Revised Dividend Yield for SBS Transit
Followers of my Dividend Stock Tracker would have notice by today of a sudden change in Dividend Yield for SBS Transit.
I feel i need to always explain these revised yields so that viewers do not get mislead by extremely good yields.
At current price near 2 dollars the yield i used to put was near 15%. With its stable business, you might think it is a bargain buy.
Hold on there. I have put in the latest 2008 dividend payout which is 6.25 cents. This is a big difference compared to the 30 cts i used to calculate the 15% yield.
As such the current yield turn out to be a miserly 3%.
Hope you guys aren’t affected by the lowered payout. In times like these, you would expect much of this lower revision of yields, but i would try to input as realistic as i can the projected future yields that can be expected.
Google Chrome: Download Google’s web browser today!
Google has finally entered into the browser wars! This time microsoft have themselves a new competitor. Why is this important to these software giants?
Because most likely we will spend most of our times on our computer on our browser and it is imperative that Google defines the way we surf so as to protect their turf, which are essentially built on cloud computing.
You can take a look at this comic strip about what Google Chrome is about
You can download Google Chrome Beta over here. I have tried it. Not bad, Google Gears is integrated!
The Fundamentals of Market Bottoms
A large-ish number of people have asked me to write this piece. For those with access to RealMoney, I did an article called The Fundamentals of Market Tops. For those without access, Barry Ritholtz put a large portion of it at his blog. (I was honored 
.) When I wrote the piece, some people who were friends complained, because they thought that I was too bullish. I don’t know, liking the market from 2004-2006 was a pretty good idea in hindsight.
I then wrote another piece applying the framework to residential housing in mid-2005, and I came to a different conclusion — yes, residential real estate was near its top. My friends, being bearish, and grizzly housing bears, heartily approved.
So, a number of people came to me and asked if I would write “The Fundamentals of Market Bottoms.” Believe me, I have wanted to do so, but some of my pieces at RealMoney were “labor of love” pieces. They took time to write, and my editor Gretchen would love them to death. By the way, if I may say so publicly, the editors at RealMoney (particularly Gretchen) are some of their hidden treasures. They really made my writing sing. I like to think that I can write, but I am much better when I am edited.
Okay, before I start this piece, I have to deal with the issue of why equity market tops and bottoms are different. Tops and bottoms are different primarily because of debt and options investors. At market tops, typically credit spreads are tight, but they have been tight for several years, while seemingly cheap leverage builds up. Option investors get greedy on calls near tops, and give up on or short puts. Implied volatility is low and stays low. There is a sense of invincibility for the equity market, and the bond and option markets reflect that.
Bottoms are more jagged, the way corporate bond spreads are near equity market bottoms. They spike multiple times before the bottom arrives. Investors similarly grab for puts multiple times before the bottom arrives. Implied volatility is high and jumpy.
As a friend of mine once said, “To make a stock go to zero, it has to have a significant slug of debt.” That is what differentiates tops from bottoms. At tops, no one cares about debt or balance sheets. The only insolvencies that happen then are due to fraud. But at bottoms, the only thing that investors care about is debt or balance sheets. In many cases, the corporate debt behaves like equity, and the equity is as jumpy as an at-the-money warrant.
I equate bond spreads and option volatility because contingent claims theory views corporate bondholders as having sold a put option to the equityholders. In other words, the bondholders receive a company when in default, but the equityholders hang onto it in good times. I described this in greater measure in Changes in Corporate Bonds, Part 1, and Changes in Corporate Bonds, Part 2.
[Continue reading @ Aleph Blog >> Fundamentals of Market Bottoms]
C&G Industrial Holdings:Cash more than Share Price?
The latest quarterly report wasn’t very favorable to C&G Industrial Holdings, but are investors in C&G smart to dump it or are we sensing something amiss?
Here are some key notes from the quarterly repot:
- Revenue fell by 7.2% compared to previous period in 2007
- Sales were affected due to snow storm in early 2008
- Normal yarn products with lower margin were not manufactured or outsourced since Feb 2008.
- Selling price were reduced.
- Huge increase in expenses up 362%. This is the reason why net profit is lower
- The increase in administrative fees was mainly due to the increase in consultancy fee for research and development of RMB 14.7 mil and other necessary expenses to support business expansion.
- Profit fell from RMB 43 mil to RMB 14 mil, down 66.5%
- The balance sheet looks ok. Solid as ever
- Depreiciation and amortisation is higher from 5.4 mil to 9.9 mil
- This was mainly attributed to 2 new plants coming online.
- Operating Cashflow was lower, due to lower profit, but still positive
- Capital spending was RMB 9 mil compared to 5 mil.
- Overall Free Cashflow is still positive at 8 mil.
Business Outlook:
The Group has begun the construction of a new plant for the manufacturing of industrial bi-component fibre.
The new industrial bi-component fibre was invented by Chisso Japan in the 90’s, as a critical raw material for environmentally-friendly manufacturing of adhesive-bonded cloth. Adhesive-bonded cloth is widely used in healthcare and personal care products. SARS, Avian Flu, Foot and Mouth disease have spurred rapid demand on disposable adhesive-bonded cloth, which is projected to grow at 8-10% per annum globally. Besides healthcare and personal care products, the new industrial bi-component fibre can also be used as a critical raw material for the manufacturing of non-adhesive synthetic cotton, which are widely used in textile apparels, bedding and home appliance, with its distinctive environmental benefit of zero formaldehyde emission.
Moving forward, the Group will focus on product safety and environmental-friendliness, given the increasing importance modern consumers place on these factors. A prime example will be the new industrial bi-component fibre. The plant will take about 18 months to build, and the new industrial bi-component fibre is expected to contribute to the Group’s financial performance by 1Q09 with its annual production capacity of 20,000 tonnes.
PTA, MEG, PEG, PSF and SIP, the main raw materials used in the production of our products, are all petrochemical products. Any fluctuations in global crude oil prices, a global commodity, have an indirect impact on the prices of our main raw materials.
I must say they are really keeping mum on the future outlook for this company. While we hope that the consultancy charges are a one time thingy, the same cannot be said for falling revenue. It looks like cost of goods on raw materials is not such a big problem for C&G Industrial.
The outlook for oil looks to be challenging going forward, so we will see if this affects C&G through this period.
Since the release of this result share price have fallen from 24 cents to nearly 14 cents. So where is C&G in terms of valuation.
- PE is 2 times
- PTB is 0.40 times
- Enterprise value is negative (!):-90 mil RMB
- EV/EBITDA is -0.48 times
Is it for real? By buying a company now, you are like paying cash for cash + plants and production. Sounds a pretty good deal.
In this bear market, we get bargains like this, but you do have to be careful. Such a low PE indicates probably that going forward earnings is going to be highly unpredictable. I don’t like the sound that the company don’t sound out that the industry aren’t doing well as well.
Next up, my calculation is based on last full year profits.
Last years operating cashflow stands at RMB 188 mil. It is highly unlikely that we are going to hit it this year. The half year operating cashflow stands at RMB 88 mil. if we think it will be worse in the second half we add RMB 40 mil to 88 to get 128 mil, predicting that each quarter the cashflow will be 20 mil compared to 40 mil.
The revised figures are as follows:
- PE is 2.8 times
- EV/EBITDA is still negative no matter how u put it since Enterprise value is negative to start with.
Unless the management is damn corrupted, i don’t see why we shouldnt punt on thsi one.
Introducing my Dividend Stock Tracker
How it came about
It started off with a frustration that i had whenever i use my excel sheet to keep track of my dividend stocks and other not-so-good dividend stocks. The frustration was that whenever i see a stock that was sold down pretty badly, i had to find the stock price and key it into my excel sheet, then i need to find the current market cap so that my excel sheet would just compute.
I got abit frustrated about it, and at the same time i think its a good time to learn abit php and web programming by coming out with a little project.
So what is it
Dividend Stock Tracker tracks a list of dividend stocks that are listed on the SGX. They can be:
- Business Trusts
- REITs
- Utilities and Infrastructure stocks
- Telecommunication stocks
- Blue Chips
- Others
The prices of these stocks will be updated daily at the end of each day. The data will be recomputed and the new ratios and yields will be displayed.
Some of the fundamental data covered are:
- Operating Cashflow
- Dividend Yield
- PE and Earnings Yield
- Operating Cashflow Yield
- Price-to-book ratio
- EV/EBITDA
- Return Premium
- Debt/Asset
- % Payout
- % Cash holding of Assets
You may have observed that not all are displayed on the main table, thats because i can’t put everything into a small table.
Clicking on the name of each stock will display more detail information.
Moderating Dividend Payout
You would have notice that some of the yields are quite different from what brokerage houses display. This is because the yields are moderated by me. One time special dividends and dividends that seems unsustainable are moderated downwards so that it doesn’t give people an impression that if you buy now your yield will be that much.
So that is why Courage Marine’s payout is much less than what they paid out last year. I used an average payout for that.
Currency
For Stocks whose balance sheet data are in USD or RMB for example, i will use an exchange conversion. Most of the balance sheet data are thus like what they display in their annual report. E.g. Hongwei’s Total assets in this case is in RMB.
Balance Sheet Data
Balance Sheet Data are updated annually except for assets and debts which are updated quarterly.
Will I be adding more stocks to it?
Definitely, though i will need to control my addition since the more i add the more problematic i will be when updating these information annually and quarterly haha!
Conclusion
I hope its useful to you as an investor. You can access my dividend stock tracker by clicking on the link next to the home.
Take a look at the dividend tracker >>
Macquarie International Infrastructure Fund (MIIF) quarter review
Its time to screw MIIF. The infrastruture play that people say good and others say that it is deeply suspect.
They just released their quarterly report and by all figures it looks like they are suffering the effects of this global slowdown.
- Net income was 25 million vs 145 million in the same period last year. This was attributed to
- A Lower gain from fair value of MIIF’s financial assets (6.5 mil vs 211 mil)
- Performance fees were lower (0 vs 3 mil)
- Management fees were lower (3.4 mil vs 4.3 mil)
- Lower total investment revenue. This is due to lower investment income collected as new asian investments generallly pay their distributions out of accounting profits annually in arrears. This results in a lagged receipt of intiial post acquisition disributions from such businesses.
- Dividend of 4.25 cents vs 4.15 cents last year declared.
- Cash position fell from 36 mil vs 55 mil. This is negligible compared to the asset size.
- New longterm debt of 85 mil. However short term debt was reduced from 178 mil to 58 mil.
- Operating cashflow decrease from 63 mil to 2.7 mil
- Capital expenditure decrease from 286 mil to 0
- 43 mil was paid out for div vs 0 mil last year same period.
- Revealed that underlying debt INSIDE ASSETS amount to 2.2 billion.
What we can take away from this set of results is this:
- We hope that by year end, the investment income from the asia assets does come in. MIIF borrowed 30 mil just so that they can pay the dividends. This has to be repaid.
- Consequently, they repaid more of their debt compared to last year, which is always a good thing.
- As a performance guage, the new assets would need to yield higher investment income then the European one. This is an important criteria. They sold those and justify that Asian assets will provide better yields and better value. We as shareholders would like to see that justfication in the bottomline.
- The report revealed more information on the assets. Particularly
- The revenue
- The operating Expenses
- EBITDA
- EBITDA Margin
- While we appluad that, much can be revealed about the interest coverage or the kind of debt financing plans these assets use. Most of these assets are unlisted and thus it is difficult to find any information on them. why am i so particular about this?
- Because the total debt held by these assets amount to 2.2 bil! Thats even more than the parent’s market cap. This is synonymous as those leverage buyouts that borrowed heavily in the hope of paying it off based on consistent, proven cashflow generate by the assets.
- Interest on these debts will reallly wacked the company if its floating rate. In a rising interest environment, interest rates will squeeze net profit margins greatly, thus making MIIF a sour investment.
- Normally these assets do cover these floating rate debts using interest swaps on fixed rate debts. We hope the underlying assets does manage their debts well.
All in all, there is still alot of holes to be filled. The yield is definately attractive at nearly 11%. But is this sustainable? I feel it is. The biggest question are those underlying debts.
MIIF is covered as a dividend play at my Dividend Stock Screen.
Sarin Technologies Quarter Report
This is the most unexpected good results that i have gotten. I would expect the diamond industry to be weaker due to weak US consumption but it is fortunate that Sarin did produce a good set of results.
- Revenue was 21% better than last year the same quarter
- Profit was 43% better than last year
- Cost on R&D have increased
- Weakening of USD compared to New Isreali Shekel increased manpower expenses.
- Africa sales improved by 500% while india sales grew as well.
- cash holding fell due to investments in IDEX and another subsidiary.
On the whole africa did present it with new opportunity instead of destroying opportunities. what is good is that india sales have not decline and they have a new opportunity.
I have listed Sarin as a dividend play, but that is more towards my own portfolio bias. It does pay a good dividend at current price. However, its industry is one where it could really be subjected to much cashflow and business fluctuations.
Thus i would advise folks who want to be invested in Sarin Technologies to look at it more as a growth stock with a good dividend payout rather and a pure dividend play. Lets just say that tech companies do go negative cashflow quite easily and that affects the dividend payout.
Hongwei Technologies half year financial results
For Hongwei Technologies, there weren’t much changes in this half year result presentation.
Net profit fell from 29 million RMB to 25 million RMB. The main reason for the fall have been a 165% increase in interest expense and 93% increase in income tax. Other than that Revenue grew 1.9%.
The shocker for Hongwei technologies lies in the cashflow statement. You will see a -17 million RMB operating cashflow vs 16 million RMB operating cashflow. Much of this can be attributed to a 30 million RMB increase in Trade Receivables, though the good thing is investnories went down by 4 million.
Its dissappointing that there weren’t any explaination why the receivables balloon by so much. I really hope this is a one time thingy and it will be collected next quarter.
The lifeblood of a dividend stock lies in its operating cashflow and if its so inconsistent, we might as well look elsewhere. However, do note that this is a half year report and its better to wait for the full year results to evaluate whether to add or sell.
I’m covering this under my dividend screener, but if the cashflow turns out to be bloody inconsistent and the economics of business is bad as a consistent dividend play, i would take it out.
Food Junction 3rd Quarter Results
This company, which i thought was a gem when i started investing 4 years ago, have been stagnating or even deteriorate during the past 4 years.
ROIC and Margins were decreasing but the biggest problem have been execution in overseas market. While BreadTalk have been doing well in this realm, Food Junction have struggle with its overseas exploits.
So how did they do for this 3rd quarter? From the profits garner you would think they have improved.
Net profit was 1 million vs 657 k for the 3 quarter in 2007. However, there was a provision for loss on disposal of 1 million taken in 2007. This explains why despite revenue being the same and cost increasing, they have done better.
As a criteria of a good dividend counter, its operating cashflow should be increasing and here you will see that operating profit have actually gone down from 3 million to 1 million. Exactly opposite that of the income statement.
At the cashflow statement, you can see that expenditure have increased from last year. the free cashflow is a negative -200k vs 2.4 million from previous year. This would explain why for this quarter, Food Junction will give out 1 ct dividend vs the normal 2 ct it traditionally give.
The group have accepted an offer to operate a food court at The Gardens, Mid Valley city located in Kuala Lumpur, but i am not expecting this to make an impact on full year results.
Going forward, the impact of Lippo Group on Food Junction seems to be rather lukewarm. You would expect some sort of synergy with them and more ventures into Indonesia and all but the results have not translated to an improving bottom line.
Rather, now Auric Pacific have came in with a partial offer to buy some of our shares at 55 cts. That is much less than the average 63 cts i paid for it.
All this translates to food junction being worse and worse as a dividend play. Rather than sustaining good operating cashflow they have been destroying shareholders’ return with ventures that add less returns compare to their singapore operations.
Based on current price, it looks a good company with high ROIC and zero debt. However, my 4 year affair with it tells me that it will take me more than this to make me add on to it. Key that i am looking at is improvement in business execution. With an improvemnt in that area, the cashflow will come and that will improve my view of this company as a dividend counter.
This counter is on my dividend Screener. Do bookmark this link and follow its daily fundmental changes vs its price changes.
Courage Marine 2nd Quarter Results
Just 2 weeks ago there have been a slew of results release on companies i own and i plan to write about them. It just that work have been pretty busy thus i can only update briefly here until now.
The first company i am covering is Courage Marine. despite the fall in Baltic Dry Shipping Index, results have been pretty strong.
- Profit for the period improved by 67% from the previous year.
- Operating cashflow generated was 20 million vs 7.8 million from previous year.
Freight rates have been very volatile during the past few months, with the BDI collapsing to the 5,600 level during the end of January this year after climbing to an all-time record above the 11,000 level from November 2007. The BDI is currently at around the 7,000 level. The Group believes that the market conditions will remain positive based on the perceived strong demand from China for raw materials.
We sent four vessels for dry-docking in 1H08 and they were out of deployment for a total of about 120 days. We expect to send two more vessels for dry-docking during 2H08 and they are expected to be out of deployment for a total of approximately 90 days.
The Group will maintain its cost-efficient structure and focus on keeping its fleet well deployed and running efficiently. Assuming that the BDI stays at around the current level and barring any unforeseen circumstances, the Group expects to continue to do well in the second half of FY2008.
Despite the cyclical nature of the shipping industry, Courage Marine’s strategy to concentrate on cost and not taking unnecessary risks can either be seen as prudent or they could be viewed as gutless to take advantage of the commodities boom to ride the wave.
I like a company that is prudent but not taking advantage of the opportunites out there does not go down welll with this investor. However, when u have a high ROIC such as Courage Marine, you don’t question too much how they earn their beef since you know you probably knows much much less than these managers who have been doing shipping for such a long time.
Courage Marine is one of the stocks on my dividend screener. Here i use a rather conservative dividend per share since shipping stocks like Courage and Singapore Shipping are prone to really good times and givign out one time big dividends. That is not what we want on my dividend screener. What we want is a consistent high yield or at least a good yield of 6-7% that is increasing yearly. This would explain why the yield based on current price is just 6.7%. Lets just say that my div yield is almost 20% from the last payout.
Courage Marine generates a good operating cashflow and have rather low expenditure. Most likely, payouts will continue long term at 6-7% with the occasional big payouts.
At current price, its EV/EBITDA is only 3.2 times, which means if you believe this cyclical shipping boom will last at least 3 years, it will take 3 years of zero operating growth to earn back what you pay for this company.
Do be advice to rational your valuation on cyclical shipping play. Your yield depends on your entry vs the cyclical nature of the industry. Ensure you do not buy it at a high premium.
