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.
Monday 20 July 2009
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
-----
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.
----
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.
----
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.”
----
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.
-----
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.
-----
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.
-----
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.
------
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
-----
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.
-------
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.
-----
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
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.
----
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.
----
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.”
----
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.
-----
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.
-----
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.
-----
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.
------
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.
-----
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
-----
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.
-------
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.
-----
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
Tuesday 14 July 2009
Glove Sector
Stock Data: Recent Stock Performance:
Current Price (7/10/2009): 3.92
(Figures in Malaysian Ringgits) 1 Week 4.3% 13 Weeks 2.6%
4 Weeks 21.7% 52 Weeks 86.7%
Kossan Rubber Industries Berhad Key Data:
Ticker: KOSSAN Country: MALAYSIA
Exchanges: KUL Major Industry: Chemicals
Sub Industry: Rubber & Tire Mfrs.
2008 Sales 897,194,335
(Year Ending Jan 2009). Employees: 665
Currency: Malaysian Ringgits Market Cap: 626,674,720
Fiscal Yr Ends: December Shares Outstanding: 159,866,000
Share Type: Ordinary Closely Held Shares: 83,457,672
----
Stock Data: Recent Stock Performance:
Current Price (7/10/2009): 1.96
(Figures in Malaysian Ringgits) 1 Week 19.5% 13 Weeks 15.3%
4 Weeks 83.2% 52 Weeks 53.1%
Supermax Corporation Berhad Key Data:
Ticker: SUPERMX Country: MALAYSIA
Exchanges: KUL Major Industry: Chemicals
Sub Industry: Synthetic Fibers
2008 Sales 811,823,877
(Year Ending Jan 2009). Employees: 1,033
Currency: Malaysian Ringgits Market Cap: 519,929,200
Fiscal Yr Ends: December Shares Outstanding: 265,270,000
Share Type: Ordinary Closely Held Shares: 172,281,734
----
Stock Data: Recent Stock Performance:
Current Price (7/10/2009): 4.50
(Figures in Malaysian Ringgits) 1 Week 10.8% 13 Weeks 23.0%
4 Weeks 65.4% 52 Weeks 216.9%
Hartalega Holdings Bhd Key Data:
Ticker: 5168 Country: MALAYSIA
Exchanges: KUL Major Industry: Apparel & Textiles
Sub Industry: Apparel Manufacturers
2009 Sales 443,204,000
(Year Ending Jan 2010). Employees: N/A
Currency: Malaysian Ringgits Market Cap: 1,090,404,000
Fiscal Yr Ends: March Shares Outstanding: 242,312,000
Share Type: Ordinary Closely Held Shares: N/A
----
Stock Data: Recent Stock Performance:
Current Price (7/10/2009): 1.31
(Figures in Malaysian Ringgits) 1 Week 12.9% 13 Weeks 0.8%
4 Weeks 114.8% 52 Weeks 367.9%
Latexx Partners Berhad Key Data:
Ticker: LATEXX Country: MALAYSIA
Exchanges: KUL Major Industry: Miscellaneous
Sub Industry: Miscellaneous Companies
2008 Sales 223,255,443
(Year Ending Jan 2009). Employees: 1,210
Currency: Malaysian Ringgits Market Cap: 255,053,611
Fiscal Yr Ends: December Shares Outstanding: 194,697,413
Share Type: Ordinary Closely Held Shares: 113,422,478
----
Stock Data: Recent Stock Performance:
Current Price (7/10/2009): 1.15
(Figures in Malaysian Ringgits) 1 Week 4.5% 13 Weeks -5.7%
4 Weeks 32.9% 52 Weeks 12.7%
Adventa Berhad Key Data:
Ticker: ADVENTA Country: MALAYSIA
Exchanges: KUL Major Industry: Drugs, Cosmetics & Health Care
Sub Industry: Medical, Surgical & Dental Suppliers
2008 Sales 247,930,470
(Year Ending Jan 2009). Employees: 1,273
Currency: Malaysian Ringgits Market Cap: 160,372,100
Fiscal Yr Ends: October Shares Outstanding: 139,454,000
Share Type: Closely Held Shares: N/A
Current Price (7/10/2009): 3.92
(Figures in Malaysian Ringgits) 1 Week 4.3% 13 Weeks 2.6%
4 Weeks 21.7% 52 Weeks 86.7%
Kossan Rubber Industries Berhad Key Data:
Ticker: KOSSAN Country: MALAYSIA
Exchanges: KUL Major Industry: Chemicals
Sub Industry: Rubber & Tire Mfrs.
2008 Sales 897,194,335
(Year Ending Jan 2009). Employees: 665
Currency: Malaysian Ringgits Market Cap: 626,674,720
Fiscal Yr Ends: December Shares Outstanding: 159,866,000
Share Type: Ordinary Closely Held Shares: 83,457,672
----
Stock Data: Recent Stock Performance:
Current Price (7/10/2009): 1.96
(Figures in Malaysian Ringgits) 1 Week 19.5% 13 Weeks 15.3%
4 Weeks 83.2% 52 Weeks 53.1%
Supermax Corporation Berhad Key Data:
Ticker: SUPERMX Country: MALAYSIA
Exchanges: KUL Major Industry: Chemicals
Sub Industry: Synthetic Fibers
2008 Sales 811,823,877
(Year Ending Jan 2009). Employees: 1,033
Currency: Malaysian Ringgits Market Cap: 519,929,200
Fiscal Yr Ends: December Shares Outstanding: 265,270,000
Share Type: Ordinary Closely Held Shares: 172,281,734
----
Stock Data: Recent Stock Performance:
Current Price (7/10/2009): 4.50
(Figures in Malaysian Ringgits) 1 Week 10.8% 13 Weeks 23.0%
4 Weeks 65.4% 52 Weeks 216.9%
Hartalega Holdings Bhd Key Data:
Ticker: 5168 Country: MALAYSIA
Exchanges: KUL Major Industry: Apparel & Textiles
Sub Industry: Apparel Manufacturers
2009 Sales 443,204,000
(Year Ending Jan 2010). Employees: N/A
Currency: Malaysian Ringgits Market Cap: 1,090,404,000
Fiscal Yr Ends: March Shares Outstanding: 242,312,000
Share Type: Ordinary Closely Held Shares: N/A
----
Stock Data: Recent Stock Performance:
Current Price (7/10/2009): 1.31
(Figures in Malaysian Ringgits) 1 Week 12.9% 13 Weeks 0.8%
4 Weeks 114.8% 52 Weeks 367.9%
Latexx Partners Berhad Key Data:
Ticker: LATEXX Country: MALAYSIA
Exchanges: KUL Major Industry: Miscellaneous
Sub Industry: Miscellaneous Companies
2008 Sales 223,255,443
(Year Ending Jan 2009). Employees: 1,210
Currency: Malaysian Ringgits Market Cap: 255,053,611
Fiscal Yr Ends: December Shares Outstanding: 194,697,413
Share Type: Ordinary Closely Held Shares: 113,422,478
----
Stock Data: Recent Stock Performance:
Current Price (7/10/2009): 1.15
(Figures in Malaysian Ringgits) 1 Week 4.5% 13 Weeks -5.7%
4 Weeks 32.9% 52 Weeks 12.7%
Adventa Berhad Key Data:
Ticker: ADVENTA Country: MALAYSIA
Exchanges: KUL Major Industry: Drugs, Cosmetics & Health Care
Sub Industry: Medical, Surgical & Dental Suppliers
2008 Sales 247,930,470
(Year Ending Jan 2009). Employees: 1,273
Currency: Malaysian Ringgits Market Cap: 160,372,100
Fiscal Yr Ends: October Shares Outstanding: 139,454,000
Share Type: Closely Held Shares: N/A
----
Stock Data: Recent Stock Performance:
Current Price (7/10/2009): .37
(Figures in Malaysian Ringgits) 1 Week 12.1% 13 Weeks 27.6%
4 Weeks 76.2% 52 Weeks 5.7%
Integrated Rubber Corporation Berhad Key Data:
Ticker: IRCB Country: MALAYSIA
Exchanges: KUL Major Industry: Metal Producers & Products Manufacturers
Sub Industry: Miscellaneous Metal Producers
2009 Sales 136,418,429
(Year Ending Jan 2010). Employees: 828
Currency: Malaysian Ringgits Market Cap: 87,619,700
Fiscal Yr Ends: January Shares Outstanding: 236,810,000
Share Type: Common Closely Held Shares: 127,681,046
----
Stock Data: Recent Stock Performance:
Current Price (7/10/2009): 7.25
(Figures in Malaysian Ringgits) 1 Week 15.1% 13 Weeks 16.9%
4 Weeks 35.5% 52 Weeks 77.7%
Top Glove Corporation Berhad Key Data:
Ticker: TOPGLOV Country: MALAYSIA
Exchanges: KUL Major Industry: Apparel & Textiles
Sub Industry: Apparel Manufacturers
2008 Sales 1,377,931,000
(Year Ending Jan 2009). Employees: 6,573
Currency: Malaysian Ringgits Market Cap: 2,191,435,750
Fiscal Yr Ends: August Shares Outstanding: 302,267,000
Share Type: Ordinary Closely Held Shares: 224,502,987
http://spreadsheets.google.com/pub?key=tcTC-lG49Sy-qaoyZgKKjEQ&output=html
Sunday 12 July 2009
Stock/Bond Mix and Rate of Return
Consider this: An investment portfolio that is 60% bonds and 40% stocks would be considered quite conservative and fairly stable by most financial planners. Looking at all the ten-consecutive-year periods since 1926, we find that the median (half the cases were higher and half the cases were lower) annual rate of return is 7.5%. In money terms, that means that if you invested $100,000, you would have about $206,000 at the end of ten years.
Historically, during the periods 1926 to 2005, your $100,000 could have turned out to be as little as $144,000 or as much as $395,000.
Historically, during the periods 1926 to 2005, your $100,000 could have turned out to be as little as $144,000 or as much as $395,000.
Through the wizardry of statistics we can estimate that 83% of the time, a portfolio of 60% bonds and 40% stocks would return at least 4.8%. (You may remember from some class in your distant past, that this assumes a normal distribution at one standard deviation below the median. Not perfect statistics, but about as good as there are.)
Here again, there is not much else to go on other than the historic record. The following gives you something you might want to use as a predicted rate of return when planning.
Stock / Bond Mix
75% Bonds - 25% Stocks
60% Bonds - 40% Stocks
50% Bonds - 50% Stocks
40% Bonds - 60% Stocks
25% Bonds - 75% Stocks
10% Bonds - 90% Stocks
Median Fifteen-Year Return
5.9%
7.8%
9.1%
10.2%
11.8%
12.4%
Return you can expect to be exceeded most of the time
3.3%
5.3%
6.5%
7.5%
8.7%
8.7%
Look carefully at the expected rate of return for the 90% stock portfolio, the last line in the table. The return that you can expect is the same as the 75% stock portfolio (8.7%). This is because portfolios which are high in stocks also exhibit high variability. The maximum you might get is higher, but the variability also pulls down the minimum return that you might expect.
http://learn.uci.edu/oo/getDemoPage.php?course=AR0102092&lesson=6&topic=3&page=9
The more important issue is saving, then investing.
While there is a great deal of hype and interest in investing, the more important issue is saving. Without systematic and increasing savings, investing programs will get you nowhere. Spending less than you are making is the key tactic.
Saturday 11 July 2009
Fundamentals of Personal Financial Planning
While there is a great deal of hype and interest in investing, the more important issue is saving. Without systematic and increasing savings, investing programs will get you nowhere. Spending less than you are making is the key tactic.
University of California, Irvine
University Extension
List of Calculators for Fundamentals of Personal Financial Planning, Module 1
Click to access each calculator, or use the numbered tabs below.
1Finding a Future Value Using a Present Value and an Interest Rate When There are No Payments
2Finding a Future Value Using a Present Value and an Interest Rate When There are Payments
3Calculator for Accumulation and Savings
4Calculator for Depletion / Distribution of an Account or Payoff of a Loan
5Calculation of Payment to Accumulate a Given Amount
6Calculation of Interest to Deplete a Given Amount, or Pay Off a Loan
7Time to Deplete a Given Amount, or Pay Off a Loan
8Time to Save a Given Amount
9Calculator for Evenly Spaced Payments of Equal Amounts
10Calculator for Equally Spaced Payments of Unequal Amounts
11Accumulation / Distribution Calculator
2Finding a Future Value Using a Present Value and an Interest Rate When There are Payments
3Calculator for Accumulation and Savings
4Calculator for Depletion / Distribution of an Account or Payoff of a Loan
5Calculation of Payment to Accumulate a Given Amount
6Calculation of Interest to Deplete a Given Amount, or Pay Off a Loan
7Time to Deplete a Given Amount, or Pay Off a Loan
8Time to Save a Given Amount
9Calculator for Evenly Spaced Payments of Equal Amounts
10Calculator for Equally Spaced Payments of Unequal Amounts
11Accumulation / Distribution Calculator
University of California, Irvine
Fundamentals of Personal Financial Planning
Module 1: Goals – Preparing to Plan
List of Documents to Gather Before Preparing Your Net Worth & Cash Flow Statements
Most Recent Payroll Stub
Income Tax Returns
Personal Employment Benefit Statements
Company Benefit Plan Booklets
o Group Pension Plans
o Group Life Insurance
o Group Disability Insurance
o Medical, Dental, Vision Insurance
Insurance & Annuity Contracts
o Life Insurance
o Health Insurance
o Hospital & Major Medical
o Disability Insurance
o Automobile Insurance
o Property and Casualty
Statements of Bank Accounts, Stocks, Bonds or Other Investments
Mortgage Statements
o Primary Mortgage Statement
o Second Mortgage Statement
o Home – Equity Line of Credit Statement
o Fair Market Value
Other Real Property Information
o Mortgage Statement
o Rental Info,
o Fair Market Value
Wills/Trusts
o Business Arrangements
o Partnership Agreement
o Buy/Sell Agreements
o Deferred Compensation
o Stock Option/Bonus Plan
Fundamentals of Personal Financial Planning
Module 1: Goals – Preparing to Plan
List of Documents to Gather Before Preparing Your Net Worth & Cash Flow Statements
Most Recent Payroll Stub
Income Tax Returns
Personal Employment Benefit Statements
Company Benefit Plan Booklets
o Group Pension Plans
o Group Life Insurance
o Group Disability Insurance
o Medical, Dental, Vision Insurance
Insurance & Annuity Contracts
o Life Insurance
o Health Insurance
o Hospital & Major Medical
o Disability Insurance
o Automobile Insurance
o Property and Casualty
Statements of Bank Accounts, Stocks, Bonds or Other Investments
Mortgage Statements
o Primary Mortgage Statement
o Second Mortgage Statement
o Home – Equity Line of Credit Statement
o Fair Market Value
Other Real Property Information
o Mortgage Statement
o Rental Info,
o Fair Market Value
Wills/Trusts
o Business Arrangements
o Partnership Agreement
o Buy/Sell Agreements
o Deferred Compensation
o Stock Option/Bonus Plan
Consider this: An investment portfolio that is 60% bonds and 40% stocks would be considered quite conservative and fairly stable by most financial planners. Looking at all the ten-consecutive-year periods since 1926, we find that the median (half the cases were higher and half the cases were lower) annual rate of return is 7.5%. In money terms, that means that if you invested $100,000, you would have about $206,000 at the end of ten years.
Historically, during the periods 1926 to 2005, your $100,000 could have turned out to be as little as $144,000 or as much as $395,000. Through the wizardry of statistics we can estimate that 83% of the time, a portfolio of 60% bonds and 40% stocks would return at least 4.8%. (You may remember from some class in your distant past, that this assumes a normal distribution at one standard deviation below the median. Not perfect statistics, but about as good as there are.)
Here again, there is not much else to go on other than the historic record. The following gives you something you might want to use as a predicted rate of return when planning.
Stock / Bond Mix
75% Bonds - 25% Stocks
60% Bonds - 40% Stocks
50% Bonds - 50% Stocks
40% Bonds - 60% Stocks
25% Bonds - 75% Stocks
10% Bonds - 90% Stocks
Median Fifteen-Year Return
5.9%
7.8%
9.1%
10.2%
11.8%
12.4%
Return you can expect to be exceeded most of the time
3.3%
5.3%
6.5%
7.5%
8.7%
8.7%
Look carefully at the expected rate of return for the 90% stock portfolio, the last line in the table. The return that you can expect is the same as the 75% stock portfolio (8.7%). This is because portfolios which are high in stocks also exhibit high variability. The maximum you might get is higher, but the variability also pulls down the minimum return that you might expect.
We have provided a worksheet for you to fill out to create a basic net worth statement.
http://learn.uci.edu/oo/getDemoPage.php?course=AR0102092&lesson=10&topic=9&page=1
Arranging your affairs in ways that reduce taxes is a way of increasing your disposable income. Unfortunately, it takes a lot of time and thought.
Five D’s of tax planning[Roll your cursor over each of the D’s to read more]
Deduction: Make sure that all deductions are taken, all records are kept to support the deductions and the payments are timed to cause the deductions to have the most effect.
Diversion: Take steps to make investments from which the returns will escape taxation or be taxed at a reduced rate.
Deferral: Taking steps to defer taxes until future years.
Deflection: Take steps to transfer income to someone in a lower tax bracket.
Diminution: Diminution is a catch all category of specific ideas or concepts that can reduce taxes.
Arranging your affairs in ways that reduce taxes is a way of increasing your disposable income. Unfortunately, it takes a lot of time and thought.
Five D’s of tax planning[Roll your cursor over each of the D’s to read more]
Deduction: Make sure that all deductions are taken, all records are kept to support the deductions and the payments are timed to cause the deductions to have the most effect.
Diversion: Take steps to make investments from which the returns will escape taxation or be taxed at a reduced rate.
Deferral: Taking steps to defer taxes until future years.
Deflection: Take steps to transfer income to someone in a lower tax bracket.
Diminution: Diminution is a catch all category of specific ideas or concepts that can reduce taxes.
http://learn.uci.edu/oo/getDemoPage.php?course=AR0102092&lesson=12&topic=2&page=2
Dealing with the risk
There are generally four choices in dealing with risk. Roll over each choice to read more.
»Avoid the Risk
» Ameliorate the risk
» Retain the Risk
» Transfer or Share the Risk
Dealing with the risk
There are generally four choices in dealing with risk. Roll over each choice to read more.
»Avoid the Risk
» Ameliorate the risk
» Retain the Risk
» Transfer or Share the Risk
Investment does not always guarantee return. You can suffer investment losses as well.
Ameliorating the Risk In the individual sense, you can ameliorate risk by thoroughly understanding the investments you are making, and by buying only high quality investments.
In the aggregate sense, you can ameliorate risk by creating a well-diversified portfolio. While this might be seen as sharing the risk, you can choose to consider it as a way to ameliorate risk. This is because a well-diversified portfolio creates a “smoother ride” with less chance of placing you in an undesirable position when the funds are needed. This is a philosophical position that could be attacked by active investors. They would say you are sharing the risk because you are giving up the opportunity for higher return in exchange for a smoother ride. All investors have to decide for themselves what level of active investment they believe is correct.
Present value of an investment is the discounted value of all its future cash flows that you derive from it.Collecting the data for life insurance needs analysis is similar to collecting for a retirement analysis. If a retirement needs analysis has already been completed, it is a good place to start. You need to consider:
Those costs you feel should not change by the loss of a spouse:
Quite probably the cost of housing
Costs of elementary and secondary school
Personal needs of the surviving spouse and children
Costs you feel are likely to increase because of the loss of a spouse:
One time costs associated with death
Child care
Education or training for the surviving spouse
Insurance costs due to loss of employer coverage
Costs you feel are likely to decrease because of loss of a spouse:
General family living costs
Medical and dental costs
Property and casualty insurance (fewer people to insure)
Costs you feel are likely to be eliminated because of loss of a spouse:
Life insurance
Disability insurance
Second automobile
Deceased spouse’s hobbies
Modification of goals because of loss of a spouse:
Change of education goals
Change of retirement goals
Change of legacy goals
Those costs you feel should not change by the loss of a spouse:
Quite probably the cost of housing
Costs of elementary and secondary school
Personal needs of the surviving spouse and children
Costs you feel are likely to increase because of the loss of a spouse:
One time costs associated with death
Child care
Education or training for the surviving spouse
Insurance costs due to loss of employer coverage
Costs you feel are likely to decrease because of loss of a spouse:
General family living costs
Medical and dental costs
Property and casualty insurance (fewer people to insure)
Costs you feel are likely to be eliminated because of loss of a spouse:
Life insurance
Disability insurance
Second automobile
Deceased spouse’s hobbies
Modification of goals because of loss of a spouse:
Change of education goals
Change of retirement goals
Change of legacy goals
http://learn.uci.edu/oo/getDemoPage.php?course=AR0102092&lesson=21&topic=2&page=3
Implicit Statement
My children will be able to attain the level of education that is most appropriate to them.
Explicit Statements
A. It is a fundamental responsibility of parenthood to provide a child with the maximum education the child can achieve. I want to do everything that I can to help my children achieve that.
B. I want to provide my children with access to at least a basic post-secondary education.
C. Getting a college education is a cooperative effort between me and my child. While I will gladly pay some of the costs, my children will need to bear some themselves.
D. College is the first real adult decision that my children will have to make. My idea is to be able to hand them $_________ and let them make their own decisions.
E. College is important but so is retirement. I do not want to sacrifice my retirement for my children’s college education. However, I am prepared to make some sacrifices in my current lifestyle.
F. College is important, but so is retirement and my current lifestyle. I do not want to sacrifice either for my children’s education. If there is extra money, then I would consider saving for their education.
G. Let’s see how things evolve. As best we can, we will pay for it out of cash flow at the time.
Implicit Statement
My children will be able to attain the level of education that is most appropriate to them.
Explicit Statements
A. It is a fundamental responsibility of parenthood to provide a child with the maximum education the child can achieve. I want to do everything that I can to help my children achieve that.
B. I want to provide my children with access to at least a basic post-secondary education.
C. Getting a college education is a cooperative effort between me and my child. While I will gladly pay some of the costs, my children will need to bear some themselves.
D. College is the first real adult decision that my children will have to make. My idea is to be able to hand them $_________ and let them make their own decisions.
E. College is important but so is retirement. I do not want to sacrifice my retirement for my children’s college education. However, I am prepared to make some sacrifices in my current lifestyle.
F. College is important, but so is retirement and my current lifestyle. I do not want to sacrifice either for my children’s education. If there is extra money, then I would consider saving for their education.
G. Let’s see how things evolve. As best we can, we will pay for it out of cash flow at the time.
Analyzing these explicit statements about college savings goals, we see that the first four (A-D) are statements about how much is needed for college and the next two (E-F) are about how much you can afford now. (The last explicit statement, of course, does not address savings goals at all, so we won’t analyze it here.)
How much is needed for college later?
How much can I afford now?
A. It is a fundamental responsibility of parenthood to provide a child with the maximum education the child can achieve. I want to do everything that I can to help my children achieve that.
B. I want to provide my children with access to at least a basic post-secondary education.
C. Getting a college education is a cooperative effort between me and my child. While I will gladly pay some of the costs, my children will need to bear some themselves.
D. College is the first real adult decision that my children will have to make. My idea is to be able to hand them $___ and let them make their own decisions.
E. College is important but so is retirement. I do not want to sacrifice my retirement for my children’s college education. However, I am prepared to make some sacrifices in my current lifestyle.
F. College is important, but so is retirement and my current lifestyle. I do not want to sacrifice either for my children’s education. If there is extra money, then I would consider saving for their education.
Clearly these two points of view require a different style of analysis.
1. The first group requires you to analyze the school(s) or school type that you might consider, create a target amount, and then analyze the amount you should save to meet that goal.
2. The second group requires you to analyze how much you think you might have and then compare it to what might be needed. Then, determine if you feel this amount is sufficient.
How much is needed for college later?
How much can I afford now?
A. It is a fundamental responsibility of parenthood to provide a child with the maximum education the child can achieve. I want to do everything that I can to help my children achieve that.
B. I want to provide my children with access to at least a basic post-secondary education.
C. Getting a college education is a cooperative effort between me and my child. While I will gladly pay some of the costs, my children will need to bear some themselves.
D. College is the first real adult decision that my children will have to make. My idea is to be able to hand them $___ and let them make their own decisions.
E. College is important but so is retirement. I do not want to sacrifice my retirement for my children’s college education. However, I am prepared to make some sacrifices in my current lifestyle.
F. College is important, but so is retirement and my current lifestyle. I do not want to sacrifice either for my children’s education. If there is extra money, then I would consider saving for their education.
Clearly these two points of view require a different style of analysis.
1. The first group requires you to analyze the school(s) or school type that you might consider, create a target amount, and then analyze the amount you should save to meet that goal.
2. The second group requires you to analyze how much you think you might have and then compare it to what might be needed. Then, determine if you feel this amount is sufficient.
http://learn.uci.edu/oo/getDemoPage.php?course=AR0102092&lesson=21&topic=3&page=2
Saving for college and paying for college may seem like two different topics and in many ways they are. However, in one important way, they are linked. The amount that you have saved often impacts the amount of financial aid that your child may be eligible to receive. This is particularly important because it is among the ways that your child can support their “share” of the cost.
There are many programs that may be available to your child. They fall into three categories:
Scholarships
Grants
Loans
All of them are considered financial aid, and applying for any of them involves an analysis of the child’s ability to pay for college. Three important factors in this analysis are your child’s savings, your savings, and your current income. The ways that colleges look at these factors differs between colleges and changes over time; therefore, we can only address this with generalizations. We will only consider the savings methods. We will not consider potential loan sources. Let’s look at types of accounts next.
Saving for college and paying for college may seem like two different topics and in many ways they are. However, in one important way, they are linked. The amount that you have saved often impacts the amount of financial aid that your child may be eligible to receive. This is particularly important because it is among the ways that your child can support their “share” of the cost.
There are many programs that may be available to your child. They fall into three categories:
Scholarships
Grants
Loans
All of them are considered financial aid, and applying for any of them involves an analysis of the child’s ability to pay for college. Three important factors in this analysis are your child’s savings, your savings, and your current income. The ways that colleges look at these factors differs between colleges and changes over time; therefore, we can only address this with generalizations. We will only consider the savings methods. We will not consider potential loan sources. Let’s look at types of accounts next.
Estate Planning
There are five primary ways in which you can make your desires known. They are all legal documents, and while some are simple enough not to need the assistance of a lawyer, using a lawyer helps assure you that your desires will be met. Used together they can provide a sufficient estate plan for even moderately substantial estates (a few million dollars).
By contract
Will
Last Medical Directive (sometimes called a Living Will)
Power of Attorney
Trust
Each of these has a slightly different context and is directed at a slightly different audience.
Earnings Yield and Earnings Growth (5)
http://spreadsheets.google.com/pub?key=tB2t3SJMRVNLsb4C8kawnlA&output=html
Company XYZA1
From 1995 to 2009:
EPS grew from 9.82 to 20 , (CAGR of 4.86% )
DPS (net of tax) grew from 2.65 to 5.2 , (CAGR of 4.6% )
DPO ratio (net DPS) averaged 24.33% , in 2009 was 26%
EY increased (decreased) from 3.47% to 9.3% , averaged 5.97% per year invested, and averaged 8.2% per 5 years invested.
DY increased (decreased) from 0.94% to 2.42% , AVERAGED 1.49% per year invested, and averaged 1.86% per 5 years invested.
Share price rose (fell) from 2.83 to 2.15 , (CAGR of -1.82% )
Total annual return averaged -0.32% (Cap. Appr of -1.82% + DY of 1.49% )
Comments:
Those who bought this stock at the high prices of 1995, 1996, and 1997 and held till today, would find that this share is today below these high prices, abeit in a bear market.
Though this is a company running a monopoly business, paying too much for a good stock can mean a negative return for the investment.
Therefore, it is always important to buy a good company when its price is obviously low, e.g. during the time when the market is obviously low, or when its price is temporarily down not related to any deterioration in its fundamentals.
On the other hand, those who bought this stock at the low prices of 1997 and 1998, would have reasonable returns from this stock. This would have been a situation when the investor might wish he or she had averaged down on this stock during those times.
Let us also examine the returns from this stock from the year 1999.
http://spreadsheets.google.com/pub?key=t5B6EOYlRpP6CMU7pMQbDiA&output=html
Company XYZA1(1999-2009)
From 1999 to 2009:
EPS grew from 9 to 20 , (CAGR of 12.02% )
DPS (net of tax) grew from 2.5 to 5.2 , (CAGR of 8.48% )
DPO ratio (net DPS) averaged 23.28% , in 2009 was 26%
EY increased (decreased) from 5.86% to 9.3% , averaged 6.31% per year invested, and averaged 10.49% per 5 years invested.
DY increased (decreased) from 1.19% to 2.42% , AVERAGED 1.5% per year invested, and averaged 2.26% per 5 years invested.
Share price rose (fell) from 1.535 to 2.15 , (CAGR of 3.43% )
Total annual return averaged 4.93% (Cap. Appr of 3.43% + DY of 1.5% )
Company XYZA1
From 1995 to 2009:
EPS grew from 9.82 to 20 , (CAGR of 4.86% )
DPS (net of tax) grew from 2.65 to 5.2 , (CAGR of 4.6% )
DPO ratio (net DPS) averaged 24.33% , in 2009 was 26%
EY increased (decreased) from 3.47% to 9.3% , averaged 5.97% per year invested, and averaged 8.2% per 5 years invested.
DY increased (decreased) from 0.94% to 2.42% , AVERAGED 1.49% per year invested, and averaged 1.86% per 5 years invested.
Share price rose (fell) from 2.83 to 2.15 , (CAGR of -1.82% )
Total annual return averaged -0.32% (Cap. Appr of -1.82% + DY of 1.49% )
Comments:
Those who bought this stock at the high prices of 1995, 1996, and 1997 and held till today, would find that this share is today below these high prices, abeit in a bear market.
Though this is a company running a monopoly business, paying too much for a good stock can mean a negative return for the investment.
Therefore, it is always important to buy a good company when its price is obviously low, e.g. during the time when the market is obviously low, or when its price is temporarily down not related to any deterioration in its fundamentals.
On the other hand, those who bought this stock at the low prices of 1997 and 1998, would have reasonable returns from this stock. This would have been a situation when the investor might wish he or she had averaged down on this stock during those times.
Let us also examine the returns from this stock from the year 1999.
http://spreadsheets.google.com/pub?key=t5B6EOYlRpP6CMU7pMQbDiA&output=html
Company XYZA1(1999-2009)
From 1999 to 2009:
EPS grew from 9 to 20 , (CAGR of 12.02% )
DPS (net of tax) grew from 2.5 to 5.2 , (CAGR of 8.48% )
DPO ratio (net DPS) averaged 23.28% , in 2009 was 26%
EY increased (decreased) from 5.86% to 9.3% , averaged 6.31% per year invested, and averaged 10.49% per 5 years invested.
DY increased (decreased) from 1.19% to 2.42% , AVERAGED 1.5% per year invested, and averaged 2.26% per 5 years invested.
Share price rose (fell) from 1.535 to 2.15 , (CAGR of 3.43% )
Total annual return averaged 4.93% (Cap. Appr of 3.43% + DY of 1.5% )
BELIEVING A BULL MARKET
BELIEVING A BULL MARKET
When markets are rapidly rising, value investing invariably falls out of favor with the investing public. In an upward racing market, value stocks appear dull and stodgy as the more speculative issues rush toward new market highs. But come the correction, it all looks different. Stable value stocks seem like trusted friends.
Most bull markets have well-defined characteristics. These include:
When markets are rapidly rising, value investing invariably falls out of favor with the investing public. In an upward racing market, value stocks appear dull and stodgy as the more speculative issues rush toward new market highs. But come the correction, it all looks different. Stable value stocks seem like trusted friends.
Most bull markets have well-defined characteristics. These include:
- Price levels are historically high.
- Price to earnings ratios are high.
- Dividend yields are low compared with bond yields (or compared with a stock’s particular dividend yield pattern).
- Margin buying becomes excessive as investors are driven to borrow to buy more of the high-priced stocks that look attractive to them.
- There is a swarm of new stock offerings, especially initial public offerings (IPOs) of questionable quality. This bull market is what investment bankers and stock promoters call the “window of opportunity.” Because IPOs so often occur when Wall Street is primed to pay top dollar, seasoned investors joke that IPO stands for “it’s probably overpriced.”
Just a reminder not to be too carried away by the rising market.
THE PAUSE AT THE TOP OF THE ROLLER COASTER
There is only one strategy that works for value investors when the market is high – patience. The investor can do one of two things, both of which require steady nerves.
· Sell all stocks in a portfolio, take profits, and wait for the market to decline. At that time, many good values will present themselves. This may sound easy, but it pains many investors to sell a stock when its price is still rising.
· Stick with those stocks in a portfolio that have long-term potential. Sell only those that are clearly overvalued, and once more wait for the market to decline. At this time, value stocks may be appreciating at slow pace compared with the frisky growth stocks, but not always.
But come the correction, be it sudden or slow, the well-chosen value stocks have a better chance of holding their price.
A nice quotation: We believe in taking advantage of temporary market downturns to position our portfolios for the long term.
Earnings Yield and Earnings Growth (4)
http://spreadsheets.google.com/pub?key=tmw-xvsqNnjlMQGQrL2RXtg&output=html
Company XYZ9growth
From 2001 to 2009:
EPS grew from 6.2 to 44.5 , (CAGR of 27.94% )
DPS (net of tax) grew from 1.6 to 12 , (CAGR of 28.64% )
DPO ratio (net DPS) averaged 26.41% , in 2009 was 26.97%
EY increased (decreased) from 14.09% to 10.55% , averaged 8.18% per year invested, and averaged 44.63% per 5 years invested.
DY increased (decreased) from 3.64% to 2.84% , AVERAGED 2.13% per year invested, and averaged 11.14% per 5 years invested.
Share price rose (fell) from 0.44 to 4.22 , (CAGR of 32.66% )
Total annual return averaged 34.79% (Cap. Appr of 32.66% + DY of 2.13% )
http://spreadsheets.google.com/pub?key=tmjm_LUI2F6vHg5jI1PXFwA&output=html
Company XYZ-A0
From 1995 to 2009:
EPS grew from 4.3 to 40.5 , (CAGR of 16.13% )
DPS (net of tax) grew from 0.5 to 7 , (CAGR of 19.24% )
DPO ratio (net DPS) averaged 16.58% , in 2009 was 17.28%
EY increased (decreased) from 3.54% to 13.48% , averaged 8.74% per year invested, and averaged 24.39% per 5 years invested.
DY increased (decreased) from 0.41% to 2.33% , AVERAGED 1.33% per year invested, and averaged 4.3% per 5 years invested.
Share price rose (fell) from 1.215 to 3.005 , (CAGR of 6.22% )
Total annual return averaged 7.55% (Cap. Appr of 6.22% + DY of 1.33% )
http://spreadsheets.google.com/pub?key=t8PIM_gvYk8VkNNfNFz4k2g&output=html
Company NBG1
From 1999 to 2009:
EPS grew (shrank) from 7.8 to -15 , (CAGR of -209.37% )
DPS (net of tax) grew (shrank) from 2.9 to 0 , (CAGR of -100% )
DPO ratio (net DPS) averaged 94.1% , in 2009 was 0%
EY increased (decreased) from 5.29% to -57.69% , averaged -2.37% per year invested, and averaged -0.79% per 5 years invested.
DY increased (decreased) from 2.33% to 0% , AVERAGED 1.98% per year invested, and averaged 1.88% per 5 years invested.
Share price rose (fell) from 1.475 to 0.26 , (CAGR of -15.93% )
Total annual return averaged -13.96% (Cap. Appr of -15.93% + DY of 1.98% )
Company XYZ9growth
From 2001 to 2009:
EPS grew from 6.2 to 44.5 , (CAGR of 27.94% )
DPS (net of tax) grew from 1.6 to 12 , (CAGR of 28.64% )
DPO ratio (net DPS) averaged 26.41% , in 2009 was 26.97%
EY increased (decreased) from 14.09% to 10.55% , averaged 8.18% per year invested, and averaged 44.63% per 5 years invested.
DY increased (decreased) from 3.64% to 2.84% , AVERAGED 2.13% per year invested, and averaged 11.14% per 5 years invested.
Share price rose (fell) from 0.44 to 4.22 , (CAGR of 32.66% )
Total annual return averaged 34.79% (Cap. Appr of 32.66% + DY of 2.13% )
http://spreadsheets.google.com/pub?key=tmjm_LUI2F6vHg5jI1PXFwA&output=html
Company XYZ-A0
From 1995 to 2009:
EPS grew from 4.3 to 40.5 , (CAGR of 16.13% )
DPS (net of tax) grew from 0.5 to 7 , (CAGR of 19.24% )
DPO ratio (net DPS) averaged 16.58% , in 2009 was 17.28%
EY increased (decreased) from 3.54% to 13.48% , averaged 8.74% per year invested, and averaged 24.39% per 5 years invested.
DY increased (decreased) from 0.41% to 2.33% , AVERAGED 1.33% per year invested, and averaged 4.3% per 5 years invested.
Share price rose (fell) from 1.215 to 3.005 , (CAGR of 6.22% )
Total annual return averaged 7.55% (Cap. Appr of 6.22% + DY of 1.33% )
http://spreadsheets.google.com/pub?key=t8PIM_gvYk8VkNNfNFz4k2g&output=html
Company NBG1
From 1999 to 2009:
EPS grew (shrank) from 7.8 to -15 , (CAGR of -209.37% )
DPS (net of tax) grew (shrank) from 2.9 to 0 , (CAGR of -100% )
DPO ratio (net DPS) averaged 94.1% , in 2009 was 0%
EY increased (decreased) from 5.29% to -57.69% , averaged -2.37% per year invested, and averaged -0.79% per 5 years invested.
DY increased (decreased) from 2.33% to 0% , AVERAGED 1.98% per year invested, and averaged 1.88% per 5 years invested.
Share price rose (fell) from 1.475 to 0.26 , (CAGR of -15.93% )
Total annual return averaged -13.96% (Cap. Appr of -15.93% + DY of 1.98% )
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