The continuing Saga of Moya Holdings Asia Limited

You know I have been watching bits of the movie “The Big Short” on YouTube. In the movie, there is this character called Mark Baum. Mark Baum, this character is loosely based on an American businessman and investor called Steven Eisman.

There is one statement from him which kind of resonates with me (read here):

Do your own homework. I can’t overstate the importance of this. When things start to go bad, speaking to the management of the company may be the worst thing you can do. You can walk away thinking things are okay when in fact they’re not, because seeing outside your own paradigm is sometimes the hardest thing to do. In the big-bank industry from 1995 up until the crisis, every year was basically a good year. Every year, people got paid more, and every year the leverage got bigger. What happened is that the people who ran these firms mistook leverage for genius. If you had gone to one of the senior people in one of these firms in 2006 or 2007 or 2008 and said, “Dude, the entire assumptions by which you have governed your career are wrong,” they would have said, “Are you crazy? I made $50-million last year. How could I be wrong?”

Greed is a very powerful force. I see it in the cryptocurrency saga, the penny stocks run-up… etc.


People want to listen and read what they want to believe, especially if they have already committed money to it or have seen their investments soar. If it is doing great…. it shows that their belief is RIGHT, right? Eg. What do all those people out there know… did they make as much (in % terms), or more? If they are so right, why aren’t these people raking in the money and turbocharging their way to retirement (like me)? The one who makes the most money is right.

Actually, if you ask me, the most volatile factor/item in my portfolio is the (Stock) Price. The business of the company behind the price, management, vision, balance sheet, business environment, etc… or even my thesis for buying or selling the stock does not even come close (in changing). If I did not invest in stocks, my net worth every day would be about the same (except for the active income I rake in or the monthly expenses I incur – which are really very predictable). However, having stay invested for many years, this net worth figure becomes kinda volatile every single day. It is just mind-numbing (some days I am a ‘hero’, or other days I am a ‘zero’ financially).

Frankly, if I base my success or failure on this short-term net worth figure – I would have a huge headache. I rather have a good night rest.

  • Stock Market Investors Are Too Impatient (read here)

The rate at which people trade today is faster than any development ever seen. A recent article estimated that the average holding period for stock market investors in 2017 was just 22 seconds.


I don’t trade cryptocurrency nor do I trade penny stocks. In fact, given the choice, I rather watch YouTube videos than research on them (hence I’ve probably missed out on a lot of the run-ups). Oh, by the way, I do think there is a much deeper thesis behind the science of cryptocurrency…but it’s too complex for me.

In gist, I just think that a value system base on the monetary value of my stock portfolio is not for me.

Actually, I don’t really aim for the ‘super-fast profit’ kind of strategy, I aim for the ‘avoid bad companies and invest during the direst situations (whereby price is below intrinsic value)’ kind of strategy. :p Like how Howard Marks define ‘playing the loser’s game’ (read here). Just stay in the game.

I did a post about Moya Holdings Asia Limited some time back in Aug 2017 (read here).

To be frank, I probably won’t bother about this stock … except for the fact that someone asked me about it. There are a lot of penny stocks out there….most of the time, I have no idea what their business is about. Perhaps they want it that way in the first place.


The recent drop in its share price is not really unexpected. I can’t really forecast when it will drop… but I am not surprised. The stock dropped from SGD o.118 to SGD 0.1030 from 12 Oct 2017 to 16 Oct 2017. That is 12.7% decline in less than a week.


A quick search revealed that on 12 Oct 2017, the Indonesia’s Supreme Court ordered the government to restore public water services to residents in Jakarta after finding private companies “failed to protect” their right to water.

Foreign Private Companies in Indonesia’s Water Resources Management, such as Aetra (which is a subsidiary of Acuatico Pte. Ltd) – and now under Moya Holdings Asia Limited might be impacted if such ruling is realized.

  1. Indonesia’s Supreme Court Upholds Water Rights (read here)
  2. Indonesia’s Supreme Court Says No to Water Supply Privatization (read here)
  3. Moya Holdings Asia sees dismissal of lawsuit against latest acquisition
    (read here)
  4. Palyja analyzes water privatization termination (read here)
  5. Coalition opposing Jakarta water privatization wins appeal (read here)

Interestingly, in the 4th article above, it mentions that Private water operator PT PAM Lyonnaise Jaya (Palyja) respected the Supreme Court’s decision to terminate water privatization in the capital. And Palyja believed the court’s decision would provide legal certainty for investors in Indonesia.

FYI, Acuatico and Palyja, are the number one and two largest water firms in the country, respectively, by water volume produced.

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.  (read here)

I am not familiar with the government policies or judicial system in Indonesia, but this factor is worth noting.

This is kind of deja-vu for me, as many years ago I have invested in Golden Agri (still holding onto the shares).

Indonesian lawmakers have tried (and are probably still trying) to restrict foreign ownership of plantations to no more than 30 percent. Foreign plantation firms currently operating in Indonesia include Singapore-listed Golden Agri-Resources and Wilmar International, Malaysia’s Sime Darby Bhd and Cargill, and this law would definitely affect them and their shareholders. (read here)

In the case of Moya Holdings, I am content to just watch the development unfold from the sidelines.


The other thing that kind of piqued my interest is the valuation of Acuatico Pte Ltd via Moya’s reverse take-over of Acuatico in June 2017.

I am not familiar with the financials of Acuatico since it was only recently a private company. But let’s do a simple exercise of comparing it with the Chinese water plays such as China Everbright Water and Citic Envirotech.

It is like for anything if you do not know, the only way to judge is to compare. You don’t know if it is worth it, but in comparison, you know if it is ‘cheap’ or ‘expensive’ if you compare apple to apple. Flawed in essence.. but we do it all the time.

Let’s just ignore the balance sheet of Acuatico/Moya Holdings for the time being. We are aware of the valuation and FY 2016 pretax profit of Acuatico base on the acquisition announcement.

  • Salim Group acquires Aetra Air, Jakarta tap water operator (read here)


Let’s think in terms of pretax profit (which I know is not really very accurate as tax is not factored in and tax rates in Indonesia and China differ, moreover it is just one-year pretax profit). Well… that’s all I can work with, with the data given for Acuatico.

Let’s see the companies as purely money generating vehicles, and place a value on each.

The pretax profits of China Everbright and Citic Envirotech are approx. 2.7 times and 3.75 times the pretax profit of Acuatico respectively. However, the market cap. of China Everbright and Citic Envirotech are approx. 3.75 times and 5.1 times the valuation paid by Moya Holdings for Acautico. Much more than the respective proportions of the pretax profits.

The price/pretax profit ratios of China Everbright and Citic Envirotech are also higher than the price/pretax profit ratio of Acuatico.

Put it in another way, using a back of the envelope calculation, given the current ratios, if China Everbright made a pretax profit of US$25.76 million in FY2016, its market cap. would be US$344 million. And if Citic Envirotech made a pretax profit of US$25.76 million in FY2016, its market cap. would be US$333 million. While Acuatico that supposedly made pretax profit of US$25.76 million in FY2016 is valued at US$245.18 million. That is almost US$100 million cheaper than China Everbright’s ‘valuation’.


If we factor in debt since both China Everbright and Citic Envirotech also have debts (lots of it as well)… what do we get? Let’s face it – debt is a big factor in valuation.

Actually, leverage by itself if used properly can be great for a company. However, if the profits are low and the company essentially does not pay any dividend, I don’t see why people would want to invest in the company and hold it for years. It is not a bond that actually pays the investors interests anyway. It is just a ticking time bomb and debt kind of accelerate the whole process.


The top 2 tables show the net debt position of China Everbright and Citic Envirotech. Subsequently, the following 3 tables show the valuation of the companies after stripping away the debt from the valuation. The valuation of Acuatico excluding its debt becomes painfully low if we look at the price/pretax profit ratios (in comparison to China Everbright and Citic Envirotech).


Why is Acautico priced so cheap, at the current market rate? Is it because more than 1/2 of it consists of Acautico’s debt (62.1% to be exact).

Look there is no lack of analysts or reports stating how great Acuatico is or the huge market potential in Indonesia… I get it. But why so cheap?


I started the post with a video clip. Shall end it with another.

Posted in Moya Holdings Asia Limited | Leave a comment

My thoughts on Sarine Technologies Ltd (SGX: U77)


The thing about Sarine Technologies is that there isn’t really a consistent trend in its revenue (well, at least in recent years). Its recent report on the expected revenue and profit for the nine months ended September 30, 2017, has triggered a sell-off in its shares.

9 Month Revenue and Profit History

If we trace back the nine months ended September 30 results from 2010 to 2017… we can see why.



There appears to be an uptrend from 2010 to 2014 until it was ‘disrupted’ in 2015. 2015 was a particularly bad year with a net profit of only US 2.1 mil.

As reported in 2015:

  • Business conditions in the diamond manufacturing industry deteriorated as various market challenges persisted;
  • Unsustainable disparity between rough and polished diamond prices, coupled
    with existing polished inventory resulting in significantly reduced quantities of new rough diamonds entering the midstream, resulted in lower GalaxyTM processing revenues and reduced demand for the Group’s capital equipment.

Things appear to be turning better in 2016 (in comparison to 2015).

Sarine Tech reported a record 60 GalaxyTM family systems delivered in the first nine months of 2016.

On 10 November 2016, the Group announced its new and groundbreaking technology to provide automated, objective and consistent Clarity measurement and grading for the diamond industry. In addition, the Group has also developed a new advanced computerized Colour evaluation technology. According to Sarine Tech, the combination of these two new capabilities will broaden the Group’s existing offerings for polished diamonds with revolutionary new products and services for Clarity and Colour grading.

That is until their recent 2017 Profitability Guidance and Industry Conditions Update:

  • Build-up of surplus inventories of polished diamonds in the mid-stream, which, in fact, worsened built up further in the third quarter, causing manufacturers to slow additional production;
  • Ongoing illicit operations of parties infringing on their intellectual properties, and uncertainties stemming from litigations pertaining to these issues.

2 points on a chart do not make a trend. The uptick in 2016 was undone in 2017. Investors, in general, do not like unpredictability. This is also not a stock covered by many analysts.

  • Rough Supply Up, Polished Sales Down, and Stockpiles Created (read here)

From a business point of view, Sarine Tech has to deal with external issues such as the build-up of surplus inventories (which they clarified is typical of 3rd quarters – read here). Previously it was the unsustainable disparity between rough and polished diamond prices. However, they seem to somewhat come to terms with it by catering new technology that is applicable for both rough and polished diamond (in 2016).

Only to have the subsequent double whammy issue of external parties infringing on their intellectual properties.

Cost wise, Sarine Tech also had ramped up on the marketing expenses to promote their new capabilities. The stronger US dollar also did not help.

From another angle, the profitability of Sarine Tech has also gone down in recent years. If you compare 9M2015 and 9M2010 revenues and net profits, you would notice that although revenues for both periods are somewhat similar, the net profits for 9M2015 is however much lower as compared to that in 9M2015. Innovations, marketing, and expansion do not come cheap. Read an article stating that it costs Sarine Tech approx. USD 10 million per year for R&D.

The Diamond Market

Diamond / Jewellery, in essence, is not a necessity, and the demand fluctuates. Moreover, there have been reports that the diamond market is no longer monopolized by De Beers (read the article below). So hence, there is this variable factor when it comes to Sarine Tech income.

  • A Diamond Market No Longer Controlled By De Beers (read here)

Sales in diamond jewelry have been clobbered by a perfect storm of wilting demand from China, as well as falling oil prices which have hurt sales in big luxury markets like the Persian Gulf and Russia.

Then there are factors pertaining to the recent rise of synthetic diamond and a public market for the trading of diamond (there has been mention of valuing diamonds like gold).

  • Diamonds can now be new gold for investors, says Singapore diamond exchange (read here)

The effect and demand of synthetic diamond are not widely reported. However, ultimately there will still be a demand for natural diamond. Yes.. in today’s ‘synthetic perfect’ world, a premium is allocated for natural imperfect “perfection”, as in the case of cultivated vs natural pearls.

Synthetic diamonds have no resale value. So the market for natural diamond will still be there, but a new equilibrium in market demand is still forming.

“Lab-created synthetic diamonds have no resale value. No jeweler will buy them back and if you try to sell them on eBay, you’ll get pennies on the dollar for it. So, from a value perspective, you would need to buy the lab-created diamond at a massive discount to justify giving up the value retention of natural diamonds……

So for identical diamonds, the lab created choice was 25% more expensive than the natural diamond. That’s right: the claims that lab-created diamonds are 30-40% cheaper are WAYoff-base. In fact, synthetic diamonds are actually about 20% more expensive on average than comparable natural diamonds…….

Given the fact that you are losing all the resale/investment value from your purchase, it seems that lab created diamonds offer very poor value indeed.” Read here.


“Undisclosed lab-grown diamonds are a major threat to our industry. Grading laboratories are essential to ensure the natural pipeline is free of undisclosed lab-grown diamonds and consumers worldwide can be confident of their purchases”, concluded Ms. Azar. (read here)

The trading of diamonds will also place a premium on a natural certified diamond. The creation of an investable market for the gem, might affect the demand for diamonds, especially natural diamonds sealed with certificates of authenticity.

This is where Sarine Tech groundbreaking technology comes in handy (as compared to relying on human’s valuation). Wholly computerized, the clarity grading process need no longer be vulnerable to subjective, human perception.

  • New Israeli machine to standardize diamond grading (read here)

Oh BTW, the world’s first electronic trading platform for the precious gems was launched in Singapore. The Singapore Diamond Investment Exchange has been live since the start of May 2016 and total trading volumes as reported in June 2016 are well on their way to $1 million. Not much, but growing.

  • Singapore Just Made Trading Diamonds Easier (read here)
  • Diamonds may be the next big thing in the futures market (read here)
  • Investing in Diamonds: Should They Be Traded Like Gold? (read here)

Nevertheless, I view the above two developments as positive for Sarine Tech, and they will boost the demand for Sarine Tech technology.

Others with Grading Technology

Other companies involved in the grading technology include De Beers’ International Institute of Diamond Grading & Research (IIDGR), Ogi Systems, GIA and HRD Antwerp.

  • De Beers Grading Firm Makes Asian Debut (read here)

In the case of the Singapore Diamond Investment Exchange (SDIX), the mark on the Diamond Bullion is developed by the International Institute of Diamond Grading and Research.


While the technologies applied by these institutions are constantly improving, we still have not gotten to an industry-wide standard that consumers can feel 100 percent confident to use when making a purchase decision.

Ogi Systems: It has developed a suite of tools, including FireTrace, which measures a diamond’s brightness, fire, and scintillation objectively, along with SimCut, which measures a stone’s symmetry and asymmetry features.

GIA: It has created a product called Facetware available to the diamond market, free of charge. It can be downloaded onto a computer, tablet, or mobile phone. Facetware references a GIA database of more than 40 million diamonds, to determine the cut grade of a diamond after being scanned and compared to references in the database.

GIA’s DiamondDock is perhaps the industry standard tool in human color grading.

HRD Antwerp: It has developed a tool to measure the smoothness of a diamond’s faceting, which a polisher can measure without removing the stone from the polishing tang. 

International Institute of Diamond Grading and Research (IIDGR), a member of the De Beers group of companies: Introduced a new Synthetic Diamond Detection course, to complement some of its newly released detection equipment.

  • Technology in Diamonds – Grading Technology (read here)

In some cases, these companies use the technologies of others for their in-house grading process.

For instance, in the case of IIDGR, each diamond passes through roughly 37 steps before it’s declared a Forevermark stone. The first task involves weighing the diamond: Forevermark measures the carat weight down to six decimal points, as opposed to the industry standard of two. The next step relies on a Sarine machine to determine polish proportions and build a 3-D model of the diamond. (read here)

The Volatility of the Stock

Personally, for me, I first bought Sarine Tech shares in April 2015 and have held on to them until today. However, these shares only account for a small percentage of my portfolio as I was initially doubtful about the sustainability of their high ROE and EPS growth.

I have recently bought a few shares due to the sudden drop in their share price (still a small percentage of my portfolio).

I believe Sarine Tech is able to overcome the issue on the illicit operations of parties infringing on their intellectual properties. I do hope they learn from this and tighten their own ‘security’. It has happened to Steve Jobs (before he created the iPhone). They can’t really prevent it, but they can get smarter about it. It’s a constant battle.

  • What Steve Jobs really meant when he said ‘Good artists copy; great artists steal’ (read here)


As for the external issues of the business conditions in the diamond manufacturing industry and build-up of surplus inventories and the stronger US dollar, nobody can predict and Sarine Tech can’t really do much about it (although they did expand their product range to cover the ‘upstream and downstream‘ markets).  Through new products and services, the company has entered the higher value-add downstream retail segment of the industry, which is more than twice the size of its traditional midstream
market and commands higher valuations.

And as a bottom-up investor, I am not really concerned about the external factors.

Fundamentally, within Sarine Tech itself, I do not see any major issues. Sarine Technologies continues to have a strong balance sheet that has US$37.1 million in cash and equivalents and zero borrowings. And they have been actively upgrading their technologies and marketing them in India and China (not the best place to protect intellectual properties though).

It is not a stock for the faint-hearted. Kind of a roller coaster type of stock (as you can see below). Not one of the better stock in my portfolio – but I have this penchant for down beaten up shares that everyone ignores (I am weird like that I guess).

Its business does not have a strong moat, but they do have an edge over their competitors (which kind of explains the copycat threat). Sarine is the market leader in precision equipment for the midstream segment of the diamond industry. And I see most of their issues as external rather than internal.

On the plus side, once there is an announcement of better market conditions and improvement in revenues and profit, the stock will rally strongly.

And in recent years there has been fewer share repurchase by the company. Which I reckon is due to cost needed for the new technology and marketing.


Posted in Sarine Technologies Ltd | 4 Comments

Why I decided not to use 8 Securities


This post is a continuation of my post dated 23 July 2017 (see below).

  • 8 Securities: Broker to trade US and Hong Kong Stocks (read here)

So yes, 8 Securities does not have holding fees, if I am to buy and hold Hong Kong or US stocks (being a foreigner not residing in HK or US respectively buying these stocks).

I have always been doubtful as to how do 8 Securities earn any commission by not having any holding fees. So I decided to do a small experiment.


Well, I did not actually buy or sell stocks using 8 Securities. My experiment is very simple. I simply transfer USD 50 to and from my 8 Securities account.

So on 7 Aug 2017, I transferred USD 50 from my local bank account to 8 Securities account. Now the exchange rate if I am not wrong (converting from USD to SGD) is USD 1 = SGD 1.36. So USD 50 = SGD 68.

I was notified when transferring online, to pay a transfer fee.


Below, is the statement from my bank account after the transfer. Note that there is another SGD 64.28 on top of the actual amount (SGD 68.55) transferred.

07 Aug 2017 FUNDS TRF – TT
8 Securities Limited
SGD 68.55
07 Aug 2017 SERV CHARGE
8 Securities Limited
SGD 64.28

Now, after I am sure that the amount of USD 50 is reflected in my account, I selected the option to withdraw the amount (without doing a single trade. Then again, what can I buy with USD 50 :p).

I received a phone call from 8 Securities shortly on the next day, asking me if I am certain about withdrawing the amount. And was told that there would again be a fee. I can’t remember the percentage (or absolute amount).

However, the eventual deposit amount I received after the fee is only SGD 37.38 (see below table). Well, the exchange rate might have changed, but not by much. So in effect, just by transferring USD 50 (to and from 8 Securities), I had to pay approx. SGD 95.45 (or USD 70).

I reckon to transfer a larger sum would involve a much larger sum (fee).

25 Aug 2017 INWARD TRF – TT
SGD 37.38

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.

However, after weighing the transfer fee, I decided not to use 8 Securities.

I reckon, the fee of SGD 2 per counter per month for using a Singapore Brokerage to hold US or HK stocks may not be that great (in comparison to 8 Securities’s transfer fee).


Posted in Hong Kong Shares, Portfolio, US Stocks | 15 Comments

Tencent Holdings Ltd 00700 – Trailing PEG and Intrinsic Value


Mobile Messaging App

Tencent is often compared to Facebook, since its mobile messaging apps dominate the China’s social networking market. Last quarter, its flagship app WeChat hit 938 million monthly active users (MAUs), its older QQ messaging app reached 678 million MAUs, and its Qzone social network had 632 million MAUs.

Video Game Publisher

However, that’s not all — Tencent is also the biggest video game publisher in the world, and its portfolio of blockbuster games include e-sport favorite League of Legends and the mobile hit Clash of Clans.


The robust growth across its social networking and gaming businesses is also reflected in its stock price.


The growth of WeChat as an all-in-one “super app” is making it a top stop for internet advertisers (much to Baidu’s chagrin), while new Chinese games like Honor of Kings and Dragon Nest Mobile are holding its domestic rivals at bay.

However, my personal take is that gaming industry is typically a low moat business, where customers are extremely fickle.

Nevertheless, its business (if we compare to the US model) has aspects of Facebook, WhatsApp, Youtube, PayPal, Apple Music plus its gaming business all rolled into one.

Tencent’s revenue and earnings respectively rose 48% and 42% in 2016. Looking ahead, analysts expect its revenue to rise another 47% and for its earnings to climb 43% — which are incredible growth figures for an 18-year-old company.


Tencent Holdings Ltd 00700 is traded on the Hong Kong Stock Exchange.

Financial statistics

A quick study on the financial statistics of Tencent Holdings Limited (data below was obtained in Yahoo Finance on 27 Sept 2017).


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. The Return on Equity is good (near 30%) and FYI better than Alibaba’s.
  3. The balance sheet is strong. The resultant cash (after deducting debt is now HKD 2.29B.
  4. Total debt/equity level is not exactly low. Not good but very bad.
  5. The current ratio is not good at 1.36. Not good but just slightly below acceptable levels. Note:  Acceptable current ratios vary from industry to industry and are generally between 1.5 and 3 for healthy businesses.
  6. Tencent offers very little dividend.

Financial Historical Data


If Tencent is a Student. He/she would be in the Gifted Programme. The perfect A kind of student who never ever perform poorly.

Just looking at its historical revenue, net income, earning per share and free cash flow above – the growth is definitely incredible (esp. since it is a large cap. stock).

Top and bottom lines are growing at 40% to 50% annually at the current time!

The current annual TTM Revenue and TTM Net Income are approx. USD 28.7 billion and USD 8.1 billion! It’s 2016 revenue was USD 22.89 billion. Alibaba’s 2017 revenue was USD 23.86 billion.

However, that is still small compared to Apple whose 2016 revenue was USD 215.6 billion.


Nevertheless, ROA, ROE and ROIC have moderated over the years. But its TTM ROE at 30.28 is still very good. Making it a growth stock. The key metric of ROIC at >20 is also great.


The growth is also no debt-fueled.

Its balance sheet is not exactly great but marginally below acceptable levels. The current ratio is marginally below the acceptable level. Acceptable current ratios vary from industry to industry and are generally between 1.5 and 3 for healthy businesses. The Debt/Equity ratio is also slightly above the ideal level of below 0.4. From a pure risk perspective, lower ratios (0.4 or lower) are considered better debt ratios.

The narratives and figures above show that the company has a high return on capital / low capital expenditure business model.


Coming back to growth. Given the huge market cap. size of the stock (at HKD 3.19T which is USD 410 billion), the growth is astonishing. Over a ten-year period, its EPS has an average growth rate of 43%! It is Big and Growing Fast.



Trailing PEG and Intrinsic value

Let’s do a quick study on the trailing PEG and intrinsic value of Tencent Holdings Ltd.

1) Trailing PEG

P/E: 50.6
Dividend Yield (%): N.A.
EPS compound growth rate (10 yrs): 43.26%
The trailing PEG will be 50.6/(43.26+0) = 1.16. Which is not good (> 1), however, it is very close to ok.

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 earnings growth. 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 (HKD 4.87)
  • R = compound growth rate (Using the 10 yrs EPS CAGR which is 43.26%. However let’s take a 20% discount, and use 34.6%. as I am not really sure if growth can be maintained.
  • N = number of years in the future (5)
    Estimated future EPS: HKD 21.5

I will be estimating the future PE of Tencent Holdings Ltd to be 41.59 (See below data from Morningstar) – average of the PEs from 2007 to 2016.


Future Stock Price

P = future stock price
EPS = future EPS
PE = future PE
Hence future stock price of Tencent is 21.5 x 41.59 = 894.19

Intrinsic Value

P = present (intrinsic) value
F = future stock price (894.19)
R = MARR (15% or 0.15)
N = Number of years (5)
Hence, the intrinsic value of Tencent is HKD 445.

Given that the share price of Tencent Holdings Ltd 00700 on 27 Sept 2017 is HKD 338.400, there appears to be a margin of safety.


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 Tencent Holdings Ltd 00700 is HKD 320.37 (see below). Then there is no a margin of safety.




Look, I don’t intend to purchase Tencent stocks given the huge run-up in its share price. However, it is worth noting its intrinsic value and to pick it when markets decline.

Posted in Hong Kong Shares | 4 Comments

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 | 2 Comments

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. I wonder why…. :p
  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. This debt is now absorbed by Moya Asia via the reverse take over. The debt by the way is more than half the overall purchase price of Acautico.

There are many reasons why management wants to list a company in the stock market. One over-riding reason is spreading the risks (or in this case, spreading the debt). Small retail investors should really think whether if the risks are worth the investment. 

Existing shareholders prior to announcement of the RTO of Acautico probably did not have much of a choice (to accept the debts). However, moving ahead, given that the ‘dynamics’ of the company has changed… is the risks worth it? And oh yes, this stock does not have dividend payouts.

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 waste 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 | 3 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