Finally an announcement from SGX : They are going to update their site. In all my years of investing nver had I seen such a crappy site as the SGX one - puts even zimbabwe to shame :-).

But here's a recent announcement - yes the beta will be up for all of us to see : www8.sgx.com.

 Here's hoping we can obtain a streaming widget to construct cool portfolios. Next stop ETFs from iShares ! CVC are you listning ? 

SGX | web 2.0 | new site SGX

As opposed to the "picking hot stock category" here's the opposite: picking value stocks. Accordingly what would be a value stock: i.e. a stock whose price is undervalued by the market.

1. The best way of doing this would be to consider a thorough DCF analysis, subtracting market value of debt, the remaining value  divided by the total number of shares outstanding should give the potential share price. Comparing it to current share price should show the upward potential. Of course that would mean correctly predicting terminal value, a task fraught with danger since the closer the cost of capital is to growth higher the terminal value.
2. The faster way (thanks Larry and Sergei) is to look up at the P/E , P/B ratios, compare it to peers and then take the study on from there.

I’ve chosen the Energy and Power sectors to look into – as they provide fundamental value – i.e. value is not created from thin air or banker’s speculation – but through the sale of energy. Price of Kwh sold is known in most jurisdictions and through energy generation sources and O/M costs per Kwh are also widely known. So you have a handle on OPEX, COGS and topline. Remains tax rebates, and different laws in jurisdictions.

Power distribution is also synonymous to growth. Higher industrial output means higher demand for power which is in turn dependent on either fossil fuels or renewable sources. If there is an imbalance in the supply demand equation either tariff will rise (in case where electricity prices are non-regulated) or volume of generation will rise through higher efficiency or installation of CAPEX.

So let’s pick some stocks – I followed A Power energy recently. A-Power is a distributed power generation holding. As you know industrial output has shockingly plunged in China – but I believe in one year we’ll probably swing upwards. So now power stocks should be down in China.  

The recent announcement of A – Pwer’s Q4 earnings beat market expectations by 100% !!! (so much so for analysts)  and their stock surged nearly 30% yesterday ( April 9^th) .

This is an extract from the official announcement:

2008 Results

For the full year 2008, A-Power's revenues rose 73.6% to $264.9 million from 2007.

Gross profit increased 79.4% to $36.9 million from 2007. Gross margin was 13.9%, compared with 13.5% in 2007.

G&A expenses were $8.7 million, compared with $3.5 million in 2007. The higher G&A expenses were mainly because of the costs of being a public company and business expansion.

Operating income increased 65% to $28.2 million from 2007.

Net income soared 87.4% to $28.5 million from 2007.

Diluted earnings per share were $1.01, compared with $2.23 in 2007. For the year 2008, the weighted average number of shares on a fully diluted basis was 28.2 million, compared with 6.8 million in 2007.

Balance Sheet Highlights

As of December 31, 2008, A-Power had cash and cash equivalents of $43.5 million, compared with $59.7 million at September 30, 2008.

Working capital as of December 31, 2008 was $97.0 million, compared with $95.8 million at September 30, 2008.

Current ratio as of December 31, 2008 was 3.06 compared with 2.91 at September 30, 2008.

Total shareholders' equity rose to $155.3 million at December 31, 2008, from $143.9 million at September 30, 2008.

As of December 31, 2008, the Company recorded no short-term or long-term bank loans.

So all in all company results look impressive amidst the down turn. So is A-Power a value stock ?

 P/E ratio of this china based company show it is undervalued as compared to its peers and  price to book ratios are under 1.

		P/E	P/B
huanneng		14.75	0.051697
A Power		6.69	0.945
China Power		-	0.272727
Datang		52.28	-
China resource Power holdings		42.09	0.886076

 So yes A-Power is a value stock for the following reasons:

1.   Power generation distribution is closer to buyer ( thus contracts will probably be made with individual buyers in full recognition of buyer’s expected demand profile.
2. Power generation is geared to match utilization so extra capex in terms of power lines are normally reduced thus increasing operational cash flows.
3. When industrial demand picks up power stocks will surge accordingly. The beta of a-power (i.e. correlation to the market) is 2.1 meaning that when markets increase by 1 point this stock should on the average surge by 2.1
4.  A quick calculation shows that 6.69 * 1.01 > current market price. Quick Ratio stood at 3.04 and Debt ratio at 0.2.

 I looked at the average price over a three year period of this stock  - it stood at 9.9USD/share with a volatility of 6 USD/share. So here's my hypothesis ( forward looking); That in two years time the stock will rise to 0.9 USD /share or if an investor would invest at current share price he would get a return of 31%.

 So I put Prosperity's risk planner to the fore and here's the graphic i obtained:

 On average I'd make 9900 bucks on 1000 shares, on the upside 16000 USD or mre, and on the downside 2700.So here’s hoping that I got in low and that I can hold on for another two years.

distributed power generation shares | China | value stocks | risk | power price world

The Lehman Mini bond scam Marketing brochure. Please read in fine print that your PRINICPAL IS NOT PROTECTED NOT GUARANTEED ….

Wonder if that Singaporean sitting on Apollo heeded my warnings …

Humpty dumpty sat on a Wall,

Humpty Dumpty had a great fall.

All GICs horses and all Temasek’s men,

Could not put Humpty together again

It is actually incredible that nowhere is Lehman actually mentioned. How senior was this bond, what was the underlying asset requiring financing… ( no banker salary is NOT the correct answer)

And look at the credit ratings ….

scam | Lehman Mini bond | singapore | humpty dumpty

 So is VC and entrepreneuship doomed and how to get "creative destruction" right ?

1.  We need a big big dream - not of making money, but of a higher cause which will progress mankind, someone to state  that dream loud and clear and goverment to push money to realise that dream. 
2. If the dream is stated and money is on the table, a competetive process needs to be put in place so that the best "brains" bid for the realization of the elements that will make up the dream. The "best brains" will hire best of class - because "brainy" people often despise being surrounded by mediocre types - and this will lead to higher awareness and participation in the exact and applied sciences. Too many science students are lured by the big bucks offered by investment banks - making money out of money has limits ( read credit crunch). 
3. VCs will be pruned out. Only the "grand cru" will survive. As money from the government spills in entrepreneurs will go for cheaper source of financing. since Vcs are human they'll want to be part of the big " show and tell" - but will have lesser bargaining power reflected in lower hurdle rates. The ones which will be able to survive on lower hurdle rates are those which have longer relations with limited partners and longer and more realistic track records as well as better networks to benefit the entrepreneurs. After all - isn't capitalism's first tenet - "The fittest survive"

venture capital | creative destruction

Personal Finance Monitor: Insights into How Vietnamese Consumers Manage their Finance

Visa International, the world’s leading provider of payment card systems and  ACNielsen the global leader in market research, announced the findings of their first Vietnam Personal Finance Monitor (PFM). The PFM is Vietnam’s leading report into the state of the money habits of people in Vietnam.

Sampling an audience of social-economic classes A,B & C and some of the key findings of the report include:

• Very low bank account penetration, with only 50% of Hanoi and 31% of Ho Chi Minh City residents in SECs ABC having bank accounts.
• 21% awareness of credit cards, 8% of debit cards, 91% awareness of ATM cards. Visa is seen as the leading brand of payment cards.
• Very low penetration of lending from banks, with the most borrowing from families and friends.
• Gold and foreign currency is seen as the “safest” investment for Vietnamese.

“It is interesting to view the results the PFM has brought us and it will be fascinating to watch the way in which this changes as Vietnam develops,” said Stuart Tomlinson, Visa Country Manager for Vietnam, Cambodia and Laos.  “The findings point to a lot of work that needs to be done in educating the public of Vietnam in terms of their management of personal finances, their use and trust of an increasingly banked economy and their attitudes toward payment with cards and personal credit.”

“Indeed, it still seems that a majority of people in the higher social-economic classes, who in other countries would be relying on banks, simply do not yet see a need to keep their money to bank accounts, interestingly citing a lack of security as a prime reason for this reluctance,” said Mr. Tomlinson.  “Further feedback from our research indicates a belief that the account opening procedures and banking operations in general are complicated and time consuming, and this also deters uptake.”

“58% of respondents indicated that they simply do not have enough money to need a bank account. This is an interesting finding considering this survey was taken among wealthier, asset holding Vietnamese.”

“Generally speaking, people will open current accounts or savings accounts before broadening their banking needs and payment cards follow this,” Mr. Tomlinson continued. “So the relatively low knowledge of payment cards is a logical follow-on from the low acceptance of banking products.”  

“However there are some extremely positive signs in this data.  The very high ATM card awareness is a step in the right direction toward getting Vietnamese people to pay with cards and to associate cards with payment.  And of course, seeing Visa prevail as the best known of the payment card providers is certainly very gratifying,” he said.

“With Visa emerging as the best known of the payment card companies in Vietnam, they were the perfect for ACNeilsen to partner with,” said Mr. Chris Morley, Managing Director of ACNeilsen Vietnam.  “We have undertaken Vietnam’s pre-eminent exploration of personal finance habits and the findings will be a very valuable tool for Vietnamese banks seeking to better understand their customers’ motivations, preferences and future requirements when it comes to savings, investments, payment cards, lending and borrowing.”

According to the report, borrowing from banks is not yet a common practice in Vietnam, with only two percent surveyed of customers having borrowed from a financial institution, preferring instead to borrow from friends and family.

“A customer perception that it is very complicated and time consuming to borrow from a bank prevails in Vietnam, as well as a belief that interest rates charged by the banks are restrictive, so people prefer to save up for major purchases and pay in cash, or otherwise borrow from friends or family to avoid interest repayments, asset declaration or red tape from the financial sector,” said Mr. Tomlinson.

“Some interesting differences between Ho Chi Minh City and Hanoian personal finance trends were revealed,” said Mr. Tomlinson. “Residents of HCMC seem to borrow more to finance business activities, while Hanoi residents tend to borrow for home improvements as general consumption spending.”

This is the first such study into personal finance and was done with a 2,000 person sample from AB and C socio-economic classes. These classes are defined by housing ownership and asset ownership. The first was carried out from 15 to 30 September 2006 with 1,000 sampled face-to-face and door-to-door in Hanoi and Ho Chi Minh City. The interview is applied to randomly pick a qualified respondent in a household with average length about 60 minutes. The next such study will be completed mid 2007.

Personal Finance | Vietnam | Visa

nice video explaining money Creation

money | debt | thieves | bankers

Bets are on that AIG is the next, with massive amount of short selling reported .. the honchos at AIG have been parading in front of the NYSE and SEC.

But given the liquidity crisis of AIG I think they are the next on the choping block.

In December, Temasek invested 4.4 billion US$ in Mother Merill at 48 US$ a share. At the moment Temasek was pretty bullish about Merill's long term prospects:

"Merrill is a leading global financial institution, with strong franchises in wealth management, global markets and investment banking. We believe it has an excellent platform with strong growth potential under John's leadership," reported Manish Kejriwal, Temasek's senior managing director of investments.

Mr Kejriwal, who in the mean time must have earned a nice plush salary must be sweating in front of his task masters as Merill is going to be acquired for 29 US$ a share. This would amount to almost 1.7 billion US$ loss for Temasek assuming that Temasek has held on to its shares.

This provides fodder to legislators who are asking for more transparency in the way sovereign funds are run. It has already been reported that Temasek was one of the worst performing government investment agencies. This only goes to show why:

1. Poor Research and Non objectivity
2. Remuneration not linked to actual long term value creation

What is funny is that the list does not stop here. I'll be pointing out a list of investments which make no sense in my next blog. In the meantime here's a few valauble lessons:

1. Investment Managers straight out of Investment Banking or MBA have noc lue where value lies because they have not build anything themselves - and just fooling around with excel spreadheets will not solve that
2. Investing in Resumes is straightforward - investing in people is not