VirtualPot Folio As At 15th May 2011

Have been rather busy with traveling and settling down in the States since I arrived a week ago. On work assignment for 14 months but I'll still be blogging :) Expect to see me post about gold, economics 101 & how to build a conservative portfolio. Arggh I did not bring my Stock Performance Guide book but I am getting someone's help to bring it over in the coming months so I can resume my usual stock analysis. Meanwhile I might start with a US company this time. 

Portfolio gains remains roughly the same @ 17.6% from the previous month's 17.9%. Losses from JOBST are compensated by gains from ICAP. SUPERMX went underwater for the first time it was bought. Unless there is no QE3 from the United States, the greenback should be starting to strengthen against the ringgit by year's end. This should help the margins of the rubber glove company while I have no concerns with demand and profit in the coming year.

Am I going to buy anything since I got spare change haha? Well I am going to inject some into my conservative SIF to catch on the semi annual dividend payout in June for this year's allocation. For the equity front, it could very well be more FREIGHT or SUPERMX. My coverage on Bursa technical analysis would be very limited now as I see no major benefit in using it unless I think the market is going to turn around (big rally or recession or depression). Most of you should know that Bursa is trading sideways for months. Heck don't go and listen to those mouth only analysts who repeatedly mention that Bursa can hit like 2000 points this year. Come one laaa..you think Msia can grow so fast meh? We are not Chinaman.

Disclaimer: The reports, analysis and recommendations in this blog are solely my personal views. I do not link to any investment body or company. As such, I will not be responsible of any of your investment decision. Consult your investment adviser or come to your own conclusions before making any investment decision.

Give Me A Break PB Fund Fanatics

Spoilers: PB fund agents or those who own PB funds might get insulted so I will apologize beforehand. I have no intention in what so ever to discredit such a big financial firm managing a lot of people's money. They are good in what they do BUT the question I have is "Are they that great to deserve widespread attention?"

One of my earliest blog post regarding the ugly truth of unit trusts and mutual funds specified 4 main rules that you could apply when choosing a fund to invest your hard earned money.

Rule 1: Avoid choosing big sized popular funds.

Rule 2: Compare fund expenses.

Rule 3: Information on the fund manager.

Rule 4: Good funds don't advertise.

Rule no.1 and no.4 are the easiest to spot as such I am going to use that as examples. I use those as filters before I move on to rule no.2 and rule no.3. The picture size might be too small but you can click it open in a separate tab in your browser. Fund size is in the millions and the source is from Lipper.

Equity MYR Class Funds: Notice the five biggest funds are from PB and they deliver mediocre returns ~15% p.a. if compared to the top 5.

Bond MYR Class Funds: Again the humongous PB funds lags in returns if compared to the top 5. With such a big fund size, I reckon CIMB is going to perform poorly as well, just look at their 1st year record & you can tell it.

Money Market MYR Class Funds: We see the same trend again, bigger funds never outperform the smaller ones.

Come on people, it is pretty obvious isn't it. Big sized funds are tantamount to popular funds, this is why they are big. If you have RM1bil to manage, you cannot dump them into 30 different stocks as they will be too overvalued. What they do is they spread it out vastly on more companies like 300 which make them look like their are the stock market itself - and probably end up spreading the fund manager's attention too thin.

PB likes to advertise its funds, from walking agents to newspaper printouts to shopping malls and public events, I can see them basically anywhere I go. If you are so good why do you need to advertise le?? Advertising need money le, and guess whose money that is? The very people who invested in your fund laaa.

What other funds don't work and are hyped?
Equity Greater China class funds: I'm sorry man if you are in it, your agent missed out one thing, the stock market in China does not correlate with its economic growth.
Equity Global class funds: Our local managers don't seemed to have the expertise to tackle overseas market. This applies to all funds names.
Others: There are other small ones that don't really work like commodities, utilities, and real estate global.

There is one exception and I know this has been quite good for PB. Their small and mid cap class fund. It looks like they are very good at picking up hidden gems but until I go into details of the fund I cannot tell yet. As for the conservative funds, it was difficult for me to go which for the top 3. From the time of investing in it until now they have remained top 3. Even though HwangDBS SIF is the biggest in its class, it has one big advantage: no defaults on its bond investment and it has the lowest volatility of the 3. Just perfect for my conservative portfolio. Look at PB which is the 2nd biggest but severely lacking behind in performance.

Mutual funds and unit trusts will always be there, it is just my take that I do not wish someone else to handle my riskier ventures like equities. If you could get 20% or more from your own hands you do not need them. Some of you might not like the idea of handling it yourself or may not find the time which is fine. Think wisely and put your money to good use into the correct fund. PB funds can generate money, they really do; BUT they do not generate the best returns, this is my point so pleaseee laa give me a break.

Please Don't Go Away Blue Monster

KUALA LUMPUR: Datuk Pang Chin Hin and his sons are proposing to take Mamee-Double Decker (M) Bhd to go private. Pang, the executive chairman of Mamee, and his sons Datuk Pang Tee Chew and Datuk Pang Tee Nam collectively own more than 45 per cent of the company. The trio, and other shareholders who in total own 71.9 per cent of Mamee collectively are offering the remaining stakeholders in the company RM4.39 a share.

Last Friday, the major shareholders of Mamee-Double Decker, who own 72% of the company, proposed a privatisation of the company via Section 64 of the Companies Act, 1965, which entails a capital reduction and repayment. Such a proposal will require the approval of 75% of the minority shareholders of Mamee-Double Decker. In other words, the Pang family, which controls 72% of Mamee-Double Decker, will not be able to vote on this proposal.

All analysts have placed their views that the capital repayment offer of RM4.39 is indeed a fair deal. The fair value put by other research houses including mine:

Aboi's House: RM3.45 http://aboiwealthpot.blogspot.com/2010/11/time-4-revaluation.html
Kenanga Research: RM3.65
OSK Research: RM3.44
The Others: RM3.30 to RM3.70 range http://mamee.investor.net.my/analyst-reports

The company also noted that its shares had been thinly traded. In its announcement on Friday, Mamee-Double Decker pointed out that the daily average trading volume of its shares over the past one year was approximately a mere 0.22% of its total free float.

It said that given the “challenging environment and low trading liquidity” of its shares, the selective capital repayment represents “an opportunity for entitled shareholders to realise their investments in Mamee-Double Decker at an attractive premium above the historical trading prices.”

 
In Malaysia, most of the time many good companies choose to go private because of illiquid trading, for the case of Maxis and also Astro. The market does not really reflect the value of the company. BUT for Mamee's case it does not seemed to be it, the market value is properly putting a value on it in my opinion (based on DCF computation). Then why? Is the Pang family trying to make a profit by realizing premiums from a take-private transaction? Maybe that is half the reason. Nothing wrong but it is not good for the overall market if this trend continues on for good listed companies in Bursa, making our market look unattractive to investors.

An offer of RM4.39 is a very good deal and I would gladly take it too as a minority shareholder. If the deals go through it looks like we are missing another good company from the market, a company who just got their profit rolling in nicely. Sad to say there is no hard line in predicting when a company will go private BUT a good filter might be looking at companies who are owned by family or individuals with big stake holding share. A few examples would be like FREIGHT, ZHULIAN, Ananda's & Vincent's related companies.

Anyway the main point of this post is to show you once again that one of the good ways to calculate the fair value of a company is thru DCF modelling. It is relatively simple once you get the hang on it. If you need the spreadsheet please email me and I will send mine as reference for your own investment use. If you had bought it at the time of my previous writing you would have pocketed a handsome gain of RM0.74 or 21.26% returns at sell price of RM4.22! Call it lucky since my initial plan was to invest in Mamee in the long run, as such my fair value for MAMEE still remains the same at RM3.45, the RM4.39 price is just an offer and is not reflective of the fair value by the major shareholders.