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We all like discount and bargains. We like the best deal. Yet some of us may be unaware that we are paying extra thousands in home loan interest each year. Getting a good home loan gives us several other benefits too.

Because of fierce competition among commercial banks, home loan terms is much better now compare to the previous decades. My initial home loan from Citibank charges me BLR + 1.65%. Five years later, I re-financed the loan. UOB offered me BLR - 1.85%. The difference of 3.5% is very substantial, equivalent to RM3,500 a year for each RM100,000 of outstanding loan I have with the bank. So it is definitely worthwhile to dig out your home loan agreement and study the terms for interest. If it is anything with BLR + x or more than 8% interest, get the prettiest SYT to market her housing loan to you

Refinancing may cost over RM5,000 because we need to pay for the legal fees and stamp duty. But if the savings on loan interest is substantial then the refinancing cost is worth paying. Some banks may offer zero-cost refinancing where they bear all your refinancing cost.

Choosing flexi-repayment loan over fixed repayment loan is advisable for those who are financially disciplined. The conventional wisdom is to keep a saving that covers up to 6 months of expenses as emergency fund. But the value of the emergency fund will shrink due to inflation. Having a flexi-repayment loan reduces the amount to emergency fund needed because (1) it is not necessary to make monthly repayment and (2) you can draw down on your loan at any time. Any extra cash could be used to repay the home loan until the time when cash is needed thus saving on interest.

Refinancing to a new home loan with better terms saves us more money than any discount we can ever get. It is much better than going to warehouse sales, MATTA fair or PC fair or haggle until mouth also dry to save a few bucks

When I started buying shares during the end of 2008, I was quite confident the shares I bought will double some time in the future. I could not say when because I do not have the ability to predict when the global financial crisis would end.

It didn’t take long for share price to recover. By end 2009, all except one of my end 2008 investments had at least doubled. The exception was Muhibbah Engineering. For a time, Muhibbah rose to more than twice my puchase price but it fell back sharply. I believe the reason for the under-performance of Muhibbah shares is due to its inability to earn profit from its billion-ringgit projects. Muhibbah ended FY2009 with a net profit of about RM14 million, far below my expectation.

With so many other shares to choose from, I decided to sell all my Muhibbah shares. From an investment of RM60k, I gained RM15.5k. It was a return of 25.9% over 14 months, better than ICAP’s average but a disappointment to me as I expected >100% return.

I decided initially to avoid buying shares of construction companies. From several years of observations, I found many problems faced by construction companies. Local projects are not big enough for bigger construction firms. For international project, costing, management and execution weaknesses create losses more than profits. IJM is the only construction company I know which had done very well outside Malaysia.

Protasco is a recommendation from S.Dali blog. I am impressed with their willingness to pay >80% of their profit out as dividend. Also, they have net cash of about RM152 million (RM0.50/share). So half the share price of RM1 is backed by cash. I bought 20k shares from the proceeds of my Muhibbah sales. Will probably buy more later.

Our FD rate currently 2.1 - 2.5%. As far as I could remember, it has been less than 3% for quite some time. Is it good enough to beat inflation? Or has your hard-earned money diminished in value over the past 5 years?

Inflation is measured by Consumer Price Index (CPI). Our CPI at the end of 2009 is 113. 2005 is the base year where CPI was set to 100. So over the past 5 years, prices had increased by 13%. How about your savings? Assuming an interest rate of 2.5% per annum and interests are not withdrawn, an FD of 100 will become 113.14 at the end of 2009. OK, just beat the official inflation

Credit: http://powellperspective.wordpress.com

But is inflation merely 13% over the past 5 years? Those who stay in Klang Valley will tell you no without any doubt. Housewives who go grocery shopping will tell you likewise. I think an inflation rate of 5% a year is more realistic for urban areas. Since FD interest rate is much lower that 5%, it means the value of your cash is bank is lower now compare to 2005.

I observed and found that one area where inflation is really high is the child-care and education. Child-care centres and kindergartens fees keep increasing each year. So does transportation fees to these centres. While pre-school education is not compulsory, many parents send their children to pre-schools at very young age for the fear of the losing out to others. Wen Jin’s kindergarten fee raised 43% from 230 to 330 this year. We checked other kindergartens and found all of them charging around this fee.

What can we do?

There is not a lot of investment instruments that is relatively safe yet offer a field of over 5%. Furthermore, most people do not have the knowledge required to understand the risk-return ratio of each option. FD is the only safe option. Real estate is the next popular option but real estate investment carries risk too. Real estates give people an impression of safety because of their physical size. But when we can easily identify the risk when looking at incomplete projects or ghost townships.

Stock investment is beyond most people due to their lack of financial knowledge. However, one don’t need to acquire such knowledge and build the mental fortitude necessary to be successful in stock investment. They just need to pick the right blue chip or fund. I mentioned in an earlier blog that ICAP has an impressive return of 18% for the past 5 years. ICAP outperforms government mutual funds such as ASN and our EPF. It is a very good option to start stock investment. If my own investment return is poorer than ICAP in the future, I will definitely invest a part of my money into it.

Marrying, or at least the financial expect of it, is vastly different today compared to during the times of our parents. Successful marketing, different lifestyle preference and easy credit had made the marriage ceremony and its preparation a much costlier affair. I suspect many newly married couples fell into debt that most would struggle to repay for the rest of their blissful (hopefully) marriage.

The norm demands a Chinese couple to move out to their own place upon marriage. So the couple have to empty their savings and EPF to buy a new dwelling. Landed properties are more than 300k in Klang Valley. Medium-cost apartments are at least 150k. Then, for some unknown reason, the buyers must renovate their house even if it is brand new. There goes another 50-100k. Home furnishing will cost over 30k unless the couple is willing to settle for low quality furniture from chinaman furniture stores.

A tiny piece of common rock called diamond will cost over 5k. Photography and video maybe another 10k. The mas kahwin is around 10k. Dinner at hotels is sure to cost the couple money depending on how many tables are ordered. Honeymoon?

Couples who are lucky to have their parents finance their wedding and/or part of their house down payment will pass through their first financial hurdle relatively unscathed. Those who are not so fortunate will end up with:

• Significantly reduced savings
• New property loan
• Credit card or personal loan balances

An outstanding property loan of 300k at 5% interest will cost the couple an additional 15k of interest expenses a year.

Marriage is expensive. Divorce is more expensive (unless you are broke ) So be good to your partner. Make sure it is only once in a lifetime

For years, I had been curious about the views and insights of Tan Teng Boo of iCapital. If I remember correctly, subscription for its newsletter used to cost over a thousand ringgit a year. Its online site, icapital.biz, charges RM199 a year but with reduced content.

Mr Tan launched icapital.biz Bhd closed-end fund (ICAP) in 2005. The fund’s Net Asset Value (NAV) was 1.96 in October 2009, an impressive annual compounded return of 18.4%. Fund investors almost doubled their investment within five years. The fund’s latest NAV is 2.07. Mr Tan is good and he fancy himself to be younger and better than Warren Buffet.

Younger, there is no doubt. Better, I don’t think so. If personal pride is put aside, I am sure Mr Tan will agree that investment return depends on the size of fund and portfolio risk profile. Berhshire Hathaway’s latest NAV is around US$135,785,000,000. ICAP’s NAV is a tiny RM290,000,000, not even kacang putih compared to the world’s best investor. It is much harder to make extraordinary returns with such a big NAV.

Buffet’s style is a very conservative long term investment on consistent cash-generating companies. ICAP’s stock picks are mostly the same cash-rish company with good dividends but not all. The top stock holdings of ICAP, Parkson Holdings and Astro, are not cash-rich and high-dividend stocks. They are bought for certain qualitative values that satisfy Mr Tan’s “Intelligently Eclectic” philosophy. When he is right, as in the case of Parkson Holdings, handsome profit follows. But there are cases where he was wrong, such as TM International and Mieco Chipboard. So the fund contains more risk element than a typical income fund.

I am younger than Mr Tan and my investment return for the period from 2005 to 2009 was better than ICAP’s. My better return is again due to (1) a much smaller investment capital and (2) investing mainly in growth stocks which carries a greater risk. I entertain no thought of being smarter than Tan Teng Boo or Warren Buffet. It is due to my admiration of his intellect that I am interested to listen to his views. Hence my purchase of some ICAP shares.

I bought 1,000 shares at RM1.74, my smallest investment ever. That will give me a free ticket to the AGM in August. I pay nothing to listen to some good expert opinions. Instead of paying, I will probably get some return out of my small RM1750 investment

There are many listed property developers in KLSE. Much more than glove makers. Among them, my favorite is Sunrise Holdings.

Top developers by revenue

SP Setia is the biggest developer, by market capitalization, revenue or profit. It is a favorite of local and foreign funds. Yet it is grossly over-valued. SP Setia trades at slightly more than 24 times earnings. This premium is normally accorded to dividend stocks such as Maxis and BAT or high growth stocks. Even Digi, which pays much better dividend, is trading at PER less than 20. SP Setia paid RM0.14 in dividend for FY2009. That’s a yield of only 3.4%. It isn’t a growth stock either and its efficiency ratios are below average.

Mah Sing is a manufacturing company turned developer. They have achieved pretty good success in their new field of niche development. At their current price, I would say they are fully-valued.

Sunrise, my favorite, is one developer other investors choose to ignore. It has among the biggest unbilled sales and profit. Its net margin, ROA and ROE is much better than SP Setia and Mah Sing. Yet it trades at an undeserved PER of 6.9. The distinctive feature of Sunrise is that it develops high-end condominiums instead of townships. Its development is concentrated on the Mont Kiara area. I don’t see why these factors should be considered when valuing Sunrise.

Just looking at the table, you would not realize that SP Setia’s market value is RM4.25 billion, 3 times more than Sunrise’s RM1.05 billion. The difference of annual profit is merely RM15 million yet the difference of market value is over RM3 billion! Haha!

The current quarterly report season brings 2 former KLSE favorites nearer to their “graves.” Some investors would have written off Transmile and LCL long ago. But for some there lingers a hope for a turnaround of fortune.

LCL’s case is more obvious. I had written about it so I will keep it short. A small cap company which got caught with extremely high gearing and receivable write-offs. They are now in negative net asset territory. Yet punters still hold LCL shares for a chance of short-term price rebound!

Robert Kuok company won’t die one, some will say. Transmile will surely die. Tycoons make mistakes also. Transmile’s fraud case was elaborate. When it was discovered, it should have been the end of story. Yet some people held on to the believe that the company could still turn around. Transmile loss half its value today after being limit down in the morning session. I don’t sympathize with those affected.

Supermax paid dearly for their mistake of investing in APLI. APLI was a white knight that took over another ailing company. APLI failed to recover from its bad decision. Supermax was smarter and wrote off the whole investment.

Berkshire Hathaway is known to investors as Warren Buffett’s holding company. Some may not know that it was one of Buffett’s failed investment. It used to be a textile manufacturing company. Buffett bought it probably due to low valuation. He changed the management yet he failed to turnaround the company. I have a feeling he use this company as his holding company to remind himself of his mistake. Because of this experience, Buffett has a quote,

When a management with a reputation for brilliance tackles a business with a reputation for bad economics, it is usually the reputation of the business that remains intact.

Knowing when the cut loss is a necessary for any investor. For what comes down may not necessary goes up again. The KLSE graveyard is littered with failed companies. I still hold shares of one of these companies, MBF Corp. Lessons learned from it helped me avoid costlier mistakes.

Dune is a award-winning novel by Frank Herbert. It is claimed to be the best-selling science fiction novel. The success of the first novel spawned several sequels and also TV and movie adaptations. Most relevant to me is that it provide the background story for Dune II, the first modern RTS game that I played during my university days in Stafford, UK.

Is it good? I’ll say average. Despite being set way forward in the future and being categorized as science fiction, the story does not focus on machines and computers. It touches more about ecology, religion and politics. The storyline is not fast-paced enough to really engaging (such as The Da Vinci Code). It also doesn’t have the sense of epic like that of The Lord of the Ring. It is a pretty straight forward story of retribution.

I don’t know what criteria they use to award the science fiction novels. Is it the languange? New idea or universe? The novel’s ability to invoke a sense of wonder among readers? A good book or movie, to me, is those which will make me re-read or re-watch again. This novel is not interesting enough for me to re-read again.

I don’t normally do short trades but there were 2 in recent times. I loss money in one and made money in the other.

Pelikan

I like Pelikan for its worldwide market. I did not do enough research on it however and I was punished for it. The day I bought 40k shares of Pelikan was the day they announced their right issue. So I effectively paid RM1.48 + another RM1.17 for the potential Pelikan profits. I also realized too late that Pelikan’s quarterly profit is very uneven. The last profit posted was normally a lot more than other quarters. After holding for a month, I disposed all Pelikan shares for a lost of around RM1,500.

Hai-O

Hai-O’s is on track to double its earning this year. For some reason, it slided from RM8+ to RM6.2+. I bought 2k shares at RM6.4 with half the money from Pelikan sales and held it until I sold today for RM9.51. Grossed around RM6k. So after netting my Pelikan loss I still have RM4.5k to spend (RM3.8k after paying “fines” to Grace for not sharing this investment with her )

IMHO both are good companies. I will be awaiting signs of Pelikan recovery before investing again. I hope the signs will be good enough for me to make a bigger investment. It is harder for me to re-invest in Hai-O because of the good results, dividends and bonus issue. So thanks for the quickie

I just came across a blog with a queer name, Where is ze moolah?. I understand the meaning of the name but I just find it odd that the blogger prefer such name instead of a more proper one that befits his content.

The blogger made many critical stock analyses and criticisms which I find very logical. Besides that, he blogs about a wide range of global economic issues. Up to now, I have never find opinions so similar with my own about local stocks. Perhaps this is why I was interested in reading the long blogs.

What had me nodding to myself in agreement repeatedly is his logical arguments about the danger signs of many analyst’s recommended stocks such as Greenpacket, Swee Joo, Tong Herr, Lion Group companies etc. These are the companies I consciously avoid. His analysis is very detail with accompanying illustrations of financial reports. If he comments negatively about the stocks that I hold or am interested to buy, I will definitely take notice of his analysis. He has better knowledge than I and does more research than me.

This blog criticizes. It seldom praise and it doesn’t highlight any good investment potential. Too negative. If the blogger realizes that all companies and the humans behind it have flaws and lower his standard a little, perhaps the blog would be even more interesting. Risk is an integral part of investment anyway. The blog gives an impression that there is no stock worth investing.