Creative Technology Ltd. (C76.SI): When the Story is Stronger than the Numbers…

There are many stocks in the Singapore Exchange, and of course out of these, there are many stocks which nobody would touch.

For the longest time, Creative Technology Ltd is one such ‘Zombie’ stock. ‘Zombie’ because it is basically a living dead stock. It is listed on the exchange but for years, it hardly registers a heartbeat (its share price oscillate around $1 from late 2015 to early 2018).

That is a far cry from the price of approx. $14.30 in Jan 2006.

Creative had at one point in its history achieved a market capitalization of more than US$1.6 billion and Creative CEO Sim Mong Woo became a billionaire at age 45.

How would you feel if you are a long-term investor of this stock?


I will probably try very hard to forget about this stock and move on. After all, the Singapore Exchange is littered with so many of these have been stocks/companies.

I know the stock is there, but I won’t touch it with a 10-foot pole. Maybe I will occasionally buy flowers to pay my respect :p… Just Joking.


The Numbers behind this Stock

Actually, I seriously doubt if many of the recent speculators of this stock have bothered looking at the past financial data of Creative.

However, just out of curiosity, I took a quick peek.


Very briefly, one can see that in general, Revenue has been trending downhill over the years (from a high of USD 737 mil in 2008 to USD 70 mil in 2017).

The net income has been negative for most years (2016 was, in fact, a good year with USD 3 mil net income). Similarly for Earnings Per Share.

Creative recently posted a second-quarter net loss of US$4.2 million for the three months to Dec 31, 2017, on a 6 percent year-on-year dip in revenue to US$20.9 million.

Free Cash Flow, on the other hand, has always been negative. I wonder how does a company even survive. I don’t call this company ‘living dead’ for nothing.

Which is probably why it is no wonder that Mr. Sim has once mentioned that (emphasis mine), ” The most important thing is to survive. I’m happy just to be able to survive”, some time back in 2017 (read here).

Interestingly, the TTM Free Cash Flow is projected at USD 35 Mil (and likewise TTM Net Income and Earning Per Share). After so many years of negative Free Cash Flow, all of sudden it spiked. From negative USD 21 mil to USD 35 mil, approx. USD 56 mil (SGD 73.69 mil) difference in a short span of time.

The share outstanding for this company is 70.33 mil. So typically for the past years, its Market Cap was approx. SGD 70.33 mil, assuming the share price was approx. SGD 1. Within a span of less than a year, the Free Cash Flow increase alone is equivalent to more than its past Market Cap??!


Below are the statistics from Yahoo Finance dated 6 March 2018.

What strikes me is not the terrible operating margin (-39%) or poor ROE (9.44%).


It is the total cash value per share. It has no debt but it has SGD 118.35 mil in cash. And that is SGD 1.68 per share. So until recently, the stock was priced below the cash value of the share itself (and the no. of shares did not fluctuate much in recent years). Book value per share was also more than SGD 1.

Anyway, a company with no growth prospect is nevertheless a zombie stock. However, the cash pile would likely explain why this company is still in existence.

Reading its recent 2017 Annual Report feels like reading an obituary. I probably wouldn’t get past the first page.



With the exception of the below portion:



In terms of Numbers, you can’t find any reasons there (for the stock price).. at least from the historical figures. From a pure value investing standpoint, one cannot find value at the current price. In fact, many of the tech firms with insane multiples also don’t.

However, if you factor in the forward earnings, it becomes a different story. It was never meant to be viewed as a value stock. The trailing PE ratio of Creative is 72.17.

However, if we look at the TTM Earnings per Share of USD 0.11 (SGD 0.14) to its Share price on 7 March 2018 (SGD 8.30), the forward PE becomes 59. Still high… but still, there are crazier PE ratios out there (read here). And we are talking about the sector as a whole.

And if you compare to the average PE ratio of the Tech Sector (eg. 46.29), it is not way high. Ultimately – it is the future/forward earnings.
Technology Sector
Price to Earning ratio is at 46.29 in the 4. Quarter 2017 for Technology Sector (Read here)

  • 2 Reasons Tech Companies Have High P/E Ratios (read here)

By now, many would already be aware of Creative’s Super X-Fi technology.


A Super X-Fi dongle is expected to be released in the middle of the year at a price of US$150. Cheap if you compare it to the price one need to fork out for a high-end sound system. Creative also plans to launch a free application with limited functionality and to license the technology to other industry players.

Judging by that, it is going all out to capture all sectors of the market. Going low price and mass market.

  • Creative Tech shares surge to decade high (read here)
  • Creative soars 600% over seven sessions, prompts note of caution (read here)

Still, the increase in its stock price is just incredible. Nevertheless, at $8.30 (closing price on 6 March 2017), it is still far from its record high of $64 attained in 2000, when it had a market cap of $5.2 billion.


Why the meteoric rise in its Stock Price?


Promotion Strategy

Some people believe, it is the initial promotion strategy employed by Creative, whereby when stock watchers briefly moonlighted as tech reviewers last week. During which, Creative hosted them to a demonstration of the device. Many came out with raving reviews of the product.

  • Creative shares jump after glowing reports on new product (read here)
  • Listening to Creative’s new Super X-Fi Headphone Holography Technology (read here)
  • Creative Super X-Fi Technology: Preview Experience (read here)

Marketing Strategy

Or it could be the overall marketing strategy: Since January, Creative said it has presented its Super X-Fi to headphone makers and received validation. It also said it would sell the new chip to other companies. The Super X-Fi technology is powered by a new chip said to pack five times more computing and digital signal processing power than Creative’s most powerful Sound Blaster chip, but consumes less than half the power.

How Creative intends to market the Super X-Fi is different from how it has marketed its Sound Blaster or MP3 players in the past, by taking big leaps (often with insufficient resources).

Creative won’t be putting Super X-Fi straight into retail. Instead, it will be rolled out as a crowdfunding project with backers given a range of solutions. Backers can choose from headphones with Super X-Fi built-in or dongles that they can use with their existing headphones.

And that is not forgetting, we are talking about a cash-rich company that intends to sell a cheap Super X-Fi dongle at US$ 150.

Creative is taking minimal financial risk via the crowdfunding route.


A company that knows its own weakness

Amidst the hype about the superb performance of the Super X-Fi, the cleverness of Mr. Sim’s marketing strategy is not lost on me. Mr. Sim is also a businessman (Chairman & CEO). And over the years, he knows his company’s weaknesses.

It is a cruel world out there with many sharks. It is like even before you move your chess piece, your enemies are already 3 steps before you.

Yes, Creative is cash-rich – SGD 118 mil (probably from infringement lawsuit wins). However, in comparison to many cash-rich Tech giants in the US and China, SGD 118 mil is really nothing.

Next, to be frank – I feel that Creative is not known for their design prowess. I don’t find the earphones nor the dongle visually appealing. I am sure Apple can design better. When I think of the past, their MP3 player also doesn’t look as appealing as Apple’s Ipod … Sorry, Mr. Sim.


And can Creative compete with the China Tech firms with their low-cost manufacturers backing? (Or even Vietnam or other South Asian countries firms imitators)….I think not.

So Creative basically can’t compete on resources (money), design, cost…..

But what is Creative actually selling? Is Creative selling the headphones, the dongle (hardware)… I don’t think so.

Mr. Sim basically eliminates the hardware portion of the product. He is selling a chip (or rather algorithms). How much does a chip cost to make? I don’t think much. And if there is essentially no hardware, he doesn’t need to worry about cost and design. Let others worry about that.

Not sure how to phrase it.. eg. Like how Bill Gates promote his Microsoft operating system to IBM or how Intel sell their chips, or how Qorvo is a provider of radio frequency (RF) solutions for mobile, defense, and infrastructure applications

Creative becomes essentially becomes a pick-axle supplier for the sound industry if it succeeds.

Yes, without a doubt, there will be imitators, probably within weeks or months.. if the product is good. Patents might minimize it but perhaps given the buzz, Creative might have the first mover advantage. And of course, infringement lawsuits might just create another revenue stream.

The profits won’t be immediate, but if they can succeed in this, there will be long-term recurring profits. Actually, I seriously doubt the US 150 can cover Creative’s R&D and manufacturing cost… but well, it won’t kill this company. But then I don’t think Creative is after the initial wave of profits too.



The Sim Mong Woo factor

Then there is the Sim Mong Woo factor.

For many listed companies, investors typically do not really consider the management as a Business Moat. After all, in many cases, it is the company that came first, then the management / CEO.

“If you’ve got a good enough business, if you have a monopoly newspaper, if you have a network television station – I’m talking of the past – you know, your idiot nephew could run it. And if you’ve got a really good business, it doesn’t make any difference.” Warren Buffett

However, for a few select companies (often tech firms), brilliant and well-educated CEOs and managers sometimes become synonymous with their company. Whether it’s Steve Jobs, Mark Zuckerberg, or Jeff Bezos, it’s hard to separate the man from the operation.

Creative Technology and Mr. Sim is one such example.

  • Bezos Prime (read here)

I believe Mr. Sim has always been consistent in his narrative about his passions and how Creative Technology’s strength is, over many years. Mr. Sim is getting better at his ‘pitch’.

Mr. Sim, a tech veteran of more than 30 years, whose 3 main passions are Technology, Chinese and Singapore. And who draws a salary of $1. Very few people can be passionate about sound technology for 30 years and after so many setbacks.

Extract from this article.

All my life, I have three “passions”.

I am passionate about technology. I am a tech junkie and I will dive into any new technologies and research and develop a lot of new technologies.

My second passion is Chinese. I am passionate about Chinese history and culture. I believe it is something we ought to know because it is our background and history.

My third passion is Singapore. In fact, for Creative Technology, the best place to grow is in the US. We can move the entire company to the US because Creative Technology is a tech firm. Don’t stay in Singapore, just move everything to the US and look for talent there. There’s so much talent there, especially in Silicon Valley. But we decided to stay in Singapore and invested in Singapore. All the marketing, technologies and methods are here in Singapore, we want to nurture locals. Even for projects involving the Chinese language, which should have been done in China, I said, do it in Singapore.

Many people would familiar with the Creative Sound Blaster. And many Singaporeans would probably want Mr. Sim to succeed even if they do not even know or tried this new Super X-Fi technology. I guess they want to believe. They want to believe that tiny Singapore can produce a Tech giant.

Very few tech companies choose to remain in Singapore or actually originated from Singapore. Or even choose to list in the Singapore Stock Market.

Razer and its co-founder and CEO, Tan Min-Liang comes to mind.

Extract from this article (emphasis mine):
“To some in Singapore, Tan is the Sim Wong Hoo of his generation, a Sim Mach 2, if you like, after the innovative founder of Creative Technology. But Tan bristles at a full comparison with Sim, who turns 60 this year, insisting that he is not a “poster boy” for Singapore’s technology industry. “We didn’t build the company in Singapore. Sim did,” he says curtly.
It’s just the laws of probability, Tan surmises. “I don’t necessarily think location makes a difference, but talent pool. There are four or five million people in Singapore. If you have a much larger pool or a bunch of engineering talent in a single location, then the chances of getting more start-ups or engineers are higher.
“You see a lot of entrepreneurs here, primarily because of the nature of the talent. You get a lot of finance and real-estate people, but not much engineering. That’s how it is.”

Creative Technology voluntarily delisted from NASDAQ on August 1, 2007 (read here), but remain listed in SGX. While Razor chose to list in Hong Kong in 2017 (read here).

On another note, I believe a key strength in Creative (which is perhaps lesser known), is its ability to challenge bigger companies legally (via patents). However, the win via patent may not be the be all and end all. In the case of Creative’s previous legal disputes with Apple, Creative may have won the battle, but it lost the war.

However, I seriously think Sarine Technologies can learn something from Creative here.

  • Apple settles with Creative for $100 million (read here)

When selling is more important than building…

1_wIzq-v1OMGxH2ZU7WAA7pQ (1).gif

Occasionally, I would meet up with some of the young start-up founders. Mr. Sim, on the other hand, belongs to an era before the terms ‘Series A, B, or C funding or incubator’ were commonplace.

I have met a couple of new startup founders who seem to put the cart before the horse (although I must say they do not represent the majority of the younger startup founders). Even before they have a real working company/team, or good service or product… their first thought inevitably drift to the ‘selling of the company’ part.

They are more concerned about how much the venture capital companies or US / China tech giants would pay to have a slice of their company, rather than struggling to hold on to their companies and take the competitors straight on…

They are not interested in finding people who can network or brainstorm or solve business models… they are interested in people or companies with deep pockets. We just could not keep the conversation focused on their business strategy, services or products… it inevitably drifts to how much to invest (and if I know any VCs).

Challenge Alibaba, Uber, Apple, Tencent… is IMPOSSIBLE. Just buy me out.

They think of the many ‘Unicorn’ companies whose valuation have rocketed up relentlessly, even though the companies themselves are still loss-making. Perhaps it is the fact, that we have so much liquidity floating around these days, people are willing to throw money at any companies with no track record or viable products/services.

It becomes more of a pricing game rather than the pure valuation of a truly functional company.

Entrepreneurship is indeed tough. To compete with the best in the world from Singapore is even harder.

Nevertheless, for whatever reason, I do hope Creative Technology latest product will turn out to be its best product ever.

Shall leave you with this song (think it is appropriate for this stock).

Posted in Creative Technology Ltd | 10 Comments


I finally have some time alone to write a post. It has been a busy week. Not easy when you have 2 kids with no domestic helper. You can’t really have much alone time to surf the internet.

I came across the below post and the poem as mentioned in the article.

  • Warren Buffett says investors should heed this 19th-century poem when the market is crashing (read here)

If written by the British Nobel laureate Rudyard Kipling in 1895.

The poem is actually much longer (than what is shown below – in blue). However, I think the first few sentences of the poem are pertinent to investing in the stock market.


If you can keep your head when all about you   
    Are losing theirs and blaming it on you,  
When running in the other direction becomes second nature to you.
When listening to your own mind rather than your heart is easy for you. You are then able to take advantages of the market volatility.
Currently, I think even a 16-years old teenage girl can comprehend that the stock market is ‘expensive’.
Extract from the article below (emphasis mine): “Yeah, it is a tempting thought. But when I calculated, this S$2,550 will become S$30,000 when I retire. The stock market’s too high anyway. Kate replied.
  • Want To Know How This 16-Year Old Singaporean Student Stands To Make $30K From Working During Her School Holidays? (read here)
And oh yeah, I have transferred money to my SRS account, transferred from my CPF OA to CPF SA account, and well as updated my tax form (so I kinda know how much tax I would be paying this year).
Pertaining to tax, it really helped that I contributed to my SRS account and top up my parents’ CPF accounts… Also tax reliefs such as Qualifying Child Relief (QCR), Parenthood Tax Rebate helped as well.
With the tax reliefs – my personal tax amount this year has dropped significantly as compared to the amount I paid last year.
  • Cheat Sheet: Personal Income Tax In Singapore 2018 (read here)
I just spent some time tidying of my personal finances since I didn’t dwell too much on stocks.
If you can trust yourself when all men doubt you,
    But make allowance for their doubting too;   
Of course, I may be wrong. Markets don’t just crash because they are over-valued. There is always a trigger. And what do I know about markets nor the economy anyway?
I like to go into investment blog posts, forums, Facebook groups (related to personal finance and investment), and typically I find a lot of posts pertaining to stock trades. After all, many of the members trade frequently. The hot stocks such as Creative, AEM, LTC…
  • Hot stock: Creative Technology shares hit decade high (read here)
Extract from above article:
CGS-CIMB’s Mr Yeo told The Business Times on Monday: “If a competitor suddenly announced a competing technology, this whole euphoria could quickly evaporate, just as rapidly as it was built up.
“On the other hand, if Creative manages to execute, then the sky is the limit, as we have seen from the other tech giants.”
Some of the older generations might remember the glory days of Creative. I did not invest in Creative back then… and am really surprised by the sudden rise in stock price. However, I must say, Mr Sim Wong Hoo is someone whom I would respect.
Perhaps many Singaporeans want to believe (even if they haven’t even know how good is the Super X-Fi technology.
Watch this video (Sim Wong Hoo is back).
I think in this case, it could be like Amazon. Investors are very forgiving of tech stocks (even if they are not earning high profits and burning cash) – provided the founder is consistent in their beliefs (through the years).
Occasionally, I would study further into some of the companies behind the stocks to find out more. Perhaps I am wrong anyway.
If you can wait and not be tired by waiting,
    Or being lied about, don’t deal in lies,
I seriously think I might be suffering from ‘waiting fatigue’.
Waiting for the stocks that I am holding to fly (eg. its stock price).
Waiting for the prices of the stocks I am eyeing to fall drastically.
Waiting for excessive greed or fear in the markets.
Waiting for the crowdfunding platform to resolve or get back a portion of the loan amounts for the invoice financing loans that have defaulted.
I think the biggest waiting for me – is simply saving and hopefully one day to buy my ‘life’ back. That is kind of an extreme way of saying it.
Well, BeatTheBush kind of sum it up in his video.
People might have the misconception that for someone that saves a lot, really loves money a lot. But money is basically a means to something else.
It could mean a trip to somewhere you have always wanted to go, things you always wanted to have… or just a way to generate passive income and to live the life you always wanted to (free from basic worry of money). To have more time to yourself and even using this time to generate more passive income.


Shall leave you with this slow song.
Posted in Uncategorized | 1 Comment

What motivates you in your quest for financial freedom? 4 persons who have screwed up big time financially, only to bounce back up.

The recent market correction in the US is perhaps a wake-up call for some of us. Well, some may think to themselves looking at the sea of red, “Hey, investing in stocks is actually kind of risky. I can lose a lot of money within a very short period of time”.

  • Seeing Red? Here’s what 10 Financial Bloggers think (read here)

Really our worst enemy is ourselves.

Often we hear about how others did well financially. How their investments are paying off. 2017 was a particularly low volatility year when it comes to the stock market in general.

Seldom do we hear about screw-ups – When people lose big money. That is natural. Who wants to look like a fool in front of others? Look like a failure.

However, it is even more seldom that we hear about how people rise from their failures and learn from it.



Investing in the stock market always provide me with a very humbling experience. I thought I know which stocks will do well and when the market will peak or crash. Or how well I know myself and my temperament. And how well I take losses.

My worst stock pick is probably Golden Agri, followed by SIA and SMRT (come to think of it, they were mostly blue chip or ex-blue chip stocks :p).

Sometimes, I wonder what is the percentage of people making money vs people losing money in stocks.

  • Stocks — Part III: Most people lose money in the market (read here)
  • Nearly 70% of investors lost money in 2015 (read here)

And I am not sure how many have given up investing in the stock market altogether.

Often, we surround ourselves with people of similar social standing and financial standing… our peers. Nevertheless, it is always good to meet people who come from a different ‘circle’. To learn from their screw-ups and how they have managed to overcome it. How hungry they are to succeed.

Below are 4 examples of people who had screwed up big time financially, but have managed to bounce back up.

  • Down S$740k after penny-stock crash, he clawed his way back (read here)
  • Ex-bankrupt can laugh all the way to the bank (read here)

Posted in Uncategorized | 6 Comments

Love People & Use Things because The Opposite never works

Love People


I came across the below post in Seedly Personal Finance Facebook group:

Should I make my bf pay me rental fees? A “social-financial” cohesion problem.

“Dear Seedly Community, My bf and I are both in our late 30s and have recently decided to live together in my landed home, the mortgage for which I have fully paid up. He pays about $5k monthly for his rental condo unit and his current lease will end soon.

Should I make him pay me rent or do we draw up some financial arrangement to make sure he will not be a free-loader when he moves in with me? He earns lots more $ than me and also spends way more $ than me. Will be interested to hear your views please. 🙂 ” Aged 30 to 34 year old.

I have always felt that it is hard to quantify a ‘relationship’ with someone who is close to you.

Personally, I keep track of my personal finances (income and expenses) as well as my investment.

However, every now and then some needs would appear in my family. FYI, I am married with 2 kids.

  1. Quarterly enrichment classes fees for my son.
  2. Medical fees for my children.
  3. Birthday presents/celebration
  4. The occasional overseas holidays (to nearby places) with my family (and with my parents and siblings + their family).
  5. Eating out with family.
  6. Insurance policies (endowment and Whole life policies) for my children. Endowment plans for their future tertiary education.
  7. The monthly sum of money for my aging parents.

Oh yeah, recently we decided to replace our aircon system. It is indeed spoilt… we tried repairing numerous times, only to end up spending unnecessary money (end up not working again after a while).

Every Chinese New Year, I have to figure out how much to give for the Ang Baos. Again how do I quantify the amount to put in each red packet to the ones I love.

To me, these are money spent for my loved ones. People who are close to me. It is really hard to quantify or to put a figure on each item.

  • As parents, we hope our children have the necessary education and not feel left out.
  • As the son of my aging parents, I hope they can live happily in their twilight years and not worry about us (me and my siblings) or money.
  • As the husband – love the wife. Don’t you know I have 2 bosses (one at work… the other…at home).

We have a fully paid up HDB apartment. No car. No domestic helper.

I am rather tight-fisted with my finances. Occasionally, annoying the people around me. So I reckon it is a work in progress.

And yes, I think we should not spoil our kids (even if one is rich).

Not many people around me share the same beliefs about how I view finances. Their concept of money is somewhat different from how I view it.

For one, I don’t think my siblings, my wife, my parents kept a soft copy of their monthly finances, not to mention investment portfolio…

However, my parents do invest in stocks. And I do occasionally discuss stock picks with my dad. However, finances were seldom discussed …

I don’t think it is an ideal ‘budget’…

Haha… I think my portfolio would look a lot ‘better’ without the occasional big expenses. And I would be that much closer to my ‘retirement sum’. If I am not married, my lifestyle would probably be very different and maybe less interesting. I think I can survive on really a low amount if I try hard enough… living the bachelor lifestyle. However, sharing itself is a joy. As long as we are spending within our means.

Ultimately money is a means for something. If eventually, I can use it for something meaningful, it would be worth it.

And oh yes, my wife and me, both came from humble backgrounds. I don’t think I ever thought of using her…hmmm…(of course it doesn’t hurt if any of us have a condo or landed property, to begin with, hahahaha.. Just joking.).


Use Things


However, it could turn the other way if I spend on frivolous things or for pure entertainment, just to keep up with the Jones.

  • Money story: Our financial 180 (read here)

See below extract from the article:

As the years passed, my spending habit worsened. By 2012, we were spending six figures a year on… Stuff.

  • Two brand-new cars at $25,000 a pop? That’s normal, right?
  • A $40,000 wedding and a fancy Bahamian honeymoon? Sure, that was expensive but we could “afford” it.
  • $13,000 in restaurant spending during a single year? We liked to think of ourselves as food connoisseurs.

Why shouldn’t I treat myself? I was putting a full 6% into my 401(k) every year to get my employer match. That was more than most Americans. I was being smart! So, I continued my adventures in spending.

Before I knew it, our life was full: food and water delivery services, monthly massages at the spa, fancy dry cleaning bills, season tickets to various entertainment venues, expensive martial arts hobbies. You name it, we had it.

But as our life — and bank statements — filled up, we weren’t getting any happier. It was actually the opposite. We were more stressed than ever before! We just couldn’t figure out the problem.

I don’t actually own many things. Hey, I am all for the sharing economy.

On weekends, for traveling short distances around my place, I use the bikes from bike sharing companies (currently I have the obike and ofo Apps applications on my smartphone).

As a family, we normally travel via public transport eg. bus or MRT. Occasionally, we would use Grab or Taxis. I think we did book quite a number of taxis for the visiting.

No expensive hobbies. I like to swim while my son goes down to the playground on most days after revising his homework. And if I have the time, I like to go to the library to read up (reading online articles for long hours can be quite straining to my eyes).

My wife likes to doddle and tends to plants, and I occasionally blog.

No smartphone, no Ipad or Play station for my son.

No impressive collection of expensive stuff. However, we do have a mini collection of Lego. Can’t imagine myself dusting off or packing any big pile of stuff (remember no domestic helper).

To me, things are for using. Not to show off to people whom I don’t like. Anyway, the stuff do not know I own them, and can’t love me back :p


Shall leave with this song.



Posted in Uncategorized | 2 Comments

What is at Stake? Does it matter?

Actually, some might say that how we view the recent crash is a matter of perspective.

After all, there are many who are rich and doesn’t have a huge stake in the stock market. They can afford to be sanguine in market corrections/crashes. What about the little man on the street?

1. How much at Stake

Person A (Stocks is his lifeline)

Imagine someone who is heavily invested in the stock market, and who is heavily dependent on the price fluctuations or dividend income of his/her stocks. The stock correction or crash will have a more adverse impact on his/her net worth. He/she could be retired and is doing trading for a ‘living’.

Person B (Doesn’t give a hoot about stocks)

Then you compare Person A with someone who is rich or has a well-paying job, or who is financially independent who doesn’t really need to ‘rely’ on the stock market. He has a small percentage of his net worth tied up in stocks or none at all.

He may not even be any of these… just the typical average Joe who doesn’t touch stocks.

  • We All Have a Stake in the Stock Market, Right? Guess Again (read here)

Person C (New to investing/trading)

Then there are the newbies who just started out in their investing journey. They could have just gotten their first pay cheque and is eager to start their investing journey with their hard earned money. After all 2017 was a great year. It seems like a good or shall I say easy time to invest. Since almost anything they touch goes up.

They could be in debt (study loan, mortgage, credit cards debts, car loan, etc)…. and this money could also be used to pay off their debt, and take care of their loved ones.

2. The Context

Given that we had a relatively easy 2017.

As stated by the article below:

“But our perceptions are distorted by more than thinking of points rather than percentages. The last 18 months have been one of the least volatile periods for the stock market in modern times. Humans have a bias toward recency, an inclination to let recent experience shape our expectations for the future.

The S.&P. 500 did not decline by more than 2 percent on a single trading day in all of 2017, which helps explain why Friday’s 2.1 percent drop seemed so startling. (The percentage drop on Monday was a much rarer event, one that last occurred in 2011.)

But 2017 was weird. There were five such days in 2016, six in 2015 and four in 2014. In 2011, there were 21 trading days in which the S.&P. fell by more than 2 percent, nearly two per month. A bit of overreaction is as natural as people in normally dry Los Angeles having trouble driving in the rain.

There’s no doubt that the 7.8 percent drop since Jan. 26 is substantial; it represents nearly $2 trillion of paper wealth. But you find some better news underneath that unpleasant fact when you look at what has happened in the bond market while stocks have been falling.”

  • Context Matters. The Stock Market Drop Is Less Scary Than It Seems. (read here)

The context has different effects on each individual.

Person X

He/she has been through the Great Financial Crisis, Flash Crash, SARS Scare, Asian Financial Crisis, 9-11, Gulf War, etc….

How does the magnitude of this correction compare to the above-mentioned clashes?

Person Y

He/she has never study the market or the companies behind the stocks. He/she is new to investing… Been ‘used’ to 2017 upward market trend. Never been through a correction or crash. Doesn’t know what he/she is investing in.. just know the price (and the price drop)…

How you think about Stakes and Context Matters

I think how the year 2017 turned out (The Context) and what we have been through do play a part.

How much is at stake… is another story. While reading through the blog posts of many financial bloggers (see my previous post), I find the blogger from Mr. Tako Escapes particularly interesting.

There are many financial bloggers who are already in the Financially Independent stage/retired. Take AK from ASSI, Sam from Financial Samurai and the Couple from Mr. Tako Escapes.

They come from various background. Some are single, some are married with kids. Some are in the high net worth league… some live simply and make do with what they have.

Some depend heavily on their passive income stream while others don’t. Then, there are various ways to get passive income. For example, Sam focus more on rental properties while Mr. Tako and AK focus on stock/REITs dividend income.

Check out who is Mr. Tako. (read here). Mr Tako reached Financial Independence very differently from how Sam from Financial Samurai did it (read here and here). He is also very family orientated.

  • He never had a big pay cheque eg. During the bulk of his earning years, he made less than $100,000 a year (pre-tax). He earned it the ‘hard way’, one day at a time, one penny at a time.
  • He didn’t work on Wall Street, or make large sums of money from software company stock options.
  • He didn’t flip real estate and sell at exactly the right time before the 2008 crash. He was never promoted to an executive level position.
  • He didn’t inherit any money.
  • He didn’t sell a business for millions.
  • In 2015 when he created this page, they (he and his wife) were worth a little over $2 million USD.
  • He has two young boys.

Well, considering their net worth – I would say that it is at a comfortable level. Not high net worth.

The fact that he has two young kids and his family is basically living off their dividend income – means his net worth is basically heavily correlated to the stock market. He is also not young (eg. Doesn’t have loads of ‘Human Capital’).


In terms of ‘stake’ —- I would say high. He is Person A in terms of Stakes, and Person X in terms of Context.

However, he is not in the ultra high stake league. These are people who invest/trade using money that is not theirs. Eg. Using margin/leverage or have lots of debt. They invest beyond their means/net worth.

What is particularly interesting about all this is his statement about the recent market sell-off (read here).

“Well, I did NOTHING in January and saw a 10% gain in our portfolio value. The markets were very optimistic and stocks rose accordingly in January. This didn’t make buying new shares easy.

Thankfully, most of these gains disappeared in the single largest one day drop in history of the Dow.

Just like a sale on eggs at the grocery store, I’m going to be on the lookout for good sales on stocks. After all, what true investors want is lower prices, not higher prices.”

Perhaps it is his past experience, and the fact that he knew what he is investing in (knowing very well that dividends will still come, rain or shine). Cheaper prices just mean better dividend income in the future… irregardless of net worth.

When we are young, we have lots of human capital… our pay may be low. But the future is bright. We can afford to wait…

The question is – do we know what we are doing, do we know ourselves well enough (how much pain/losses we can endure) and do we have the patience to wait.

Posted in Uncategorized | Leave a comment

Seeing Red? Here’s what 10 Financial Bloggers think.


So the US S&P 500 has dropped from its high of 2872 on 26 Jan 2018 to 2581 on 8 Feb 2018; a 10.1% drop in a matter of days.


While the STI Index has dropped from its high of 3609 on 24 Jan 2018 to 3377 on 9 Feb 2018; a 6.4% drop in a matter of days.


By now, you ought to know that I am not talking about the RED packets/Ang Baos commonly associated with the Chinese New Year. This post is about the red losses in your stock portfolio.

Well, for some, it meant painful losses, while for others, it is an exciting period to buy the dips. Then there are some who are just looking deeper for more opportunities (perhaps not now but later).

Basically, you are not the only one seeing red in your stock portfolio. Many others do as well.

For me, I’m not out of the markets (don’t think I ever will be totally out in the next foreseeable future). My portfolio has also taken a hit. However, I am curious as to what others think as well. So I started surfing and reading what others have to say. Bloggers being bloggers – they love to write.

Well, at least that is better than staring at the losses and crying … :p Just kidding.

Below are the opinions of 10 Financial Bloggers.


1) T.U.B Investing

In his post, titled “Steps To Take In A Market Correction”, he mentioned the following:

  • Keep Calm and A Clear Mind
  • Reduce Your Watchlist and Focus on Your Portfolio
  • Focus on Individual Company and Not The Market
  • Pace Yourself, Funds Are Limited
  • Buy Strong Fundamental Companies


In his post, titled “Buy? Hold? Sell?”, Darren mentioned that his personal take is to buy the dip. He has entered an order for UMS holdings on 7 Feb 2018, when prices declined.

3) Ryan Goh: Life through these eyes

In his post, titled “What’s your plan when the markets drop?”, Ryan emphasized the need to have a plan to get through the fall in the markets. The plan would be something like this:

  1. Split the money you have to invest** into 10 portions.
  2. When the market goes down 10%, invest 1 portion into whatever’s on your watchlist. To keep things simple, I’ll assume it’s the STI ETF.***
  3. If it goes down another 10% (relative the peak), invest 2 portions.
  4. If it goes down another 10% (relative to the peak), invest 3 portions.
  5. If it goes down another 10% (relative to the peak), invest 4 portions. By this time, that sum of money you had will be fully invested.


In his post, titled “STI- [Crash Or Correction?]”, Kelwin & Roy mentioned that they would take this opportunity to look for good blue chips that have been sold down. It’s the great stock sale!

5) Investment Moats

In his post, titled “Stock Markets are Red – Where are the Low Correlations for the Day?”, Kyith mentioned that for himself, he has set up his portfolio based on his financial security needs. He is near the end of his capital injection cycle.

The allocation is based on the overall market value and the individual selections contain a lot of pseudo-bonds that usually don’t do too well in times like this. He has some speculative positions that are going to be killed. However, he has a rough idea what he should do with them.

And for people who are in the phase where they are growing their money. Kyith highlighted that they should rejoice, as drawdowns like this are good for them. It is good because they experience first hand what they have been telling themselves – that they can stomach the volatility.

6) The Bedokian Portfolio

In his post, titled “Seeing Red?”, he mentioned that,

“As investors, particularly the Bedokian Portfolio ones, we must be prepared. Again, if you are in the passive side, just wait for your next rebalancing cycle and reallocate accordingly, and move on. If you are in the active side, there are a few strategies to adhere to, like the 10-30 Rule1, look out for bargains in fundamentally strong equity/REIT counters that fall for no reason, or consider other asset classes.

Remember, investing is a long journey that goes uphill and down.”


7) Financial Samurai

In his post, titled “Contingency Plans For A Digital Bank Run”, Sam mentioned that,

“When the S&P 500 futures were pointing to another -5% opening on February 6, 2018, I got excited. After all, the S&P 500 closed down 4.5% on February 5. I get aggressive whenever the stock market corrects by 10% or more because history has shown positive returns in subsequent days and months.

The initial down 5% move was blamed on the 10-year bond yield jumping to 2.85%. But since the 10-year bond yield declined from 2.85% to 2.75% after the 5% stock market drop, and futures were signaling another 5% drop in the stock market, I figured it was time to deploy some significant cash. Fundamentally, corporate earnings growth and economic indicators were still sound.

Armed with $200,000, my plan was to use $100,000 to buy the morning gap down and deploy the remaining $100,000 throughout the day just in case the stock market panicked even further. I set my alarm clock for 6:15am just in case, brushed my teeth, sat on the toilet, and fired up my Fidelity account to put in my $100,000 buy order.”

8) A Wealth of Common Sense

In his post, titled “The Drawbacks of Behavioral Finance During a Market Correction”, Ben mentioned that he is not sure if this correction will prove to be short-lived or turn into a longer, drawn-out bear market. No one can predict how investors will react once things start to go down. But if you don’t have a plan of attack in place going into something like this, your emotions will get the best of you.

9) Mr. Tako Escapes

In his post, titled “January 2018 Dividend Income And Expenses”, Mr. Tako mentioned that he has changed absolutely nothing in their portfolio and let their investments ride.

He just couldn’t force himself to buy stocks at these elevated prices, so he wrote about investing instead.

Investing is one of the few activities in the world where sloth can actually be an advantage. Moving funds around means fees get generated, and capital gains get taxed. Doing nothing can certainly have advantages.

Well, he did NOTHING in January and saw a 10% gain in their portfolio value. The markets were very optimistic and stocks rose accordingly in January. This didn’t make buying new shares easy.

To quote: Thankfully, most of these gains disappeared in the single largest one day drop in the history of the Dow.

Just like a sale on eggs at the grocery store, I’m going to be on the lookout for good sales on stocks. After all, what true investors want is lower prices, not higher prices.”

10) The Reformed Broker

In his post, titled “The Definition”, Joshua mentioned the following:

“As for investors who are currently in retirement and drawing on their investment accounts to meet living expenses – provided they have planned well and allocated according to these plans, a 10% normal drawdown in stocks should not have any material impact beyond the merely psychological.

And for those who’ve been hurt disproportionately due to excessive risk-taking, leverage or poorly constructed portfolios, it serves as a perfect wake-up call that they may need to consult a professional on either their plan, their portfolio or, most likely, both.”


In gist:

For many of the bloggers, they are sanguine about the correction. They have highlighted the need to have a plan, and not let your emotions get the better of you. For those who have speculated recklessly, they should use this as a lesson. For others who have planned well, this could be a great opportunity to buy quality stocks at a lower price.

Many of them have started strategizing on how to deploy their cash in buying the dips. Take, for instance, the bloggers from:

  • T.U.B Investing, 
  • Financial Samurai,
  • Mr. Tako Escapes.

Some are in fact excited (Financial Samurai) and even thankful for the correction (Mr. Tako Escapes).


Well, some may think that Financial Bloggers are an odd bunch…

However, we all do not know how long (and how deep) the draw-down will be.


“It would be wonderful if we could avoid the setbacks with timely exits, but nobody has figured out how to predict them.” Peter Lynch

Actually personally for me, I think things are starting to get interesting. Although, I don’t see many undervalued quality stocks yet (given the long run-up we had so far). It has been a long while since I started thinking about buying stocks for keeps.

I can’t do much about the losses that are already in my portfolio, but for now, I can do much to plan for the foreseeable future. I think the fundamentals of many of my stocks can withstand economic setbacks.

I will never ever have a crystal ball (to tell me when the markets will crash) and I will always have a foot in the markets. I also don’t short stocks. So when the markets turn, my portfolio will be hit.

Stock investing is always about the future, not the now. And the distant future is starting to look better (can’t say the same for the immediate future).

Shall leave you with this song.

Now that I have completed this post, it’s back to staring at my stock portfolio…. :p


Posted in Portfolio | 3 Comments

From FOMO to STGI?

It was only recently when I did a post about FOMO (Fear of Missing Out), back in Dec 2017. Now I think this post can be called STGI (Scare To Go In).


Currently, I am screening through my ‘shopping list’. However, I feel it is still early (being the cheapskate that I am when it comes to buying stocks). The correction in the US markets though big on a daily basis is not huge when taken in the context of the overall market rise over the recent years.


Yes, it sucks, looking at the unrealized losses I had in just a couple of days. However, I reckon I should be thinking more in terms of value rather than price.

Just find the market super Emo.


I am investing in stocks for gains, not excitement. While looking through my buy list, I have yet to find any undervalued stocks. Darn!

At the end of the day, despite all the news, what matters to me, is still how close the price is to the value (or if the price is below the value).

For some, the Stock Market is a mechanism/system to transfer wealth from the impatient people to the patient people.


Perhaps this could be the time when I could finally get my hands on quality income stocks or growth stocks (even those in the US markets) and add on to my stock holdings, or buy back those which I have sold, at a lower price… (After all, one could see it as about achieving Alpha, right? A better percentage gain over the long term for a single counter).

Hmm.. given the long and huge run-up for US Tech stocks (FAANG Stocks and BAT Stocks- guess it will be a stretch. And this true for even some of the US Stocks I looked at before T. Rowe Price Group, Inc., MasterCard, Paypal….Let’s see.

However, when it falls, it normally falls fast. I don’t ever recall seeing the market drop at the rate market rise (the slow grind upwards). Fear is always a stronger force than greed (in the short term). They don’t call it a Drop for nothing.


This reminds me of the Sept 2015 post I did, aptly named Cavalry charge.

So back to screening my shopping list, and reading my past blog posts/analysis.

I came across this old post of mine back in Aug 2015 (See below). I reckon some of the counters have been delisted. The fundamentals for many of these companies would have changed. But well to me, it is a starting point.

  • Market Correction = Shares on Sale? (read here)

Then my mind thought of other (Income) stocks like Heineken Malaysia Bhd, Carlsberg Brewery Malaysia Bhd, Straco, Vicom, Tat Seng Pkg, Capital Commercial Trust, First REIT, Ascendas REIT, Frasers Logistics and Industrial Trust…

And for now, I have stopped transferring my cash to the Money Market Fund. And stopped tracking my portfolio (kind of depressing and distracting..). And I have started thinking ahead, and remind myself to focus on VALUE.

I am currently awaiting the FY 2017 results from Sarine Technologies scheduled this month. Hopefully, things have changed for the better. Even if it did, I can’t really say how it would affect the stock price in the short term given the state of the market now. Likewise, for Shinsho Corporation, the rise in share price has been reduced in recent days.

  • Sarine Tech is getting back its shine, says CIMB (read here)
  • Sarine Technologies Ltd – Sell-off overdone; restoring its lost shine (read here)

We are still at the beginning of 2018, a long year ahead. Technically, I don’t see blood on the street yet, and I still don’t really read much headline news from CNBC.

  • Dow plunges 250 points, 3-day losses total more than 2,000 points (read here)


The pain of loss is always greater than the joy from gains. Even if I buy, I will buy in drips. Or put in another way, let’s just say, I know my ‘pain threshold’.

Will buy big if there is really a big sale.

“Opportunities come infrequently. When it rains gold, put out the bucket, not the thimble” Warren Buffett

Posted in Portfolio | 2 Comments

Slowly getting out but not ‘out’ out

This will be a short post.

Previously, I did a post at the beginning of the year about my portfolio. Read here.

In it, I mentioned that I would like to increase my ‘war-chest’. Well, it has been a slow process. I have slowly reduced my holdings in some of the stocks which I have been holding on to…. but at the same time I have increased my holdings in Sarine Technologies and started a new position in Shinsho Corporation.

I don’t actively sell (or buy) my holdings. I typically do my trades after work (after office hours), at home. I key in the sell price (which is typically a bit higher than the day’s closing price), and a portion of my holdings and that’s it. And hope it gets sold. I don’t actively trade during my working hours.

Shinsho Corporation has recently exploded upwards … so that was good.

  • Shinsho Corporation: Is the stock a bargain? (read here)

Still, my cash holding is relatively high. Near 60%. I have been dutifully transferring some of this amount into Lion Global Money Market Fund (in Fundsupermart). It has been a slow process. As I am not a Wealth Premium Account holder with UOB, so I can only transfer $5k per day. I could be a Wealth Premium Account holder with UOB, but don’t really see the need (except for probably now). Yes, I get some interest from the Money Market Fund, but it isn’t much (if I think about the potential returns from Stocks).

I have been reading about Money Market Funds. Theoretically, it is a safe and liquid way to store your cash. However, in extreme (and very rare) cases there are a couple of instances whereby the fund net asset value went below $1.

Looking at the portfolio of Lion Global Money Market Fund, I think it is unlikely… (anyway let just say, I don’t think I will put all my cash into the fund).

  • Money-Market Fund ‘Breaks the Buck’ (read here)
  • Why Money Market Funds Break The Buck (read here)

The recent sell-off in the US market on Friday- was swift and for a one day drop, it is rather large (666 points for the S&P). Anyway, as for me, I did not do any trade today.  FYI, it was a sea of red for my portfolio on Monday.

Hope things are ok for you guys.

I don’t really like to time the market, and frankly, I don’t think I can.


I try not to be totally out of the market. So yes, although I have been divesting a number of my holdings (since 2016) and also reducing my holdings for some of my current stock holdings, however, one key thing I did was to record down the sell-prices (those counters that have not been delisted).

I think ultimately, for some of these counters I would like to buy them again if the price is right. When the market gets ugly, I do browse through the stock prices of these counters. For some of these stocks, the prices are really very volatile.

Also, I don’t know how long the market will keep going up or if the correction or crash comes, how long it will stay depressed. People forget. I know I do. Often I do not remember the price at which I sold or bought. Unless I record it down.


And like I said – slowly getting out, but not ‘out’ out.

Am still staying in the game.

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The 2 Financial Pillars of Sarine Technologies

sarine logo.png

I have previously written a post about my thoughts on Sarine Technologies and the effect of its revenue and net profit on its roller-coaster share price.

  • My thoughts on Sarine Technologies Ltd (SGX: U77) (read here)


As investors, we often take the financial results at ‘face value’, and in my case, I am sometimes too lazy to read more deeply into the reports. Let’s face it, reading annual reports and quarterly reports can be quite daunting and tedious at times.

However, every business is unique and for some companies, there are more to the headline revenue and profit numbers. We just need to spend a wee bit of time and effort checking it out.

In gist, the financial results of Sarine Technologies for FY 2015 and 9M 2017 have been rather ‘disappointing’ when taken into context of its historical financial results. See below.


It is easy to see from the above chart that for the 9M 2017 results, the sharp decrease in the profit from the operation has dragged down the revenue and net profit.

As stated by Sarine Technologies (read here), for 9M 2017, the Group recorded a decrease of 15% in revenue to US$45.7 million. The decrease was mainly attributed to lower sales of capital equipment in Q3 2017. Due to the buildup of higher than normal inventories of polished diamonds in the midstream in the third quarter, manufacturers slowed production and reduced capital expenditure.

In the case of FY 2015, as stated by Sarine Technologies (read here), diamond manufacturing activities dropped significantly, by 30- 50%. Overly aggressive rough diamond pricing and stagnant polished diamond prices. Higher than normal polished diamond inventory level at end 2014. The decrease in profitability on a year-over-year basis was primarily due to significantly lower sales due to the challenging industry conditions in FY2015.


Interestingly, the 9M 2017 net profit is already higher than the FY 2015 net profit.

I view the situation of aggressive rough diamond pricing and stagnant polished diamond prices as unsustainable and will eventually correct itself. Being a bottom-up investor, I tend to focus more on the company’s fundamentals rather the macro industry conditions.

  • Rough Diamond Bust (read here)

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.

The downstream market is significantly larger than midstream, generating revenues of around US$74bn compared to US$19bn in 2016.

  • Sarine Technologies – Edison Investment Research (read here)

The 2 Financial Pillars of Sarine Technologies


1. Strong Balance Sheet

Before I go on, in terms of balance sheet, Sarine Technologies is one of the few listed companies in the SGX with a cash hoard and zero debt.

The cash hoard amount has been fairly consistent.


In most years, the earnings has been more than sufficient to pay for the annual dividend (except for FY 2015 and maybe 2017). There is no need to dip into the cash hoard to issue as a dividend.



Well, the above is fairly obvious.

2. Strong Recurring Revenue

This part is less obvious to some. As stated earlier in the post, I am sometimes distracted by the revenue and net profit announcement and attribute it to lower sales (and perhaps the bigger macro diamond industry conditions).

Actually, if we study the recurring revenue of Sarine Technologies, we can see why it is a strength in its own right.


As you can see, even though the revenue and net profit fluctuate higher and lower (blue and green lines), the recurring revenue (in red line) remains fairly constant. True, during bad years such as in FY 2015 (and maybe FY 2017), the recurring revenue also dipped, but basically, it is kind of range bound – hovering between US$20 mil to US$30 mil.


To put it simply, Sarine Technologies’ revenue comes from 2 main components:

  1. Sale of products
  2. Maintenance and services
  • What Does Sarine Technologies Ltd Do and How Does it Make Money? (read here)

“One of its key products, the Galaxy family, has no competition in the automated inclusion mapping systems market. As of 31 December 2016, Sarine Technologies had a total installed base of 299 systems worldwide. These systems have helped to contribute to Sarine Technologies’ recurring revenue.”

Historically, Sarine’s revenues were entirely driven by equipment sales, which are heavily concentrated in India and were volatile. The company modified its business model to charge usage fees for its products, starting with the launch of the Galaxy family of products in 2009.


Fast forward today, Sarine Technologies is now the dominant player with an estimated 70% global market share in midstream planning and grading equipment.

The relevant product families for planning and optimization are Galaxy, DiaExpert and Advisor software. In addition to selling the equipment, Sarine applies a per-usage charge per carat. A pay-per-use service at a higher price is also available at its services centers in Mumbai, Surat, Ramat-Gan, Antwerp, Moscow, Johannesburg, Gaborone, Windhoek and New York.

Integrated with its planning equipment are its systems for cutting, shaping, polishing and finishing of rough diamonds (Quazer, Strategist, DiaMension and Instructor software). These services are also available as a per-carat service in multiple locations.

Personally, I view recurring revenue as the holy grail of companies’ profit. If a company can somehow have minimal expenditure (once the system is in place), and collect recurring income either via the sales of upgrading software or products, rental fees of equipment, fees from maintenance and services, it will be great.

The business model is scalable. Profitability is maintained or even increased even though revenue (and capacity) increases. This is quite similar to many tech companies which have strong business moats. Which why investors are often willing to pay a premium for their stocks, resulting in high P/E ratios/valuations.

This recurring income is the bread and butter business aspect of Sarine Technologies. While at the same time, Sarine Technologies uses the excess cash for R&D and marketing of new products.


The Recurring Revenue is also fairly ranged bound as compared to the Profit from Operation and Net Profit. Eg, does not fluctuate that wildly.

2014 is an important year. Prior to FY 2014, the Profit from Operation is actually higher than the Recurring Revenue. However, subsequently, the Recurring Revenue figures surpassed the Profit from Operation figures. Without such Recurring Revenue, Net Profit will, without doubt, perform worse.

Theoretically, over time, with an increased base of Galaxy systems, the recurring revenue will do more to help financially.


In addition, during bad times, the company can theoretically tighten on the R&D and marketing expenses of new products and just ‘cruise by’ base on the recurring income. Moreover, Sarine Technologies does not need to worry about debt and liquidity issues. Although this will not be good in the long term and I don’t think Sarine Technologies is doing that. However, it is totally possible.

The recurring revenue is a significant portion of Sarine Technologies’s total revenue. In 9M 2017, the recurring revenue alone is 46% of the total revenue. Not surprisingly, during bad years when there are significantly lower sales due to the challenging industry conditions, the percentage of this recurring revenue in the total revenue increases. As stated in Sarine Technologies 9M 2017 report (read here): “Nevertheless, the Group did not experience any significant drop in the number of stones processed by its installed base. Recurring revenues remained stable and accounted for over 46% of Group revenue.”

In many of the companies I invest (or have invested in before), I tend to like businesses with recurring income. Eg. Vicom, IsoTeam, Colex, Fu Shou Yuan…

Perhaps this is why many investors like investing in REITs or Healthcare stocks. There is this recurring aspect of the business which is less cyclical and less dependent on macroeconomic conditions.


Nevertheless, there are threats to the Sarine Technologies recurring revenue. As mentioned earlier, the Galaxy family systems have helped to contribute to Sarine Technologies’ recurring revenue.



The total installed base of Galaxy System has been steadily increasing over the years. And currently, there is no legitimate competition for the Group’s automated inclusion mapping systems in the market.



Oddly, despite the above mentioned, it is observed that the recurring revenue has been range bound, or more specifically, did not continue upwards after FY 2014. It could be due to the bad macro diamond industry conditions during those periods. However, it could also be due to the fraudulent use of Sarnie Technologies Galaxy® inclusion mapping technology and systems by manufacturers.

Nevertheless, Sarine Technologies have been active in their legal efforts against these technology infringers. So far, the related news has been encouraging.

  • Sarine Thwarts Customer’s Fraudulent Use of Galaxy (read here)
  • Sarine Technologies Group Continuing Legal Efforts Against Technology Infringers (read here)
  • Sarine to sue overseas manufacturer for fraudulent misuse of Galaxy system (read here)
  • Israeli firm sues diamond companies over software ‘piracy’ (read here)


In addition, Sarine Technologies has started expanding their recurring revenue base, through increasing market penetration for sales programs utilizing the Sarine Profile. This is to target the polished diamond retail-related segment. So it is not just recurring revenue from the downstream portion but also upstream portion of the industry.

  • Your guide to choosing the perfect diamond the 21st century way (read here)

Posted in Sarine Technologies Ltd | 7 Comments

Sarine Technology (Gemmological) Laboratory: Will this Tech Company be the Pick-axe to the Diamond Gold Rush?

Recently, I have a colleague who got engaged and she showed all of us her nice big diamond ring. Well… I did not ask her if it is a natural or lab-grown diamond, that would appear rude. However, I just can’t help wondering.

After all, natural and lab-grown/synthetic diamonds look the same. And there is no way of knowing how many undisclosed lab-grown diamonds are circulating.

However, even if they look the same (and the composition of synthetic diamond is actually no different from that of a real mined-diamond), lab-grown/synthetic diamonds cost less and has no resale value.

  • Synthetics: cheaper but more expensive (read here)
  • Analysis: The State of the Diamond Industry (read here)


In the war between natural and lab-grown/synthetic diamonds, there will always be winners and losers. Customers gain from a wider choice (with a wider price range), while traditional jewelers who do not educate (or equip) themselves in differentiating the synthetic diamonds from natural diamonds and the uninformed customers will stand to lose.

Authentication/Grading centers have now become essential. A sunrise industry some might say (that seems to rise in sync with that of the lab-grown diamond industry).

Unlike the rubies, emeralds, and sapphires market, whereby the synthetic market for these gems matured years ago and is now larger than the natural equivalent, in the case of diamonds, gem-quality synthetics currently represent only about 1-2% of the global diamond jewelry market. (read here)

Indeed the synthetic/lab grown diamond is only in its infancy.

GIA, based in the United States, is considered to be the industry standard and is the most widely used and trusted name in the diamond trade.

Again reputation is important. A lot of retailers are already issuing IGI certs (due to cost) even though IGI is widely known to be a second-tier lab. A GIA certified diamond is often recommended as compared to an IGI certified diamond.

GIA actually developed the “4 C’s” diamond grading system (used almost universally today) to provide truly objective standards in the evaluation of a diamond.

  • GIA, AGS, EGL and other diamond grading certificates (read here)
  • IGI Certification: The Main Reasons We Don’t Recommend It (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)

A quick search on the internet revealed that it is indeed difficult to differentiate lab made CVD diamonds from real natural diamonds. However, CVD synthetic diamonds currently on the market can be unambiguously identified only by the combination of two advanced test methods; UV-fluorescence microscopy and photoluminescence spectroscopy. (read here).

The recent news by Sarine Technology about the Opening of Sarine Technology (Gemmological) Laboratory which will initially offer its services in Ramat Gan, Israel, commencing in February 2018 is significant in relation to the rising trend of synthetic diamonds (read here).

The services offered will include authentication of the polished diamond (as per diamond or simulant, natural or synthetic, treated or not) and the grading of its 4Cs, all using the latest state-of-the-art technology.

  • GIA Verifies Sarine’s DiaMensionTM Axiom Platform And Adopts InstructorTM As Standard Software (read here)
  • GIA adopts Sarine Instructor as standard software (read here)

It was only recently in 2015 that GIA adopted Sarine Instructor as standard software. The ‘jump’ from a mere supplier of software and equipment to having their own Gemmological Laboratory is rather quick (though natural) progression. In fact, I think it is a path in the right direction.

The company says it will utilize its, “breakthrough artificial-intelligence based technological solutions for the automated, accurate, consistent, digital, and objective grading of a polished diamond’s Clarity and Colour.”

There are very significant differences as to how Sarine Tech grade diamonds vs how GIA grade diamonds.

  • Sarine and GGTL Laboratories Cooperate to Take Gemmological Grading Technology to the Next Level (read here)
  • GGTL LABORATORIES (read here)
  • How GIA grades diamonds (read here)

Sarine Technology could hold the upper hand in diamond certification since their turnaround time for grading a diamond could be much shorter than traditional gem labs employing human gemologists (1 month or more, especially for smaller stones). In addition, by using technologies, the consistency and reliance will be there, as compared to a trained human eye.

Perhaps Sarine Technology is the diamond in the rough.


Posted in Sarine Technologies Ltd | 2 Comments