Saturday 25 July 2009
Price volatility is usually a bad sign.
Price volatility is usually a bad sign. If a company is experiencing far greater price fluctuations than the market as a whole is seeing, particularly when it alternates between going up rapidly and going down rapidly, avoid the stock. Such events happen only in companies that are either unstable or are involved in something else going on in the market, both of which are good to avoid.
Everything Buffett Needs to Know, He Learned Right Here
Everything Buffett Needs to Know, He Learned Right Here
By Morgan Housel
July 17, 2009
Millions of investors chase Warren Buffett. Tens of thousands attend Berkshire Hathaway's (NYSE: BRK-A) (NYSE: BRK-B) annual shareholder meetings. Wealthy fans bid millions of dollars to have lunch with him. His appearances on CNBC bring trading floors to a halt. People want to know what he's thinking. Why he's different. What secret has made him so much more successful than anyone else.
What's interesting -- and a little ironic -- is that Buffett has never held back what his secret is. As he recently told PBS:
I read a book, what is it, almost 60 years ago roughly, called The Intelligent Investor and I really learned all I needed to know about investing from that book, and particular chapters 8 and 20 … I haven't changed anything since.
One book. Two chapters. Legendary success.
You'd think such precisely guided advice would draw more attention. Not only has Buffett filtered his success down to one book, he's even listed the two specific chapters on which he built his wisdom. He's making this almost embarrassingly easy for us.
What bits of sage advice do these two chapters -- published in 1949 by Buffett's early mentor Ben Graham -- hold? Here are key points from each one.
Chapter 8: The Investor and Market Fluctuations
Markets go up. Markets go down. Most of us accept this fact until we experience the latter, at which time we throw up our hands and consider the whole thing a sham.
That kind of behavior is what Chapter 8 is all about: dealing with market movements, and how fundamental they are to investing success.
We have a tendency to become confident and invest the most money after stocks have logged big gains, and vice versa -- selling in panic after big drops. Two seconds of logical thought will tell you this isn't rational. Yet we do it over and over again.
Buffett built his success on exploiting the market's movements, rather than following them with lemming-like obedience. He bought companies like Coca-Cola (NYSE: KO) and Wells Fargo (NYSE: WFC) when the market wanted nothing to do with them. He then sat on his hands and laughed when companies like Microsoft (Nasdaq: MSFT) and Amazon.com (Nasdaq: AMZN) soared during the dot-com boom, ignoring heckles about his technophobic incompetence. It's truly as simple as "being greedy when others are fearful, and fearful when others are greedy."
Here's how Graham puts it in Chapter 8:
The true investor scarcely ever is forced to sell his shares, and at all other times he is free to disregard the current price quotation. He need pay attention to it and act upon it only to the extent that it suits his book, and no more. Thus the investor who permits himself to be stampeded or unduly worried by unjustified market declines in his holdings is perversely transforming his basic advantage into a basic disadvantage. That man would be better off if his stocks had no market quotation at all, for he would then be spared the mental anguish caused him by other persons' mistakes of judgment.
Chapter 20: Margin of Safety as the Central Concept of Investment
Graham opens Chapter 20 with a potent message:
In the old legend the wise men finally boiled down the history of mortal affairs into the single phrase, 'This too will pass.' Confronted with a like challenge to distill the secret of sound investment into three words, we venture the motto, MARGIN OF SAFETY.
We have an overwhelming urge to expect certainty, but live in a world that is anything but. Forward-looking projections of a stock's value are based on assumptions, prone to wild miscalculations and unforeseen events. And by prone, I mean 100% assured.
There's only one surefire solution to this: Pay far less for stocks than your estimate of value, leaving room for error. That's a margin of safety. It's giving yourself room to be wrong, knowing that you probably will be. Think a company is worth $50 a share? Great. Don't pay more than $25 for it. Think a company could earn $2 per share next year? Great. Set yourself up so you'll profit if it only makes a buck. There has to be a wide range of acceptance between the projected and the potential.
One stock that might epitomize the opposite of a margin of safety is Visa (NYSE: V). Visa is a great company, to be sure, exploiting a global consumer shifting from paper to plastic transactions. But it currently trades at more than 22 times 2009 earnings. My calculations of growth show this is probably what the company is worth if everything goes according to plan.
But what if everything doesn't? What if growth hits a speed bump? What if management drops the ball? What if consumer spending takes a sustained nosedive? What if, what if, what if -- that's the basis of a margin of safety. There has to be sizable room for error.
Moving on
These lessons might seem basic and dull. They are. Yet too many investors fail to implement them. Buffett obviously isn't the only one who's read The Intelligent Investor -- he's simply put its lessons and theories to work in a habitual manner.
Our Motley Fool Inside Value team strives to put these basic values to work with all of its recommendations, which are currently outperforming the market by an average of four percentage points each. To see what we're recommending right now, you can try the service free for 30 days. Click here to get started. There's no obligation to subscribe.
Fool contributor Morgan Housel owns shares of Berkshire Hathaway. Amazon.com and Berkshire Hathaway are Motley Fool Stock Advisor picks. Berkshire Hathaway, Coca-Cola, and Microsoft are Motley Fool Inside Value selections. Coca-Cola is a Motley Fool Income Investor recommendation. The Fool owns shares of Berkshire Hathaway, and has a disclosure policy.
http://www.fool.com/investing/value/2009/07/17/everything-buffett-needs-to-know-he-learned-right-.aspx
By Morgan Housel
July 17, 2009
Millions of investors chase Warren Buffett. Tens of thousands attend Berkshire Hathaway's (NYSE: BRK-A) (NYSE: BRK-B) annual shareholder meetings. Wealthy fans bid millions of dollars to have lunch with him. His appearances on CNBC bring trading floors to a halt. People want to know what he's thinking. Why he's different. What secret has made him so much more successful than anyone else.
What's interesting -- and a little ironic -- is that Buffett has never held back what his secret is. As he recently told PBS:
I read a book, what is it, almost 60 years ago roughly, called The Intelligent Investor and I really learned all I needed to know about investing from that book, and particular chapters 8 and 20 … I haven't changed anything since.
One book. Two chapters. Legendary success.
You'd think such precisely guided advice would draw more attention. Not only has Buffett filtered his success down to one book, he's even listed the two specific chapters on which he built his wisdom. He's making this almost embarrassingly easy for us.
What bits of sage advice do these two chapters -- published in 1949 by Buffett's early mentor Ben Graham -- hold? Here are key points from each one.
Chapter 8: The Investor and Market Fluctuations
Markets go up. Markets go down. Most of us accept this fact until we experience the latter, at which time we throw up our hands and consider the whole thing a sham.
That kind of behavior is what Chapter 8 is all about: dealing with market movements, and how fundamental they are to investing success.
We have a tendency to become confident and invest the most money after stocks have logged big gains, and vice versa -- selling in panic after big drops. Two seconds of logical thought will tell you this isn't rational. Yet we do it over and over again.
Buffett built his success on exploiting the market's movements, rather than following them with lemming-like obedience. He bought companies like Coca-Cola (NYSE: KO) and Wells Fargo (NYSE: WFC) when the market wanted nothing to do with them. He then sat on his hands and laughed when companies like Microsoft (Nasdaq: MSFT) and Amazon.com (Nasdaq: AMZN) soared during the dot-com boom, ignoring heckles about his technophobic incompetence. It's truly as simple as "being greedy when others are fearful, and fearful when others are greedy."
Here's how Graham puts it in Chapter 8:
The true investor scarcely ever is forced to sell his shares, and at all other times he is free to disregard the current price quotation. He need pay attention to it and act upon it only to the extent that it suits his book, and no more. Thus the investor who permits himself to be stampeded or unduly worried by unjustified market declines in his holdings is perversely transforming his basic advantage into a basic disadvantage. That man would be better off if his stocks had no market quotation at all, for he would then be spared the mental anguish caused him by other persons' mistakes of judgment.
Chapter 20: Margin of Safety as the Central Concept of Investment
Graham opens Chapter 20 with a potent message:
In the old legend the wise men finally boiled down the history of mortal affairs into the single phrase, 'This too will pass.' Confronted with a like challenge to distill the secret of sound investment into three words, we venture the motto, MARGIN OF SAFETY.
We have an overwhelming urge to expect certainty, but live in a world that is anything but. Forward-looking projections of a stock's value are based on assumptions, prone to wild miscalculations and unforeseen events. And by prone, I mean 100% assured.
There's only one surefire solution to this: Pay far less for stocks than your estimate of value, leaving room for error. That's a margin of safety. It's giving yourself room to be wrong, knowing that you probably will be. Think a company is worth $50 a share? Great. Don't pay more than $25 for it. Think a company could earn $2 per share next year? Great. Set yourself up so you'll profit if it only makes a buck. There has to be a wide range of acceptance between the projected and the potential.
One stock that might epitomize the opposite of a margin of safety is Visa (NYSE: V). Visa is a great company, to be sure, exploiting a global consumer shifting from paper to plastic transactions. But it currently trades at more than 22 times 2009 earnings. My calculations of growth show this is probably what the company is worth if everything goes according to plan.
But what if everything doesn't? What if growth hits a speed bump? What if management drops the ball? What if consumer spending takes a sustained nosedive? What if, what if, what if -- that's the basis of a margin of safety. There has to be sizable room for error.
Moving on
These lessons might seem basic and dull. They are. Yet too many investors fail to implement them. Buffett obviously isn't the only one who's read The Intelligent Investor -- he's simply put its lessons and theories to work in a habitual manner.
Our Motley Fool Inside Value team strives to put these basic values to work with all of its recommendations, which are currently outperforming the market by an average of four percentage points each. To see what we're recommending right now, you can try the service free for 30 days. Click here to get started. There's no obligation to subscribe.
Fool contributor Morgan Housel owns shares of Berkshire Hathaway. Amazon.com and Berkshire Hathaway are Motley Fool Stock Advisor picks. Berkshire Hathaway, Coca-Cola, and Microsoft are Motley Fool Inside Value selections. Coca-Cola is a Motley Fool Income Investor recommendation. The Fool owns shares of Berkshire Hathaway, and has a disclosure policy.
http://www.fool.com/investing/value/2009/07/17/everything-buffett-needs-to-know-he-learned-right-.aspx
Friday 24 July 2009
Companies with different EPS GR bought at different prices
Conclusion:
1. Best buy:
High EPS GR companies
Bought at a discount
Held for long haul
2. Good buy:
High EPS GR companies
Bought at a fair price
Held for long haul
3. Good buy:
Low EPS GR companies
Bought at a discount
Held for short haul
5. Do not buy
High EPS GR companies
Bought at high price
Avoid meantime
Be patient
6. Do not buy
Low EPS GR companies
Bought at high price
Avoid
The high CAGR in the early years of the investing period, due to buying at a discount, tended to decline and approach that of the intrinsic EPS GR of the companies over a longer investment time-frame.
http://spreadsheets.google.com/pub?key=thtZJOZYT-iKNP3VPKg9jig&output=html
Chapter 20 - “Margin of Safety” as the Central Concept of Investment
A single quote by Graham on page 516 struck me:
Observation over many years has taught us that the chief losses to investors come from the purchase of low-quality securities at times of favorable business conditions.
Basically, Graham is saying that most stock investors lose money because they invest in companies that seem good at a particular point in time, but are lacking the fundamentals of a long-lasting stable company.
This seems obvious on the surface, but it’s actually a great argument for thinking more carefully about your individual stock investments. If most of your losses come from buying companies that seem healthy but really aren’t, isn’t that a profound argument for carefully studying any company you might invest in?
1. Best buy:
High EPS GR companies
Bought at a discount
Held for long haul
2. Good buy:
High EPS GR companies
Bought at a fair price
Held for long haul
3. Good buy:
Low EPS GR companies
Bought at a discount
Held for short haul
5. Do not buy
High EPS GR companies
Bought at high price
Avoid meantime
Be patient
6. Do not buy
Low EPS GR companies
Bought at high price
Avoid
The high CAGR in the early years of the investing period, due to buying at a discount, tended to decline and approach that of the intrinsic EPS GR of the companies over a longer investment time-frame.
http://spreadsheets.google.com/pub?key=thtZJOZYT-iKNP3VPKg9jig&output=html
Chapter 20 - “Margin of Safety” as the Central Concept of Investment
A single quote by Graham on page 516 struck me:
Observation over many years has taught us that the chief losses to investors come from the purchase of low-quality securities at times of favorable business conditions.
Basically, Graham is saying that most stock investors lose money because they invest in companies that seem good at a particular point in time, but are lacking the fundamentals of a long-lasting stable company.
This seems obvious on the surface, but it’s actually a great argument for thinking more carefully about your individual stock investments. If most of your losses come from buying companies that seem healthy but really aren’t, isn’t that a profound argument for carefully studying any company you might invest in?
Thursday 23 July 2009
To map out a course of action and follow it to an end requires courage.
Whatever strategy or strategies you use, the most critical thing in investing is to take a good map with you on your journey and stick to it no matter what. There will be all sorts of distractions along the road to your investment goals. You'll come upon supposed shortcuts that promise to get you where you're going twice as fast. You'll see and hear from all sorts of people who are telling you that they've found a better way to go than the road you're on. Sometimes, you'll even think that your map must be wrong, and that it has you headed in the opposite direction of where you want to go.
But remember, the people who gave you directions - the gurus upon whom some of the strategies are based - are expert mapmakers. They know how to get where you want to go because they've been there before - unlike most of the people who will be telling you to take those shortcuts or alternate routes.
With the map, you have what you need to avoid the obstacles and bad advice along the way, and to do what it takes to beat the market. Remember, while being a good investor is hard, it doesn't have to be complicated. The greatest difficult isn't in the details of stock-picking or portfolio management; you don't have to be a rocket scientist to produce nice returns. No, the hard part will be clearing those psychological and emotional barriers we reviewed, so that you stick to your road map no matter what happens.
If you stick to your roadmap, you should be quite happy with where you end up.
But remember, the people who gave you directions - the gurus upon whom some of the strategies are based - are expert mapmakers. They know how to get where you want to go because they've been there before - unlike most of the people who will be telling you to take those shortcuts or alternate routes.
With the map, you have what you need to avoid the obstacles and bad advice along the way, and to do what it takes to beat the market. Remember, while being a good investor is hard, it doesn't have to be complicated. The greatest difficult isn't in the details of stock-picking or portfolio management; you don't have to be a rocket scientist to produce nice returns. No, the hard part will be clearing those psychological and emotional barriers we reviewed, so that you stick to your road map no matter what happens.
If you stick to your roadmap, you should be quite happy with where you end up.
Investing Principle 6: Stick to the Strategy - Not the Stocks
If a stock no longer meets the fundamental criteria that led you to buy it, don't feel obligated to hold on to it.
You're a long-term investor if you stick to a strategy for the long haul - not because you blindly hold on to individual stocks for long periods.
You're a long-term investor if you stick to a strategy for the long haul - not because you blindly hold on to individual stocks for long periods.
Investing Principle 5: Don't Limit Yourself
Studies show that "style-box" investing can limit your gains by about 300 basis points per year.
Using "strategy-based investing" allows you to pick the best values in the market at any given time, regardless of market cap or growth-value designations.
Using "strategy-based investing" allows you to pick the best values in the market at any given time, regardless of market cap or growth-value designations.
Investing Principle 4: Diversify, but Don't Own the Market
Diversification is good - to a point. Maintain a focussed portfolio that includes enough stocks to limit stock-specific risk, but don't hold so many that you end up simply mirroring the market's returns.
In a rigid fundamental-based investing system, portfolios as small as 10 stocks can significantly beat the market over the long haul.
While you don't need to hold stocks in every sector or industry, set guidelines to make sure you maintain at least some diversification across those areas within your portfolio.
In a rigid fundamental-based investing system, portfolios as small as 10 stocks can significantly beat the market over the long haul.
While you don't need to hold stocks in every sector or industry, set guidelines to make sure you maintain at least some diversification across those areas within your portfolio.
Investing Principle 3: Stay Disciplined Over the Long Haul
It is essential to stick to your strategy for the long term. Even the best strategies have down periods, and it can sometimes take over a year to reap the benefits of a good method. If you try to time your use of a strategy, you'll likely miss out on some big gains.
Expectations shape reactions: be prepared for short-term 10 to 20% downturns that are inevitable in the stock market - and the less frequent but also inevitable 35 to 50% downturns you'll occasionally experience. You can't predict when they will happen, so you just have to roll with them if you want to reap the market's long-term benefits.
Give the Internet a rest. Checking your portfolio every day, let alone every 10 minutes, can make you want to jump in and out of the market, which hurts your long-term performance.
Expectations shape reactions: be prepared for short-term 10 to 20% downturns that are inevitable in the stock market - and the less frequent but also inevitable 35 to 50% downturns you'll occasionally experience. You can't predict when they will happen, so you just have to roll with them if you want to reap the market's long-term benefits.
Give the Internet a rest. Checking your portfolio every day, let alone every 10 minutes, can make you want to jump in and out of the market, which hurts your long-term performance.
Investing Principle 2: Stick to the Numbers
Human emotions cloud decision-making, hampering human beings' forecasting abilities.
Using proven, quantitative strategies allows you to make buy and sell decisions solely on the numbers - a stock's fundamentals - helping to remove emotion from the process.
It is best to stick firmly to strategies that are backed up by long, proven track records.
Using proven, quantitative strategies allows you to make buy and sell decisions solely on the numbers - a stock's fundamentals - helping to remove emotion from the process.
It is best to stick firmly to strategies that are backed up by long, proven track records.
Investing Principle 1: Combining Strategies
Because of compounding, downside volatility costs you money.
If you are looking to smooth out returns, pick stocks with lower degrees of correlation (those that perform differently in the same type of market conditions).
Learn how to combine strategies to limit risk or enhance returns.
To maximise returns, give more weight to those strategies with the best historical track records.
If you are looking to smooth out returns, pick stocks with lower degrees of correlation (those that perform differently in the same type of market conditions).
Learn how to combine strategies to limit risk or enhance returns.
To maximise returns, give more weight to those strategies with the best historical track records.
How can investment returns be improved?
How to improve on my returns on my investing?
Always keep cash for emergency use. Also, always have cash for opportunistic investing. This is not a problem for those who have constant stream of cash incomes. For others, keeping cash:stock in the ratio of 25:75, gives a return quite close to those who are 100% invested into stocks.
Next, would be selecting the right stocks. Using my QVM method, we aim to select stocks that will give us good sustainable returns for a long time. We should aim for a return of 15% per year, if possible, and always going for high probability events that give high returns at low risks. Returns can also be sought from badly beaten down stocks (undervalued stocks) that will give great returns when they are repriced at fair values.
Maintain a concentrated portfolio. Bet big on those stocks you have conviction in. Do not over-diversify. The company specific risks are fully diversified when you have 6 stocks in your portfolio. An additional stock added to the portfolio after the sixth may lead to lower returns without the benefit of reducing further the risks. The market risks cannot be diversified, but can be partially managed through asset allocation.
It is important to manage the portfolio actively. This also incorporates asset allocation. There will be time when the market is bubbly, when one may need to pare down exposure to stocks, though, never completely. There will be times, when one's exposure to stock will be relatively high, especially at the end of a severe and prolonged bear market.
Always monitor the business of the stocks in the portfolio in your readings of the papers, business magazines, etc. Track their business performance every quarter through their regular financial releases.
Two active strategies are employed to improve on the returns of our portfolio. Firstly, the defensive strategy. This is to prevent harm to our portfolio. This occurs when the fundamentals of the business of the stock have deteriorated, sometimes suddenly, for various reasons. Another reason maybe "creative" accounting. In these situations, sell the related stocks quickly. Do not hesistate. Speed in selling is important in reducing severe damage to your portfolio, by limiting the losses.
The next is termed offensive strategy. Of 5 stocks one invest into, expect 1 to perform exceptionally well, 3 to be fairly well and 1 to do "not so well or badly". You have time to apply this strategy leisurely. There is no urgency as like the situation previously described.
Review and rebalance your portfolio at regular intervals. Perhaps, once per month or even less frequent than this. You may wish to sell or trim the stocks where the prices are too high, reducing the upside potential and increasing the downside risk. You may also wish to sell or trim those stocks where the potential for upside gain is assessed to be low. (Remember you aim for 15% return on an annual basis.) The cash derived from their disposals should be re-deployed into those stocks which have a higher potential for gain.
Sounds simple, but trust me, active investing and active management of portfolio are both challenging and take effort. However, the returns can be good for those employing a disciplined investing philosophy and strategy.
Always keep cash for emergency use. Also, always have cash for opportunistic investing. This is not a problem for those who have constant stream of cash incomes. For others, keeping cash:stock in the ratio of 25:75, gives a return quite close to those who are 100% invested into stocks.
Next, would be selecting the right stocks. Using my QVM method, we aim to select stocks that will give us good sustainable returns for a long time. We should aim for a return of 15% per year, if possible, and always going for high probability events that give high returns at low risks. Returns can also be sought from badly beaten down stocks (undervalued stocks) that will give great returns when they are repriced at fair values.
Maintain a concentrated portfolio. Bet big on those stocks you have conviction in. Do not over-diversify. The company specific risks are fully diversified when you have 6 stocks in your portfolio. An additional stock added to the portfolio after the sixth may lead to lower returns without the benefit of reducing further the risks. The market risks cannot be diversified, but can be partially managed through asset allocation.
It is important to manage the portfolio actively. This also incorporates asset allocation. There will be time when the market is bubbly, when one may need to pare down exposure to stocks, though, never completely. There will be times, when one's exposure to stock will be relatively high, especially at the end of a severe and prolonged bear market.
Always monitor the business of the stocks in the portfolio in your readings of the papers, business magazines, etc. Track their business performance every quarter through their regular financial releases.
Two active strategies are employed to improve on the returns of our portfolio. Firstly, the defensive strategy. This is to prevent harm to our portfolio. This occurs when the fundamentals of the business of the stock have deteriorated, sometimes suddenly, for various reasons. Another reason maybe "creative" accounting. In these situations, sell the related stocks quickly. Do not hesistate. Speed in selling is important in reducing severe damage to your portfolio, by limiting the losses.
The next is termed offensive strategy. Of 5 stocks one invest into, expect 1 to perform exceptionally well, 3 to be fairly well and 1 to do "not so well or badly". You have time to apply this strategy leisurely. There is no urgency as like the situation previously described.
Review and rebalance your portfolio at regular intervals. Perhaps, once per month or even less frequent than this. You may wish to sell or trim the stocks where the prices are too high, reducing the upside potential and increasing the downside risk. You may also wish to sell or trim those stocks where the potential for upside gain is assessed to be low. (Remember you aim for 15% return on an annual basis.) The cash derived from their disposals should be re-deployed into those stocks which have a higher potential for gain.
Sounds simple, but trust me, active investing and active management of portfolio are both challenging and take effort. However, the returns can be good for those employing a disciplined investing philosophy and strategy.
Risk comes from misjudgement of a company's prospects, not price volatility
Academics define risk as price volatility, and to counter that risk, they recommend holding a diversified portfolio.
But to value investors, like Warren Buffett, risk is the intrinsic value risk of a business, not the price behaviour of its stock. And intrinsic value risk, he says, comes from misjudgement of a company's prospects. He has extreme confidence in his ability to pick fundamentally strong companies which are trading at prices below their intrinsic value, and thus favours placing big bets on these companies.
You should have the courage and conviction to put at least 10 percent of your net worth into each investment you make, he says. "We believe that a policy of portfolio concentration may well decrease risk if it raises, as it should, both the intensity with which an investor thinks about a business and the comfort level he must feel with its economic characteristics before buying into it," he explains.
Ptui
MCA: Dr M’s remarks not helping racial unity
PETALING JAYA: Tun Dr Mahathir Moha-mad’s claim that the Chinese are the masters in the country will not help foster racial harmony, said the MCA.
Thursday July 23, 2009
http://thestar.com.my/news/story.asp?file=/2009/7/23/nation/4375350&sec=nation
PETALING JAYA: Tun Dr Mahathir Moha-mad’s claim that the Chinese are the masters in the country will not help foster racial harmony, said the MCA.
Thursday July 23, 2009
http://thestar.com.my/news/story.asp?file=/2009/7/23/nation/4375350&sec=nation
Wednesday 22 July 2009
iCap Portfolios of 2008 and 2009
http://spreadsheets.google.com/pub?key=tC9bD59Bg2AKPA3Bgfyo8qA&output=html
There are 17 stocks in iCap Portfolio for the financial year ended 31 May 2009. This is the same number of stocks as for the previous financial year ended 31 May 2008.
iCap sold:
- AirAsia,
- Axiata and
- VADS.
2 new stocks were included in the present portfolio at the cost of $ 42.95 million, namely,
- Astro (31% gain), and,
- KLKepong (30.16% gain).
During the last financial year, iCap added more shares at the cost of $ 6.1 million, in 4 pre-existing stocks:
- Boustead (average cost of newly bought shares 3.64, giving 8.17% gain)
- Parkson (average cost of newly bought shares 4.84, giving 13.62% gain)
- PohKong (average cost of newly bought shares 0.36, giving 6.73% gain)
- HaiO (HaiO shares are probably from share dividends).
iCap NAV fell from $1.95 per share on 31 May 2008 to RM 1.77 per share by 31 May 2009 or a loss of 9%. The KLCI declined 18% in the same period.
Tuesday 21 July 2009
How best to allocate your funds?
To a certain extent, that depends on your risk appetite, which in turn hinges on your individual circumstances.
A risk-averse investor may hold more cash, and a risk-tolerant investor vice-versa.
Allocation will also depend on market conditions.
Equity risk premium can be a good guiding principle for asset allocation decisions, i.e., when to hold cash and when to hold stocks if you are looking at just 2 asset classes.
Even if you have high tolerance for risks, it would be foolish to allocate 80% of your portfolio to equities during a stockmarket bubble.
And even, if the market was "normal" when you allocated your assets, prices will move, leaving you holding more of one asset class than you desire. In which case, you might want to rebalance your portfolio.
Stocks, bonds or cash? How much you hold of each asset class - or asset allocation - is the most important decision in an investment process. Studies have shown that about 95% of variations in returns on portfolios are explained by asset allocation decisions. Only about 5% are due to other causes, such as security selection.
Ref: Show Me the Money by Teh Hooi Ling
A risk-averse investor may hold more cash, and a risk-tolerant investor vice-versa.
Allocation will also depend on market conditions.
Equity risk premium can be a good guiding principle for asset allocation decisions, i.e., when to hold cash and when to hold stocks if you are looking at just 2 asset classes.
Even if you have high tolerance for risks, it would be foolish to allocate 80% of your portfolio to equities during a stockmarket bubble.
And even, if the market was "normal" when you allocated your assets, prices will move, leaving you holding more of one asset class than you desire. In which case, you might want to rebalance your portfolio.
Stocks, bonds or cash? How much you hold of each asset class - or asset allocation - is the most important decision in an investment process. Studies have shown that about 95% of variations in returns on portfolios are explained by asset allocation decisions. Only about 5% are due to other causes, such as security selection.
Ref: Show Me the Money by Teh Hooi Ling
When is the market over-valued?
The stock market moves in a cycle - from extreme optimism to extreme pessimism. How can you tell when stocks are under or over-valued vis-a-vis bonds or cash? Taking advantage of perceived over or under-valuation of securities in different asset classes can yield spectacular results.
Equity risk premium:
> 3.5%, market is undervalued
< 0.6%, market is overvalued.
0.6% to 3.5%, market is fairly valued.
Equity risk premium is the compensation investors require for holding stocks.
When the economic outlook is bad, or in the aftermath of a catastrophe, the equity risk premium will be high because fear grips investors and they can only be enticed to hold "risky" stocks if the promised returns are good.
Conversely, in good times everyone become over-confident of the continued good performance of stocks and will demand very little compensation to hold them.
Equity risk premium
= earnings yield (1/market PE) - the risk free rate.
Market PE ratios were obtained from Thomson Financial Datastream.
One-year deposit rates were taken as risk-free rates.
Ref: Show Me the Money by Teh Hooi Ling
Equity risk premium:
> 3.5%, market is undervalued
< 0.6%, market is overvalued.
0.6% to 3.5%, market is fairly valued.
Equity risk premium is the compensation investors require for holding stocks.
When the economic outlook is bad, or in the aftermath of a catastrophe, the equity risk premium will be high because fear grips investors and they can only be enticed to hold "risky" stocks if the promised returns are good.
Conversely, in good times everyone become over-confident of the continued good performance of stocks and will demand very little compensation to hold them.
Equity risk premium
= earnings yield (1/market PE) - the risk free rate.
Market PE ratios were obtained from Thomson Financial Datastream.
One-year deposit rates were taken as risk-free rates.
Ref: Show Me the Money by Teh Hooi Ling
My investment horizon is 10 or 20 years
Those with investment horizons of 10 or 20 years should be ever ready to embrace out-of-favour asset classes.
Time and again, the market has handsomely rewarded those willing to bear equity risk in uncertain times. Extreme pessimism - which leads to swings from the equilibrium - compresses a proverbial spring that will eventually bounce back into equilibrium. The more share price falls, the more return it promises a prospective buyer.
Stocks - short of the company going bankrupt - will very often produce their promised returns eventually; it is the timing that will elude us. So for those with time on their side, they have nothing to lose. In short, having an explicit investment plan supports discipline and helps ensure that an investor is not swayed by panic or overconfidence.
If one is investing for financial independence 20 or 30 years down the road, opportunities that came with Sept 11's after-shocks, the Asian financial crisis, or the recent Lehman crash, are not to be missed.
Ref: Show Me the Money by Teh Hooi Ling
Time and again, the market has handsomely rewarded those willing to bear equity risk in uncertain times. Extreme pessimism - which leads to swings from the equilibrium - compresses a proverbial spring that will eventually bounce back into equilibrium. The more share price falls, the more return it promises a prospective buyer.
Stocks - short of the company going bankrupt - will very often produce their promised returns eventually; it is the timing that will elude us. So for those with time on their side, they have nothing to lose. In short, having an explicit investment plan supports discipline and helps ensure that an investor is not swayed by panic or overconfidence.
If one is investing for financial independence 20 or 30 years down the road, opportunities that came with Sept 11's after-shocks, the Asian financial crisis, or the recent Lehman crash, are not to be missed.
Ref: Show Me the Money by Teh Hooi Ling
Bursa Malaysia Aims for 40 Listings a Year, CEO Yusli Says
Bursa Malaysia Aims for 40 Listings a Year, CEO Yusli Says
By Chan Tien Hin
July 21 (Bloomberg) -- Bursa Malaysia Bhd., operator of the nation’s exchange, said it aims to attract as many as 40 new listings a year as the easing of investment rules in the country helps draw foreign investors.
Bursa attracted 23 listings last year and 26 in 2007, down from 40 three years ago, according to its Web site. Only one sold shares for the first time in the first half, it added.
“Over the next six months, if we get the same number as last year, that will be good,” Yusli Yusoff, Bursa’s chief executive officer, said in an interview in Kuala Lumpur. “I don’t see why we can’t continue the momentum, I’ve always said that in any year, we should be looking at 30 to 40 companies.”
Malaysian Prime Minister Najib Razak last month eased investment rules governing initial public offerings and takeovers, scrapping the need for overseas companies and publicly traded Malaysian businesses to set aside 30 percent of their equity to local ethnic Malay investors.
Najib, who took office in April, is overhauling the Southeast Asian nation’s financial markets to attract investors and revive an economy that’s facing its first contraction in a decade. The benchmark FTSE Bursa Malaysia KLCI has risen 30 percent this year, lagging behind regional markets.
The measure’s gap with Southeast Asian indexes may widen. Macquarie Group Ltd. said in a report today that investors should “take profit” in Malaysian stocks as “liquidity and earnings upgrades are showing signs of fatigue.”
‘Big Ones’
Bursa said more than 20 companies are already in the “pipeline” for initial share sales, including a handful of businesses from China, with more expected following the easing of investment rules.
“We expect companies who previously may not have wanted to come to the market because of this condition to now come forward,” Yusli said today. “I want some big ones this year.”
The bourse said discussions with Southeast Asia’s stock exchanges to develop an electronic trading link connecting five markets in the next two to three years are at a “fairly advanced stage.”
Southeast Asia’s stock exchanges signed a preliminary agreement on Feb. 23 to develop a trading link to boost competitiveness and lure more overseas funds into the region.
To contact the reporter on this story: Chan Tien Hin in Kuala Lumpur at thchan@bloomberg.net
Last Updated: July 20, 2009 23:12 EDT
By Chan Tien Hin
July 21 (Bloomberg) -- Bursa Malaysia Bhd., operator of the nation’s exchange, said it aims to attract as many as 40 new listings a year as the easing of investment rules in the country helps draw foreign investors.
Bursa attracted 23 listings last year and 26 in 2007, down from 40 three years ago, according to its Web site. Only one sold shares for the first time in the first half, it added.
“Over the next six months, if we get the same number as last year, that will be good,” Yusli Yusoff, Bursa’s chief executive officer, said in an interview in Kuala Lumpur. “I don’t see why we can’t continue the momentum, I’ve always said that in any year, we should be looking at 30 to 40 companies.”
Malaysian Prime Minister Najib Razak last month eased investment rules governing initial public offerings and takeovers, scrapping the need for overseas companies and publicly traded Malaysian businesses to set aside 30 percent of their equity to local ethnic Malay investors.
Najib, who took office in April, is overhauling the Southeast Asian nation’s financial markets to attract investors and revive an economy that’s facing its first contraction in a decade. The benchmark FTSE Bursa Malaysia KLCI has risen 30 percent this year, lagging behind regional markets.
The measure’s gap with Southeast Asian indexes may widen. Macquarie Group Ltd. said in a report today that investors should “take profit” in Malaysian stocks as “liquidity and earnings upgrades are showing signs of fatigue.”
‘Big Ones’
Bursa said more than 20 companies are already in the “pipeline” for initial share sales, including a handful of businesses from China, with more expected following the easing of investment rules.
“We expect companies who previously may not have wanted to come to the market because of this condition to now come forward,” Yusli said today. “I want some big ones this year.”
The bourse said discussions with Southeast Asia’s stock exchanges to develop an electronic trading link connecting five markets in the next two to three years are at a “fairly advanced stage.”
Southeast Asia’s stock exchanges signed a preliminary agreement on Feb. 23 to develop a trading link to boost competitiveness and lure more overseas funds into the region.
To contact the reporter on this story: Chan Tien Hin in Kuala Lumpur at thchan@bloomberg.net
Last Updated: July 20, 2009 23:12 EDT
Warren Buffett's Priceless Investment Advice
Warren Buffett's Priceless Investment Advice
By John Reeves
July 19, 2009
"It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price."
If you can grasp this simple advice from Warren Buffett, you should do well as an investor. Sure, there are other investment strategies out there, but Buffett's approach is both easy to follow and demonstrably successful over more than 50 years. Why try anything else?
Two words for the efficient market hypothesis: Warren Buffett
An interesting academic study (PDF file) illustrates Buffett's amazing investment genius. From 1980 to 2003, the stock portfolio of Berkshire Hathaway (NYSE: BRK-B) beat the S&P 500 index in 20 out of 24 years. During that same period, Berkshire's average annual return from its stock portfolio outperformed the index by 12 percentage points. The efficient market theory predicts that this is impossible, but the theory is clearly wrong in this case.
Buffett has delivered these outstanding returns by buying undervalued shares in great companies such as Gillette, now owned by Procter & Gamble. Over the years, Berkshire has owned household names such as UPS (NYSE: UPS), Iron Mountain (NYSE: IRM), and Wal-Mart (NYSE: WMT).
Although not every pick worked out, for the most part Buffett and Berkshire have made a mint. Indeed, Buffett's investment in Gillette increased threefold during the 1990s. Who'd have guessed you could get such stratospheric returns from razors?
The devil is in the details
So buying great companies at reasonable prices can deliver solid returns for long-term investors. The challenge, of course, is identifying great companies and determining what constitutes a reasonable price.
Buffett recommends that investors look for companies that deliver outstanding returns on capital and produce substantial cash profits. He also suggests that you look for companies with a huge economic moat to protect them from competitors. You can identify companies with moats by looking for strong brands that stand alongside consistent or improving profit margins and returns on capital.
How do you determine the right buy price for shares in such companies? Buffett advises that you wait patiently for opportunities to purchase stocks at a significant discount to their intrinsic values -- as calculated by taking the present value of all future cash flows. Ultimately, he believes that "value will in time always be reflected in market price." When the market finally recognizes the true worth of your undervalued shares, you begin to earn solid returns.
Do-it-yourself outperformance
Before they can capture Buffett-like returns, beginning investors will need to develop their skills in identifying profitable companies and determining intrinsic values. In the meantime, consider looking for stock ideas among Berkshire's own holdings.
In the Form 13-F that Berkshire filed recently, we learned that Buffett has boosted his stake in financials, adding to existing positions Wells Fargo (NYSE: WFC) and U.S. Bank (NYSE: USB).
It's pretty clear that Buffett thinks these conservatively run banks represent compelling investment opportunities at the moment. In fact, Buffett claimed in May that if he had to put all of his net worth into a single stock, it would be Wells Fargo.
Despite Buffett's confidence, it's clear that many individual investors are still afraid of financial stocks. If you fall into that camp, another place to find great value-stock ideas is Motley Fool Inside Value. Philip Durell, the advisor for the service, follows an investment strategy very similar to Buffett's.
He looks for undervalued companies that also have strong financials and competitive positions. This approach has allowed Philip to outperform the market since Inside Value's inception in 2004. To see his most recent stock picks, as well as the entire archive of past selections, sign up for a free 30-day trial today.
If investing in wonderful companies at fair prices is good enough for Warren Buffett -- arguably the finest investor on the planet -- it should be good enough for the rest of us.
Already subscribe to Inside Value? Log in at the top of this page.
This article was originally published on April 7, 2007. It has been updated.
John Reeves can't remember the last time he used a razor made by someone other than Gillette, and he wishes he'd owned shares in that company before P&G acquired it. John does not own shares of any companies mentioned. The Motley Fool owns shares of Berkshire Hathaway and Procter & Gamble. Berkshire and Wal-Mart are Inside Value recommendations. Berkshire is also a Stock Advisor selection. UPS and P&G are Income Investor picks. The Fool has a disclosure policy.
By John Reeves
July 19, 2009
"It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price."
If you can grasp this simple advice from Warren Buffett, you should do well as an investor. Sure, there are other investment strategies out there, but Buffett's approach is both easy to follow and demonstrably successful over more than 50 years. Why try anything else?
Two words for the efficient market hypothesis: Warren Buffett
An interesting academic study (PDF file) illustrates Buffett's amazing investment genius. From 1980 to 2003, the stock portfolio of Berkshire Hathaway (NYSE: BRK-B) beat the S&P 500 index in 20 out of 24 years. During that same period, Berkshire's average annual return from its stock portfolio outperformed the index by 12 percentage points. The efficient market theory predicts that this is impossible, but the theory is clearly wrong in this case.
Buffett has delivered these outstanding returns by buying undervalued shares in great companies such as Gillette, now owned by Procter & Gamble. Over the years, Berkshire has owned household names such as UPS (NYSE: UPS), Iron Mountain (NYSE: IRM), and Wal-Mart (NYSE: WMT).
Although not every pick worked out, for the most part Buffett and Berkshire have made a mint. Indeed, Buffett's investment in Gillette increased threefold during the 1990s. Who'd have guessed you could get such stratospheric returns from razors?
The devil is in the details
So buying great companies at reasonable prices can deliver solid returns for long-term investors. The challenge, of course, is identifying great companies and determining what constitutes a reasonable price.
Buffett recommends that investors look for companies that deliver outstanding returns on capital and produce substantial cash profits. He also suggests that you look for companies with a huge economic moat to protect them from competitors. You can identify companies with moats by looking for strong brands that stand alongside consistent or improving profit margins and returns on capital.
How do you determine the right buy price for shares in such companies? Buffett advises that you wait patiently for opportunities to purchase stocks at a significant discount to their intrinsic values -- as calculated by taking the present value of all future cash flows. Ultimately, he believes that "value will in time always be reflected in market price." When the market finally recognizes the true worth of your undervalued shares, you begin to earn solid returns.
Do-it-yourself outperformance
Before they can capture Buffett-like returns, beginning investors will need to develop their skills in identifying profitable companies and determining intrinsic values. In the meantime, consider looking for stock ideas among Berkshire's own holdings.
In the Form 13-F that Berkshire filed recently, we learned that Buffett has boosted his stake in financials, adding to existing positions Wells Fargo (NYSE: WFC) and U.S. Bank (NYSE: USB).
It's pretty clear that Buffett thinks these conservatively run banks represent compelling investment opportunities at the moment. In fact, Buffett claimed in May that if he had to put all of his net worth into a single stock, it would be Wells Fargo.
Despite Buffett's confidence, it's clear that many individual investors are still afraid of financial stocks. If you fall into that camp, another place to find great value-stock ideas is Motley Fool Inside Value. Philip Durell, the advisor for the service, follows an investment strategy very similar to Buffett's.
He looks for undervalued companies that also have strong financials and competitive positions. This approach has allowed Philip to outperform the market since Inside Value's inception in 2004. To see his most recent stock picks, as well as the entire archive of past selections, sign up for a free 30-day trial today.
If investing in wonderful companies at fair prices is good enough for Warren Buffett -- arguably the finest investor on the planet -- it should be good enough for the rest of us.
Already subscribe to Inside Value? Log in at the top of this page.
This article was originally published on April 7, 2007. It has been updated.
John Reeves can't remember the last time he used a razor made by someone other than Gillette, and he wishes he'd owned shares in that company before P&G acquired it. John does not own shares of any companies mentioned. The Motley Fool owns shares of Berkshire Hathaway and Procter & Gamble. Berkshire and Wal-Mart are Inside Value recommendations. Berkshire is also a Stock Advisor selection. UPS and P&G are Income Investor picks. The Fool has a disclosure policy.
Marc Faber: The next bubble being inflated right now
Faber: Next Stimulus Will Be Worse
Wednesday, July 15, 2009 3:46 PM
By: Julie Crawshaw Article Font Size
Some economists think that another bubble is what’s needed to get the economy moving again.
Gloom, Boom and Doom publisher Marc Faber said this is ridiculous, and that the Federal Reserve — which he holds responsible for creating the housing bubble — wants to do it all over again.
The central bank should not encourage excessive credit growth, Faber tells Moneynews.com's Dan Mangru in an exclusive interview.
Between 2000 and 2007 the total U.S. credit market debt increased at five times the rate of nominal gross domestic product.
Unfortunately, Faber said, the next bubble is already here. This time it’s government spending and fiscal deficits that Faber thinks will double the government’s debt during the next six years or less.
“The U.S. government is largely deranged,” he said. “The private sector is the dynamic one, and that’s why I object tremendously against building up fiscal deficits because (they) shift economic activity into unproductive government instead of leaving it in the private sector.”
Another stimulus package would only make matters worse.
“In the Depression, they had one stimulus after another and it didn’t help,” Faber said. “What helped was World War II.”
The problem with bubbles, Faber said, is that they only temporarily stimulate the economy.
“The whole economic expansion driven by a bubble in America has been a total disaster and has shifted wealth from the ordinary people who work … to the Wall Street elite,” he said.
Nor does the government score any higher when it comes to managing inflation, which Faber thinks will reach Zimbabwe-like levels in the U.S. courtesy of the Fed’s policy of keeping interest rates too low.
“The Fed, in my opinion, has zilch idea about monetary policy,” Faber said.
“What they focus upon is basically core inflation, which does not include energy and food prices and the way the Fed measures inflation is highly questionable in the first place because when you measure inflation it’s a basket of goods and services.”
When the economy recovers, interest rates should go up because of inflationary pressures, something Faber expects the Fed won’t let happen because it could cause interest payments on the government’s debt to double. Those payments today are slightly below $500 billion annually.
If the global economy collapses in a deflationary spiral, those government deficits actually expand, leading to more central bank-driven monetization, Faber said. And keeping interest rates artificially low will lead to more and more inflation.
Add to all of this the expectation that health care costs will soar and jobless rates will probably continue to be high, and the economic picture becomes even gloomier.
“I think we’ve just gone … to the beginning of the realization that the economy may be bottoming out but not much recovery is forthcoming,” Faber said.
© 2009 Newsmax. All rights reserved.
http://www.thedailycrux.com/content/2349/Economy/eml
http://moneynews.newsmax.com/streettalk/federal_reserve/2009/07/15/235992.html
Wednesday, July 15, 2009 3:46 PM
By: Julie Crawshaw Article Font Size
Some economists think that another bubble is what’s needed to get the economy moving again.
Gloom, Boom and Doom publisher Marc Faber said this is ridiculous, and that the Federal Reserve — which he holds responsible for creating the housing bubble — wants to do it all over again.
The central bank should not encourage excessive credit growth, Faber tells Moneynews.com's Dan Mangru in an exclusive interview.
Between 2000 and 2007 the total U.S. credit market debt increased at five times the rate of nominal gross domestic product.
Unfortunately, Faber said, the next bubble is already here. This time it’s government spending and fiscal deficits that Faber thinks will double the government’s debt during the next six years or less.
“The U.S. government is largely deranged,” he said. “The private sector is the dynamic one, and that’s why I object tremendously against building up fiscal deficits because (they) shift economic activity into unproductive government instead of leaving it in the private sector.”
Another stimulus package would only make matters worse.
“In the Depression, they had one stimulus after another and it didn’t help,” Faber said. “What helped was World War II.”
The problem with bubbles, Faber said, is that they only temporarily stimulate the economy.
“The whole economic expansion driven by a bubble in America has been a total disaster and has shifted wealth from the ordinary people who work … to the Wall Street elite,” he said.
Nor does the government score any higher when it comes to managing inflation, which Faber thinks will reach Zimbabwe-like levels in the U.S. courtesy of the Fed’s policy of keeping interest rates too low.
“The Fed, in my opinion, has zilch idea about monetary policy,” Faber said.
“What they focus upon is basically core inflation, which does not include energy and food prices and the way the Fed measures inflation is highly questionable in the first place because when you measure inflation it’s a basket of goods and services.”
When the economy recovers, interest rates should go up because of inflationary pressures, something Faber expects the Fed won’t let happen because it could cause interest payments on the government’s debt to double. Those payments today are slightly below $500 billion annually.
If the global economy collapses in a deflationary spiral, those government deficits actually expand, leading to more central bank-driven monetization, Faber said. And keeping interest rates artificially low will lead to more and more inflation.
Add to all of this the expectation that health care costs will soar and jobless rates will probably continue to be high, and the economic picture becomes even gloomier.
“I think we’ve just gone … to the beginning of the realization that the economy may be bottoming out but not much recovery is forthcoming,” Faber said.
© 2009 Newsmax. All rights reserved.
http://www.thedailycrux.com/content/2349/Economy/eml
http://moneynews.newsmax.com/streettalk/federal_reserve/2009/07/15/235992.html
Monday 20 July 2009
The biggest assumption and risk for investors: Earning Forecast
The biggest assumption in any valuation model is the earning forecast.
We have assumed that the earning forecasts by various analysts are good and accurate. This is the biggest risk investors have to face.
In general, investors can use consensus earning forecasts for computing the valuation, however, through experience, investors can identify good analysts from not so good ones, and hence, can be selective in using the earning forecast data.
Bear in mind that a way-off-earning forecast (especially over-bullish) could have disastrous effects on the stock price once the actual result is announced.
A good practice is to compare the forecast EPS growth rate with the averge EPS growth rate in the past three years and see whether the forecast EPS growth rate is in line with the historical numbers.
In short, what investors are looking for is an accurate EPS growth forecast.
We have assumed that the earning forecasts by various analysts are good and accurate. This is the biggest risk investors have to face.
In general, investors can use consensus earning forecasts for computing the valuation, however, through experience, investors can identify good analysts from not so good ones, and hence, can be selective in using the earning forecast data.
Bear in mind that a way-off-earning forecast (especially over-bullish) could have disastrous effects on the stock price once the actual result is announced.
A good practice is to compare the forecast EPS growth rate with the averge EPS growth rate in the past three years and see whether the forecast EPS growth rate is in line with the historical numbers.
In short, what investors are looking for is an accurate EPS growth forecast.
Analysts' earnings forecasts
Investors should be aware that in an up cycle, analysts would do two things:
1. to upgrade the earning forecast almost on a regular basis, and,
2. to accord the stock on a higher valuation (i.e. stock is now valued at a higher PE ratio).
This, we call, earning expansion and PE ratio expansion.
Normally, the analysts would do this a couple of times during a complete up cycle.
In a down cycle, the reverse happens. That is, earning and PE ratio (valuation) contract.
For those who have been investing over the last 4 years, they would have observed these in the analysts reports during the bull and the bear phases of the market.
What lessons should we learn from this?
We should not be sucked into this as we know that a very high EPS forecast is not sustainable (as compared to its historical records), and hence disappointment or downgrade would ahve to occur and we need to get out of this before it happens.
Thus, it is very important to know the big picture to gain an inkling of which stage of the economic cycle we are in now and how it is going to move looking forward.
Hence, when we look at EPS growth, we should ask ourselves whether it is sustainable in the next few years.
1. to upgrade the earning forecast almost on a regular basis, and,
2. to accord the stock on a higher valuation (i.e. stock is now valued at a higher PE ratio).
This, we call, earning expansion and PE ratio expansion.
Normally, the analysts would do this a couple of times during a complete up cycle.
In a down cycle, the reverse happens. That is, earning and PE ratio (valuation) contract.
For those who have been investing over the last 4 years, they would have observed these in the analysts reports during the bull and the bear phases of the market.
What lessons should we learn from this?
We should not be sucked into this as we know that a very high EPS forecast is not sustainable (as compared to its historical records), and hence disappointment or downgrade would ahve to occur and we need to get out of this before it happens.
Thus, it is very important to know the big picture to gain an inkling of which stage of the economic cycle we are in now and how it is going to move looking forward.
Hence, when we look at EPS growth, we should ask ourselves whether it is sustainable in the next few years.
PE ratio, PEG and EPS Growth rates
A high PE ratio by itself means that either
For high growth stocks, we also look at the PEG ratio (PE ratio/ EPS Growth rate). For high growth stocks, their PE ratio if viewed on absolute basis is usually very high. How do we then decide if it is still "cheap" enough for us to hold or even buy? We use the PEG ratio to see whether its growth is at a faster rate as compared to its appreciation in value (i.e. high PE ratio). If PEG is low despite a high PE ratio, this would indicate the growth in earning (higher EPS growth) is much faster than the increase in its valuation (higher PER), and hence could justify our holding or even buying the stock.
- the valuation is very expensive (where the stock price is high as compared to its EPS) or
- it has such great potential for growth that investors are willing to accord it with a high PE ratio.
In general, the lower the PE ratio, the better it is.
For high growth stocks, we also look at the PEG ratio (PE ratio/ EPS Growth rate). For high growth stocks, their PE ratio if viewed on absolute basis is usually very high. How do we then decide if it is still "cheap" enough for us to hold or even buy? We use the PEG ratio to see whether its growth is at a faster rate as compared to its appreciation in value (i.e. high PE ratio). If PEG is low despite a high PE ratio, this would indicate the growth in earning (higher EPS growth) is much faster than the increase in its valuation (higher PER), and hence could justify our holding or even buying the stock.
Public Bank records RM1.54b pre-tax profit in H1
Monday July 20 2009.
KUALA LUMPUR, July 20 — Public Bank Bhd posted a pre-tax profit of RM1.564 billion in the first half of the year year ended June 30, 2009 compared with RM1.76 billion in the same period last year.
Revenue declined to RM4.78 billion from RM5.15 billion previously.
In a statement today, the bank said net interest and financing income grew by nine per cent to RM180 million, driven by its expanding loan and deposits businesses and sustained strong assets.
It said total assets crossed the RM200 billion mark for the first time, standing at RM204.0 billion as at end-June 2009.
Total loans and advances grew by RM8.7 billion, or 7.2 per cent, in the first six months of 2009, to RM129.4 billion, significantly above the banking industry’s 1.2 per cent for the first five months of 2009, it said.
Public Bank said core customer deposits grew by 11.5 per cent in the first six months of 2009 to RM125.3 billion compared with the industry’s 2.9 per cent during the first five months of 2009.
As at the end-May 2009, Public Bank’s domestic market share of total loans and core customer deposits rose to 15.5 per cent and 15.2 per cent respectively compared with 14.8 per cent and 14.7 per cent respectively as at Dec 31, 2008, it said.
It said the group's net non-performing loan ratio was below one per cent as at end-June 2009, significantly lower than the industry’s 2.2 per cent in May 2009.
The group’s loan loss coverage of 173 per cent was about twice the banking industry’s ratio of 87 per cent, and continued to be the highest and most prudent in the Malaysian banking industry, it said.
On outlook, it said, despite the slowing economy, the banking industry in Malaysia remained resilient, supported by its strong capitalisation, stable asset quality and improved risk management practices.
Hence, it said, the group would continue to pursue its strategy of strong organic business growth, as well as maintain a high quality loan portfolio and improved productivity.
"Barring unforeseen circumstances, the group is expected to continue to record satisfactory performance for the rest of 2009," it said. — Bernama
KUALA LUMPUR, July 20 — Public Bank Bhd posted a pre-tax profit of RM1.564 billion in the first half of the year year ended June 30, 2009 compared with RM1.76 billion in the same period last year.
Revenue declined to RM4.78 billion from RM5.15 billion previously.
In a statement today, the bank said net interest and financing income grew by nine per cent to RM180 million, driven by its expanding loan and deposits businesses and sustained strong assets.
It said total assets crossed the RM200 billion mark for the first time, standing at RM204.0 billion as at end-June 2009.
Total loans and advances grew by RM8.7 billion, or 7.2 per cent, in the first six months of 2009, to RM129.4 billion, significantly above the banking industry’s 1.2 per cent for the first five months of 2009, it said.
Public Bank said core customer deposits grew by 11.5 per cent in the first six months of 2009 to RM125.3 billion compared with the industry’s 2.9 per cent during the first five months of 2009.
As at the end-May 2009, Public Bank’s domestic market share of total loans and core customer deposits rose to 15.5 per cent and 15.2 per cent respectively compared with 14.8 per cent and 14.7 per cent respectively as at Dec 31, 2008, it said.
It said the group's net non-performing loan ratio was below one per cent as at end-June 2009, significantly lower than the industry’s 2.2 per cent in May 2009.
The group’s loan loss coverage of 173 per cent was about twice the banking industry’s ratio of 87 per cent, and continued to be the highest and most prudent in the Malaysian banking industry, it said.
On outlook, it said, despite the slowing economy, the banking industry in Malaysia remained resilient, supported by its strong capitalisation, stable asset quality and improved risk management practices.
Hence, it said, the group would continue to pursue its strategy of strong organic business growth, as well as maintain a high quality loan portfolio and improved productivity.
"Barring unforeseen circumstances, the group is expected to continue to record satisfactory performance for the rest of 2009," it said. — Bernama
Wake up Malaysians. “What has this country come to?”
What has this country come to?
There had been so many unexplained and unresolved incidences. Altantunya, Kugan, and now Teoh. There are also many issues, like Lingam tapes, alleged corruptions in high places, abuses of public offices and others.
When some lawyers mentioned in 1998 that if such an "event" can happen to Anwar, then the deputy PM, it may happen to anyone. They were not mincing their words.
Politics in this country is very partisan. Even the recent tragedy of Teoh, which should have provoked a bipartisan response, was debated by some "significant" politicians in a partisan manner. Surprisingly, too many remain silent on this important issue. This is truly saddening.
Where is the sense of right and wrong in these politicians and certain national papers.
Wake up Malaysians.
There had been so many unexplained and unresolved incidences. Altantunya, Kugan, and now Teoh. There are also many issues, like Lingam tapes, alleged corruptions in high places, abuses of public offices and others.
When some lawyers mentioned in 1998 that if such an "event" can happen to Anwar, then the deputy PM, it may happen to anyone. They were not mincing their words.
Politics in this country is very partisan. Even the recent tragedy of Teoh, which should have provoked a bipartisan response, was debated by some "significant" politicians in a partisan manner. Surprisingly, too many remain silent on this important issue. This is truly saddening.
Where is the sense of right and wrong in these politicians and certain national papers.
Wake up Malaysians.
Sunday 19 July 2009
Market risk or systemic risk
This risk cannot be eliminated by diversifying one's portfolio.
Definitions of Market risk on the Web:
Market risk is the risk that the value of an investment will decrease due to moves in market factors. The four standard market risk factors are: * Equity risk, the risk that stock prices will change. * Interest rate risk, the risk that interest rates will change. ...en.wikipedia.org/wiki/Market_risk
The possibility that the value of an investment will fall because of a general decline in the financial markets.www.waddell.com/jsp/index.jsp
The chance that a security's value will decline. With fixed income securities, market risk is closely tied to interest rate risk--as interest rates rise, prices decline and vice versa.www.netxclientdemo.com/invest_glosry_MMa.htm
Exposure to changes in market prices.www.info-forex.com/glossary.htm
Also called systematic risk. The portion of a security’s risk common to all securities in the same asset class, and that cannot be eliminated through diversification.www.manealfinancial.com/Glossary-MtoZ.htm
One of six risks defined by the Federal Reserve. The risk of an increase or decrease in the market value/price of a financial instrument. Market values for debt instruments are affected by actual and anticipated changes in prevailing interest rates. ...www.americanbanker.com/glossary.html
Exposure to a change in the value of some market variable, such as interest rates or foreign exchange rates, equity, or commodity prices.www.fhlb.com/Glossary.html
Market risk refers to the risk of financial loss as a result of adverse market movements. NZDMO specifically measures market risk with regard to movements in interest rates and foreign exchange rates.www.oag.govt.nz/2007/nzdmo/glossary.htm
The value of a security may decline due to general market conditions that are not specifically related to a particular company, such as real or perceived adverse economic conditions, changes in the outlook for corporate earnings, changes in interest or currency rates or adverse investor ...www.dreyfus.com/content/dr/control
Uncertainty in the value of real estate due to market, economic, political or other conditions.www.new-york-new-york-real-estate.com/m2.html
The risk of loss resulting from changes in the prices of financial instruments in the markets in which Chase participates, such as changes in the value of foreign exchange or fixed-income securities.https://www.chase.com/inside/financial/annual/glossary.html
Risk that cannot be diversified away. Related: systematic riskbiz.yahoo.com/glossary/bfglosm.html
Risk relating to the market in general and cannot be diversified away by hedging or holding a variety of securities.charmforex.com/index.php
Risk of loss due to unfavourable price changes on the financial markets.www.ingwholesalebanking.com/smartsite.shtml
risk that comes from customers not wanting to buy a product, the market being smaller than originally estimated, or a competitor launching a competing product. http://www.google.com/url?&q=http://www.epilepsy.com/innovation/entrepreneurs/glossary&ei=FexiSvKmMZWBkQWf1antDw&sa=X&oi=define&ct=&cd=1&usg=AFQjCNFChX-S8PEUc0fWkKKMwHxGc_shwA
Friday 17 July 2009
Has the share price discounted all the negatives?
In a downturn, or a crash, the price of a stock may go down by a large amount. After the price has stabilised, the question to ask oneself, would be: "Has this share price discounted all the negatives?" Re-value this stock again using its latest fundamentals. It may be a rewarding exercise.
Wake up Malaysians. “What has this country come to?”
The MACC is a highly efficient body. However, it has not been unnoticed that this body moves very fast in certain cases, and suffers severe malaise in others. A very sad situation reflecting the political culture in this country. Wake up Malaysians.
Thursday 16 July 2009
Covered Warrants
Covered Warrants on the London Stock Exchange
In October 2002, the LSE launched a market in covered warrants. Its first year was a resounding success, with 823 new issues and trading volume of GBP97 million.
A covered warrant is essentially an option. Unlike the traditional "corporate" warrant, which is issued by the underlying company, a financial institution issues the covered warrant.
Goldman, Sachs, and JP Morgan, are notable players in this market.
Covered warrants are sometimes referred to as securitised derivatives.
Whereas the typical corporate warrants gives the holder the right to buy shares directly from the company (like a call option), the covered warrant comes in may forms:
- some (put warrants) carry the right to sell rather than to buy,
- some are based on foreign exchange or commodities rather than on stock, and,
- some have complicated exercise terms.
Characteristics of warrants
A warrant is a non-dividend paying security giving its owner the right to buy a certain number of shares at a set price directly from the issuing company. These usually have an initial life of between 3 and 5 years.
Characteristics
Warrants are often issued in conjuction with a new debt issue.
Including a warrant with the bond enables the issuing firm to float the bond issue at a lower interest rate than would otherwise be required. This may be the primary motivation for their issuance.
Warrants can be detachable and nondetachable, although the former are more important for our purposes. Detachable warrants may be sold separately from their accompanying debt issue. A nondetachable warrant cannot be sold separately.
Warrants pay no dividends, and they carry no voting rights. Their principal investment attraction is the leverage they provide; the warrant price is less than that of the corresponding common stock, and consequently warrant investments magnify the effect of stock price movements.
Warrants can have unusual exercise terms and conditions. The Standard & Poor's Stock Guide listing for many warrants indicates "terms and trading basis should be checked in detail." The majority of US warrants are from small, relatively risky firms. Newly issued warrants usually originate in conjunction with an initial public offering.
Some warrants are called "B" warrants. These come about from the exercise of an "A" warrant that allows its owner to trade the warrant for shares of stock and a "B" warrant with a higher exercise price than the "A" warrant.
Looking at warrant population by stock price range, the majority are from a firm whose stock price is low. While there may be no inherent reason why a low-priced stock should be risky, it is an empirical observation that a low stock price is frequently associated with higher relative risk.
A warrant is much like a long-term call option issued by the underlying company. The warrant holder has the right but not the obligations, to buy shares at a set price during the life of the warant. Warrants provide leverage in the same fashion as an option.
Characteristics
Warrants are often issued in conjuction with a new debt issue.
Including a warrant with the bond enables the issuing firm to float the bond issue at a lower interest rate than would otherwise be required. This may be the primary motivation for their issuance.
Warrants can be detachable and nondetachable, although the former are more important for our purposes. Detachable warrants may be sold separately from their accompanying debt issue. A nondetachable warrant cannot be sold separately.
Warrants pay no dividends, and they carry no voting rights. Their principal investment attraction is the leverage they provide; the warrant price is less than that of the corresponding common stock, and consequently warrant investments magnify the effect of stock price movements.
Warrants can have unusual exercise terms and conditions. The Standard & Poor's Stock Guide listing for many warrants indicates "terms and trading basis should be checked in detail." The majority of US warrants are from small, relatively risky firms. Newly issued warrants usually originate in conjunction with an initial public offering.
Some warrants are called "B" warrants. These come about from the exercise of an "A" warrant that allows its owner to trade the warrant for shares of stock and a "B" warrant with a higher exercise price than the "A" warrant.
Looking at warrant population by stock price range, the majority are from a firm whose stock price is low. While there may be no inherent reason why a low-priced stock should be risky, it is an empirical observation that a low stock price is frequently associated with higher relative risk.
A warrant is much like a long-term call option issued by the underlying company. The warrant holder has the right but not the obligations, to buy shares at a set price during the life of the warant. Warrants provide leverage in the same fashion as an option.
Warrants and leverage
Speculators buy warrants because of the leverage they provide.
Example:
CBrand
Number of warrants to buy 1 share: 1
Exercise price: $19.23
Expiration: 3-10-09
Warrant price: $10.00
Stock price: $27.46
Suppose someone believes that CBrand is an attractive investment and wants to put about $5000 into the company. The speculator could buy either:
$5000/$10 per warrant = 500 warrants
or
$5000/$27.46 per share = 182 shares
Suppose at the end of the warrant's life in 2009, CBrand stock sells for $40.00.
With an exercise price of $19.23, the warrants would be worth $40.00 - $19.23 = $20.77.
The holding of 500 warrants would be worth $10,385.
The 182 shares of stock would be worth $7,280.
The respective holding period returns are as follows:
Warrants: ($10,385 - $5,000)/$5,000 = 107.7%
Stock: ($7,280 - $5,000) / $5,000 = 45.6%
CBrand pays a dividend, so the value of the dividend should be included in the stock holding period calculation in order for the comparison to be fair. Shareholders are entitled to declared dividends; warrant holders are not.
Example:
CBrand
Number of warrants to buy 1 share: 1
Exercise price: $19.23
Expiration: 3-10-09
Warrant price: $10.00
Stock price: $27.46
Suppose someone believes that CBrand is an attractive investment and wants to put about $5000 into the company. The speculator could buy either:
$5000/$10 per warrant = 500 warrants
or
$5000/$27.46 per share = 182 shares
Suppose at the end of the warrant's life in 2009, CBrand stock sells for $40.00.
With an exercise price of $19.23, the warrants would be worth $40.00 - $19.23 = $20.77.
The holding of 500 warrants would be worth $10,385.
The 182 shares of stock would be worth $7,280.
The respective holding period returns are as follows:
Warrants: ($10,385 - $5,000)/$5,000 = 107.7%
Stock: ($7,280 - $5,000) / $5,000 = 45.6%
CBrand pays a dividend, so the value of the dividend should be included in the stock holding period calculation in order for the comparison to be fair. Shareholders are entitled to declared dividends; warrant holders are not.
Extending the life of out-of-the-money warrant
Companies sometimes extend the life of an out-of-the-money (stock price is less than exercise price) warrant as it nears expiration. The exercise of warrants is a relatively inexpensive source of new capital for the firm. Management may not want to let the opportunity pass.
Extending the life of a warrant will immediately add value to it. A nearly worthless expiring warrant is likely to jump several dollars in value if the firm extends its life a few years.
The actual price change would depend on:
Extending the life of a warrant will immediately add value to it. A nearly worthless expiring warrant is likely to jump several dollars in value if the firm extends its life a few years.
The actual price change would depend on:
- the stock/exercise price relationship,
- the added term of the warrant, and
- the anticipated volatility of the stock over the extension period.
Pricing of Warrants (illustrations)
Illustrations
AR warrant.
Exercise price $7.32
Current stock price $11.95
This warrant is in-the-money.
It must sell for at least its intrinsic value of $11.95-$7.32 = $4.63, which it does.
Market price of warrant $5.00, represents a $0.37 premium over the warrant's intrinsic value.
GC warrant
4 warrants to buy 1 share at $6.60
Current stock price $19.72
What is the minimum value for which this warrant should sell?
http://www.klse.com.my/website/bm/market_information/market_statistics/equities/downloads/warrants_info.pdf
AR warrant.
Exercise price $7.32
Current stock price $11.95
This warrant is in-the-money.
It must sell for at least its intrinsic value of $11.95-$7.32 = $4.63, which it does.
Market price of warrant $5.00, represents a $0.37 premium over the warrant's intrinsic value.
GC warrant
4 warrants to buy 1 share at $6.60
Current stock price $19.72
What is the minimum value for which this warrant should sell?
Current stock price > exercise price by $19.72-$6.60 - $13.12.
This amount would be the intrinsic value of the warrant if each warrant permitted the purchase of one share.
Because 4 warrants are required, the intrinsic value declines proportionately: $13.12/4 = $3.28.
This amount is the minimum value at which the warrant should sell.
http://www.klse.com.my/website/bm/market_information/market_statistics/equities/downloads/warrants_info.pdf
Pricing of Warrants
The most important factor influencing the market price of a warrant is the relationship between the price of the underlying common stock and the price at which the investor may buy shares - the exercise price.
The warrant is in-the-money: stock price > exercise price
The warrant is out-of-the money: stock price < exercise price.
When the warrant is in-the-money, it has intrinsic value.
Minimum, maximum and actual market values of a warrant.
If it takes one warrant to buy one shae of stock, then the effective exercise price is the same as the stated exercise price.
If however, a single warrant with an exercise price of $10 allows you to buy 2 shares of a stock, the effective exercise price is $5.
Effective exercise price = Exercise price/conversion ratio
As Standard & Poor's warns, "trading terms and basis should be checked in detail." An investor should always check the effective exercise price, which is the stated exercise price divided by the conversion ratio. It is the amount of money needed to buy one share of the stock.
Assuming a conversion ratio of 1:1, it would not make sense for the warrant to ever sell for more than the value of the underlying asset. The theoretical maximum price of a warrant is therefore equal to the stock price. (For instance, if one share of the stock sells for $25, no rational person would be willing to pay more than $25 for the right to buy a share, even if the warrant exercise price were zero.)
The theoretical minimum value is the warrant's intrinsic value. This is the greater of zero and the amount by which the stock price exceeds the exercise price. (Given a stock price of $25 and an exercise price of $20, this warrant should always sell for at least $5. If not, arbitrage would be present.)
Actual warrant prices fall between the two extremes. The gap between the market price of the warrant and its minimum value is largest when the stock price equals the exercise price. As the stock price rises or falls from this point, the gap narrows.
The warrant is in-the-money: stock price > exercise price
The warrant is out-of-the money: stock price < exercise price.
When the warrant is in-the-money, it has intrinsic value.
Minimum, maximum and actual market values of a warrant.
If it takes one warrant to buy one shae of stock, then the effective exercise price is the same as the stated exercise price.
If however, a single warrant with an exercise price of $10 allows you to buy 2 shares of a stock, the effective exercise price is $5.
Effective exercise price = Exercise price/conversion ratio
As Standard & Poor's warns, "trading terms and basis should be checked in detail." An investor should always check the effective exercise price, which is the stated exercise price divided by the conversion ratio. It is the amount of money needed to buy one share of the stock.
Assuming a conversion ratio of 1:1, it would not make sense for the warrant to ever sell for more than the value of the underlying asset. The theoretical maximum price of a warrant is therefore equal to the stock price. (For instance, if one share of the stock sells for $25, no rational person would be willing to pay more than $25 for the right to buy a share, even if the warrant exercise price were zero.)
The theoretical minimum value is the warrant's intrinsic value. This is the greater of zero and the amount by which the stock price exceeds the exercise price. (Given a stock price of $25 and an exercise price of $20, this warrant should always sell for at least $5. If not, arbitrage would be present.)
Actual warrant prices fall between the two extremes. The gap between the market price of the warrant and its minimum value is largest when the stock price equals the exercise price. As the stock price rises or falls from this point, the gap narrows.
The Problem with Big Losses
Risky situation must involve a chance of loss.
Suppose the possible returns on an investment fall into a normal distribution curve. This distribution shows this investment has an expected return of 9.5%. Standard statistical thinking tells use if we invest in this stocka nd hold it, some years we will have high rturns and some years low returns, but that, on average, the return will be 9.5%. This assumption is true, but it is also a potentially misleading result.
To see why, suppose an investor buys this stock and holds it 10 years. In each of 9 of those years, the stock advances 20%; in the other year it falls 90%. The 10-year arithmetic average return is 9%, slightly below the return predicted by the distribution. A $1,000 invesment, howver, would be worth only $1,000(1.20)^9*(0.10) = $516, less than the starting value! The compound annual rate of return is a negative 6.40%.
The lesson is that a large one period loss can overwhelm a series of gains. If an initial investment falls by 50%, for instance, it must gain 100% to return to its original value. Big losses complicate actual returns, and investors learn to avoid situations where they may lurk.
Suppose the possible returns on an investment fall into a normal distribution curve. This distribution shows this investment has an expected return of 9.5%. Standard statistical thinking tells use if we invest in this stocka nd hold it, some years we will have high rturns and some years low returns, but that, on average, the return will be 9.5%. This assumption is true, but it is also a potentially misleading result.
To see why, suppose an investor buys this stock and holds it 10 years. In each of 9 of those years, the stock advances 20%; in the other year it falls 90%. The 10-year arithmetic average return is 9%, slightly below the return predicted by the distribution. A $1,000 invesment, howver, would be worth only $1,000(1.20)^9*(0.10) = $516, less than the starting value! The compound annual rate of return is a negative 6.40%.
The lesson is that a large one period loss can overwhelm a series of gains. If an initial investment falls by 50%, for instance, it must gain 100% to return to its original value. Big losses complicate actual returns, and investors learn to avoid situations where they may lurk.
Understanding Warrant
For example:
WARRANTS xx07/xx16
- new ordinary share at an exercise price of RM0.40 per ordinary share.
- The exercise period is 9 years from the date of issuance which will expire on xx, May xx16.
-----
Illustration:-
Today's Share Price: 14.40
Warrant's Price: 10.80
Exercise Price: 5.30
Quantity: 60,000,000 free detachable warrants
In-the-money:
Market price of mother share > exercise price
Intrinsic value of warrant
= Market share price - Exercise price of warrant
= 14.40 - 5.30 = 9.10.
Therefore, you can exercise your right to buy the mother share at the exercise (lower) price to sell at the market (higher) price.
Premium:
Premium paid for the warrant
= Warrant market price - Intrinsic value of warrant
= 10.80 - 9.10
= 1.70
The premium paid is 1.70 (1.70/9.10 = 18.7%) over the warrant's intrinsic value.
Premiums (over the warrant's intrinsic value) are commonly used as a quick measure of the warrant's expensiveness. Because warrants are issued at a premium, investors must consider if it can appreciate to a level that allows recovery of the paid premium within the warrant's lifespan.
While warrants can offer a smart addition to a portfolio, keep in mind the following - your view of the underlying share is important; understand the unique nature of warrants and stay attentive to small movements in the market.
Cash extraction:
Assuming mother share increased to $2.00 and warrants also increased, to $1.58.
One can sell the mother share and invest some of these money into its warrants. Effectively, you would have decreased your invested capital (extracted cash of 0.42 per share) while maintaining exposure to further upside.
WARRANTS xx07/xx16
- new ordinary share at an exercise price of RM0.40 per ordinary share.
- The exercise period is 9 years from the date of issuance which will expire on xx, May xx16.
-----
Illustration:-
Today's Share Price: 14.40
Warrant's Price: 10.80
Exercise Price: 5.30
Quantity: 60,000,000 free detachable warrants
In-the-money:
Market price of mother share > exercise price
Intrinsic value of warrant
= Market share price - Exercise price of warrant
= 14.40 - 5.30 = 9.10.
Therefore, you can exercise your right to buy the mother share at the exercise (lower) price to sell at the market (higher) price.
Premium:
Premium paid for the warrant
= Warrant market price - Intrinsic value of warrant
= 10.80 - 9.10
= 1.70
The premium paid is 1.70 (1.70/9.10 = 18.7%) over the warrant's intrinsic value.
Premiums (over the warrant's intrinsic value) are commonly used as a quick measure of the warrant's expensiveness. Because warrants are issued at a premium, investors must consider if it can appreciate to a level that allows recovery of the paid premium within the warrant's lifespan.
While warrants can offer a smart addition to a portfolio, keep in mind the following - your view of the underlying share is important; understand the unique nature of warrants and stay attentive to small movements in the market.
Cash extraction:
Assuming mother share increased to $2.00 and warrants also increased, to $1.58.
One can sell the mother share and invest some of these money into its warrants. Effectively, you would have decreased your invested capital (extracted cash of 0.42 per share) while maintaining exposure to further upside.
Including Warrant in your Portfolio
A warrant is a specialized investment tool with its own language; call warrants, in-the-money warrants (a warrant with an exercise price which is below the market price of its underlying security), gearing and premiums are among the terms used. It's important to understand the main aspects of this vehicle before including it in your portfolio.
A warrant is a derivative, meaning it 'derives' its value from its underlying share. This is why the performance of a warrant will always depend on the performance of its underlying share.
A small movement in the price of the mother share can result in a surge or fall in the value of your warrant. Thus, expect this to happen and choose strategies that leverage and profit from this behavior.
Unlike a share, warrants carry an expiry date. The warrant tends to lose its value when it's close to expiring. Once it expires, it has no value and you lose the capital invested to buy the warrant. Buying and holding, as you would a share, is why 90% of warrant traders lose their capital.
If the underlying share price is above the warrant strike price (the predetermined price that the warrant holder is entitled to purchase or sell in the case of put warrant the underlying security), your call warrant is said to be in-the-money and you can exercise your right to buy the mother share at the strike (lower) price to sell at the market (higher) price.
There are costs involved when buying warrants - transaction costs and the time lag before you receive the underlying share after exercising the warrant. There're also occasions when a warrant trades at a discount. This incurs when the strike price and the cost to obtain the warrant are less than the price of the underlying share. Even tough this may look like an opportunity to make arbitrage profit, however, the risk of the underlying share price falling during the period between receiving the shares from exercising the warrant and their sale.
The whole process can take up to a month, during which the mother share can move in any direction. Warrants can also trade at a discount if the underlying share has just enjoyed spectacular run in price. Investors should avoid buying these discount warrants if they feel the high price of the mother share is unsustainable.
Warrants are the domain of short run traders. Some analysts recommend a particular trading strategy known as cash extraction. This strategy can be executed if you're holding a particular share that has appreciated in value. By selling the share and investing some of the proceeds into its warrants, you decrease your invested capital while maintaining exposure to further upside.
Many investors also trade in warrants because they sell at a fraction of the price of the underlying share and their leverage effect (a characteristic of warrants that enables the holder to enjoy larger percentage returns than the underlying security, at a lower price) allows the investors making bigger percentage gains when compared with conventional share investments.
For instance, share ABC may gain 30cent to close at $1.80, representing an increase of 20%, but a similar gain of 30cent for warrant ABC (from 50cent) to 80cent is an equivalent gain of 60%.
When the price paid for the warrant as well as its strike price is higher than the price of the underlying share, the warrant is trading at a premium. Meaning, the warrant's premium can crudely measure how much more expensive it is to acquire a share via a warrant compared with buying the share directly. Premiums are commonly used as a quick measure of the warrant's expensiveness. Because warrants are issued at a premium, investors must consider if it can appreciate to a level that allows recovery of the paid premium within the warrant's lifespan.
Another important factor to consider when selecting a warrant is volatility. A high volatility warrant, even though more expensive, can very well generate more money than a low volatility warrant. High volatility means that the underlying share is more likely making big swings.
While warrants can offer a smart addition to a portfolio, keep in mind the following - your view of the underlying share is important; understand the unique nature of warrants and stay attentive to small movements in the market.
http://ezinearticles.com/?Investing:-Warrant&id=291064
A warrant is a derivative, meaning it 'derives' its value from its underlying share. This is why the performance of a warrant will always depend on the performance of its underlying share.
A small movement in the price of the mother share can result in a surge or fall in the value of your warrant. Thus, expect this to happen and choose strategies that leverage and profit from this behavior.
Unlike a share, warrants carry an expiry date. The warrant tends to lose its value when it's close to expiring. Once it expires, it has no value and you lose the capital invested to buy the warrant. Buying and holding, as you would a share, is why 90% of warrant traders lose their capital.
If the underlying share price is above the warrant strike price (the predetermined price that the warrant holder is entitled to purchase or sell in the case of put warrant the underlying security), your call warrant is said to be in-the-money and you can exercise your right to buy the mother share at the strike (lower) price to sell at the market (higher) price.
There are costs involved when buying warrants - transaction costs and the time lag before you receive the underlying share after exercising the warrant. There're also occasions when a warrant trades at a discount. This incurs when the strike price and the cost to obtain the warrant are less than the price of the underlying share. Even tough this may look like an opportunity to make arbitrage profit, however, the risk of the underlying share price falling during the period between receiving the shares from exercising the warrant and their sale.
The whole process can take up to a month, during which the mother share can move in any direction. Warrants can also trade at a discount if the underlying share has just enjoyed spectacular run in price. Investors should avoid buying these discount warrants if they feel the high price of the mother share is unsustainable.
Warrants are the domain of short run traders. Some analysts recommend a particular trading strategy known as cash extraction. This strategy can be executed if you're holding a particular share that has appreciated in value. By selling the share and investing some of the proceeds into its warrants, you decrease your invested capital while maintaining exposure to further upside.
Many investors also trade in warrants because they sell at a fraction of the price of the underlying share and their leverage effect (a characteristic of warrants that enables the holder to enjoy larger percentage returns than the underlying security, at a lower price) allows the investors making bigger percentage gains when compared with conventional share investments.
For instance, share ABC may gain 30cent to close at $1.80, representing an increase of 20%, but a similar gain of 30cent for warrant ABC (from 50cent) to 80cent is an equivalent gain of 60%.
When the price paid for the warrant as well as its strike price is higher than the price of the underlying share, the warrant is trading at a premium. Meaning, the warrant's premium can crudely measure how much more expensive it is to acquire a share via a warrant compared with buying the share directly. Premiums are commonly used as a quick measure of the warrant's expensiveness. Because warrants are issued at a premium, investors must consider if it can appreciate to a level that allows recovery of the paid premium within the warrant's lifespan.
Another important factor to consider when selecting a warrant is volatility. A high volatility warrant, even though more expensive, can very well generate more money than a low volatility warrant. High volatility means that the underlying share is more likely making big swings.
While warrants can offer a smart addition to a portfolio, keep in mind the following - your view of the underlying share is important; understand the unique nature of warrants and stay attentive to small movements in the market.
http://ezinearticles.com/?Investing:-Warrant&id=291064
KLSE Market PE is 19.70
09.07.09
PE Ratio
19.70
Div Yield
3.47
Price/Bk Value
1.90
KLSE CI
1065.68
02.07.09
PE Ratio
17.63
Div Yield
3.54
Price/Bk Value
1.61
KLSE CI
1078.71
03.07.08
PE Ratio
10.24
Div Yield
3.74
Price/Bk Value
1.82
KLSE CI
1153.70
http://spreadsheets.google.com/ccc?key=tfdJmkOsX8p5jmD7g1FgrIw
Even in this bullish environment, one can still look for bargains. Time for another rebalancing of my portfolio.
PE Ratio
19.70
Div Yield
3.47
Price/Bk Value
1.90
KLSE CI
1065.68
02.07.09
PE Ratio
17.63
Div Yield
3.54
Price/Bk Value
1.61
KLSE CI
1078.71
03.07.08
PE Ratio
10.24
Div Yield
3.74
Price/Bk Value
1.82
KLSE CI
1153.70
http://spreadsheets.google.com/ccc?key=tfdJmkOsX8p5jmD7g1FgrIw
Even in this bullish environment, one can still look for bargains. Time for another rebalancing of my portfolio.
Wednesday 15 July 2009
Market PE
The largest companies on Bursa Malaysia ranked by market capitalization.
Market Capitalization 580,236.6
Net Profit 41,161.1
Market PE 14.1
http://www.horizon.my/investor/list.php
1 SIME 6,009.5 7.350 44,169.8 34,044.7 3,512.1
2 MAYBANK 7,077.7 5.900 41,758.4 16,153.9 2,928.2
3 PBBANK 3,531.9 9.950 35,142.4 10,500.3 2,622.7
4 COMMERZ 3,578.1 9.700 34,707.6 - 1,952.0
5 TENAGA 4,334.6 7.900 34,243.3 25,750.6 2,594.0
6 MISC 3,719.8 8.550 31,804.3 12,957.4 2,430.3
7 IOICORP 6,150.6 4.660 28,661.8 14,665.4 2,231.6
8 AXIATA 8,445.1 2.700 22,801.8 11,347.7 498.0
9 GENTING 3,703.8 5.650 20,926.5 9,082.5 569.3
10 PETGAS 1,978.7 9.800 19,391.3 3,125.7 1,092.9
11 DIGI 777.5 22.000 17,105.0 4,814.5 1,140.7
12 PLUS 5,000.0 3.180 15,900.0 2,968.0 1,079.3
13 PPB 1,185.5 12.000 14,226.0 3,462.0 1,286.5
14 BAT 285.5 44.750 12,776.1 4,135.2 811.7
15 KLK 1,067.5 11.900 12,703.3 7,855.4 1,040.7
16 YTLPOWR 5,464.2 2.170 11,857.3 4,242.5 1,038.8
17 YTL 1,658.8 6.850 11,362.8 6,549.9 769.8
18 TM 3,577.4 2.950 10,553.3 8,674.9 791.9
19 AMMB 2,723.0 3.680 10,020.6 5,860.7 860.8
20 RHBCAP 2,153.5 4.420 9,518.5 - 1,048.7
21 HLBANK 1,580.1 5.850 9,243.6 - 741.8
22 PETDAG 993.5 8.300 8,246.1 22,301.6 661.7
23 NESTLE 234.5 32.000 7,504.0 3,877.1 340.9
24 MMCCORP 3,045.0 2.300 7,003.5 8,545.0 527.3
25 ASTRO 1,934.0 3.480 6,730.3 2,601.7 -6.2
26 UMW 1,080.7 6.050 6,538.2 12,769.6 565.8
27 TANJONG 403.3 14.400 5,807.5 3,693.9 463.8
28 GAMUDA 2,003.2 2.870 5,749.2 2,403.7 325.1
29 BJTOTO 1,351.0 4.240 5,728.2 3,277.8 348.7
30 HLFG 1,052.8 4.960 5,221.9 - 528.7
31 PARKSON 1,036.4 4.940 5,119.8 2,354.0 448.0
32 LMCEMNT 849.7 6.000 5,098.2 2,530.8 367.7
33 IJM 859.4 5.800 4,984.5 4,637.2 -420.5
34 MAS 1,671.0 2.970 4,962.9 15,035.3 244.3
35 BJLAND 1,144.9 3.800 4,350.6 1,516.1 1,110.8
36 SPSETIA 1,008.9 3.900 3,934.7 1,328.3 213.5
37 AIRPORT 1,100.0 3.520 3,872.0 1,384.7 288.9
38 BURSA 523.7 7.250 3,796.8 290.3 104.4
39 BKAWAN 436.0 8.600 3,749.6 284.1 505.5
40 AFG 1,548.1 2.270 3,514.2 - 380.0
41 F&N 356.5 9.100 3,244.2 2,865.1 152.9
42 EONCAP 693.2 4.600 3,188.7 - 133.8
43 SHELL 300.0 10.400 3,120.0 13,086.1 -330.0
44 MAYBULK 1,000.0 3.080 3,080.0 721.2 460.9
45 KLCCP 934.1 3.220 3,007.8 843.0 441.6
46 SARAWAK 1,519.0 1.930 2,931.7 1,339.3 275.6
47 AIRASIA 2,372.4 1.200 2,846.9 1,603.3 498.0
48 BJCORP 3,047.4 0.910 2,773.1 3,465.8 616.5
49 BSTEAD 651.0 4.060 2,643.1 7,029.8 578.8
50 AFFIN 1,494.4 1.750 2,615.2 2,115.4 292.8
Market Capitalization 580,236.6
Net Profit 41,161.1
Market PE 14.1
http://www.horizon.my/investor/list.php
1 SIME 6,009.5 7.350 44,169.8 34,044.7 3,512.1
2 MAYBANK 7,077.7 5.900 41,758.4 16,153.9 2,928.2
3 PBBANK 3,531.9 9.950 35,142.4 10,500.3 2,622.7
4 COMMERZ 3,578.1 9.700 34,707.6 - 1,952.0
5 TENAGA 4,334.6 7.900 34,243.3 25,750.6 2,594.0
6 MISC 3,719.8 8.550 31,804.3 12,957.4 2,430.3
7 IOICORP 6,150.6 4.660 28,661.8 14,665.4 2,231.6
8 AXIATA 8,445.1 2.700 22,801.8 11,347.7 498.0
9 GENTING 3,703.8 5.650 20,926.5 9,082.5 569.3
10 PETGAS 1,978.7 9.800 19,391.3 3,125.7 1,092.9
11 DIGI 777.5 22.000 17,105.0 4,814.5 1,140.7
12 PLUS 5,000.0 3.180 15,900.0 2,968.0 1,079.3
13 PPB 1,185.5 12.000 14,226.0 3,462.0 1,286.5
14 BAT 285.5 44.750 12,776.1 4,135.2 811.7
15 KLK 1,067.5 11.900 12,703.3 7,855.4 1,040.7
16 YTLPOWR 5,464.2 2.170 11,857.3 4,242.5 1,038.8
17 YTL 1,658.8 6.850 11,362.8 6,549.9 769.8
18 TM 3,577.4 2.950 10,553.3 8,674.9 791.9
19 AMMB 2,723.0 3.680 10,020.6 5,860.7 860.8
20 RHBCAP 2,153.5 4.420 9,518.5 - 1,048.7
21 HLBANK 1,580.1 5.850 9,243.6 - 741.8
22 PETDAG 993.5 8.300 8,246.1 22,301.6 661.7
23 NESTLE 234.5 32.000 7,504.0 3,877.1 340.9
24 MMCCORP 3,045.0 2.300 7,003.5 8,545.0 527.3
25 ASTRO 1,934.0 3.480 6,730.3 2,601.7 -6.2
26 UMW 1,080.7 6.050 6,538.2 12,769.6 565.8
27 TANJONG 403.3 14.400 5,807.5 3,693.9 463.8
28 GAMUDA 2,003.2 2.870 5,749.2 2,403.7 325.1
29 BJTOTO 1,351.0 4.240 5,728.2 3,277.8 348.7
30 HLFG 1,052.8 4.960 5,221.9 - 528.7
31 PARKSON 1,036.4 4.940 5,119.8 2,354.0 448.0
32 LMCEMNT 849.7 6.000 5,098.2 2,530.8 367.7
33 IJM 859.4 5.800 4,984.5 4,637.2 -420.5
34 MAS 1,671.0 2.970 4,962.9 15,035.3 244.3
35 BJLAND 1,144.9 3.800 4,350.6 1,516.1 1,110.8
36 SPSETIA 1,008.9 3.900 3,934.7 1,328.3 213.5
37 AIRPORT 1,100.0 3.520 3,872.0 1,384.7 288.9
38 BURSA 523.7 7.250 3,796.8 290.3 104.4
39 BKAWAN 436.0 8.600 3,749.6 284.1 505.5
40 AFG 1,548.1 2.270 3,514.2 - 380.0
41 F&N 356.5 9.100 3,244.2 2,865.1 152.9
42 EONCAP 693.2 4.600 3,188.7 - 133.8
43 SHELL 300.0 10.400 3,120.0 13,086.1 -330.0
44 MAYBULK 1,000.0 3.080 3,080.0 721.2 460.9
45 KLCCP 934.1 3.220 3,007.8 843.0 441.6
46 SARAWAK 1,519.0 1.930 2,931.7 1,339.3 275.6
47 AIRASIA 2,372.4 1.200 2,846.9 1,603.3 498.0
48 BJCORP 3,047.4 0.910 2,773.1 3,465.8 616.5
49 BSTEAD 651.0 4.060 2,643.1 7,029.8 578.8
50 AFFIN 1,494.4 1.750 2,615.2 2,115.4 292.8
Beautiful Nestle (M) 19 year chart
Chart 1: Nestle M's daily chart for the past 19 years (Source: Tradesignum)
http://nexttrade.blogspot.com/2009/07/nestle-m-time-to-take-profit.html
Latexx bounces back
Saturday May 23, 2009
Latexx bounces back
By C.S. TAN
TAIPING-based Latexx Partners Bhd was the first rubber glove manufacturer to be listed on Bursa Malaysia, but it had to muddle through several years of heavy losses that resulted in it being overtaken by rivals that were listed later.
It was held back by losses for five years, between 2000 and 2004 by which time, its net tangible assets had shrunk to just 19 sen a share.
Small wonder that investors still remember the company for its difficult years even though it has erased the accumulated losses. The years of losses coincided with the time when Low Bok Tek, who was managing director for 14 years between 1987 and 2001, left the company.
Low would not say why he left. At that time, there were eight brothers, including Low, in the company, and it was probably difficult for so many to agree on any matter. This might have been difficult for Low who, as the CEO, was not the eldest. He is number six among the brothers.
Latexx’s losses between 2000 and 2004 were sizeable, from RM41.5mil in 2000, about RM20mil each in 2001 and 2002, RM13mil in 2003 and RM700,000 in 2004.
Cumulatively, these losses bled Latexx which was then still a small company.
Resulting from the losses, Latexx lacked working capital to do business. Hence, Latexx was operating at only about 20% of its plant capacity when Low returned to the company in 2004 after working out an agreement with his brothers that he would take over.
Low then set about to improve manufacturing operations, and put some money into company. He then talked to the banks about credit lines, and to restructure the heavy borrowings. “Otherwise, we won’t be able to expand,” he told StarBizWeek.
A debt restructuring exercise, after some initial difficulties, was eventually worked out with creditor bankers. Stemming from that, RM51mil of debts were converted into new Latexx shares with free warrants.
Following that, Citibank Bhd owned 15.4% of Latexx, as well as warrants in 2007 when it took the stocks in settlement of debts. It ceased to be a substantial shareholder a month later.
Low said he bought a substantial position in Latexx from his brothers and the creditor banks. He currently owns direct and deemed interests of 30.3% in the company.
Over time, he managed to persuade glove buyers, suppliers and former management staffers to return. “They came back after they saw our finances improving,” he said. Bankers also returned, agreeing to credit facilities.
“Now, I have cash,” he said, adding that the company is operating comfortably with RM20.5mil cash, against borrowings of RM48.8mil.
That’s a net debt-to-equity ratio of just 22%, one of the lowest in the industry.
With the company back in the black, cashflow generated and borrowings will enable Latexx to reclaim a position higher up the industry ranks in terms of size and profitability. The company earned a net profit of RM15.6mil last year, and RM9.1mil in the first quarter (Q1) this year. It could potentially earn RM36mil, annualising from Q1, or more this year.
Low said the current plant capacity of 4.4 billion pieces of gloves a year would progressively increase to six billion pieces by the end of the year. “Every month the production increases, I see my unit costs coming down,” he added.
The unknown factors in the industry are US dollar weakness and higher latex prices which cut into profit margins if they move too sharply.
All of Latexx’s five plants are located on a single piece of land in Taiping, and a sixth plant being built on adjacent land will increase total plant capacity to 7.5 billion pieces next year and nine billion in 2010.
One of the biggest employers in Taiping, Latexx’s recovery is an asset to the local community and its shareholders.
http://biz.thestar.com.my/news/story.asp?file=/2009/5/23/business/3959883&sec=business
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Latexx’s 1Q profit up, to install 8 new lines
Written by Yantoultra Ngui Yichen
Thursday, 07 May 2009 14:35
KUALA LUMPUR: Latexx Partners Bhd’s net profit for its first quarter ended March 31, 2009 (1Q09) surged to RM9.14 million from RM1.13 million a year earlier, mainly due to better margins from a change in product mix with sales of more premium gloves.
In notes accompanying its financial statement yesterday, the rubber glove maker also attributed the stronger performance to an improvement in overall cost savings from economies of scale, lower latex and crude oil prices, and favourable US dollar exchange rate.
Revenue rose 47% to RM70.3 million in 1QFY09 from RM47.8 million a year earlier, while earnings per share jumped to 4.7 sen from 0.58 sen. No dividend was declared.
Moving forward, Latexx said it targeted to install eight new double formers glove production lines and continue to upgrade its existing glove production to meet market demand.
“The eight new double formers glove production lines are targeted to be completed in 2009,” it said. “With the additional lines, the group projected total annual output to increase from four billion pieces to six billion pieces.”The company expected strong demand from the healthcare sector despite the current economic slowdown.
Latexx also expected to benefit from lower prices of latex concentrate and crude oil, and favourable exchange rate.
This article appeared in The Edge Financial Daily, May 7, 2009.
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Friday February 27, 2009
Latexx to raise glove output
By DAVID TAN
KAMUNTING: Latexx Partners Bhd is allocating RM70mil next year to increase its production of latex and nitrile gloves to nine billion in 2011.
Group managing director Low Bok Tek told StarBiz that although the global economy had entered a recession, demand for the group’s medical gloves was still strong.
“Sales of our powder-free latex and nitrile gloves in January had also improved significantly over the previous corresponding period.
“This is why we expect the first quarter ending March 31 to chart better performance than the comparable quarter last year,” he said.
For this year, the group will install 16 more production lines, which would increase its production to six billion gloves a year from four billion currently.
“Next year, we will spend another RM70mil for our sixth facility in the Kamunting Industrial Estate (in Taiping).
“The plant is scheduled for completion in 2011 and will raise our annual production to nine billion pieces a year. It will also create over 2,000 jobs in Kamunting,” he said.
Low said the global economic crisis had affected the group’s sales to the food and beverage sector. “However, sales from the food and beverage, and general industry segments are less than 10% (of total revenue),” he said.
Low said the stronger US currency was favourable to the group’s financial position as it traded in US dollars.
Listed on Bursa Malaysia second board in 1996, Latexx Partners operates from a 20ha site in Kamunting Industrial Estate.
For the year ended Dec 31, the group posted a pre-tax profit of RM15.5mil on revenue of RM223mil compared with RM4.9mil and RM150mil respectively in 2007.
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24th Sept 2008
Latexx set for better quarter
By DAVID TAN
New facility will contribute to revenue in third quarter
GEORGE TOWN: Glove maker Latexx Partners Bhd expects a strong performance in its third quarter ending Sept 30, due to contribution from its latest facility in the Kamunting Industrial Estate.
Group chairman Low Bok Tek said the quarter should perform better than the previous corresponding period because the new plant, which started operations in July, had started contributing to the group’s turnover.
“We invested about RM70mil in the new facility, which is equipped with 26 production lines. The new plant is expected to gradually raise the annual production of our group to 6 billion pieces of gloves by the end of next year from the current annual output of 3.3 billion,” he told StarBiz.
Low said the group had also received orders from customers in new markets such as China and South America.
By 2012, the group planned to increase its total annual output to 12 billion pieces of latex gloves.
“We will achieve this figure after we have installed two more production plants in the Kamunting Industrial Estate between 2010 and 2012. This will make us a leading latex glove producer in the country and the region.
“We will be able to achieve economies of scale, as all our production facilities are concentrated in one single location,” he said, adding that this would give Latexx a key competitive edge as it would be able to cut cost on transportation and administration costs.
The global consumption of latex gloves was estimated at 130 billion pieces this year, he said.
“Next year, the growth in consumption is expected at 10% to 12%. Malaysia is among the world’s largest exporter of latex gloves. It supplies 60% to the world market.”
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Monday October 8, 2007
Glove maker will not relocate to China
LATEXX Partners Bhd, one of the top five glove makers in the country, will not relocate to China, as its cost of production in Kamunting Industrial Estate is lower.
“Costs such as labour, transportation and utilities are lower here than in China. In fact, the cost of labour in China is no longer competitive,” group chairman Low Bok Tek said.
He said Latexx found that focusing its manufacturing activities at one site helped reduce operating and production costs.
“Prior to the Asian financial crisis, we used to have manufacturing operations in Thailand and Indonesia. We had to shut them at the peak of the crisis.
“We then learned that it was more cost effective to operate in one location, as that enabled us to control the quality of our products better,” Low said.
He noted that in Kamunting, the company was also closer to its source of raw material, natural rubber, which comes from Southern Thailand.
Low said the latex glove business was a volume game.
“Enlarging the capacity of production reduces production costs and increases profit margin. This is why we want to be consolidated in one location – so that we can increase output more effectively,” he added.
Low said Latexx was now designing a new range of latex gloves.
“We are designing surgical and high-risk gloves for use in public safety units such as the fire and rescue department and we hope to introduce them in 2008,” he said, adding that previously, the company concentrated only on producing examination gloves.
Low said the selling price of latex gloves fluctuated in tandem with the price of rubber. “If the price of natural rubber increases, we will pass the cost hike to our customers. If the price of natural rubber drops, the selling price of latex gloves drops correspondingly,” he said.
The price of natural rubber is about RM5 per kg, compared with about RM6.80 per kg last year.
“At RM5 per kg, the price is still on the high side. We expect it to come down a little,” he said.
Originally known as Sin Super Holdings Sdn Bhd in 1982, the company changed its name in 1989 to Taiping Super Holdings Sdn Bhd. It became known as Latexx Partners Bhd when it was listed on the second board in 1996.
The company specialises in producing latex-powdered examination gloves, latex powder-free examination gloves and nitrile powder-free examination gloves.
Latexx Partners is the original equipment manufacturer for international brands such as Cardinal Health, Ansell and Kimberly-Clark.
It also manufactures latex gloves under its own brands of Medtexx, Black Dragon and Palmflex.
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Monday October 8, 2007
Latexx seeks bigger presence globally
By DAVID TAN
LATEXX Partners Bhd aims to increase its share in the global latex glove market to 7% over the next three to five years from the present 2.5%.
Group chairman and chief executive officer Low Bok Tek told StarBiz that the company would need to penetrate China and South America to achieve this target.
“To prepare ourselves for these markets, we are investing RM100mil to build two more plants on our 20ha site in Kamunting Industrial Estate, Taiping.
“These plants, scheduled to begin operations in 2010, will increase the group's annual production capacity to eight billion pieces of latex gloves from the present three billion,” he said.
The existing four plants in Kamunting Industrial Estate employ some 1,000 workers. The group's workforce is expected to rise to about 4,000 when the new plants are ready in 2010. The number of production lines will also increase to 68 from the present 32.
“Beyond 2010, we have plans to build two more manufacturing facilities to boost the annual capacity from eight billion pieces to 12 billion,” he added.
Loh said Latexx's strategy was to participate in exhibitions such as the China International Medical Equipment Fair; HOSPITALAR International Fair of Products, Equipment, Services, and Technology for Health Clinics and Laboratories in Brazil; and Medica World Forum for Medicine International Trade Fair Congress in Dusseldorf.
“The global consumption of latex gloves is around 120 billion pieces per annum. The annual growth globally is between 10% and 12%,” he said.
According to him, the growth in demand comes from the consumption of powder-free medical gloves in the US and Europe.
“The contribution of Asia-Pacific sales to the group's revenue is about 10% presently, and we aim to increase this to 20% over the next three years,” he added.
Low said Latexx's sales were strongest in the US, which contributed about 60% of its revenue. The European market accounts for 16% and South America 7%.
In 2006, the company made a net profit of RM3.9mil on the back of RM141mil in revenue, compared with RM4.2mil and RM127mil respectively in 2005.
Low said the net profit dropped because of lower profit margins.
Latexx reduced its gearing significantly in June. “The group has settled 97.7% of its bank borrowings of RM51mil under a settlement exercise,” he said.
Low added that after the debt settlement, the gearing ratio went down to 0.01 times from 1.08 times.
“The savings on interest is estimated to be about RM4mil per year. We are now on a much stronger footing to embark on expansion and increase our global market share.
“We will continue with efforts to manage costs, increase production and improve productivity,” he said.
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Latexx to expand production
By Ooi Tee Ching
bt@nstp.com.my
August 20 2007
RUBBER glovemaker Latexx Partners Bhd will invest RM100 million within the next five years to boost annual output to 12 billion pieces from 3.3 billion at present.
"Having settled old debts with the banks, we're now ready to expand again. We'll start with RM8 million investment in October to add three more lines," said chairman and chief executive officer Low Bok Tek.
Latexx settled old debts totalling RM36.12 million with HSBC Bank Malaysia Bhd, Standard Chartered Bank Malaysia Bhd and OCBC Bank (Malaysia) Bhd during December 2006 to April this year via issuance of new shares and warrants.
"Before the 1997/98 financial crises, we had factories in Thailand and Indonesia. However, when it swept across the region, we had to scale back," he told Business Times in an interview at the group's factory in Kamunting, Perak. Also present was Latexx director Gan Chong Shyan.
Currently, the second board-listed glovemaker has 32 production lines and employs 1,000 workers, the majority being foreigners.
"Looking back at the years when we expanded overseas, we found it better to operate from a single location. We can have more effective control over the quality of the gloves. Therefore, since last year, we've been buying adjacent plots. Now our industrial landbank has risen to 20ha," Low said.
"Rubber gloves are a volume game. We need to expand to reap the economies of scale and fatten our profit margin," he said.
While Latexx Partners contract manufactures for global names like Cardinal Health, Ansell and Kimberly-Clark, it also sells under its own brands namely Medtexx, Palmflex and Black Dragon.
At the turn of the century, Latexx Partners went through a period of leadership uncertainty but the group's direction became clearer in 2004 when Low bought up his brothers' shares in the company.
Asked on Multi-Purpose Holdings Bhd emerging as the single biggest shareholder in Latexx Partners Bhd two months ago and selling that stake the very next day, Low explained that on June 14 Multi-Purpose's stockbroking arm AA Anthony Securities Sdn Bhd bought 32 per cent stake in Latexx from HSBC Bank Malaysia and it sold the stake to a group of investors the next day.
He said the individual shareholders are his friends and they still own Latexx shares today.
"I still hold about 20 per cent in Latexx. We're all friendly parties, and the business direction of Latexx remains the same," he said.
"This year, we're confident of concluding a third year of profit since Latexx restructuring in 2004," Low said.
Last year, the group achieved RM3.94 million profit on RM141.01 million revenue. In 2005, it made RM4.28 million profit on RM127.64 million revenue. This was a significant turnaround from 2004's net loss of RM668,364 on RM60.47 million revenue.
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MPHB sells Latexx shares
June 15 2007
MULTI-PURPOSE Holdings Bhd (MPHB) has sold a big block of shares in rubber glove maker Latexx Partners Bhd, just a day after it bought the shares at a massive discount.
It sold the 32.3 per cent stake at a slightly higher price of RM21.68 million, giving it a gain of about RM320,000.
This was done by MPHB's stockbroking unit, AA Anthony Securities Sdn Bhd, and the deals are said to be in the normal course of business.
Meanwhile, new shareholders have emerged in Latexx while an existing investor has raised his stake.
Teong Lian Aik, based in Taiping, bought 14.85 per cent stake, or 28.5 million shares, yesterday through a direct business transaction.
Existing shareholder Low Bok Tek, who has about 5 per cent stake in Latexx, has raised his shareholding to over 20 per cent. He now has a direct and indirect stake of 38.94 million shares.
Low is also the chairman of Gunung Capital Bhd, the company formerly known as Taiping Super Bhd.
Last year, Gunung Capital sold off its coach building business, tour and travel business as well as its express bus business so that it can focus on its latex concentrate trading business.
Shares of Latexx were down 5.6 per cent, or seven sen, to RM1.17 yesterday while MPHB closed 0.4 per cent up to RM2.37.
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MPHB takes the wheel at Latexx
June 14 2007
MULTI-PURPOSE Holdings Bhd (MPHB) has become the single biggest shareholder of rubber glovemaker Latexx Partners Bhd after it bought a 32.3 per cent stake at a jaw-dropping price.
MPHB, a diversified group which controls gaming firm Magnum Corp Bhd, did not say why it bought Latexx.
It also did not say who was the seller.
MPHB bought 62.83 million Latexx shares for RM21.36 million or 34 sen each, in a direct business deal. At 34 sen a share, it is 70 per cent lower than Latexx's closing price of RM1.24 yesterday.
It will fund the purchase with internal funds and borrowings, it said in a statement to Bursa Malaysia yesterday.
Meanwhile, in a separate statement, Citibank Bhd has emerged as a substantial shareholder of Latexx with 29.97 million shares or 15.4 per cent. The shares were issued to Citibank to settle debts owed by Latexx.
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09-04-2007: Latexx settles RM4.69m debt with StanChart, OCBC
Latexx Partners Bhd has entered into agreements with Standard Chartered Bank Malaysia Bhd and OCBC Bank (Malaysia) Bhd for the settlement of RM4.69 million debts in new shares and warrants.
In a statement on April 9, Latexx said it would issue 3.97 million shares of 50 sen apiece and 2.83 million warrants to StanChart to settle its borrowings of RM1.98 million.
For OCBC, Latexx would issue 5.43 million shares and 3.88 million warrants to settle its debt of RM2.71 million with the bank
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23-03-2007: Latexx settles RM14.9m debt via new shares
Latexx Partners Bhd will settle its debt of RM14.98 million owed to Citibank Bhd by issuing new shares with warrants.
Latyexx and its subsidiary, Latexx Manufacturing Sdn Bhd, had entered into a debt settlement with Citibank on March 21.
It said on March 23 under the RM14.98 million debt settlement, it would issue 29.97 million new Latexx shares of 50 sen each with 21.41 million free detachable warrants on the basis of five warrants for every seven new Latexx shares issued.
Latexx share price closed one sen higher to 54 sen on March 23.
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Low said the latex glove business was a volume game.
“Enlarging the capacity of production reduces production costs and increases profit margin. This is why we want to be consolidated in one location – so that we can increase output more effectively,” he added.
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January 20, 2009
Latexx Manufacturing Sdn Bhd
Filed under: Medical Company — Tags: Malaysia, Manufacturers, OEM — admin @ 4:35 am
PT 5054 Jalan Perusahaan 3, Kamunting Industrial Estate
34600 Kammunting, Perak
Malaysia
Phone: +605 8911111
Fax: +605 8911088
http://www.latexx.com.my
marketing@latexx.com.my
Manufacturers
OEM
Company Figures
Number of employees 1000-4999
Export content > 75%
Year of foundation 1988
Area of business Commodities and Consumer Goods for Surgeries and Hospitals
Company Profile
About us
Latexx Manufacturing Sdn Bhd (Latexx) is a wholly owned subsidiary of Latexx Partners Berhad. Latexx Partners Berhad is a public listed company on the Bursa Malaysia (Formally known as Kuala Lumpur Stock Exchange).
Latexx manufacturing facilities located in Kamunting Industrial Estate, northern of Peninsular Malaysia, with close proximity to Penang Seaport and Penang International Airport.
Latexx is one of the largest disposable examination gloves producers in Malaysia. Latexx started its production in 1988, and as of today, Latexx 4 plants housed with 35 production lines, producing 3.3 billion pieces of gloves annually, are built within the 20 hectares land, with sufficient land bank for future expansion.
Latexx is now on the expansion path, looking at between 25% to 35% yearly increase in production capacity for the next 3 to 5 years, producing up to 12 billion pieces annually in single location when the expansion is fully completed.
Latexx range of products includes ambidextrous pre-powdered latex examination gloves, powder-free latex examination gloves, powder-free nitrile examination gloves, controlled environment powder-free latex gloves, high risk gloves, and hand specified powdered latex surgical gloves.
Latexx philosophy is to be the best business partners to all customers with emphasis of excellent quality products, competitive pricing and excellent services. Continuous R & D efforts, working together with customers to meet their expectations have proven to be the success factors of Latexx to stay as chosen partners by major multi-national companies, exporting to various countries worldwide.
Latexx commitment to quality has gained many accreditations and certifications as follows:
ISO 9001 : 2000 (Awarded by TUV Management service GmbH, Germany)
ISO 13485 : 2003 and ISO 9001:2000 (Accredited by Standards council of Canada) for CMDCAS Awarded by TUV America Inc.
EN ISO 13485 : 2003 (Awarded by TUV product Service GmbH, Germany)
MS ISO 9001 : 2000 Quality System Registration Certificate
(Awarded by SIRIM QAS International Sdn Bhd)
Standard Malaysian Glove Scheme
(Awarded by the Malaysian Rubber Board for Pre-Powdered Latex Gloves)
Standard Malaysian Glove Scheme
(Awarded by the Malaysian Rubber Board for Powder-free latex Gloves)
Latexx place supreme emphasis on quality at every stage of production, in the choice of raw materials and high-grade chemicals. Latexx manufacturing facilities meeting Quality System Regulation (QSR) and United States FDA requirements, with respective 510(K) available for each product currently manufactured, also, compliance to Canadian Medical Devices Regulations (CMDR), and licenced by Health Canada, as well as listed in the Australian Register of Therapeutic Goods (ARTG). The Certifications obtained of ISO 9001:2000, EN ISO 13485:2003 and ISO 13485:2003 with SCC Accreditation serve to re-affirm this status.
Latexx is ready to face the challenges with innovative technology, effective quality management, upgrading of automation and a good management team. The commitment and aspiration will bring Latexx to be the largest disposable examination gloves producer in the northern manufacturing corridor of Malaysia and one of the major producers in the world.
http://www.wordpublish.org/latexx-manufacturing-sdn-bhd.htm
RPT:
http://announcements.bursamalaysia.com/EDMS/subweb.nsf/7f04516f8098680348256c6f0017a6bf/e0f77acaa0ee78f1482575c400173f49/$FILE/LATEXX-Circular.pdf
Fundamentals:
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Latexx bounces back
By C.S. TAN
TAIPING-based Latexx Partners Bhd was the first rubber glove manufacturer to be listed on Bursa Malaysia, but it had to muddle through several years of heavy losses that resulted in it being overtaken by rivals that were listed later.
It was held back by losses for five years, between 2000 and 2004 by which time, its net tangible assets had shrunk to just 19 sen a share.
Small wonder that investors still remember the company for its difficult years even though it has erased the accumulated losses. The years of losses coincided with the time when Low Bok Tek, who was managing director for 14 years between 1987 and 2001, left the company.
Low would not say why he left. At that time, there were eight brothers, including Low, in the company, and it was probably difficult for so many to agree on any matter. This might have been difficult for Low who, as the CEO, was not the eldest. He is number six among the brothers.
Latexx’s losses between 2000 and 2004 were sizeable, from RM41.5mil in 2000, about RM20mil each in 2001 and 2002, RM13mil in 2003 and RM700,000 in 2004.
Cumulatively, these losses bled Latexx which was then still a small company.
Resulting from the losses, Latexx lacked working capital to do business. Hence, Latexx was operating at only about 20% of its plant capacity when Low returned to the company in 2004 after working out an agreement with his brothers that he would take over.
Low then set about to improve manufacturing operations, and put some money into company. He then talked to the banks about credit lines, and to restructure the heavy borrowings. “Otherwise, we won’t be able to expand,” he told StarBizWeek.
A debt restructuring exercise, after some initial difficulties, was eventually worked out with creditor bankers. Stemming from that, RM51mil of debts were converted into new Latexx shares with free warrants.
Following that, Citibank Bhd owned 15.4% of Latexx, as well as warrants in 2007 when it took the stocks in settlement of debts. It ceased to be a substantial shareholder a month later.
Low said he bought a substantial position in Latexx from his brothers and the creditor banks. He currently owns direct and deemed interests of 30.3% in the company.
Over time, he managed to persuade glove buyers, suppliers and former management staffers to return. “They came back after they saw our finances improving,” he said. Bankers also returned, agreeing to credit facilities.
“Now, I have cash,” he said, adding that the company is operating comfortably with RM20.5mil cash, against borrowings of RM48.8mil.
That’s a net debt-to-equity ratio of just 22%, one of the lowest in the industry.
With the company back in the black, cashflow generated and borrowings will enable Latexx to reclaim a position higher up the industry ranks in terms of size and profitability. The company earned a net profit of RM15.6mil last year, and RM9.1mil in the first quarter (Q1) this year. It could potentially earn RM36mil, annualising from Q1, or more this year.
Low said the current plant capacity of 4.4 billion pieces of gloves a year would progressively increase to six billion pieces by the end of the year. “Every month the production increases, I see my unit costs coming down,” he added.
The unknown factors in the industry are US dollar weakness and higher latex prices which cut into profit margins if they move too sharply.
All of Latexx’s five plants are located on a single piece of land in Taiping, and a sixth plant being built on adjacent land will increase total plant capacity to 7.5 billion pieces next year and nine billion in 2010.
One of the biggest employers in Taiping, Latexx’s recovery is an asset to the local community and its shareholders.
http://biz.thestar.com.my/news/story.asp?file=/2009/5/23/business/3959883&sec=business
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Latexx’s 1Q profit up, to install 8 new lines
Written by Yantoultra Ngui Yichen
Thursday, 07 May 2009 14:35
KUALA LUMPUR: Latexx Partners Bhd’s net profit for its first quarter ended March 31, 2009 (1Q09) surged to RM9.14 million from RM1.13 million a year earlier, mainly due to better margins from a change in product mix with sales of more premium gloves.
In notes accompanying its financial statement yesterday, the rubber glove maker also attributed the stronger performance to an improvement in overall cost savings from economies of scale, lower latex and crude oil prices, and favourable US dollar exchange rate.
Revenue rose 47% to RM70.3 million in 1QFY09 from RM47.8 million a year earlier, while earnings per share jumped to 4.7 sen from 0.58 sen. No dividend was declared.
Moving forward, Latexx said it targeted to install eight new double formers glove production lines and continue to upgrade its existing glove production to meet market demand.
“The eight new double formers glove production lines are targeted to be completed in 2009,” it said. “With the additional lines, the group projected total annual output to increase from four billion pieces to six billion pieces.”The company expected strong demand from the healthcare sector despite the current economic slowdown.
Latexx also expected to benefit from lower prices of latex concentrate and crude oil, and favourable exchange rate.
This article appeared in The Edge Financial Daily, May 7, 2009.
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Friday February 27, 2009
Latexx to raise glove output
By DAVID TAN
KAMUNTING: Latexx Partners Bhd is allocating RM70mil next year to increase its production of latex and nitrile gloves to nine billion in 2011.
Group managing director Low Bok Tek told StarBiz that although the global economy had entered a recession, demand for the group’s medical gloves was still strong.
“Sales of our powder-free latex and nitrile gloves in January had also improved significantly over the previous corresponding period.
“This is why we expect the first quarter ending March 31 to chart better performance than the comparable quarter last year,” he said.
For this year, the group will install 16 more production lines, which would increase its production to six billion gloves a year from four billion currently.
“Next year, we will spend another RM70mil for our sixth facility in the Kamunting Industrial Estate (in Taiping).
“The plant is scheduled for completion in 2011 and will raise our annual production to nine billion pieces a year. It will also create over 2,000 jobs in Kamunting,” he said.
Low said the global economic crisis had affected the group’s sales to the food and beverage sector. “However, sales from the food and beverage, and general industry segments are less than 10% (of total revenue),” he said.
Low said the stronger US currency was favourable to the group’s financial position as it traded in US dollars.
Listed on Bursa Malaysia second board in 1996, Latexx Partners operates from a 20ha site in Kamunting Industrial Estate.
For the year ended Dec 31, the group posted a pre-tax profit of RM15.5mil on revenue of RM223mil compared with RM4.9mil and RM150mil respectively in 2007.
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24th Sept 2008
Latexx set for better quarter
By DAVID TAN
New facility will contribute to revenue in third quarter
GEORGE TOWN: Glove maker Latexx Partners Bhd expects a strong performance in its third quarter ending Sept 30, due to contribution from its latest facility in the Kamunting Industrial Estate.
Group chairman Low Bok Tek said the quarter should perform better than the previous corresponding period because the new plant, which started operations in July, had started contributing to the group’s turnover.
“We invested about RM70mil in the new facility, which is equipped with 26 production lines. The new plant is expected to gradually raise the annual production of our group to 6 billion pieces of gloves by the end of next year from the current annual output of 3.3 billion,” he told StarBiz.
Low said the group had also received orders from customers in new markets such as China and South America.
By 2012, the group planned to increase its total annual output to 12 billion pieces of latex gloves.
“We will achieve this figure after we have installed two more production plants in the Kamunting Industrial Estate between 2010 and 2012. This will make us a leading latex glove producer in the country and the region.
“We will be able to achieve economies of scale, as all our production facilities are concentrated in one single location,” he said, adding that this would give Latexx a key competitive edge as it would be able to cut cost on transportation and administration costs.
The global consumption of latex gloves was estimated at 130 billion pieces this year, he said.
“Next year, the growth in consumption is expected at 10% to 12%. Malaysia is among the world’s largest exporter of latex gloves. It supplies 60% to the world market.”
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Monday October 8, 2007
Glove maker will not relocate to China
LATEXX Partners Bhd, one of the top five glove makers in the country, will not relocate to China, as its cost of production in Kamunting Industrial Estate is lower.
“Costs such as labour, transportation and utilities are lower here than in China. In fact, the cost of labour in China is no longer competitive,” group chairman Low Bok Tek said.
He said Latexx found that focusing its manufacturing activities at one site helped reduce operating and production costs.
“Prior to the Asian financial crisis, we used to have manufacturing operations in Thailand and Indonesia. We had to shut them at the peak of the crisis.
“We then learned that it was more cost effective to operate in one location, as that enabled us to control the quality of our products better,” Low said.
He noted that in Kamunting, the company was also closer to its source of raw material, natural rubber, which comes from Southern Thailand.
Low said the latex glove business was a volume game.
“Enlarging the capacity of production reduces production costs and increases profit margin. This is why we want to be consolidated in one location – so that we can increase output more effectively,” he added.
Low said Latexx was now designing a new range of latex gloves.
“We are designing surgical and high-risk gloves for use in public safety units such as the fire and rescue department and we hope to introduce them in 2008,” he said, adding that previously, the company concentrated only on producing examination gloves.
Low said the selling price of latex gloves fluctuated in tandem with the price of rubber. “If the price of natural rubber increases, we will pass the cost hike to our customers. If the price of natural rubber drops, the selling price of latex gloves drops correspondingly,” he said.
The price of natural rubber is about RM5 per kg, compared with about RM6.80 per kg last year.
“At RM5 per kg, the price is still on the high side. We expect it to come down a little,” he said.
Originally known as Sin Super Holdings Sdn Bhd in 1982, the company changed its name in 1989 to Taiping Super Holdings Sdn Bhd. It became known as Latexx Partners Bhd when it was listed on the second board in 1996.
The company specialises in producing latex-powdered examination gloves, latex powder-free examination gloves and nitrile powder-free examination gloves.
Latexx Partners is the original equipment manufacturer for international brands such as Cardinal Health, Ansell and Kimberly-Clark.
It also manufactures latex gloves under its own brands of Medtexx, Black Dragon and Palmflex.
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Monday October 8, 2007
Latexx seeks bigger presence globally
By DAVID TAN
LATEXX Partners Bhd aims to increase its share in the global latex glove market to 7% over the next three to five years from the present 2.5%.
Group chairman and chief executive officer Low Bok Tek told StarBiz that the company would need to penetrate China and South America to achieve this target.
“To prepare ourselves for these markets, we are investing RM100mil to build two more plants on our 20ha site in Kamunting Industrial Estate, Taiping.
“These plants, scheduled to begin operations in 2010, will increase the group's annual production capacity to eight billion pieces of latex gloves from the present three billion,” he said.
The existing four plants in Kamunting Industrial Estate employ some 1,000 workers. The group's workforce is expected to rise to about 4,000 when the new plants are ready in 2010. The number of production lines will also increase to 68 from the present 32.
“Beyond 2010, we have plans to build two more manufacturing facilities to boost the annual capacity from eight billion pieces to 12 billion,” he added.
Loh said Latexx's strategy was to participate in exhibitions such as the China International Medical Equipment Fair; HOSPITALAR International Fair of Products, Equipment, Services, and Technology for Health Clinics and Laboratories in Brazil; and Medica World Forum for Medicine International Trade Fair Congress in Dusseldorf.
“The global consumption of latex gloves is around 120 billion pieces per annum. The annual growth globally is between 10% and 12%,” he said.
According to him, the growth in demand comes from the consumption of powder-free medical gloves in the US and Europe.
“The contribution of Asia-Pacific sales to the group's revenue is about 10% presently, and we aim to increase this to 20% over the next three years,” he added.
Low said Latexx's sales were strongest in the US, which contributed about 60% of its revenue. The European market accounts for 16% and South America 7%.
In 2006, the company made a net profit of RM3.9mil on the back of RM141mil in revenue, compared with RM4.2mil and RM127mil respectively in 2005.
Low said the net profit dropped because of lower profit margins.
Latexx reduced its gearing significantly in June. “The group has settled 97.7% of its bank borrowings of RM51mil under a settlement exercise,” he said.
Low added that after the debt settlement, the gearing ratio went down to 0.01 times from 1.08 times.
“The savings on interest is estimated to be about RM4mil per year. We are now on a much stronger footing to embark on expansion and increase our global market share.
“We will continue with efforts to manage costs, increase production and improve productivity,” he said.
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Latexx to expand production
By Ooi Tee Ching
bt@nstp.com.my
August 20 2007
RUBBER glovemaker Latexx Partners Bhd will invest RM100 million within the next five years to boost annual output to 12 billion pieces from 3.3 billion at present.
"Having settled old debts with the banks, we're now ready to expand again. We'll start with RM8 million investment in October to add three more lines," said chairman and chief executive officer Low Bok Tek.
Latexx settled old debts totalling RM36.12 million with HSBC Bank Malaysia Bhd, Standard Chartered Bank Malaysia Bhd and OCBC Bank (Malaysia) Bhd during December 2006 to April this year via issuance of new shares and warrants.
"Before the 1997/98 financial crises, we had factories in Thailand and Indonesia. However, when it swept across the region, we had to scale back," he told Business Times in an interview at the group's factory in Kamunting, Perak. Also present was Latexx director Gan Chong Shyan.
Currently, the second board-listed glovemaker has 32 production lines and employs 1,000 workers, the majority being foreigners.
"Looking back at the years when we expanded overseas, we found it better to operate from a single location. We can have more effective control over the quality of the gloves. Therefore, since last year, we've been buying adjacent plots. Now our industrial landbank has risen to 20ha," Low said.
"Rubber gloves are a volume game. We need to expand to reap the economies of scale and fatten our profit margin," he said.
While Latexx Partners contract manufactures for global names like Cardinal Health, Ansell and Kimberly-Clark, it also sells under its own brands namely Medtexx, Palmflex and Black Dragon.
At the turn of the century, Latexx Partners went through a period of leadership uncertainty but the group's direction became clearer in 2004 when Low bought up his brothers' shares in the company.
Asked on Multi-Purpose Holdings Bhd emerging as the single biggest shareholder in Latexx Partners Bhd two months ago and selling that stake the very next day, Low explained that on June 14 Multi-Purpose's stockbroking arm AA Anthony Securities Sdn Bhd bought 32 per cent stake in Latexx from HSBC Bank Malaysia and it sold the stake to a group of investors the next day.
He said the individual shareholders are his friends and they still own Latexx shares today.
"I still hold about 20 per cent in Latexx. We're all friendly parties, and the business direction of Latexx remains the same," he said.
"This year, we're confident of concluding a third year of profit since Latexx restructuring in 2004," Low said.
Last year, the group achieved RM3.94 million profit on RM141.01 million revenue. In 2005, it made RM4.28 million profit on RM127.64 million revenue. This was a significant turnaround from 2004's net loss of RM668,364 on RM60.47 million revenue.
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MPHB sells Latexx shares
June 15 2007
MULTI-PURPOSE Holdings Bhd (MPHB) has sold a big block of shares in rubber glove maker Latexx Partners Bhd, just a day after it bought the shares at a massive discount.
It sold the 32.3 per cent stake at a slightly higher price of RM21.68 million, giving it a gain of about RM320,000.
This was done by MPHB's stockbroking unit, AA Anthony Securities Sdn Bhd, and the deals are said to be in the normal course of business.
Meanwhile, new shareholders have emerged in Latexx while an existing investor has raised his stake.
Teong Lian Aik, based in Taiping, bought 14.85 per cent stake, or 28.5 million shares, yesterday through a direct business transaction.
Existing shareholder Low Bok Tek, who has about 5 per cent stake in Latexx, has raised his shareholding to over 20 per cent. He now has a direct and indirect stake of 38.94 million shares.
Low is also the chairman of Gunung Capital Bhd, the company formerly known as Taiping Super Bhd.
Last year, Gunung Capital sold off its coach building business, tour and travel business as well as its express bus business so that it can focus on its latex concentrate trading business.
Shares of Latexx were down 5.6 per cent, or seven sen, to RM1.17 yesterday while MPHB closed 0.4 per cent up to RM2.37.
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MPHB takes the wheel at Latexx
June 14 2007
MULTI-PURPOSE Holdings Bhd (MPHB) has become the single biggest shareholder of rubber glovemaker Latexx Partners Bhd after it bought a 32.3 per cent stake at a jaw-dropping price.
MPHB, a diversified group which controls gaming firm Magnum Corp Bhd, did not say why it bought Latexx.
It also did not say who was the seller.
MPHB bought 62.83 million Latexx shares for RM21.36 million or 34 sen each, in a direct business deal. At 34 sen a share, it is 70 per cent lower than Latexx's closing price of RM1.24 yesterday.
It will fund the purchase with internal funds and borrowings, it said in a statement to Bursa Malaysia yesterday.
Meanwhile, in a separate statement, Citibank Bhd has emerged as a substantial shareholder of Latexx with 29.97 million shares or 15.4 per cent. The shares were issued to Citibank to settle debts owed by Latexx.
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09-04-2007: Latexx settles RM4.69m debt with StanChart, OCBC
Latexx Partners Bhd has entered into agreements with Standard Chartered Bank Malaysia Bhd and OCBC Bank (Malaysia) Bhd for the settlement of RM4.69 million debts in new shares and warrants.
In a statement on April 9, Latexx said it would issue 3.97 million shares of 50 sen apiece and 2.83 million warrants to StanChart to settle its borrowings of RM1.98 million.
For OCBC, Latexx would issue 5.43 million shares and 3.88 million warrants to settle its debt of RM2.71 million with the bank
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23-03-2007: Latexx settles RM14.9m debt via new shares
Latexx Partners Bhd will settle its debt of RM14.98 million owed to Citibank Bhd by issuing new shares with warrants.
Latyexx and its subsidiary, Latexx Manufacturing Sdn Bhd, had entered into a debt settlement with Citibank on March 21.
It said on March 23 under the RM14.98 million debt settlement, it would issue 29.97 million new Latexx shares of 50 sen each with 21.41 million free detachable warrants on the basis of five warrants for every seven new Latexx shares issued.
Latexx share price closed one sen higher to 54 sen on March 23.
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Low said the latex glove business was a volume game.
“Enlarging the capacity of production reduces production costs and increases profit margin. This is why we want to be consolidated in one location – so that we can increase output more effectively,” he added.
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January 20, 2009
Latexx Manufacturing Sdn Bhd
Filed under: Medical Company — Tags: Malaysia, Manufacturers, OEM — admin @ 4:35 am
PT 5054 Jalan Perusahaan 3, Kamunting Industrial Estate
34600 Kammunting, Perak
Malaysia
Phone: +605 8911111
Fax: +605 8911088
http://www.latexx.com.my
marketing@latexx.com.my
Manufacturers
OEM
Company Figures
Number of employees 1000-4999
Export content > 75%
Year of foundation 1988
Area of business Commodities and Consumer Goods for Surgeries and Hospitals
Company Profile
About us
Latexx Manufacturing Sdn Bhd (Latexx) is a wholly owned subsidiary of Latexx Partners Berhad. Latexx Partners Berhad is a public listed company on the Bursa Malaysia (Formally known as Kuala Lumpur Stock Exchange).
Latexx manufacturing facilities located in Kamunting Industrial Estate, northern of Peninsular Malaysia, with close proximity to Penang Seaport and Penang International Airport.
Latexx is one of the largest disposable examination gloves producers in Malaysia. Latexx started its production in 1988, and as of today, Latexx 4 plants housed with 35 production lines, producing 3.3 billion pieces of gloves annually, are built within the 20 hectares land, with sufficient land bank for future expansion.
Latexx is now on the expansion path, looking at between 25% to 35% yearly increase in production capacity for the next 3 to 5 years, producing up to 12 billion pieces annually in single location when the expansion is fully completed.
Latexx range of products includes ambidextrous pre-powdered latex examination gloves, powder-free latex examination gloves, powder-free nitrile examination gloves, controlled environment powder-free latex gloves, high risk gloves, and hand specified powdered latex surgical gloves.
Latexx philosophy is to be the best business partners to all customers with emphasis of excellent quality products, competitive pricing and excellent services. Continuous R & D efforts, working together with customers to meet their expectations have proven to be the success factors of Latexx to stay as chosen partners by major multi-national companies, exporting to various countries worldwide.
Latexx commitment to quality has gained many accreditations and certifications as follows:
ISO 9001 : 2000 (Awarded by TUV Management service GmbH, Germany)
ISO 13485 : 2003 and ISO 9001:2000 (Accredited by Standards council of Canada) for CMDCAS Awarded by TUV America Inc.
EN ISO 13485 : 2003 (Awarded by TUV product Service GmbH, Germany)
MS ISO 9001 : 2000 Quality System Registration Certificate
(Awarded by SIRIM QAS International Sdn Bhd)
Standard Malaysian Glove Scheme
(Awarded by the Malaysian Rubber Board for Pre-Powdered Latex Gloves)
Standard Malaysian Glove Scheme
(Awarded by the Malaysian Rubber Board for Powder-free latex Gloves)
Latexx place supreme emphasis on quality at every stage of production, in the choice of raw materials and high-grade chemicals. Latexx manufacturing facilities meeting Quality System Regulation (QSR) and United States FDA requirements, with respective 510(K) available for each product currently manufactured, also, compliance to Canadian Medical Devices Regulations (CMDR), and licenced by Health Canada, as well as listed in the Australian Register of Therapeutic Goods (ARTG). The Certifications obtained of ISO 9001:2000, EN ISO 13485:2003 and ISO 13485:2003 with SCC Accreditation serve to re-affirm this status.
Latexx is ready to face the challenges with innovative technology, effective quality management, upgrading of automation and a good management team. The commitment and aspiration will bring Latexx to be the largest disposable examination gloves producer in the northern manufacturing corridor of Malaysia and one of the major producers in the world.
http://www.wordpublish.org/latexx-manufacturing-sdn-bhd.htm
RPT:
http://announcements.bursamalaysia.com/EDMS/subweb.nsf/7f04516f8098680348256c6f0017a6bf/e0f77acaa0ee78f1482575c400173f49/$FILE/LATEXX-Circular.pdf
Fundamentals:
http://www.ooinvest.com/stock/funda.aspx?symbol=LATEXX
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