At the end of these 700 words you will all be able to value your business, your shares, your investment property, even your spouse.

Doing the sums is is easy, but it's still a value judgment
December 11, 2010

YOU may have heard of a discounted cash-flow valuation. You should have. It is core to life, the financial industry and everything else. But, of course, half of us haven't and the other half are too afraid to ask.

So in a mild attempt to educate you, let me take you gently through it so you'll never have to nod cluelessly again. At the end of these 700 words you will all be able to value your business, your shares, your investment property, even your spouse.

Let's start with this. What is the value of a dollar? Well it's a dollar, of course. OK. So what is the value of a dollar in a year's time? Ah, well, it's not a dollar. And this is the issue. Thanks to inflation, a dollar in a year's time is only worth about 97¢ because, by the time you get the dollar, prices will have gone up by about 3 per cent, so the dollar in a year's time will only buy you about 97¢ worth of the goods that you could buy today.

We can now use this to value a company, an asset or an individual. All you have to do is work out how much money they are going to earn and, using inflation, turn those future dollars back into today's money, add them all up, add in the value of any other assets they have and that's what they are worth.

Here's the root calculation: A dollar earned in a year's time is worth $1 divided by 1.03 (1 plus the inflation rate). That's 97¢ in today's money (97.08¢, actually). To work out the current value of a dollar earned in two years you divide by 1.03 and divide by 1.03 again. Which gives us 94.26¢. So 94.26¢ is all you would want to pay for a dollar someone is going to give you in two years' time. So to bust a bit of jargon, the net present value (NPV) of a dollar earned in two years' time, discounted at the rate of inflation, is 94.26¢.

So now let's value a company. 

• Step one: Forecast how much profit it will make each year between now and eternity. 
• Step two: Use our calculation to ''discount'' all those future profits and price them in today's money. 
• Step three: Add up all those discounted profits. 
• Step four: Add any other assets (cash and buildings). That's the current value of the company and what someone buying the company should be prepared to pay today.

So you can see that by forecasting future profits and discounting the value of future profits back to today's money you can value almost any income-producing company, asset, property, or person. You can even work out what your own net present value is. If you spend more than you earn, it's zero.

So this is what research analysts do with shares. They forecast profits, discount those profits back to today's money, add them all up, account for any other assets, divide by the number of shares on issue and come up with what a share is worth. A lot of them call that a ''target price''.

Of course, it's not quite this simple. In the real world they don't use inflation. They calculate a ''discount rate'' and the arguments over what discount rate to use are endless, but basically, rather than inflation, it is what you could have earned investing your money somewhere else. It is the opportunity lost, not the inflation cost. So if you could have put the money in a bond for 10 years and earned 5.5 per cent you'd use that instead of inflation.

So that's it. How to value a company or share. Nice concept.

But before you go out and value your spouse you should know that it's all complete bollocks. Of course it is. Because, in the end, there are so many forecasts, assumptions and subjective opinions integrated into the calculation of value that it ceases to be a science and ends up an imperfect art. A basis for the negotiation of price at best. A starting point for an argument between buyer and seller. May the best negotiator win. And that's the sharemarket.

Marcus Padley is a stockbroker with Patersons Securities and the author of sharemarket newsletter Marcus Today. For a free trial visit marcustoday. com.au

His views do not necessarily reflect the views of Patersons.


http://www.theage.com.au/business/doing-the-sums-is-is-easy-but-its-still-a-value-judgment-20101210-18swe.html

Don't Be Misled By the P/E Ratio. It's actually growth that determines value.

By Nathan Slaughter Thursday, March 25, 2010

You might know the name Bill Miller. Aside from Warren Buffett, he could be the closest thing the investment world has to a rock star.

Every year, millions of investors set out with one goal in mind: to outperform the S&P 500. Miller's Legg Mason Value Trust did that for an impressive 15 years in a row.

That streak was finally broken in 2006, but his reputation was firmly cemented at that point. From his fund's inception in April 1982 until 2006, Miller steered his fund to annualized gains of +16%. That was good enough to turn a $10,000 investment into $395,000 -- about $156,000 more than a broad index fund would have returned.

After a long overdue slump, Miller's fund is back on top of the charts again. In fact, his fund's +47% gain during 2009 was 1,200 basis points ahead of the S&P 500.

Here's what you might not know. Miller achieved stardom and ran circles around other value fund managers by taking large stakes in companies like eBay (Nasdaq: EBAY), Google (Nasdaq: GOOG), and Amazon.com (Nasdaq: AMZN) -- highfliers that value purists wouldn't touch because of their high P/E ratios.

The message is clear: If P/E ratios are your only value barometer, then get ready to let some profits slip through your fingers. In fact, Investor's Business Daily has found that some of the market's biggest winners were trading at prices above 30 times earnings before they made their move.

All too often, novice investors buy into preconceived notions of what's cheap and what's expensive. A stock with a P/E below 10 may be a better deal than another trading at a P/E above 20. But then again it might not. These figures might get you in the ballpark -- but biting hook, line and sinker can cost you big.

Putting aside the fact that earnings can be inflated by asset sales, deflated by one-time charges, and distorted in other ways, let's remember that today is just a brief snapshot in time.

The point is, when you become a part owner in a company, you have a claim not just on today's earnings, but all future profits as well. The faster the company is growing, the more that future cash flow stream is worth to shareholders.

That's why Warren Buffett likes to say that "growth and value are joined at the hip."

You can't encapsulate the inherent value of a business in a P/E ratio. Take Amazon, for example, which has traded at 66 times earnings on average during the past five years. On occasion, the stock has garnered multiples above 80. Many looked at that figure and immediately dismissed the company as exorbitantly overpriced. And for most companies that would be true.

But as it turns out, the shares were actually cheap relative to what the e-commerce giant would soon become. In fact, the "expensive" $35 price tag from March 2005 is only about 12 times what the company earns per share now -- and guys like Bill Miller that spotted the firm's potential have since enjoyed +230% gains.

Digging into the annual report archives, I see where CEO Jeff Bezos applauded Amazon's sales of $148 million in 1997. Today, the firm rakes in that amount every 2.2 days. Clearly, that type of hyper-growth deserves a premium price.

And that's exactly why price-conscious value investors shouldn't automatically fear growth stocks -- growth is simply a component of value.

Let me show you an example. The table below depicts the impact of future cash flow growth assumptions on Company XYZ which trades today at $10. For the sake of consistency, we will keep all other variables constant.

If free cash flow climb at a modest +6% annual pace during the next five years, then your $10 investment in Company XYZ would be worth about $13.30 per share or a +33.0% return. If cash flow grows even faster, its projected value quickly ramps up to returns of +46.9%, +101.1% or even +148.8%.

We've been taught to believe there's an invisible velvet rope separating value stocks from growth stocks. But as you can see with Company XYZ, it's actually growth that determines value. So don't be blinded to the possibility that the market's most promising growth stocks can sometimes be the cheapest.

Many analysts choose to use the Price/Earnings to Growth (PEG) ratio in addition to the P/E ratio. PEG is a simple calculation -- (P/E) / (Annual Earnings Growth Rate).

The PEG ratio is used to evaluate a stock's valuation while taking into account earnings growth. A rule of thumb is that a PEG of 1.0 indicates fair value, less than 1.0 indicates the stock is undervalued, and more than 1.0 indicates it's overvalued. Here's how it works:

If Stock ABC is trading with a P/E ratio of 25, a value investor might deem it "expensive." But if its earnings growth rate is projected to be 30%, its PEG ratio would be 25 / 30 PEG.83. The PEG ratio says that Stock ABC is undervalued relative to its growth potential.

It is important to realize that relying on one metric alone will almost never give you an accurate measure of value. Being able to use and interpret a number of measures will give you a better idea of the whole picture when evaluating a stock's performance and potential.


http://www.investinganswers.com/education/dont-be-misled-pe-ratio-1115

Price-to-Earnings Ratio (P/E)

What It Is:

A valuation method of a company’s current share price compared to its per-share earnings.

How It Works/Example:

The market value per share is the current trading price for one share in a company, a relatively straightforward definition. However, earnings per share (EPS) may not be as intuitive for most investors. The more traditional and widely used version of the EPS calculation comes from the previous four quarters of the price-to-earnings ratio, called a trailing P/E. Another variation of the EPS can be calculated using a forward P/E, estimating the earnings for the upcoming four quarters. Both sides have their advantages, with the trailing P/E approach using actual data and the forward P/E predicting possible outcomes for the stock. Calculated as the following;

Price-to-Earnings Ratio (P/E) = Market value per share / Earnings Per Share (EPS)

Moving on from the basics, let us do a sample calculation with company XYZ that currently trades at $100.00 and has an earnings per share (EPS) of $5.00. Using the previously mentioned formula, you can calculate that XYZ’s price-to-earnings ratio is 100 / 5 = 20.

For more explanation of how to use the P/E ratio in conjunction with other valuation ratios, please read our educational article Don't Be Misled By the P/E Ratio

Why It Matters:

The price-to-earnings ratio is a powerful, but limited tool. For investors, it allows a very quick snapshot of the company’s finances without getting bogged down in the details of an accounting report.

Let us use our previous example of XYZ, and compare it to another company, ABC. Company XYZ has a P/E of 20, while company ABC has a P/E of 10. Company XYZ has the highest P/E ratio of the two and this would lead most investors to expect higher earnings in the future than from company ABC (which possesses a lower P/E ratio).

As noted earlier, the P/E ratio is limited. It does not paint the entire picture for the potential investor; rather it is a complementary tool in your financial toolbox. Be wary of forward EPS measures, (remember, EPS is an essential aspect of calculation of the P/E ratio) as they are matters of prediction and are only estimates of projected earnings. Further, trailing P/E ratios can only tell you what happened to a company in the previous time periods.

http://www.investinganswers.com/term/price-earnings-ratio-pe-459

When Stock Prices Drop, Where's the Money?

When Stock Prices Drop, Where's the Money?

by Investopedia Staff
Monday, March 16, 2009

Have you ever wondered what happened to your socks when you put them into the dryer and then never saw them again? It's an unexplained mystery that may never have an answer. Many people feel the same way when they suddenly find that their brokerage account balance has taken a nosedive. So, where did that money go? Fortunately, money that is gained or lost on a stock doesn't just disappear. Read to find out what happens to it and what causes it.

Disappearing Money

Before we get to how money disappears, it is important to understand that regardless of whether the market is in bull (appreciating) or bear (depreciating) mode, supply and demand drive the price of stocks, and fluctuations in stock prices determine whether you make money or lose it.

So, if you purchase a stock for $10 and then sell it for only $5, you will (obviously) lose $5. It may feel like that money must go to someone else, but that isn't exactly true. It doesn't go to the person who buys the stock from you. The company that issued the stock doesn't get it either. The brokerage is also left empty-handed, as you only paid it to make the transaction on your behalf. So the question remains: where did the money go?

Implicit and Explicit Value

The most straightforward answer to this question is that it actually disappeared into thin air, along with the decrease in demand for the stock, or, more specifically, the decrease in investors' favorable perception of it.

But this capacity of money to dissolve into the unknown demonstrates the complex and somewhat contradictory nature of money. Yes, money is a teaser - at once intangible, flirting with our dreams and fantasies, and concrete, the thing with which we obtain our daily bread. More precisely, this duplicity of money represents the two parts that make up a stock's market value: the implicit and explicit value.

On the one hand, money can be created or dissolved with the change in a stock's implicit value, which is determined by the personal perceptions and research of investors and analysts. For example, a pharmaceutical company with the rights to the patent for the cure for cancer may have a much higher implicit value than that of a corner store.

Depending on investors' perceptions and expectations for the stock, implicit value is based on revenues and earnings forecasts. If the implicit value undergoes a change - which, really, is generated by abstract things like faith and emotion - the stock price follows. A decrease in implicit value, for instance, leaves the owners of the stock with a loss because their asset is now worth less than its original price. Again, no one else necessarily received the money; it has been lost to investors' perceptions.

Now that we've covered the somewhat "unreal" characteristic of money, we cannot ignore how money also represents explicit value, which is the concrete worth of a company. Referred to as the accounting value (or sometimes book value), the explicit value is calculated by adding up all assets and subtracting liabilities. So, this represents the amount of money that would be left over if a company were to sell all of its assets at fair market value and then pay off all of liabilities.

But you see, without explicit value, implicit value would not exist: investors' interpretation of how well a company will make use of its explicit value is the force behind implicit value.

Disappearing Trick Revealed

For instance, in February 2009, Cisco Systems Inc. had 5.81 billion shares outstanding, which means that if the value of the shares dropped by $1, it would be the equivalent to losing more than $5.81 billion in (implicit) value. Because CSCO has many billions of dollars in concrete assets, we know that the change occurs not in explicit value, so the idea of money disappearing into thin air ironically becomes much more tangible. In essence, what's happening is that investors, analysts and market professionals are declaring that their projections for the company have narrowed. Investors are therefore not willing to pay as much for the stock as they were before.

So, faith and expectations can translate into cold hard cash, but only because of something very real: the capacity of a company to create something, whether it is a product people can use or a service people need. The better a company is at creating something, the higher the company's earnings will be and the more faith investors will have in the company.

In a bull market, there is an overall positive perception of the market's ability to keep producing and creating. Because this perception would not exist were it not for some evidence that something is being or will be created, everyone in a bull market can be making money. Of course, the exact opposite can happen in a bear market.

To sum it all up, you can think of the stock market as a huge vehicle for wealth creation and destruction.

Disappearing Socks

No one really knows why socks go into the dryer and never come out, but next time you're wondering where that stock price came from or went to, at least you can chalk it up to market perception.

http://finance.yahoo.com/focus-retirement/article/106739/When-Stock-Prices-Drop-Where

Related:

Focus on Lifelong Investing

His "Balinese palace" and his fall from grace

'He is not in a good place at the moment, his political career is as good as finished and he is fighting to clear his name.'
Star 12.12.2010

APM Insider Trade

Insider trade:

Date: 03/11/10
Dato Tan Heng Chew sold 2.165 million shares

APM AUTOMOTIVE HOLDINGS BERHAD 

====19/11/2010	Changes in Director's Interest (S135) - Azman Badrillah
====09/11/2010	Changes in Director's Interest (S135) - Dato' Tan Heng Chew
====09/11/2010	Changes in Sub. S-hldr's Int. (29B) - Dato' Tan Heng Chew
====08/11/2010	Changes in Sub. S-hldr's Int. (29B) - Tan Eng Soon
====08/11/2010	Changes in Sub. S-hldr's Int. (29B) - Tan Chong Consolidation Sdn Bhd
====08/11/2010	Changes in Sub. S-hldr's Int. (29B) - Tan Kheng Leong
====08/11/2010	Changes in Director's Interest (S135) - Tan Eng Soon
====27/09/2010	Changes in Director's Interest (S135) - Azman Badrillah
====15/09/2010	Changes in Director's Interest (S135) - Azman Badrillah
====04/06/2010	Changes in Director's Interest (S135) - Dato' Tan Heng Chew
====04/06/2010	Changes in Director's Interest (S135) - Tan Eng Soon
====04/06/2010	Changes in Sub. S-hldr's Int. (29B) - Tan Eng Soon
====04/06/2010	Changes in Sub. S-hldr's Int. (29B) - Tan Kheng Leong
====04/06/2010	Changes in Sub. S-hldr's Int. (29B) - Tan Chong Consolidated Sdn Bhd
====04/06/2010	Changes in Sub. S-hldr's Int. (29B) - Dato' Tan Heng Chew
====28/04/2010	Changes in Director's Interest (S135) - Azman Badrillah
====14/04/2010	Changes in Director's Interest (S135) - Azman Badrillah
====09/04/2010	Changes in Director's Interest (S135) - Dato' Tan Heng Chew
====11/03/2010	Changes in Director's Interest (S135) - Dato' Tan Heng Chew
====11/03/2010	Changes in Sub. S-hldr's Int. (29B) - Dato' Tan Heng Chew
====11/03/2010	Changes in Director's Interest (S135) - Tan Eng Soon
====11/03/2010	Changes in Sub. S-hldr's Int. (29B) - Tan Eng Soon
====11/03/2010	Changes in Director's Interest (S135) - Tan Eng Hwa
====11/03/2010	Changes in Sub. S-hldr's Int. (29B) - Wealthmark Holdings Sdn Bhd
====09/03/2010	Notice of Person Ceasing (29C) - LEMBAGA TABUNG HAJI
====05/03/2010	Changes in Sub. S-hldr's Int. (29B) - Lembaga Tabung Haji
====04/03/2010	Changes in Director's Interest (S135) - Azman Badrillah
====02/03/2010	Changes in Director's Interest (S135) - Azman Badrillah
====02/03/2010	Changes in Sub. S-hldr's Int. (29B) - Lembaga Tabung Haji
====02/02/2010	Changes in Sub. S-hldr's Int. (29B) - Tan Kheng Leong
====02/02/2010	Changes in Sub. S-hldr's Int. (29B) - Tan Kheng Leong
====02/02/2010	Changes in Sub. S-hldr's Int. (29B) - Tan Kheng Leong
====29/01/2010	Changes in Sub. S-hldr's Int. (29B) - Lembaga Tabung Haji
====28/01/2010	Notice of Person Ceasing (29C) - Dr Tan Kang Leong
====28/01/2010	Changes in Sub. S-hldr's Int. (29B) - Lembaga Tabung Haji
====25/01/2010	Changes in Director's Interest (S135) - Azman Badrillah
====25/01/2010	Changes in Sub. S-hldr's Int. (29B) - Tan Chong Consolidated Sdn Bhd ("TCC")
====25/01/2010	Changes in Director's Interest (S135) - Dato' Tan Heng Chew
====25/01/2010	Changes in Sub. S-hldr's Int. (29B) - Dato' Tan Heng Chew
====25/01/2010	Changes in Director's Interest (S135) - Tan Eng Soon
====25/01/2010	Changes in Sub. S-hldr's Int. (29B) - Tan Eng Soon
====25/01/2010	Notice of Person Ceasing (29C) - Parasand Limited ("Parasand")
====22/01/2010	Changes in Sub. S-hldr's Int. (29B) - Lembaga Tabung Haji
====21/01/2010	Changes in Director's Interest (S135) - Azman Badrillah
====19/01/2010	Changes in Sub. S-hldr's Int. (29B) - Lembaga Tabung Haji
====15/01/2010	Changes in Sub. S-hldr's Int. (29B) - Lembaga Tabung Haji

Madoff trustee sues HSBC for nine billion dollars

Business 2010-12-07 11:56

NEW YORK, Tuesday 7 December 2010 (AFP) - The trustee charged with recouping assets for victims of Wall Street fraudster Bernard Madoff is suing British banking giant HSBC and related entities for at least nine billion dollars.

In a statement issued Sunday, Irving Picard accused the firms of enabling Madoff's massive Ponzi scheme by creating, marketing and supporting "an international network of a dozen feeder funds based in Europe, the Caribbean and Central America."

HSBC and the related funds led investors to direct over 8.9 billion dollars into Bernard L. Madoff Investment Securities LLC (BLMIS) -- Madoff's fraudulent investment advisory business, according to Picard.

"The defendants also earned hundreds of millions of dollars by selling, marketing, lending to and investing in financial instruments designed to substantially assist Madoff by pumping money into BLMIS and prolonging the Ponzi scheme," despite being aware of the fraud, he added.

Italian bank UniCredit, Austrian banker Sonja Kohn and her Bank Medici are among those accused of helping the former Nasdaq chairman expand his scheme.

"Had HSBC and the defendants reacted appropriately to such warnings and other obvious badges of fraud outlined in the complaint, the Madoff Ponzi scheme would have collapsed years, billions of dollars and countless victims sooner," Picard said.

"The defendants were willfully and deliberately blind to the fraud, even after learning about numerous red flags surrounding Madoff."

Last week, Picard said he was seeking 6.4 billion dollars from JPMorgan Chase for supporting the scam and he has filed a suit against Swiss bank UBS seeking two billion dollars in damages for its part in the massive fraud.

Madoff, who touted himself as one of New York's most successful money managers, was arrested in early December 2008 for running a pyramid scheme. He was sentenced in June 2009 to 150 years in prison.

Madoff's victims, including charities, major banks, Hollywood moguls and savvy financial players, handed him tens of billions of dollars over more than two decades.

The crime rocked Wall Street, where Madoff was a pillar of the New York and Florida Jewish communities.

Madoff's right hand man, Frank DiPascali, and his accountant, David Friehling, have since pleaded guilty in an investigation that has yet to fully unravel the crime or compensate the approximately 16,000 direct victims.

Even the amount of money stolen remains elusive: Madoff originally claimed to have been managing 65 billion dollars, but in October the court-appointed liquidator said the real bottom line was 21.2 billion dollars.

Madoff has insisted he acted alone, but a handful of others, including an assistant, two executives, computer experts and a bookkeeper have also been arrested.

Madoff, who rose from a humble start as a lifeguard in New York to become one of Wall Street's most trusted and powerful money managers, is incarcerated in North Carolina.

His luxury watches, piano and other personal items were sold at auction to raise money for his fraud victims on November 13.

MySinchew 2010.12.07

Basic financial statements (Profit and Loss Account)

The particulars of a regular company's Profit & Loss Account would look as follows:

Revenue - Sales value generated
Cost of Goods Sold - All costs related to the sale of the goods
Gross Profit - The excess of revenue over cost of goods sold (or likewise Gross Loss if otherwise)
Operating Expenses - All remaining expenses of the operations
EBITDA - Earnings before interest, taxes, depreciation & Amortisation
Depreciation - The decrease in the value of capital assets which are expensed off
EBIT - Earnings before interest and taxes
Interest - Interest cost of borrowings
Taxes - Taxes imposed on income
Net Profit - The final bottom line



Saturday December 11, 2010

Basic financial statements interpreted

By RAYMOND ROY TIRUCHELVAM


FOR a non-finance person, evaluating a company's financial can be daunting, let alone understanding it to form an opinion. The most basic form of financial statements comprises the Profit & Loss Account or sometimes referred to as Income Statement and the Balance Sheet.

Another two statements that make a complete financial information for reporting purposes comprise the Statement of Retained Earnings and Statement of Cash Flow.

The objective of a financial statement is to provide information about the financial position, performance and changes in the position of an enterprise.

The Balance Sheet represents the financial position or net worth of a business entity on a specified date. The presentation is based on a fundamental accounting equation of Assets = Liabilities + Shareholders Fund. The main categories of assets are usually listed first, usually in order of liquidity. Next follows liabilities, short and long term, which represent payables and borrowings held by the entity.

The difference between the assets and liabilities (Assets Liabilities = Shareholders Funds), is known as Shareholders Funds, or sometimes referred to as owner's equity, that entails the company's capital plus retained earnings. Borrowings (liability) or owner's money (owner's equity) are the two means used for financing an asset.

Mathematically, over a period of time, if the assets grow bigger than the liabilities, it would mean that the entity has made a profit (which represents the essence of the Profit & Loss Account); this is reflected via an increased asset base (taking shape in many forms from cash, inventories, accounts receivable, fixed assets or investments).

Reverting to the Balance Sheet equation, the Shareholders Fund will reflect the increment. Since the entity's capital remains constant (unless the new assets are caused by new share issues), the increment is credited to a special account called Retained Earnings, as the name denotes.

Next, the Profit & Loss Account represents summarised transactions of an entity's performance over a given period, showing its profitability (or losses). Acting as the management's scorecard, it identifies the revenues and expenses undertaken which results in either a profit or a loss, based on the fundamental accounting concept of: Revenue Expenses = Profit (or Loss if expenses exceed revenue).

This in return will drive the direction of the Shareholders Fund (in particular Retained Earnings sub-category), for good (profit) or for worse (loss).

The particulars of a regular company's Profit & Loss Account would look as in Table 1.

There is also a category of item to be on the lookout called Unusual Item, which represents non-recurring non-revenue based transaction undertaken by the entity that results in a profit or loss. Examples of MAS selling aircraft, discontinuing a business line, incurring losses from natural disaster, writing down of investment value, are a few, which should be evaluated separately from the results from operations.

Due to its importance, EPS or Earnings Per Share is also required to be disclosed at the end of the Profit & Loss account. It presents the earnings divided by the total ordinary shares outstanding.

This single measure differentiates the efficiency in the earnings between companies, and represents the most important criteria in determining the price of the entity's shares and is used as a component to derive the all important PE or Price to Earnings ratio.

A large Retained Earnings balance as compared to the total Shareholders Fund, will denote a profitable company (accumulation of profits over the years), and a negative Retained Earnings (or Retained Loss) reflects the opposite. In extreme cases, the Retained Loss (debit balance) can overtake the Share Capital (credit balance), thus resulting in a negative Shareholders Fund. One surely would not want to invest in such a company.

Some listed companies, when the Retained Earnings gets so large (coupled with other factors such as inability to pay out dividend), reward the shareholders via Bonus Issue exercise, whereby part of the retained earnings are converted into new shares, accruing to existing shareholders.

This not only represents a short cut of the dividend payout, but also a tax free option via capital returns.

Raymond Roy Tiruchelvam, who has problems reconciling his gross habits with his net income is a financial planner with SABIC Group of Companies.

http://biz.thestar.com.my/news/story.asp?file=/2010/12/11/business/7567075&sec=business

Bursa Malaysia: Importance of Interpreting Volume Bars

Bursa Malaysia: Importance of Interpreting Volume Bars

Author: Lee TG | Publish date: Fri, 10 Dec 16:20


All the chart tools and technical indicators are derived from price. Most technical traders often overlook the importance of volume in the chart, not knowing the significance of interpreting volume bars.

There are two ways we can look at volume:
1. the relative volume, that is, the volume in relation to the previous bar or bars.
2. The actual volume, that is, the size of volume an individual bar represents.

Activities of smart money are shown not only in the price actions, but also in the volume. During the day of high volume, there is a big amount of professional activities shown in the volume histogram (possibly as much as 90%). When there is high volume up bars with wide spread, then it is possible that the professionals are selling.

Personally I will be wary of high volume and big price bars, and prefer not to participate, while many traders may be tempted to ride the uptrend, and often prompted by news and tips. I would think it is better to avoid entry, letting go of the perceived gains rather than risking possible actual losses. But most traders would get excited to chase the stocks when they see high volume price spike with a wide range bar. It is a general rule that strength comes in on high volume down-bars and weakness comes in on high volume up-bars. It is likely that professionals are selling into up bars so as not to be hurt by their own selling. When there is small volume, it merely means that there is no activity by the professionals, and all trading activities are by retail investors.


http://www.i3investor.com/jsp/incl/blogdet.jsp?f=11&e=54

Ringgit a favorite pick of Morgan Stanley

Ringgit a favorite pick of Morgan Stanley
Published: 2010/12/10


Malaysian ringgit and Singapore dollar are likely to outperform among Asian currencies next year, say Morgan Stanley strategists in research note.

They added that one of their top 2011 FX trade ideas is long MYR/JPY with target of Y29.0, about 8.6 per cent above current level near Y26.70.

“SGD and MYR are our favourite picks in Asia, as both are great reflation trades ... and both have hawkish central banks, strong economic fundamentals and very healthy balance of payments positions.”

Morgan Stanley economists see growth in Asia ex-Japan reaching 8.2 per cent in 2011, slowing only moderately from 9.5 per cent expected for 2010.

Another plus for MYR is potential benefits from rising commodity prices, since Malaysia is the only net commodity exporter in the region, say the strategists, who think INR, THB and IDR look overvalued and may lag in 2011 among Asian currencies.

Risks to Asian currencies include global “risk-off” events, potential for lagged policy responses to regional inflation and risk of more capital controls, they add. -- Reuters


Read more: Ringgit a favorite pick of Morgan Stanley http://www.btimes.com.my/Current_News/BTIMES/articles/20101210102032/Article/index_html#ixzz17hWyBjT4

Maybank's international operations expected to contribute 40% to group's net profit by 2015

Friday December 10, 2010

Maybank told to sell down stake in Indonesian bank
By LEONG HUNG YEE
hungyee@thestar.com.my


PETALING JAYA: Malayan Banking Bhd's (Maybank) Indonesia unit, PT Bank Internasional Indonesia (BII), saw its shares jump to a 10-year high amid comments by the country's regulator that Maybank refloat a 20% stake in BII within six months.

BII's shares surged 25% yesterday to 1,010 rupiah a piece. Its share price has also appreciated by more than 215% year-to-date.

Yesterday, Bloomberg quoted Indonesia capital market regulator chairman Ahmad Fuad Rahmany who said that Maybank needed to fulfil its sell-down requirement and complete the exercise by June 1, 2011.

Maybank acquired BII in 2008 for RM7.9bil and holds a 97.5% stake. Maybank said last Friday that it had received a letter from the Indonesian Regulatory Authority for Indonesian Capital Market (Bapepam) that gave it an extension of time to June 1, 2011 to complete its sell-down.

But Maybank added then that it may request for further extension if the sell-down exercise would result in it incurring a potential loss in excess of 10% of its original value of the BII acquisition.

While analysts said Maybank could potentially realise a gain from the sale of the 20% stake given the high share price of BII, the problem is likely to be finding potential buyers willing to pay such a high price.

PT Ciptadana Securities head of sales John Teja was quoted by Bloomberg as saying the shares rose on expectation Maybank would sell the stake at a higher price.

MIMB Investment Bank research head Chan Ken Yew said it was a definitely good deal if Maybank could sell its stake at such a high price.

He said Maybank paid a book value of four times when it bought the bank but said that BII's current market price was around 9.9 times its book value.

A local bank-backed head of research said that despite the lofty price of BII, it should be noted that Maybank did a huge write down after the take-over.

He also said that the main reason why Maybank has delayed its sell down of BII shares was because it has not found a buyer willing to pay a price around the current trading price of BII.

It is not easy to find a buyer. Furthermore, I think the Indonesian regulator may not want another Malaysian entity to take up such a big block in BII. Hence Maybank is likely to be looking for an Indonesian partner that could potentially add value to BII, but that's whats taking time, he said.

It is likely that Maybank will place out the shares either to one entity or a group of insitutions. Maybank expects its international operations from countries such as Singapore and Indonesia to contribute 40% to the group's net profit by 2015.

For the nine months ended Sept 30, BII posted a net profit of 415 billion rupiah (US$47mil) despite an earlier significant impairment charge in 2009.

This marked a significant turnaround from a net loss of 183 billion rupiah (US$19mil) in the same period last year.

http://biz.thestar.com.my/news/story.asp?file=/2010/12/10/business/7594718&sec=business

Investment guru Rogers bets the farm as he shuns Wall Street

Investment guru Rogers bets the farm as he shuns Wall Street
December 8, 2010 - 10:15AM

Investor guru Jim Rogers says life on the farm will bring far more riches in coming years than the trenches of Wall Street.

Rogers, a commodities evangelist for more than a decade, has tweaked his pitch, saying the producers of the world - whether individuals, companies or countries - will become the new growth sector.

In short, Rogers told the Reuters 2011 Investment Outlook Summit in New York, being productive, saving the fruits of your labor, and owning hard assets hold the keys to a bright future.

"All these people who got MBAs made a mistake. The city of London and Wall Street are not going to be great places to be in the next two or three decades. It's going to be the people who produce real goods," he said.

"Throughout history we've had long periods when the financial centers were in charge. But we've also had long periods when people who produced real goods were in charge - the farmers and the miners," Rogers said.

Rogers, who rose to prominence after co-founding the now defunct Quantum Fund with billionaire investor George Soros some four decades ago, railed about the fiscal irresponsibility of debtor governments and praised China and other Asian countries because they save, work hard and invest in the roads, schools and factories that beget tangible wealth.

As an example, he said that commodity- and mineral-rich Canada will fare far better than Belgium, the seat of European bureaucracy.

Rogers still touts commodities, despite a recent price surge. Even with the benchmark Reuters-Jefferies CRB index of 19 commodities hitting its highest level on Tuesday since October 2008, Rogers said commodities will continue to soar over the next decade.

"They're very high, but they're going to be much, much higher over the next decade. Even I'm going to be stunned, and I'm the bull," he said.

Spot gold hit an all-time high at $US1430.95 an ounce on Tuesday, benchmark copper hit a record peak at $9,044 a tonne in London and US crude rose above $US90 a barrel for the first time in 26 months, before all turned lower.

A year ago at the Reuters Investment Outlook Summit, Rogers said investors in oil, metals and grains should not sweat sell-offs in those markets because the printing of money by governments across the globe would push prices higher.

Rogers reiterated on Tuesday that politicians are afraid to bite the fiscal bullet and will opt to debase their country's currency. He called the Chinese renminbi the world's safest currency and again said gold would eventually rise above $US2000 an ounce.

A bubble might exist in housing in China's coastal cities, but he called it a price bubble and not harmful like the credit bubble that was behind the US housing debacle.

"We had a credit bubble here, perhaps the biggest credit bubble in the whole world," he said. "That kind of huge credit bubble certainly is different than a price bubble. If people go bankrupt in China, it's not going to bring down the Chinese economy."

More currency crises loom, and creditor nations - China, South Korea, Japan, Thailand, Taiwan and Singapore - will thrive, he said.

Rogers singled out the United Kingdom as vulnerable to hard times, and said the pound would underperform the euro over the next five years.

The United States also faces difficulties.

"The way you build an economy, a thriving economy is you save and invest," he said. "Productive capacity is what leads to long-term growth of the economy. You don't build an economy by going to the disco every night."

Reuters

OSK maintains its ''buy'' call on Pos Malaysia, target price of RM4.33

Pos earnings forecasts revised upward
Published: 2010/12/08

OSK Research has revised upwards Pos Malaysia Bhd's earnings forecast by eight per cent for financial year 2010 (FY10) and two per cent for FY12 while keeping FY11's intact.

In a research note today, OSK said the revision was prompted by Pos Malaysia's better-than-expected volume for the first nine months of this financial year following postal rate increase.

"It recorded a decline of only 5.4 per cent as opposed to our full-year expectations of a fall of 10.7 per cent," it said.

OSK said Pos Malaysia Bhd's transformation plan remained intact though impact to earnings would be marginal for next year.

It said the excitement over the unlocking of Pos Malaysia's land bank value remained in place as the Postal Land Act was scheduled to be tabled in Parliament this month.

"We foresee the relaxation on land bank usage will go through as it would make economic sense for the government to maximise the potential value of these land bank scattered nationwide.

"Currently, the land bank (of over 600 outlets) is restricted to offering postal-related services," it said.

The research firm said the relaxation on the usage would act as a key catalyst for Pos Malaysia.

"This will unlock the value potential of its land bank noting that other national postal service providers overseas have already leveraged on their postal branches by combining other forms of commercial activities such as supermarkets, banks and restaurants," it said.

It said other possible amendment of the Postal Land Act could also see Pos Malaysia expanding its foray into franchising its post offices to boost entrepreneurial activities among its employees and the unemployed.

OSK said it would maintain its ''buy'' call on Pos Malaysia with unchanged target price of RM4.33. -- Bernama

Read more: Pos earnings forecasts revised upward http://www.btimes.com.my/Current_News/BTIMES/articles/20101208145455/Article/index_html#ixzz17VMcAILo

Market Risk

Which statement(s) is/are FALSE about market risk?

I. It is mitigated by writing calls.

II. It includes the risk the investor will lose invested principal.

III. It is the same as systemic risk.

IV. It is mitigated by buying defensive stocks.


A. I only

B. II only

C. II and III

D. III and IV





Correct answer: B

Statement II describes capital risk not market risk.


http://www.investopedia.com/ask/answers/09/series7-070709.asp?partner=pitm12a

Vietnam: Call to punish speculators who unsettle domestic stock markets

Last update 04/12/2010 02:49:49 PM (GMT+7)


Call to punish speculators who unsettle domestic stock markets
VietNamNet Bridge – Strict punishment was necessary to stop speculation, illegal price rises and to prevent deliberate rumours having a negative impact on domestic markets.

This was one of the suggestions made at an online meeting yesterday, Dec 3, chaired by the deputy Prime Minister, Hoang Trung Hai.

According to ministries and agencies, gold and dollar price hikes are often attributed to the increased efforts by domestic speculators.

Hai required the Ministries of Industry and Trade , and Finance to review and supplement regulations to handle any acts of speculation, price increase and trade fraud.

Inspections were also needed to deal with any unusual phenomenon on the share and gold markets.
Hai said the media should help disseminate State policies on trading to help prevent rumours.

Plenty of supply


According to the Ministry of Industry and Trade, from now to the end of January there should be plenty of essential commodities.

In Ha Noi and HCM City, a series of price stabilisation programmes have been conducted with financial support from the State.

Deputy Minister of Agriculture and Rural Development Bui Ba Bong said there would be no pressure on the supply of rice as harvest time was near and businesses had plenty of reserves.

* Buyers continue to gain confidence

Positive entiment caused investors to pump money into the stock market pushing 300 shares to their ceilings in both HCM City and Ha Noi yesterday, Dec 3.

The VN Index continued its rise, up 1.51 per cent to close at 464.35 yesterday.

The trading volume was 71.9 million shares valued at VND1.55 trillion (US$77.5 million).

"The 460-466 mark offered strong resistance during the past four months and a mid-term uptrend is likely if the VN-index surpasses it because trading volumes have increased strongly against last month's average," said FPT Securities Co analyst Nguyen Minh Quan.

Volume ranged from 45-70 million shares during the past four days against about 30-35 million last month.
Among the 233 advancers, securities, property and rubber shares were hottest.

They included Sai Gon Securities Incorporate (SSI), HCM City Securities (HCM), Tan Tao Industrial Zone (ITA), Investment Construction (DIC), Kinh Bac Urban Development (KBC), Da Nang Rubber (DRC) and Sao Vang Rubber (SRC).

In Ha Noi, the HN-Index volume climbed to 61.6 million and a total value of VND1.18 trillion.

The index rose strongly by 4.2 per cent to close at 116.6. Securities and property shares were the hottest.

Nguyen Quang Minh, a research analyst for vietstock.vn, said investors seemed to have remembered the lesson of 2008 that when interest rates increased sharply the stock market fell to the bottom.

The market's gain reflected the activities of bottom catchers. When the stock market dropped strongly, foreign investors bought shares to bail out the market, partly helping stabilise the sentiments of domestic investors, he said.

VietNamNet/Viet Nam News

http://english.vietnamnet.vn/en/business/2303/call-to-punish-speculators-who-unsettle-domestic-stock-markets.html

Foreign firms eager to invest in Vietnam

Last update 03/12/2010 05:30:11 PM (GMT+7)


Foreign firms eager to invest in VN
International enterprises are more confident about doing business in Viet Nam and are planning to expand is the message the Viet Nam Business Forum in Ha Noi delivered to the Government yesterday.

But their representatives expect a concerted effort to tackle major macro-economic obstacles.

"Viet Nam's success in attracting foreign investment has largely been built on the expectation of economic and political stability," American Chamber of Commerce, Amcham, chairman Hank Tomlinson told the forum - a prelude to the yearly donor Consultative Group meeting.

Unfortunately, the Government's approach to economic and monetary policy had also raised concern, he said.

Amcham, together with other investor representatives, is worried about the falling value of the dong and a perceived lack of an effective policy to control inflation.

Street vendors traded the US dollar at between VND21,400-21,450 yesterday, up VND100 against late last week.

The nominal depreciation of the currency through five deprecations since December 2008 is 11 per cent.

Fall

But the dong has fallen 36.8 per cent in value during the past three years when measured against the consumer price index.

"Monetary policy has helped boost economic growth and control inflation," Deputy Minister of Planning and Investment Dang Huy Dong assured the forum.

And while he recognised potential risk, he reminded the forum that GDP growth in Quarter 1 had been 5.8 per cent; 6.4 per cent in Quarter 2; 7.16 per cent in Quarter 3 and 6.7 per cent in Quarter 4. GDP for the year was estimated at 6.7 per cent against an initial target of 6.5 per cent.

Planning and Investment Minister Vo Hong Phuc said fighting inflation and maintaining stability would be next year's economic priorities.

Inflation of 7 per cent was expected while the target for economic growth was 7.5 per cent.

International Monetary Fund Viet Nam representative Benedict Bingham told Viet Nam News the Government should make macro-economic stability - rather than frequently shift between growth and stability - its first priority.

The change would ensure economic growth, he said.

International Finance Corporation Regional Manager Simon Andrews said Viet Nam could not forever rely on its natural resources, favourable location, relatively low-cost labour for economic growth work.

Quality

Improving the quality of growth was a major challenge, he said.

Eurocham chairman Alain Cany warned that Viet Nam's ability to maintain high economic growth was dependent on the Government's action in infrastructure and its encouragement of innovation.

"Without this, Viet Nam risks falling into the middle-income trap," he said. The trap was an economy based on cheap labour and low-technology manufacturing against value-added knowledge-intensive and innovation-based manufacturing for domestic consumption and export.

The forum listed a variety of worries for international enterprises including:

An inefficient State-owned system;

Corruption and a conflict of interest in the State-owned sector;

Inadequate infrastructures;

A lack of transparency and inadequate governance; and

Bureaucratic investment licensing procedures and the protection of intellectual and property rights.

Vietnamese Government representatives said the contribution of the international enterprises was highly appreciated and their proposals to improve the efficiency of doing business in Viet Nam would be considered.
Source: VNS

http://english.vietnamnet.vn/en/business/2264/foreign-firms-eager-to-invest-in-vn.html

Vietnamese Stock market: are there any opportunities for long term investments?

Last update 22/11/2010 09:34:09 PM (GMT+7)


Stock market: are there any opportunities for long term investments?
VietNamNet Bridge – The sickly stock market has been testing stock investors’ patience for many months. Other stock markets have recovered but when will Vietnam’s stock market bounce back?

PVGas could only sell 64 percent of the volume of shares it offered at the IPO (initial public offering) on November 17. The IPO average price of PVGas’ share was 31,000 dong per share.

Becoming shareholders of the enterprise which is leading Vietnam’s gas industry, the key industry in Vietnam’s national economy which decides the development of other industries such as power, fertilizer and steel, is really the dream of many investors. Andy Ho, Investment Director of VinaCapital, said that becoming the “owners” of state-owned general corporations is a golden opportunity which does not come regularly.

However, contrary to previous thoughts, the shares were not selling like hot cakes. Of the 1057 investors who successfully bought the stakes, 12 institutions and 1045 individuals bought 4.244 million stakes out of nearly 61 million of stakes sold.

Money exhausted

A lot of companies reported they could sell only 6-10 percent of the volume of stakes offered. At a recent auction of 7.32 million stakes of a LPG firm in the north, only five individual investors registered to buy 0.6 percent of the volume of shares.

According to Huynh Anh Tuan, General Director of SJC, as money is becoming scarcer investors are becoming more cautious with their investment decisions.

Cash is not flowing into the stock market because of many reasons. Tuan said that there are not many expectations on medium term investments, because the market is still awaiting macroeconomic problems to be solved, including the gold and dollar price fever, and it is still awaiting information about the consumer price index (CPI) in November. The increasing bank interest rates have been creating difficulties for enterprises while investors dare not borrow money and mortgage their shares for the loans.

Many enterprises have licenses to issue shares to increase their chartered capital. However, the enterprises still cannot fix the list of shareholders, because shareholders do not want to spend more money on stakes.

Are there any opportunities?

According to some securities companies, institutions and funds have planned for the disbursement. In October, for example, VF1 fund disbursed, lowering the cash proportion from 10 percent to 7 percent of NAV, and sold all the bonds in its investment portfolio. VF4 also disbursed, while the proportions of cash and other assets have decreased from 7.2 percent to 2.4 percent.

According to Tuan, domestic institutions have disbursed because of the cheap stocks, but they also can see the uncertainties.

“At this moment, they dare not spend too much money. The main force in the stock market is individual investors who account for 80 percent of the trading volume,” he said.

So far this year foreign investors’ net sale has reached over 10 trillion dong or 500 million dollar. According to Au Viet Securities Company, the figure is not big, because in the first quarter of 2008 alone, they incurred a loss of up to $1.3 billion.

Why do foreign investors keep purchasing? According to AVSC, foreign investors always target long term investments (3-5 years), and it is still early to explain their investment strategies.

The advice for investors is to maintain high proportions of cash. However, some analysts believe that if investors have idle money, they should think of medium term investments, because they can expect opportunities when the cash flow of $600 billion is pumped into the US economy and a part of the sum may flow to Vietnam.

Source: Saigon tiep thi

http://english.vietnamnet.vn/en/business/1805/stock-market--are-there-any-opportunities-for-long-term-investments-.html

Vietnam: Stock market keeps falling, stocks dirt cheap

Last update 18/11/2010 04:56:58 PM (GMT+7)


Stock market keeps falling, stocks dirt cheap
VietNamNet Bridge – The stock market has become unprecedentedly gloomy. Securities investors say the stocks are now as “cheap as vegetables”. 105 out of 603 share items listed on both the bourses have market prices below the face values.

T, a securities investor earlier this week came to a securities company to reconsider his investment portfolio. In the first quarter of the year, T purchased a large volume of shares on credit. Now, as the stock prices keep decreasing, he has to put more money into his account, or the security company will have to sell his stocks to take back money.

“I cannot sleep for the last month. This is for the third time the securities company threatened to sell my stocks,” T said.

T’s investment portfolio was once worth five billion dong. However, as stock prices have been decreasing, the values of stocks have decreased by a half. T said he has “blue chips” – the stocks of big insurance companies and banks, but it is very difficult to find buyers nowadays, when the stock prices have become “as cheap as vegetables”.

“The shares are now like waste-papers. The dividends are just 3-4 percent per annum,” he said. Twice T had to put more money into his account (more than 400 million dong) in September in order to keep his investment portfolio.

Trinh Hoai Giang, Deputy General Director of the HCM City Securities Company (HSC), also said that stocks are now dirt cheap. 105 out of 603 share items listed on both the bourses now have the market prices below the face values.

On the HCM City bourse, for example, BAS is now selling at 5800 dong per share, CAD 6500 dong, HVX 5900 dong, MHC 5700 dong, while PRUBF fund certificate 5100 dong, TRI 5100 dong. On the Hanoi bourse, SHC is trading at 6500 dong, SVS 7700 dong, TTC 6300 dong and VTA 4200 dong.

According to stox.vn, 280 share items are being traded at the prices lower or equal to the book values, including blue chips.

Le C, a big stock investor said that he and many friends of his are “meeting troubles” because of the stock price decreases. They do not want to put more money into the accounts, and also do not want to sell stocks to take back money. They decide to “nourish” the investment portfolios, hoping stock prices may increase one day.

Head of the brokerage division of a securities company has revealed that the number of repo contracts of his company has been decreasing sharply.

“They have withdrawn money to make bank deposits. Instead of asking me to give advices on stock prices, they ask me to help update gold and dollar price information,” the broker said.

He added that securities investors do not make transactions these days. They just keep the wait-and-see attitude.

According to Le Dat Chi, MA, a securities analyst, the average trading value has been very low since the beginning of November, at 700 billion dong per trading session. This shows that the majority of investors have been staying out of the market.

Analysts say the stock market remains gloomy because investors still cannot see positive signs of the macro economy, while there are signs showing that the cash flow will be tightened towards the year end. Securities investors have been advised to keep cash until the signs about development become clearer.

Giang said that HSC has been mostly selling its stocks since the beginning of the year. It continues selling stocks now to keep cash and hopes that it will not take a loss.

According to Le Dat Chi, securities investors now feel insecure. The cash flow is still running into gold, foreign currencies and bank deposits as the deposit interest rates have been increasing.

Securities investors are awaiting information about CPI in November to decide what they have to do next. If the CPI keeps increasing, the cash flow will keep away from the stock market.

Source: Saigon tiep thi

http://english.vietnamnet.vn/en/business/1656/stock-market-keeps-falling--stocks-dirt-cheap.html