesn’t mean that they have a stable recurring income.

In fact, judging from what I have read in the forums, not many are for the move. The bike sharing system appears to be saturated (or abused) in Singapore. And I hope that the situation will not worsen to what happened in some cities in China. There is only so many empty ‘spaces’ here eg. clear pathways, bicycle stands, void decks….the bikes are starting to invade roads, vehicle parking lots, traffic islands, drains, etc.

However, before we sweep this idea as just one of those wacky ones (by ISOTeam)… there is some difference in ISOTeam bike sharing venture – SG Bike’s strategies (see below) as compared to the other existing bike sharing companies.

  1. Virtual Docking Stations that taps on both GPS and geo station technology.
  2. Users have to return the bikes by parking them in designated areas which are 5m to 20m grid of geo stations to complete their journey or face paying a fine.
  3. Users can also unlock the bikes by tapping a prepaid contactless card such as an EZ-Link or NETS FlashPay card at the lock.
  4. The bikes are installed with alarms which sound a loud warning should there be attempts to vandalize or steal the bikes.

Basically, we can foresee what Singapore will become if bike sharing continues to ‘grow’ and go unregulated.

  • Bikeshare cycles dumped en masse in China (read here)
  • People are dumping shared bikes in horrible piles (read here)


The proliferation of dockless bike-sharing has resulted in widespread indiscriminate parking as well as theft and vandalism of the shared bicycles.

The government in China and Taipei are starting to grabble with the issues.

  • China issues bike-sharing guidelines as complaints rise (read here)
  • Taipei and New Taipei writing up rules for oBike (read here)

1. SG Bike (First 2 Points)

Which brings me to the first 2 points proposed by SG Bike, namely: Users have to return the bikes by parking them in designated areas which are 5m to 20m grid of geo stations to complete their journey or face paying a fine.

Conceptually, it appears to be a good solution. I did mention in my earlier post (See below), that the solution to indiscriminate parking seems to be imposing a fine. Well, after all, I reckon Singapore invented the ‘Fine’ culture.. just joking!

  • oBike (Bike sharing, the good, the bad) (read here)

The question is who will impose the fine. The government (eg. LTA, Town Councils, Nparks, HDB….) or the bike sharing companies themselves.

For the latter, it is counter-intuitive. The more and higher the fine, the less number of potential users. It might only work if all bike sharing companies adhere to a standard set of ‘fine’ system. No point SG Bike imposing fines, while oBike, Mobike and ofo do not have such stringent system. People will just continue ‘dumping’ oBike, Mobike and ofo anywhere…. while ignoring SG Bike.

Both oBike and Mobike have rolled out carrot-and-stick, community policing schemes which award or deduct credits from users based on their behaviour, which may in turn affect how much they need to pay for the service. ofo has also taken to social media to warn users against abusing their bikes, saying that the firm “would not hesitate to report to (the) police or take legal actions” against such conduct.

But none ( oBike, Mobike and ofo) has used the word “Fine”.

And bike sharing (as much as venture capital investors love them), are actually a very capital intensive enterprise. Theoretically, the bike sharing companies need to maintain/repair the bikes, move the bikes to ‘popular locations’, retrieve impounded bikes, etc. Some wonder how these companies actually make any money (other than the first deposit amounts that users pay). So can they afford to ‘fine’ the users?

For each bike that is not utilized, is a bike that might be left in the open rusting away. The bike, after all, has a limited lifespan, and is subject to wear and tear (even if it is not used).


So basically, it is not something that a single bike sharing company (unless it is the only one in the city) can resolve. It might need a top down solution, with the government intervening in a big way.

2. SG Bike (3rd Point)

Pertaining to the 3rd point proposed by SG Bike, namely: Users can also unlock the bikes by tapping a prepaid contactless card such as an EZ-Link or NETS FlashPay card at the lock.

From a financial point of view, it seems like a good idea. With easier access, there will be more customers and with more customers, more income.

But wait….


In China, where children under 12 years old are banned from riding bicycles on public roads, bike-sharing companies are mulling over ways to prevent under-aged kids from using their bikes – after an 11-year-old rider in Shanghai was hit by a tourist bus and died.

  • Chinese bike-share firm vows to stop child riders after death (read here)
  • Ofo added to lawsuit in 11-year-old’s death (read here)
  • Death of 11-Year-Old Boy Puts Shared-Bike Operators in Hot Seat (read here)
Quote from 3rd article above: 
“Kids fool around on these yellow bikes all the time, picking up bikes people forgot to lock. It’s time Ofo upgraded its registration system instead of being obsessed with user numbers,” said another Weibo user, Lucky_gjy.

I don’t think an incident like the above mentioned has happened in Singapore, and I am not aware if 12 years old children here are banned from riding bicycles on public roads. However, why wait for such things to happen?

dents in Singapore below 21 years of age who are attending government or government-aided schools and pursuing full-time courses, are each given a school smart-card/ITE student concession card to use for travel on buses, the MRT and LRT (read here). Which I believe function like an EZ-Link card.

Even if a child who is less than 12 years old does not have a School Smartcard… it is also easy for him or her to get hold of a prepaid contact-less card. I don’t think there is any regulation banning any kid from buying one.

So that brings me to my question: What is stopping the kids who are 12 years old and below from riding a SG Bike (and getting into an accident) or abusing it?

  • New Video of Boys Abusing An ofo Bike Could Have Killed Someone (read here)

Yes, I have seen kids riding obikes, mobike, and ofo (mainly) – without any adult supervision. However, I reckon it is harder for kids (who are 12 years old and below) to get hold of a Visa card/Mastercard and a smart phone so as to sign up and use the bikes.


3. SG Bike (4th point)

4th point proposed by SG Bike: The bikes are installed with alarms which sound a loud warning should there be attempts to vandalize or steal the bikes.

I think the above is a good move. Bikes, after all, can’t defend themselves. And judging by the numerous reports of abuse. It might help (though not eradicate the abuse).

  • Bike-sharing firm ofo lodges police report over boy throwing bike down from Whampoa HDB block (read here)


In gist

With a paid up capital of SGD 1 million, and with ISOTeam holding a majority stake of 51%, ISOTeam’s investment isn’t much (yet).

However, being a listed company, there are pros and cons.

  • Pros being having access to funding.
  • Cons being under the scrutiny of the investors (who may be impatient for results).

If the venture proves to be unprofitable for a prolonged period of time, more investors may start questioning why funds are directed to such risky & unprofitable ventures.

Posted in Bike Sharing, ISOTeam | Leave a comment

Alibaba Group Holding Limited – What you need to know if you are to invest in it now


Alibaba Group Holding Limited:

  • The company accounts for 80% of all online retail sales in China.
  • As of 2015 the company has 350 million active users, larger than the entire population of the United States.
  • Alibaba recorded $9.3 billion worth of orders in just one day in November 2014, during the holiday known as “Singles Day.”

When I first started doing the e-commerce stint using Fulfillment by Amazon (FBA), I inevitably used the portal Alibaba (to source for goods from manufacturers).

I have been planning to start a US stock portfolio for the longest time. However, with the US markets at all time high, I have been shelving it.

For the US Portfolio, I was looking for growth stocks, and hopefully, companies with high profitability and low capital expenditure. Inevitability, the FAANG stocks would come to mind – Facebook (FB), Amazon (AMZN), Apple (AAPL), Netflix (NFLX), and Alphabet (GOOG).

However, to me, I would probably also classify Alibaba up there as well (just that it originated from China, not the US). To even before thinking about investing in Alibaba Group Holding LimitedIt is first important to understand the business model of Alibaba Group Holding Limited. I reckon in thinking about the model, it would be easier if I compare Alibaba with Amazon (since I used both platforms when doing Amazon FBA).

Prior to thinking about investing in Alibaba Group Holding Limited, one must first think about the business model of Alibaba Group Holding Limited. I reckon in thinking about the model, it would be easier if I compare Alibaba with Amazon (since I used both platforms when doing Amazon FBA).

Alibaba vs Amazon


Firstly, the business model of Alibaba is different from the e-commerce leader in the United States, Three major web portals make up the core of Alibaba’s businessː Alibaba, Taobao, and Tmall. And all three of these e-commerce websites serve to connect various types of buyers and sellers, wherein Alibaba acts as a middleman.

  • All the Western companies you’d have to combine to get something like Alibaba (read here)


Unlike Amazon, Alibaba Group holds no inventory and owns no warehouses. Rather, Alibaba has created software platforms that facilitate the exchange of goods and services. While Alibaba’s revenues are only a fraction of Amazon’s, it has higher operating margins and profit margins.

Personally, I find that there are pros and cons to this. Yes, with no inventory and warehouses, the profitability is higher (capital expenditure is low). However, it is also because of Amazon Fulfillment Centres which make Amazon such a formidable competitor to all e-commerce site.

Yes, with no inventory and warehouses, the profitability is higher (capital expenditure is low).

Put it in another way, the revenue of Alibaba (USD 23.41B) is only a fraction of Amazon’s revenue (USD 150.12B). However, the Gross profit of Alibaba (USD 99.65B) is way higher than that of Amazon (USD 47.72B). So as I mentioned earlier if I am looking for a high profitability and low capital expenditure stock, Alibaba would fit right in (not Amazon).

PicMonkey Collage.jpg

However, it is also because of Amazon Fulfillment Centres which is why Amazon is such a formidable competitor to all other e-commerce platforms (it is like Tesla with their own set of charging stations, which charge much faster). Seldom you see an e-commerce site (that is business-to-consumer or consumer-to-consumer focused) which has both a successful online platform and an extensive net work of high tech fulfillment centers ensuring goods are delivered promptly to customers.

From what I have read, Alibaba’s core business resembles that of eBay. Alibaba acts as a middleman between buyers and sellers online and facilitates the sale of goods between the two parties through its extensive network of websites. The largest site, Taobao, operates as a fee-free marketplace where neither sellers nor buyers are charged a fee for completing transactions.

Ok, I have not used Taobao. However, if Taobao is like ebay, then it is in comparison relatively less sophisticated than Amazon’s platform which is backed by its extensive network of fulfillment centers. Amazon’s platform is also backed by their partner retailers who often sell less common items or those with a higher purchase price, allowing Amazon to avoid holding slow-moving inventory that could dilute profit.

Between Amazon and Alibaba, the starkest contrast can be seen in the philosophy each company has.


Jeff Bezos’ long standing goal is to build the world’s most customer centric company.  And it’s hard to argue with his progress. Despite their size, Amazon’s customer service – in terms of pricing, delivery and customer support – is impressive.

Amazon is obsessed with the customer and getting them the best possible price – at almost any cost.  They’re notorious for alienating suppliers, content partners and publishers in their pursuit of this goal.


Jack Ma and Alibaba have a different focus.  The following quote is taken from their recent IPO prospectus:

“Our proposition is simple: we want to help small businesses grow by solving their problems through Internet technology. We fight for the little guy. Since our founding in 1999, we have helped millions of small businesses to achieve a brighter future.”

Alibaba’s goal to help small businesses stands in stark contrast to Amazon, who is often (fairly or otherwise) criticized for making it harder for small businesses to compete and stay relevant online.


The feeling from the ground when Amazon and Alibaba reached Singapore


To be clear, I am trying to view this from the existing retailers’ perspective rather than the customers’ perspective.

As mentioned earlier when it comes to the business model of Alibaba, what’s important to note is that Alibaba’s platforms merely facilitate the transactions.  They manage the marketplace and charge a small commission, but don’t hold – or sell – any merchandise themselves.

Amazon, by comparison, plays in both markets.  On, you’ll find thousands of products you can buy directly from 3rd party businesses.  But Amazon is also in the business of stocking items and selling products directly to consumers.  In many instances, they’re competing directly with the same merchants who are using their platform to sell.

Somehow, from a retailer’s point of view (whether you have a brick or mortar store or an e-commerce site), personally, I sense a difference in perception when it comes to Alibaba and Amazon’s expansion into Singapore.

The way Alibaba does expansion overseas is primarily via buying stakes in foreign companies. In fact, indirectly Alibaba has been in Singapore prior to Amazon through Lazada, Redmart and Singapore Post.


  • In March 2016, Lazada claimed it recorded a total of $1.36 billion in annualized across its six markets in Asia, making it the largest e-commerce player.
  • In April 2016, Alibaba Group announced that it intended to acquire a controlling interest in Lazada by paying $500 million for new shares and buying $500M worth of shares from existing investors.
  • In June 2017, Alibaba Group announced it will pump in another $1 billion in Lazada to raise its stake to 83 per cent from the 51 per cent it had acquired last year.


  • Alibaba-backed Lazada acquired Singapore online grocer RedMart in Nov 2016.

Interestingly, Bloomberg reported in September 2016 that Redmart had run into financing problems and was seeking a buyer. It held unsuccessful talks with a number of potential suitors, including supermarket chain FairPrice, Singapore sovereign wealth fund GIC and online retail titan Amazon.

Singapore Post

  • In 2014, Alibaba invested $312.5 million for a 10.35 per cent stake in SingPost at $1.42 a share, making it the postal and e-commerce group’s second largest shareholder after Singtel.
  • In October 2016, Alibaba raised its stake to 14.4 per cent from 10.2 per cent with a further investment of S$187.1 million.
  • In October 2016, Alibaba also subscribed for a 34 per cent stake in Quantium Solutions International, SingPost’s e-commerce logistics unit, for $86.2 million.

Basically, the operations of Lazada, Redmart and Singapore Post have not changed drastically after the investment. And the fact is, residents of Singapore are already familiar with these companies/platforms. So the presence of Alibaba has not been felt acutely.

However, besides financial support, Alibaba’s investment has helped these companies in many ways. For instance, Alibaba has boosted Lazada’s range of merchants and improved its logistics.

Alibaba has a soft approach in not competing head on when it comes to expansion. Instead of starting from scratch in a new eco-system, they similar adopt the best companies and strengthen their operations.

Between Alibaba and Amazon, Jack Ma seems to position Alibaba as the ‘good guy’, and like to ride the wind of other’s success (you know, kind of like the biker riding directly behind the lead biker in competitive biking, thereby avoiding the headwinds).


Amazon, on the other hand, exports their system.

One Platform: The Amazon platform is very consistent worldwide and it’s discrete services based architecture means that each piece of it can be rolled out incrementally. This means that programs such as Amazon Prime can be launched in one geography, tested and learnt and then rolled out elsewhere for relatively little development cost. While local geographies can adjust, it is more tinkering (e.g. the Super Saver threshold in the UK is £0) than wholesale change.

In many ways, Amazon’s services are superior when compared to many other online retailers (as can be seen in the popularity of their Amazon Prime launch here).

“Singaporeans make a just fraction of total purchases online now, but the country’s shoppers rushed to download the app, which offers free delivery on orders of S$40 ($29.50) or more. For now, Amazon is waiving the membership requirement.”

Amazon competes externally, and sometimes even against their own retail partners.

In fact, when I was researching on FBA, it is not uncommon to read about experiences whereby Amazon launched a new product in direct competition with some of the FBA sellers. Look, in FBA, as a seller, you basically don’t even need to see your goods. You can literally ship your products directly from the manufacturer to the fulfillment centers and Amazon take care of the rest.

Operation wise, as a retailer, it is that easy. Which is why I am able to do so, while still having a full-time job. However, by so doing, there is a catch… Amazon basically knows how well your product is doing and where you source your supplies from.

Many of the small time retailers using Amazon are aware that they are working on borrowed time, and sooner or later they may face competition not just among themselves but also from the very platform from which they sell their products.


Main Difference

Maybe, a simplistic way of defining (at least on a superficial level), is that I relate Alibaba more to Berkshire Hathaway while I see Amazon more like the typical America Inc eg. Starbucks, MacDonald…

The key difference can be boiled down to one word, ‘Control’.


Alibaba, does not seem to like to interfere too much with the day to day operations of the companies they invest in (well at least on the surface). In their words, they are ‘facilitating’…or some might say, ‘create’, and help the ‘little guys’.


However, some might even say that their investments lack focus (but well, the investments do help to expand their online presence/empire).

On the other hand, Amazon competes directly with anyone (it is either you integrate with their system or compete.. no 2 way about it). And Amazon is known to compete aggressively at all costs (even if it is at a loss to them in the short term, so as to gain market share). Or some might say, ‘eliminate’ the inefficiency.

For instance, Amazon Prime (which costs member USD 99 per year) is not profitable. Read the article below.

  • How Amazon Loses on Prime and Still Wins (read here)

Which is why when Amazon Prime is launched in Singapore, there is an ominous feeling that many brick and mortar retailers and even online retailers would face extinction.

They are basically going up against a giant with extremely deep pockets who does not mind losing money for a very long time, just to gain market shares. And bringing the best services.

And just how big is Amazon? Just for comparison:

  • Amazon’s revenue: USD 150.12 billion
  • Singapore GDP in 2016: USD 297 billion

It is more than half of Singapore’s GDP.

You know, Warren Buffett often mention how he classifies a company as a ‘good’ company. It is the kind of company he would not compete against (eg. Coca Cola, etc), even if he is given a billion dollar to do so since he knows for sure that he would lose….. Well, Amazon seems to fit the bill really well.

Aswath Damodaran in his talk at Google talked briefly about Amazon (Watch here, fast forward to 1:04:30). Amazon’s concept is to him, an “if you build it, they will come” concept.

Aswath mentioned that Amazon spends about $400 to service each Amazon Prime customer (who pays only $99). However, like what Aswath Damodaran, once mentioned, he won’t be surprised if one day, Amazon add a third 9 after the first two 9 in the subscription fee for Amazon Prime.

  • Singapore slings? Taking on Alibaba, Amazon launches Prime Now in the city state (read here)


And like many of the big American corporations, as a customer, you basically know what kind of service you are getting. You go to a MacDonald/Starbucks anywhere in the world, and you can be sure to find similar services and products.


Financials of Alibaba

Financial statistics

A quick study on the financial statistics of Alibaba Group Holding Limited.


When looking at growth stocks, I try not to look too deeply into their valuations (else I will be sorely disappointed). Let’s look at its profitability and see if it justify the price.

  1. The Profit Margin and Operating Margin is definitely high.
  2. However, the Return on asset and Return on Equity is at best mediocre.
  3. The balance sheet is strong. The resultant cash (after deducting debt is now USD 8.74B.  Total debt/equity level is not exactly low but acceptable.
  4. The current ratio is good at 1.95. Note:  Acceptable current ratios vary from industry to industry and are generally between 1.5 and 3 for healthy businesses.
  5. Alibaba does not offer any dividend.


In terms of the historical trend of the ROA, ROE and ROIC. From the below table, one can see that there is a peak in 2014 (the year Alibaba was listed – 19 September 2014). ROIC has been rather consistent hoovering at around 11 to 13 after 2014.



Trailing PEG and Intrinsic value

Let’s do a quick study on the trailing PEG and intrinsic value of Alibaba Group Holding Limited.

1) Trailing PEG

P/E: 60.54 (Data from POEMS)
Dividend Yield (%): N.A.
EPS compound growth rate (5 yrs): 58.88%
The trailing PEG will be 60.54/(58.88+0) = 1.03. Which is not good (> 1), however, it is very close to ok.

2) Intrinsic Value

First, let’s look at the estimated 5 years earning growth. We are going to use a time-frame of 5 years from now for this purpose. Given EPS and a PE ratio, the stock price can easily be calculated for any company. Using the below formula.

F = P(1+R)N where:

  • F = the future EPS
  • P = the starting (present) EPS (USD 2.52)
  • R = compound growth rate (Using the 5 yrs CAGR which is 58.88%. However let’s take a 20% discount, and use 47.1% as I am not really sure if growth can be maintained.
  • N = number of years in the future (5)
    Estimated future EPS: USD 17.40

I will be estimating the future PE of Alibaba Group Holding Limited to be 40.4 (See below data from Morningstar) – average of the PEs from 2014 to 2016.


Future Stock Price

P = future stock price
EPS = future EPS
PE = future PE
Hence future stock price of Alibaba is 17.40 x 40.4 = 702.96

Intrinsic Value

P = present (intrinsic) value
F = future stock price (702.96)
R = MARR (15% or 0.15)
N = Number of years (5)
Hence, the intrinsic value of Alibaba is USD 349.

Given that the share price of Alibaba Group Holding Limited (BABA) on 28 July 2017 is USD 157.56, there appears to be a margin of safety.


Posted in US Stocks | Leave a comment

8 Securities: Broker to trade US and Hong Kong Stocks

In my previous post, I mentioned that I am looking for a broker so that I can trade US and Hong Kong Stocks with no holding fees.


Why look for a broker now?

Now, before I continue, just to clarify…

I currently only have 1 counter which is a non-Singapore market listed stock: Fu Shou Yuan International Group Limited. It is listed on the Hong Kong stock market. This counter only occupies a tiny portion of my stock portfolio.

Well, FYI, in recent times, I always felt that market valuations are either fully or richly priced. Yes, there are pockets of opportunities here and there, but overall, I don’t see the need to invest a lot at the moment.

Nevertheless, recently I did make some buy moves for some Singapore listed stocks (read here).

So why bother (to find a broker to trade US and HK stocks) you might ask. Well, for one I can never predict when opportunities will come knocking. It could be months or years before the markets correct (or crash)… Simply said, it is not a matter of ‘if’ but ‘when’. And when it comes I like to be prepared for it.

When I study the tabulation of my net worth, there are 2 components that are relatively variables. Eg. My cash and SRS holdings vs my Stock holdings. The other components are more or less fixed (not changing much / less dependent on market situations).


At the moment if I am to compare these 2 components (Cash & SRS vs Stocks):

  • My cash and SRS holdings: 43%
  • Stocks: 57%

Actually, I would say that historically, for me personally, this cash holding is rather high. It is not easy for me to increase my cash holdings, as I do believe in staying invested for the long term. And I rarely sell my stocks. After all, we should ride our compounders.

In the near future, I do hope to keep this proportion fairly fixed (or try to increase cash proportion by a bit). Nevertheless, if there are opportunities, I will still seize them.

Anyway, back to why I am looking for a broker for US and HK stocks. As I mentioned earlier, I felt that I should be prepared when opportunities come knocking. And one way of being prepared is to have an account that is able to have zero holding fees.

As mentioned earlier, I am a buy and hold investor. A really passive one who like to ‘collect’ stocks for the long term. And the last thing I would want is a ‘holding fee’ or an ‘inactivity fee’ – no matter how small the amount is.

As I have been using local brokers to trade US and HK stocks, these stocks are held in a nominee account, and for each counter, I would be charged a holding fee of approx. $2 per month (base on current rates).

Come to think, on second thought, I shouldn’t have used the word ‘trade’ (even in the title). I seldom trade….  (Unless the market is really crashing).

That is not a big deal if I only have 1 counter eg. the total holding fees for 10 years is only S$2 x 12 x 10 = S$240. The daily value fluctuation of that 1 counter in my portfolio would probably be more than that amount.

However, what if all of a sudden I increased my US / HK stock portfolio to 10 counters, in my aim to have a diversified portfolio? The holding fees alone per month would be approx. S$20, and in a year, it would be S$240 (no matter if I have unrealised gains or losses, and no matter how small each counter is). Now, why would I want that? And by the way, I still get taxed 30% for dividends from US stocks.

I don’t think I need to pay anyone to hold my stocks for me. Do you? What ‘value add’ service is the broker providing anyway?

Anyway, no harm getting the system set up now.. and wait for the storm to come. When it starts pouring, bring out the buckets. The buckets shouldn’t have holes in them.

Asia’s First Free Stock Trading App

In my previous post, a reader, “Green cow”, suggested that I try 8 Securities

  • Commission-free stock trading by year-end? (read here)
  • Asia’s First Free Stock Trading App (read here)

What initially attracted me to 8 Securities was the below 3 key points:

  1. Stocks in 8 securities will be held in a nominee account without any holding fees. 
  2. No minimum trading activity fee.
  3. No minimum deposit requirement.

Details of the commission for trading US and HK stocks can be found below.


Funding of the account is also fairly easy eg. via Internet banking (read here).


By the way, I am not keen on their Robo-advisor ‘Chloe‘ service.


What’s the Catch?

If you study in detail their fee, you would notice that for the Hong Kong stock dividends, there is a fee of HKD 0.8 / Lot (Min HKD 28). By the way, 1 Lot is the same as 1 Counter, and HKD 28 is SGD 4.88.

In comparison, there is no such stock dividend fee if you are using Standard Chartered Online Trading.

So yes, that to me is a loophole (in the case of 8 Securities)…  However, Standard Chartered (SCB) charges a fee for trading for their Personal Banking Clients (read here), while 8 Securities doesn’t:

  • Minimum Fee: $10 if shares are traded in AUD, CHF, GBP, SGD & USD currencies ($10.70 with 7% GST)

In addition, I would also need to first have a banking account with them (SCB) as well. Consequently, I would then need to maintain a min. deposit amount. As mentioned earlier, I don’t particularly like having to maintain a min. deposit (directly or indirectly). There are various types of SCB banking account, however, the min. deposit amount I need to maintain is S$1000. This to me, makes SCB online trading rather unattractive. I don’t need another bank account (to park my cash), and I don’t see many SCB ATMs around nor do I need their credit cards etc.

Pertaining to 8 Securities, another point is I am not sure of is their currency conversion rates. I do understand Standard Chartered’s rates are not that favorable compared to other brokerages (guess this is how they earn).

However, nevertheless, I think looking at these two brokerages (8 Securities and Standard Chartered), their fees are pretty close. And the major point is having no holding fees for US and HK stocks.

The Tricky Part

However, to open a trading account with 8 Securities from overseas (which I am, since I am staying in Singapore and 8 Securities is located in Hong Kong) is a bit tricky (see below).


I need someone to witness me signing the documents since I can’t be at the 8 Securities office in Hong Kong. And that someone can’t be anyone.

“Qualified witnesses include a bank branch manager, lawyer, public accountant, justice of the peace or a notary public.”

When looking at the list above, I decided that a bank branch manager seems the most approachable :p (My last choice is probably the justice of peace hehehe).

So I went to the local bank (I have stated my local bank account in the 8 Securities application form) and showed the counter staff the portion that requires the witness signature.

HHAAAA+NotoSansCJKtc-Light Adobe Identity 0.jpg

After waiting for a while, she came back and informed me that the bank branch manager does not sign as a qualified witness. However, for S$20, the bank will provide a Letter of Reference (LOR) to be attached to my application so that the HK brokerage can contact the bank for any inquiries pertaining to my details.

I checked with 8 Securities, apparently, this is not feasible. By the way, I realized that 8 Securities response time to emails is pretty prompt. I was able to send the email (at the bank branch), have a quick lunch in between, and received the reply within half an hour (or more like 10 minutes :p).

So my next option was to get a notary public to witness me signing the documents. By the way, there are quite a number of notary public offices in Singapore. I reckon they are basically law firms (lawyers with a certain min. no. of years of practice experience).

The fee for a notary public to witness me signing the document is S$115.

Oh yeah, FYI, I have never been in a law firm before. The Notary Public office which I went to, was a small law firm. The lawyer was having a meeting with a couple, who are probably in their 40s or 50s (I guess), when I reached there. I guess the lady was having a problem with his ex-husband and they were discussing their options (pertaining to the divorce probably). Interesting discussion – I reckon it is great when you can converse in Mandarin, English, Hokkien all in one sentence….

So with that, I was able to mail my application. Oh yeah, if you are wondering, it costs me S$2.20 to mail the letter to 8 Securities in HK. And I did drop 8 Securities an email with an attachment showing that signed portion by the Notary Public lawyer before I mail it out… ‘looks good’ according to them. As usual, 8 Securities’ email reply was really prompt. I didn’t have to wait for long.

See how it goes from here.

Posted in Hong Kong Shares, Portfolio, US Stocks | 2 Comments

Finding a Broker to trade US and Hong Kong stocks

I came across this article by the Fifth Person: “How to open a brokerage account in Singapore (and how to choose the right broker)” (read here).

In the article, it mentioned the following:

“I’ll assume you plan on trading in the local stock market since you’re to looking to open a brokerage account in Singapore. But besides the SGX, you may also be interested in stocks listed in foreign markets like Malaysia, Indonesia, Thailand, Hong Kong, the U.S., etc. If that is the case, you probably want to check if a broker offers you access to the markets you want.
Do note that foreign shares are not held in your CDP account, instead they’re held in a nominee account with your broker. Most local brokers charge S$2 per month per counter for foreign stocks. This can add up to quite a bit if you invest quite a bit overseas (in which case you may prefer to go direct to a foreign broker to save on fees).
For U.S. markets, I personally prefer to use a U.S. broker as their commissions are much cheaper at around US$5 per trade (Interactive Brokers goes as low as US$1 per trade). A few U.S. brokers like OptionsXpress and thinkorswim have Singapore branches which can come in handy in case you need any support.”

Basically, I do trade US and Hong Kong listed stocks using the local (Singapore) brokers here. And yes, they do charge approx. $2 per counter (UOB KH’s rate is $2 per counter per month while Phillips Securities’ rate is S$2.14 per counter per month).

Hence, I did a quick application and checked online with some of the overseas brokers.


Min. Monthly Activity Fee & Inactivity Fee

Basically, I do understand that Interactive Brokers, have this policy for minimum monthly activity fee requirement (if you do not meet the min. monthly trading quota, fees will be imposed, unless you have more than 100,000 USD in equity in your account).

If you don’t trade for any given month, the fee would be USD 10 (eg.  USD 10 – commissions).

  • For Interactive Broker – read here.

In the case of Saxo Capital, no fees are charged for holding an account with Saxo, unless the account has been inactive for a prolonged period of time, in which an inactivity fee applies.

  • For Saxo – read here.

For accounts with no trading activity during a period of 6 consecutive months (180 days) an inactivity fee of USD 100.00 or equivalent in the account currency will be charged.


This ‘inactivity fee’ requirement is a big deal to me as a passive investor, as I am basically a buy and hold investor. And for some counters, I do hold them for many years.

Or put it in another way, I do not like to be compelled to trade (due to inactivity fees). If there are no good reasons to buy or sell, then why should I do any trades?


Fees imposed for having stocks in a Nominee Account: Is it such a big deal?

Yes, the fee amount involved may not be big ($2 per counter per month). Especially given that most people don’t hold their stocks for long and they don’t really have that many counters.

For instance, to hold a counter for 10 years, it would probably cost me only $240 ($2 x 12 x 10), provided that the rate did not change in the future. I do doubt that the rates won’t change within 10 years. How much it would change, I have no idea.

From another angle, this amount ($240) would probably be lower than the unrealised values of the stock holding daily fluctuations.

However, being the ‘cheapskate’ that I am, there is this nagging feeling as to why I need to pay for this inactivity fee (no matter how small the amount is).


On further inquiry, I noticed that OptionXpress and TD Ameritrade do not have such inactivity fee requirements.

More on the above-mentioned brokers later.


Minimum Deposit for New Account

Most of the US brokers require a min. funding to open an account. For instance, Interactive Brokers require a min. deposit of USD 10,000 (read here). Similarly, for OptionXpress, they require a min. deposit of USD 10,000 (read here).

I did notice that TD Ameritrade (read here) does not have a min. deposit requirement.

Now, I am quite concerned about the initial wiring of USD 10,000 to an overseas US bank account. USD 10,000 is not a small amount to me. And then there is the fee involved to wire money (which makes the purpose of eliminating holding fees with a local broker kind of pointless).


Non-US Citizen not residing in US opening a US brokerage account (likewise for opening a Hong Kong brokerage account)

Nevertheless, I tried applying for a new account with the following:

  1. TD Ameritrade (US brokerage): To trade US Stocks
  2. OptionXpress (US brokerage): To trade US Stocks
  3. Phillips Securities (Hong Kong brokerage): To trade HK Stocks


For item 1: TD Ameritrade (US brokerage). When I tried applying online, I was directed to the TD Ameritrade (Singapore brokerage) upon partial completion of the application, and after I stated that I am a non-US Citizen not residing in the US.

This got me curious again. Would there be holding fees (eg. the US stocks are held in a nominee account) should I trade via the TD Ameritrade (Singapore brokerage). Upon inquiry with the Singapore branch, I was told that there is no holding fee. See below reply.

“If you live in Singapore, you can only open an account with the Singapore office. We do not charge any custodian fees for holding your stocks. We currently only offer US markets, so you will not be able to trade Hong Kong stocks through us.”

So currently, I am in the process of applying for an account with TD Ameritrade Singapore.


For item 2: OptionXpress (US brokerage). I tried applying online, and enquired via their online chat. I was informed that they have stopped accepting new applicants until the ongoing company integration is completed. I was not informed when this integration will be completed (despite asking).

The below is what I found on their website:

Do you open accounts for people outside the U.S.? 
Yes, upon our review and at our discretion we accept unsolicited accounts from non-U.S. residents. Although our account opening process is geared toward opening accounts for persons with a U.S. domestic address, we will review and open foreign accounts depending on the country of residence and at our discretion. Please note that we are a U.S.-based broker. We offer only U.S. exchange traded products and we accept only U.S. currency in our customer accounts.”

I think many like OptionXpress due to their low fees. Anyway, for the time being, I wasn’t able to open an account.


For item 3: Phillips Securities (Hong Kong brokerage). I have a Phillips Securities Singapore brokerage account. However, Phillips Securities Singapore and Phillips Securities Hong Kong are two different entities.

I was informed of the below by the Hong Kong branch for opening an account to trade Hong Kong stocks.

“For Overseas Customers, if you cannot open an account in person, you can open an account by post and should enclosed the following documents:
(a) Hong Kong Identity Card OR Travel document with photograph (i.e Passport)
(b) Proof of residential address issued within the recent three months; e.g. Recent utilities bills, bank statements
(c) Completed Account Opening Form and W.8 Ben
(d) For non face-to-face client, the additional document is:
 (i) *a cheque of HKD10,000 issued by authorized bank in Hong Kong; (A crossed Personal cheque of HK$ 10,000. Please make the cheque payable to “PHILLIP SECURITIES (HK) LTD”.) which can be drawn on a Local Bank.  Deposit can be used for stock trading and is refundable when close account.
(ii) **document issued by governmental body
*The cheque or document bearing client’s full name and signature must be the same on the Account Opening Form.
** All of the above mentioned (a,b,c,d sections) should be of Certified True Copy (The documents should be verified by suitable certifier, such as our Company’s employee, licensed representative, authorized insurance agent, bank manager, CPA, lawyer etc. The certifier should sign and date the copy documents with his position / capacity, contact detail, and state it is the true copy of the original.) and mail to 11-12/F United Centre, 95 Queensway, Hong Kong .”

Currently, I am still trying to understand through them what they meant by item (d)(ii). I wonder if a certified true copy of passport would work (which is basically a repeat of item (a)).



Posted in Portfolio | 5 Comments