Showing posts with label shrewd investor. Show all posts
Showing posts with label shrewd investor. Show all posts
Saturday, 7 August 2010
A classic definition of a shrewd investor
"(O)ne who bought in a bear market when everyone else was selling and sold out in a bull market when everyone else was buying."
Sunday, 8 November 2009
Caveat Emptor — Be a wary investor
Caveat Emptor — Be a wary investor
Tags: Asian Financial Crisis | Bubble | Caveat emptor | Emotional value | Ethical practices | Excessive greed | Intrinsic values | Investors | Mushida Muhammad | Second judgement | stock market | Subprime crisis | Tech Bubble | Warren Buffett | Winning qualities
Written by Mushida Muhammad
Monday, 02 November 2009 10:53
In the high stake game of making money in the stock market, getting emotional is not an option. It is true that investors should focus on fundamentals, be patient and exercise good judgment; but alas, they are only human.
In the exuberance of a bull run or the trepidation of a bear, often times there exist tendencies to inflate or deflate stocks above or below their intrinsic values disproportionately before investors realise that their optimism or pessimism was not entirely justified.
The danger lies when emotions overcome rational judgment, giving way to greed and fear. Excessive greed leads to a superfluous rise in share prices, creating a bubble which eventually sows the seeds for future panic.
Time and again, history has shown that panic often leads to a crash. In the past 10 years, greed and fear had culminated in three major financial crises; the Asian Financial Crisis, the Tech Bubble and — most recently — the Subprime Crisis.
In all cases, markets were experiencing unprecedented outperformance prior to the crash. Driven by greed, many believed that they could ride the high waves without repercussions. What lesson can be learned from this?
For one, investors tend to have a short term memory, often falling prey to the “herd mentality”. The temptation of making a killing often prompts them to take extremely high risks and disregard fundamentals for fear of missing the boat if they did.
Going back to basics. Regardless whether the objective is for the long- or short-term, investment practices should be based on fundamentals and good business judgment. Warren Buffett’s foundation has always been centralised on the principle of fundamental business analysis — a good investor should identify good businesses, purchase them at fair prices and hold them for the long term.
Success lies not in price behaviour but rather on an investor’s ability to apply sound judgment and make the distinction between market price and intrinsic value.
At a time when markets are insecure and unstable, information is key. Investors must understand the company’s business.
Thus, the onus lies with the investor to be discerning. Information is best found in financial statements, as they provide an up-to-date snapshot view of the company’s financial health and growth potential.
Some industries are inherently better for investment than others due to their intrinsic qualities. Health-care, consumer, plantation are a few sectors that generally provide better investment opportunities due to the inelasticity in demand.
Striking a balance between risk and reward is crucial, for the amount of risk taken ought to be proportionate with the anticipated reward. Assuming too much risk for too little reward gives way to bad investment.
More importantly, investors must have a stop-loss strategy to prevent escalating losses. Many a time investors make the mistake of holding on to losing stocks in the hope that it will turn around — but in reality, these stocks seldom do.
For those with a long term investment horizon, high and stable dividend income may be an important factor, as are return on equity, business sustainability, cash flow management. Corporate governance and management best practice are critical factors.
If a company reports annual growth and profits that seems “too good to be true”, it most probably is too good to be true.
Finding good stocks to invest in is difficult enough; therefore, investors should hold on to them for the long haul. Companies with a competitive edge have the tendency to increase in value over time. Eventually, the market would acknowledge the underlying value and push the price upwards.
So, when is the best time to sell? The answer is often as difficult as deciding when to buy. Depending on investor’s risk tolerance, if the stock proves to be too volatile for the nerves, it is best to sell and replace with another that lets you sleep at night.
Furthermore, social, environmental and ethical practices of many companies are now becoming a concern and investors may dispose of those that are in conflict with their social, religious or moral beliefs.
At times, the decision to sell is due to the company itself. A change in the company’s fundamentals or business plan may warrant a re-assessment on whether it is able to continue to meet the investor’s investment requirements.
There is no doubt that the stock market offers the best opportunity for higher returns in the long run. The risk is that it could dramatically erode investor’s net worth in the short-term should the down market last longer than expected. Nonetheless, it offers great opportunities.
Investors ought to rely on their judgment and not be influenced by the market. Knowing the company, finding its winning qualities and knowing when the right time to sell should aid the investor in obtaining success.
Attaching emotional value, however, is not. So be a wise investor; do not get sentimental. Have an investment objective and take the time to study before putting in your hard-earned money. Caveat emptor; be a wary investor.
Mushida Muhammad is the senior portfolio manager of the equity department, Kumpulan Wang Persaraan (Diperbadankan) (KWAP).
This article appeared in The Edge Financial Daily, November 2, 2009.
Tags: Asian Financial Crisis | Bubble | Caveat emptor | Emotional value | Ethical practices | Excessive greed | Intrinsic values | Investors | Mushida Muhammad | Second judgement | stock market | Subprime crisis | Tech Bubble | Warren Buffett | Winning qualities
Written by Mushida Muhammad
Monday, 02 November 2009 10:53
In the high stake game of making money in the stock market, getting emotional is not an option. It is true that investors should focus on fundamentals, be patient and exercise good judgment; but alas, they are only human.
In the exuberance of a bull run or the trepidation of a bear, often times there exist tendencies to inflate or deflate stocks above or below their intrinsic values disproportionately before investors realise that their optimism or pessimism was not entirely justified.
The danger lies when emotions overcome rational judgment, giving way to greed and fear. Excessive greed leads to a superfluous rise in share prices, creating a bubble which eventually sows the seeds for future panic.
Time and again, history has shown that panic often leads to a crash. In the past 10 years, greed and fear had culminated in three major financial crises; the Asian Financial Crisis, the Tech Bubble and — most recently — the Subprime Crisis.
In all cases, markets were experiencing unprecedented outperformance prior to the crash. Driven by greed, many believed that they could ride the high waves without repercussions. What lesson can be learned from this?
For one, investors tend to have a short term memory, often falling prey to the “herd mentality”. The temptation of making a killing often prompts them to take extremely high risks and disregard fundamentals for fear of missing the boat if they did.
Going back to basics. Regardless whether the objective is for the long- or short-term, investment practices should be based on fundamentals and good business judgment. Warren Buffett’s foundation has always been centralised on the principle of fundamental business analysis — a good investor should identify good businesses, purchase them at fair prices and hold them for the long term.
Success lies not in price behaviour but rather on an investor’s ability to apply sound judgment and make the distinction between market price and intrinsic value.
At a time when markets are insecure and unstable, information is key. Investors must understand the company’s business.
Thus, the onus lies with the investor to be discerning. Information is best found in financial statements, as they provide an up-to-date snapshot view of the company’s financial health and growth potential.
Some industries are inherently better for investment than others due to their intrinsic qualities. Health-care, consumer, plantation are a few sectors that generally provide better investment opportunities due to the inelasticity in demand.
Striking a balance between risk and reward is crucial, for the amount of risk taken ought to be proportionate with the anticipated reward. Assuming too much risk for too little reward gives way to bad investment.
More importantly, investors must have a stop-loss strategy to prevent escalating losses. Many a time investors make the mistake of holding on to losing stocks in the hope that it will turn around — but in reality, these stocks seldom do.
For those with a long term investment horizon, high and stable dividend income may be an important factor, as are return on equity, business sustainability, cash flow management. Corporate governance and management best practice are critical factors.
If a company reports annual growth and profits that seems “too good to be true”, it most probably is too good to be true.
Finding good stocks to invest in is difficult enough; therefore, investors should hold on to them for the long haul. Companies with a competitive edge have the tendency to increase in value over time. Eventually, the market would acknowledge the underlying value and push the price upwards.
So, when is the best time to sell? The answer is often as difficult as deciding when to buy. Depending on investor’s risk tolerance, if the stock proves to be too volatile for the nerves, it is best to sell and replace with another that lets you sleep at night.
Furthermore, social, environmental and ethical practices of many companies are now becoming a concern and investors may dispose of those that are in conflict with their social, religious or moral beliefs.
At times, the decision to sell is due to the company itself. A change in the company’s fundamentals or business plan may warrant a re-assessment on whether it is able to continue to meet the investor’s investment requirements.
There is no doubt that the stock market offers the best opportunity for higher returns in the long run. The risk is that it could dramatically erode investor’s net worth in the short-term should the down market last longer than expected. Nonetheless, it offers great opportunities.
Investors ought to rely on their judgment and not be influenced by the market. Knowing the company, finding its winning qualities and knowing when the right time to sell should aid the investor in obtaining success.
Attaching emotional value, however, is not. So be a wise investor; do not get sentimental. Have an investment objective and take the time to study before putting in your hard-earned money. Caveat emptor; be a wary investor.
Mushida Muhammad is the senior portfolio manager of the equity department, Kumpulan Wang Persaraan (Diperbadankan) (KWAP).
This article appeared in The Edge Financial Daily, November 2, 2009.
Tuesday, 3 November 2009
6 Common Traits of Successful Traders and Investors
6 Common Traits of Successful Traders and Investors
By Jack Ablin
On 8:23 am EST, Monday November 2, 2009
Jack Ablin, Chief Investment Officer of Harris Private Bank, is responsible for managing over $50 billion in private client assets, and for developing strategies for some of America's wealthiest individuals and families. He is a trusted source to some of America's most respected journalists; a frequent commentator on CNBC and Bloomberg; and a frequent contributor to Barron's.
For the last 27 years, I've been an institutional investor. I have spent more than a decade on trading desks and have overseen the management of billions on behalf of individuals and institutions alike. One trend that has been very clear during my 27 years, and that is the balance of information has clearly changed.
Early in my career, the balance of information was clearly skewed in favor of the big boys. All of that has now changed with the democratization of investment data. The Internet has brought real-time quotes to avid investors' desktops and CNBC leveled the playing field when it comes to news. In fact within a year of its launch, CNBC forced virtually every investment professional to get a TV set in their office just to spare the embarrassment of having one of their clients clue them in on an investment scoop.
Like many other segments of business, just because individuals have equal access to many of the same tools, doesn't mean that they will employ them as effectively as the professionals. WebMD is a great tool for understanding our health and bodies, but I would still leave medical diagnoses to trained physicians. Desktop publishing is another area where we now all have the tools to layout a newsletter, but that doesn't make us graphic designers. When it comes to investing, the little guy is clearly empowered, but there are a few points, however, that individual investors must keep in mind before charting their own course in the rough seas of investing.
Pay Less Attention
Individual investors tend to get caught in the minutia of the moment and often lose sight of broader trends. Focus instead on what's important. There's so much information available nowadays, it's easy to drown in the deep end of the data pool.
From 1982 to 1990, I was a mortgage-backed securities trader. My job was to scour the markets for the best deals in Freddie Mac, Fannie Mae and Ginnie Mae securities looking for the best opportunities. Day in and day out I would concentrate on my trading screens and watch the prices of as many as 60 securities ebb and flow with the movement of the marketplace. I was set to pounce on any instrument that got as little as one-sixteenth of a point out of whack. Talk about granularity. Had I simply appreciated that the yield of a 10-year Treasury was nearly 14 percent and it was the single-minded aim of Treasury Secretary Volker to drive the yield lower, I could have simply put one big trade in place at the beginning of my career and kept in place throughout my entire tenure, and made significantly more money for my clients and would have had a much easier time of it. Certainly, "buy in 1982 and go away," is unrealistic, but appreciating the enormous tailwind behind the bond market would have made my life a heck of a lot easier at the time.
Leverage Your Strengths
Each of us bring a unique set of skill and expertise. Make sure you're employing your best skills in investing. At the same time, insulate yourself against your weaknesses. Understand that individuals, for example, have far fewer resources when it comes to stock selection than large institutions. Last time I checked, Fidelity spent about $150 million annually on stock research, so going toe-to-toe with the big boys when it comes to selecting stocks puts individuals at a big disadvantage. Notwithstanding their advantage is selecting securities, big institutions are handicapped when it comes to market selection.
Most big institutions are "mandate managers," meaning that they are constrained by a set of specific investment styles and markets. A small-cap value manager, for example, must maintain small-cap value exposure through thick and thin, regardless of their opinion of the market for small cap value stocks. The fund manager would be chastised for leaving their "style box" if they decided that international large cap equities were a better deal. Since the big guys are often constrained to their pre-determined style boxes, individuals have an opportunity to play between the giants; by evaluating and trading markets, not securities.
You're Your Own Worst Enemy
Human nature often gets in the way of sound investment decision making; even among institutional investors. Do you consider yourself to be "better than average" drivers? Most people do. The Lake Wobegon Effect, as it's affectionately called, was inspired by the radio series, A Prairie Home Companion by Garrison Keillor, where "all the children are above average." Seriously though, overconfidence has the potential to make bad investments worse, by pushing obstreperous investors to hang onto losing positions; even when evidence to the contrary is overwhelming. New car buyers love reading favorable reviews about the bright and shiny automobile they just purchased, at the same time they would be highly critical reviews that criticize their decision. As investors, we sift through a myriad of information as we assemble a mosaic. How valuable would our conclusions be if we latched onto data that only supported our views and ignored information that refuted it?
Be Willing to Be Wrong
Those investors who recognize mistakes sooner are better investors than those who don't. One way to maintain objectivity is to articulate your strategy and expectations before establishing a position. This means write out your investment premise and establish "rules" for exiting the position, whether it's time horizon, return or price targets, or simply a technical factor like breaking below a moving average. Not all investment decisions work out as planned. Recognizing when to get out and move on is paramount. Darwinian survivors aren't necessarily the smartest, but they are the most flexible.
Be a Hawk, Not a Worm
Always be aware of the big picture. Investment market movements are a function of the global economic and political environment as well as the collection of moods and attitudes of investors. While investors are mercurial, the political and economic landscape tends to move in a more deliberate fashion. Peter Stamos, Chairman and CEO of Sterling Stamos Capital Management, relayed the story about the headmaster on campus who walked his dog every evening. Every evening after dinner the headmaster would stroll along the quad, walking his dog who hurriedly scampered from lawn to lawn, bush to bush, occasionally stopping to greet a passer by. Each evening the headmaster walked an identical path in a slow and predictable fashion, yet predicting the path of his dog was impossible. That depended upon an incalculable number of decisions taking place in his trusted pet's brain. Ultimately, the dog followed the headmaster. After all, he was on a leash. Peter's point was that the economy is the headmaster and the market is the dog. Over shorter periods, predicting the markets' pathways is like reading the collective minds of investors, yet over longer periods, the market must follow the economy. Focus on the landscape and understand the economic headwinds and tailwinds as your guide to managing your asset allocation.
Lessons Learned
Study after study have found that asset allocation, the decision whether or not to be in a particular market or asset class, is by far the most influential on your investment outcome than virtually any other investment decision you will make. Yet, sadly, very few individual investors spend nearly enough time thinking about the overall market. The explosion of exchange-traded funds, or ETFs, enables individuals to effectively maintain a broadly-diversified global portfolio. Think of it as a CliffsNotes Guide to effective investing. The basics are there for the taking, but some extra effort will always pay off. The tools available today are so much better than they were when I started in this business 27 years ago. That means that everyone has the opportunity to be successful, even during a very challenging market.
For more trading strategies, go to TradingMarkets.com/reports.
By Jack Ablin
On 8:23 am EST, Monday November 2, 2009
Jack Ablin, Chief Investment Officer of Harris Private Bank, is responsible for managing over $50 billion in private client assets, and for developing strategies for some of America's wealthiest individuals and families. He is a trusted source to some of America's most respected journalists; a frequent commentator on CNBC and Bloomberg; and a frequent contributor to Barron's.
For the last 27 years, I've been an institutional investor. I have spent more than a decade on trading desks and have overseen the management of billions on behalf of individuals and institutions alike. One trend that has been very clear during my 27 years, and that is the balance of information has clearly changed.
Early in my career, the balance of information was clearly skewed in favor of the big boys. All of that has now changed with the democratization of investment data. The Internet has brought real-time quotes to avid investors' desktops and CNBC leveled the playing field when it comes to news. In fact within a year of its launch, CNBC forced virtually every investment professional to get a TV set in their office just to spare the embarrassment of having one of their clients clue them in on an investment scoop.
Like many other segments of business, just because individuals have equal access to many of the same tools, doesn't mean that they will employ them as effectively as the professionals. WebMD is a great tool for understanding our health and bodies, but I would still leave medical diagnoses to trained physicians. Desktop publishing is another area where we now all have the tools to layout a newsletter, but that doesn't make us graphic designers. When it comes to investing, the little guy is clearly empowered, but there are a few points, however, that individual investors must keep in mind before charting their own course in the rough seas of investing.
Pay Less Attention
Individual investors tend to get caught in the minutia of the moment and often lose sight of broader trends. Focus instead on what's important. There's so much information available nowadays, it's easy to drown in the deep end of the data pool.
From 1982 to 1990, I was a mortgage-backed securities trader. My job was to scour the markets for the best deals in Freddie Mac, Fannie Mae and Ginnie Mae securities looking for the best opportunities. Day in and day out I would concentrate on my trading screens and watch the prices of as many as 60 securities ebb and flow with the movement of the marketplace. I was set to pounce on any instrument that got as little as one-sixteenth of a point out of whack. Talk about granularity. Had I simply appreciated that the yield of a 10-year Treasury was nearly 14 percent and it was the single-minded aim of Treasury Secretary Volker to drive the yield lower, I could have simply put one big trade in place at the beginning of my career and kept in place throughout my entire tenure, and made significantly more money for my clients and would have had a much easier time of it. Certainly, "buy in 1982 and go away," is unrealistic, but appreciating the enormous tailwind behind the bond market would have made my life a heck of a lot easier at the time.
Leverage Your Strengths
Each of us bring a unique set of skill and expertise. Make sure you're employing your best skills in investing. At the same time, insulate yourself against your weaknesses. Understand that individuals, for example, have far fewer resources when it comes to stock selection than large institutions. Last time I checked, Fidelity spent about $150 million annually on stock research, so going toe-to-toe with the big boys when it comes to selecting stocks puts individuals at a big disadvantage. Notwithstanding their advantage is selecting securities, big institutions are handicapped when it comes to market selection.
Most big institutions are "mandate managers," meaning that they are constrained by a set of specific investment styles and markets. A small-cap value manager, for example, must maintain small-cap value exposure through thick and thin, regardless of their opinion of the market for small cap value stocks. The fund manager would be chastised for leaving their "style box" if they decided that international large cap equities were a better deal. Since the big guys are often constrained to their pre-determined style boxes, individuals have an opportunity to play between the giants; by evaluating and trading markets, not securities.
You're Your Own Worst Enemy
Human nature often gets in the way of sound investment decision making; even among institutional investors. Do you consider yourself to be "better than average" drivers? Most people do. The Lake Wobegon Effect, as it's affectionately called, was inspired by the radio series, A Prairie Home Companion by Garrison Keillor, where "all the children are above average." Seriously though, overconfidence has the potential to make bad investments worse, by pushing obstreperous investors to hang onto losing positions; even when evidence to the contrary is overwhelming. New car buyers love reading favorable reviews about the bright and shiny automobile they just purchased, at the same time they would be highly critical reviews that criticize their decision. As investors, we sift through a myriad of information as we assemble a mosaic. How valuable would our conclusions be if we latched onto data that only supported our views and ignored information that refuted it?
Be Willing to Be Wrong
Those investors who recognize mistakes sooner are better investors than those who don't. One way to maintain objectivity is to articulate your strategy and expectations before establishing a position. This means write out your investment premise and establish "rules" for exiting the position, whether it's time horizon, return or price targets, or simply a technical factor like breaking below a moving average. Not all investment decisions work out as planned. Recognizing when to get out and move on is paramount. Darwinian survivors aren't necessarily the smartest, but they are the most flexible.
Be a Hawk, Not a Worm
Always be aware of the big picture. Investment market movements are a function of the global economic and political environment as well as the collection of moods and attitudes of investors. While investors are mercurial, the political and economic landscape tends to move in a more deliberate fashion. Peter Stamos, Chairman and CEO of Sterling Stamos Capital Management, relayed the story about the headmaster on campus who walked his dog every evening. Every evening after dinner the headmaster would stroll along the quad, walking his dog who hurriedly scampered from lawn to lawn, bush to bush, occasionally stopping to greet a passer by. Each evening the headmaster walked an identical path in a slow and predictable fashion, yet predicting the path of his dog was impossible. That depended upon an incalculable number of decisions taking place in his trusted pet's brain. Ultimately, the dog followed the headmaster. After all, he was on a leash. Peter's point was that the economy is the headmaster and the market is the dog. Over shorter periods, predicting the markets' pathways is like reading the collective minds of investors, yet over longer periods, the market must follow the economy. Focus on the landscape and understand the economic headwinds and tailwinds as your guide to managing your asset allocation.
Lessons Learned
Study after study have found that asset allocation, the decision whether or not to be in a particular market or asset class, is by far the most influential on your investment outcome than virtually any other investment decision you will make. Yet, sadly, very few individual investors spend nearly enough time thinking about the overall market. The explosion of exchange-traded funds, or ETFs, enables individuals to effectively maintain a broadly-diversified global portfolio. Think of it as a CliffsNotes Guide to effective investing. The basics are there for the taking, but some extra effort will always pay off. The tools available today are so much better than they were when I started in this business 27 years ago. That means that everyone has the opportunity to be successful, even during a very challenging market.
For more trading strategies, go to TradingMarkets.com/reports.
Friday, 25 September 2009
Quek and Chua invest US$150mil in HK IPO
Friday September 25, 2009
Quek and Chua invest US$150mil in HK IPO
By YEOW POOI LING
PETALING JAYA: Tycoons Tan Sri Quek Leng Chan and Tan Sri Chua Ma Yu have agreed to take part in the initial public offering (IPO) of Wynn Macau Ltd on the Hong Kong Stock Exchange by investing US$80mil and US$70mil respectively.
Quek’s investment is via Guoco Management Co Ltd and GuoLine Group Management Co Ltd, which are indirect subsidiaries of Hong Leong Co (M) Bhd, while Chua’s vehicle is CMY Capital Markets Sdn Bhd.
It is learnt that these Malaysian parties are going in independently. Chua is an investor and the attraction in Wynn is purely seen as a China play.
Chua was unavailable for comment.
In the listing document, Wynn Macau said CMY’s stake could amount to almost 5% of the offered shares while Guoco and GuoLine could collectively hold 5.3% based on a mid-point offer price of HK$9.30 and assuming the over-allotment option was not exercised.
Wynn Macau, owned by US-based Wynn Resorts, is among the biggest gaming operators in Macau and caters mainly to high-end clientele. The IPO involves floating 1.25 billion shares at HK$8.52-HK$10.08 each.
Other investors include Hong Kong tycoons Walter Kwok and Thomas Lau, as well as fund management company Keywise Capital Management (HK) Ltd.
Quek, the sixth richest man in Malaysia based on Forbes Asia Malaysia Rich List 2009, is not new to the gaming business. His Hong Kong-listed entity, Guoco Group Ltd’s subsidiary, has gaming operations in Britain.
Chua, on the other hand, owned a stake in Star Cruises Ltd briefly in 2007.
Macau is the world’s largest gaming market based on gross gaming revenue and the only place in China with legalised casino gaming.
Last year, Macau attracted 22.9 million visitors, mostly from Hong Kong and mainland China. The gaming market generated HK$105.6bil in gross gaming revenue, double the amount of Las Vegas Strip. For the first six months, Macau generated HK$49.9bil in gross gaming revenue. In 2008, Wynn Macau took a 16% of Macau’s table revenues and a daily gross win per gaming table of about HK$119,000. Its listing, targeted for Oct 9, will make Wynn Macau the first American company to list on the Hong Kong Stock Exchange.
A local research house said the IPO would unlock the value and boost the valuations of Wynn Resorts.
“Currently, the simple average price-to-earnings (PE) for 2010 of gaming companies listed on the Hong Kong Stock Exchange is 66.9 times versus Wynn Resorts’ PE of 74.1 times in the United States. If Wynn Resorts’ PE were to expand, it would also boost valuations of regional gaming companies,” it said.
Wynn Macau is currently adding new VIP areas with 35 more high-limit slot machines and 29 VIP table games at the private gaming salons. These are expected to open in the first quarter of 2010.
A new resort, Encore, is also under way, which costs about HK$5bil and is expected to open in the first half of next year. These expansions should increase Wynn Macau’s VIP table games by 44%.
Meanwhile, Wynn Macau is still awaiting approval for its application to lease a 52-acre site in Cotai for the development of an integrated casino and a five-star resort.
Macau’s gaming business was hurt when China, in May 2008, limited travel by its citizens to Macau to once a month, and later extended the limit to once every two months.
However, there have been reports that the Chinese Government was easing restrictions, starting from those in Guangdong province travelling to Macau.
http://biz.thestar.com.my/news/story.asp?file=/2009/9/25/business/4776752&sec=business
Comment: What planning needs to be in place to graduate into their league?
Quek and Chua invest US$150mil in HK IPO
By YEOW POOI LING
PETALING JAYA: Tycoons Tan Sri Quek Leng Chan and Tan Sri Chua Ma Yu have agreed to take part in the initial public offering (IPO) of Wynn Macau Ltd on the Hong Kong Stock Exchange by investing US$80mil and US$70mil respectively.
Quek’s investment is via Guoco Management Co Ltd and GuoLine Group Management Co Ltd, which are indirect subsidiaries of Hong Leong Co (M) Bhd, while Chua’s vehicle is CMY Capital Markets Sdn Bhd.
It is learnt that these Malaysian parties are going in independently. Chua is an investor and the attraction in Wynn is purely seen as a China play.
Chua was unavailable for comment.
In the listing document, Wynn Macau said CMY’s stake could amount to almost 5% of the offered shares while Guoco and GuoLine could collectively hold 5.3% based on a mid-point offer price of HK$9.30 and assuming the over-allotment option was not exercised.
Wynn Macau, owned by US-based Wynn Resorts, is among the biggest gaming operators in Macau and caters mainly to high-end clientele. The IPO involves floating 1.25 billion shares at HK$8.52-HK$10.08 each.
Other investors include Hong Kong tycoons Walter Kwok and Thomas Lau, as well as fund management company Keywise Capital Management (HK) Ltd.
Quek, the sixth richest man in Malaysia based on Forbes Asia Malaysia Rich List 2009, is not new to the gaming business. His Hong Kong-listed entity, Guoco Group Ltd’s subsidiary, has gaming operations in Britain.
Chua, on the other hand, owned a stake in Star Cruises Ltd briefly in 2007.
Macau is the world’s largest gaming market based on gross gaming revenue and the only place in China with legalised casino gaming.
Last year, Macau attracted 22.9 million visitors, mostly from Hong Kong and mainland China. The gaming market generated HK$105.6bil in gross gaming revenue, double the amount of Las Vegas Strip. For the first six months, Macau generated HK$49.9bil in gross gaming revenue. In 2008, Wynn Macau took a 16% of Macau’s table revenues and a daily gross win per gaming table of about HK$119,000. Its listing, targeted for Oct 9, will make Wynn Macau the first American company to list on the Hong Kong Stock Exchange.
A local research house said the IPO would unlock the value and boost the valuations of Wynn Resorts.
“Currently, the simple average price-to-earnings (PE) for 2010 of gaming companies listed on the Hong Kong Stock Exchange is 66.9 times versus Wynn Resorts’ PE of 74.1 times in the United States. If Wynn Resorts’ PE were to expand, it would also boost valuations of regional gaming companies,” it said.
Wynn Macau is currently adding new VIP areas with 35 more high-limit slot machines and 29 VIP table games at the private gaming salons. These are expected to open in the first quarter of 2010.
A new resort, Encore, is also under way, which costs about HK$5bil and is expected to open in the first half of next year. These expansions should increase Wynn Macau’s VIP table games by 44%.
Meanwhile, Wynn Macau is still awaiting approval for its application to lease a 52-acre site in Cotai for the development of an integrated casino and a five-star resort.
Macau’s gaming business was hurt when China, in May 2008, limited travel by its citizens to Macau to once a month, and later extended the limit to once every two months.
However, there have been reports that the Chinese Government was easing restrictions, starting from those in Guangdong province travelling to Macau.
http://biz.thestar.com.my/news/story.asp?file=/2009/9/25/business/4776752&sec=business
Comment: What planning needs to be in place to graduate into their league?
Tuesday, 11 August 2009
Be very shrewd
The investor has two powerful enemies:
- market psychology and
- the uncertainties of the future.
- a low price.
General rules to follow:
Avoid secondary stock for investment if it sells at a full price. (That is, unless it is selling at a substantially less than indicated by his calculation of the value of the enterprise.)
- When a secondary stock is popular - because of some substantial improvement in its position and prospects - it is practically never a sound purchase for investment.
- On the contrary, the investor who bought it when it was unpopular and the price was low should now be strongly moved to sell it despite the promising development.
- This is his chance to cash in on his earlier shrewdness. It should not be missed.
There will be a number of individual instances in which this important principle will seem to work out poorly, because the company will continue to forge ahead and the average price of the future will be much higher than the level at which the investor sold.
- Such occurrences, while very possible, are exceptional and delusive.
- If they did not happen the market would never go to its extemes. They resemble the cases of large winnings at roulette, without which encouragement there would be no customers for the wheel.
- It would be too easy to supply examples from the past of secondary stocks that rose too far on favourable developments and then cound a much lower average level.
When a security is popular the relationship of its price to indicated value is an entirely different matter than when the same or a similar security is unpopular.
- The stock market often departs from a rational valuation of the securities it deals in, and is often prone to go to extremes in the direction of optimism and pessimism on the flimsiest of foundations.
Be shrewd
One cannot be taught how to weigh the future. No matter how rosy the prospects, the price may still be too high.
Therefore, always remember:
- keep away from buying inferior stocks during periods of enthusiasm and high prices.
- buy your good quality companies when the market level is below, rather than above, its indicated long-term normal figure.
- do not pay extremely high prices for good stocks.
Wednesday, 29 July 2009
Be a shrewd investor
- For individual stocks: buy low and sell high.
- For the portfolio of stocks, through the strategy of rebalancing and asset allocation: buy when the market is obviously low and sell when the market is obviously high.
- Refrain from buying when the stock or market, is obviously highly priced.
- Even in a high market, you may be able to seek and buy undervalued stocks.
- A beaten down stock maybe worth a look. The price may have discounted all the negatives making it undervalued, provided its long term fundamentals are intact.
- It is common for stock price to fluctuate; prices can go down by a third from the high and go up by 50% from its low. A true investor cannot hope to profit from this on a consistent basis. He invests for the long term dividends and long term appreciation in the stock price.
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