Friday, 13 May 2016

ISR Capital - Is it real or the new "Mini blumont/Asiaons Capital"?

One company caught my eye today - "ISR Capital"

From 0.6 cents on 11 May 2016, ISR is now at a price of 6.0 cents as of writing, that's a 10 bagger in two days! So what's going on?

ISR Capital

Basically ISR is an investment company which invests in companies that are listed/unlisted and debt securities in such companies. Doesn't that sound like a group of companies which gained infamy on the SGX sometime back in 2013?

Its current book value stands at 0.5 cents. Therefore, it is now trading at 11 times its reported book value. The company has a negative cashflow generation in the latest FY.

Its current CEO is Ms Quah Su Yin and the company was asked by CAD to help in CAD's probe into the penny stock scandal in 2013.

My Take

With such a high book value and an investment holding company where I do not see any hidden value among its balance sheet; I honestly do not know what is going on at SGX. Unless of course, I may have overlooked the many hidden gems hidden among ISR capital's balance sheet.

What do readers think?

Sunday, 8 May 2016

How the World is Changing

Read an interesting article on And one of the most though-invoking lines from the article was this: 

"In Buffett’s own words, if there is a good business running, there will always be someone else looking to do it in a better way. Competition will always be trying. And competition may be coming from online or mobile."

The disruption we are seeing in Singapore

Unfortunately for many businesses here, serious competition is now sprouting out especially in the P2P sphere. A quick search on the internet reveals some interesting sites.

A portal for home bakers to consumers directly

Need an interesting overseas trinket that can't be found here or is sold too expensive here?

Apparently, the worldwide-web and the ingenious minds behind them are showing that many business can be done in a better way. Even offline, I have made an interesting observation that "Jenny Bakery" is selling its biscuits (in limited quantities) through Hako's locker display at various locations instead of renting a retail store to sell. Now that is a good way to sell.

Even in the banking industry, Goldman Sachs has moved to compete with other online banks by creating their own online savings account. It shows how the concept of traditional brick and mortar branch is under threat and the emerging trend where people need banking services and such services do not require the presence of a physical branch.

With the proliferation of these sites and their innovative solutions offering better convenience and value, it is trying times especially for retail REIT landlords, to continue demanding positive rental reversions. What do readers think?  

Friday, 6 May 2016

"Financial Stupidity" is enriching DBS

The latest financial results for our local banks are out! And a comparison among their deposit interest rates reveals something interesting.

Fig 1: DBS 1QFY16 results

Fig 2: OCBC 1QFY16 results

Fig 3: UOB 1QFY16 results

Comparing the 3 figures, DBS is paying its customers an average deposit rate of 0.56%, while OCBC is paying a weighted average of 1.14% and UOB 1.15%. DBS is paying only half the rate of OCBC and UOB and has the most deposits among the local banks! What's more, DBS net interest margin is the highest among them. There must be a lot of "stupid money" lying around for this to happen.

For individual savers like us, getting 1+% for our money is easy. Just credit your salary through OCBC 360 account to enjoy a rate of 1.25% or a CIMB Fast saver account for 1%. So why are people settling for 0.56% or less with DBS?

How much is DBS saving?

If DBS were to pay its customers OCBC's rate of 1.14%; based on DBS's current deposit amount of $313 billion, DBS will have to pay out an additional s$1.81 billion annually. That is 39% of its net profit.

To those who park a significant amount of money in a DBS/POSB account, thank you for your contribution towards nation building by contributing to our nation's coffers through the DBS dividends received by Temasek.

However as a financial blogger, I question if that is a smart money management decision.

Sunday, 1 May 2016

Buying a life insurance policy

For young working adults, the thought of purchasing a life insurance policy is one of the first things we will be approached in our working life. To help out, here are some things to note on life insurance.

What is life insurance?

Life insurance provides you a payout upon death or total permanent disability (TPD). The policy can vary from a limited period of time (20 year limited plan) to the entire insured's lifetime. There are 4 common policies which falls under the category of life insurance - Term, Whole life, Endowment & Investment Link Policy.

When should we buy?

This is the most common question young working adults will ask. To me, the idea of life insurance is simple: It is to provide for a dependent in times of unfortunate circumstances.

What is a Dependent?

A dependent is someone who rely on you. In financial/insurance context, it refers to an individual who is dependent on your income. Some examples are: a young child who rely on his parents since he can't work, a housewife who is dependent on her spouse income, aged parents who are really reliant on their child's monthly allowance because they do not have other sources of avenues (i.e. CPF Life payouts)

When should we buy?

This is when we should buy a life insurance - ONLY when we have dependents relying on our income. This is because should we be unable to work, it is an economic loss to them. This is basically what life insurance is meant for - to make up for this economic loss.

In addition, I will  not recommend individuals to buy a life insurance policy on their child. This is because should anything happen to a child, there is no economic loss experienced on the household. Remember a life insurance policy is to help dependents tide over an economic loss. Insuring a child's life is worthless unless your child is the one bringing in the dough and is one of the main contributor to the family finances.

Length of Insurance Coverage

Following from what I have written thus far, one can deduce a life insurance policy may not be necessary for your entire lifetime. For many of us, a life insurance insuring to the age of 65 should suffice.

This is because at the age of 65: 1) Your child is likely to have entered the workforce for a few years, found his footing and will not be relying on your for his livelihood, 2) unlikely to have aged parents who are still reliant on your income and 3) in modern day context, your spouse will likely be having CPF life payouts for their expenses.