Sold F&N

I've just read through the Crcular to Shareholders from F&N dated 6 Sept 2012.

Many whould have known that F&N has agreed to sell its shares in APB to Heineken @ $53.00 per share.
This would amount to a net gain of $4,770 million for F&N Group.

Seems good? Well, look again at the net profits attributable to the Sale Interests, which amount to $331 million or 48.2% of the Group's 9-month net profits, or 36.1% of its FY estimated net profit. As such, there will be a drastic 36.1% drop in profits from here on....

The board intends to distribute approximately $4.0 billion, representing approximately 84% of the gain on disposal by way of capital reduction. What they will do is cancel 1 share for evey 3 shares held by shareholders (rounded down to nearest 10 shares), and paying $8.50 per share for the cancellation.

This would mean that I will lose a third of my shares but gain $8.50 per share for each share cancelled.

According to the circular, after the proposed transaction and capital reduction, the NAV per share will rise from $4.94 to $8.37, EPS will also rise from $0.457 to $0.595 before adjustment. However, I believe the earnings growth potential will be greatly hampered without APB. Prior to the sale of APB, my conservative intrinsic value of F&N was $8.60, and since it hits $8.60 today, I sold all my F&N shares @ $8.74 for a 240.94% profit. Granted the improved EPS and NAV/share values, the outlook of F&N don't look as good to me now.

Will continue to put it in my watchlist. Meanwhile, I'm searching for more wonderful companies at valuable prices.

Cheers and God Bless

Sold Sakari

I've just sold my holdings on Sakari for a total profit of 32.57% and bought Ezion @$1.10.

Reason for selling: Sakari will remain flat for a while, due to the madatory offer by PTT.

Reason for buying Ezion: Really conservative intrinsic value estimate of Ezion is between $2.16-$2.44. At $1.10, the MOS is so great that the potential profit (conservatively) is 109%. Will probably become my zero-cost stocks.

Putting money in the bank

Recenty I've been asked by person A, "How do you earn more money than putting money in the bank?"

My answer: Putting those money in the bank!

Person A: So how does putting money in the bank earn more than putting money in the bank? Aren't they the same thing?

Me: The answer lies in the definition of "putting money in the bank". "Putting money in the bank" to most people means putting the money in fixed deposit or savings/current account with the bank. To me, putting money in the bank means investing in the bank.

Person A: Won't that be risky?

Me: Do you believe that your deposits with the bank will be safe? That's the reason why you put  deposit with the bank isn't it?

Person A (after some thinking to make sure I'm not asking a trick question): Yeah?

Me: So why will investing in the bank make it more risky than your deposit?

Person A: I don't know, I just think investing is risky.

Me: Banks use your money to lend others, they then make money from the interests. If they are not operating safely, whose money will they lose?

Person A (after some thinking again): Mine?

Me: Yes, and Singapore banks have business models that place them in the #1 to #3 safest banks in Asia. I too, believe they are really safe. So you continue to place your trust in the bank keeping your money safe, why don't you invest in the bank to take a cut of the bank's profit from lending your money to others?

Person A: Woah you damn smart!

Me: You did not think out of the box, and I'm not smart.
__________________________________________________________________________________

Think about it, DBS, OCBC, and UOB are the safest banks in Asia.
Don't believe me?: http://www.gfmag.com/tools/best-banks/11929-worlds-safest-banks-in-asia-2012.html#axzz25hpEpOLA

So instead of placing your trust in the bank, believing that the bank will keep your money safe, why not invest in the bank, so that you own a part of the "most legal loan shark" business and collect a cut of that profit regularly?

Starting a new year with new accounts

I’ve just started to really take my accounts seriously. Not that I do not keep track of where my money is flowing, but I find that it is not thorough in my accounts. I realised that my returns for my paper assets far exceed my expectations… I wanted to re-start all calculations as I've made several changes and modifications to my excel sheets. So here's the results of my performance since Jan 1, 2012. Cheers!

Savings

XIRR (Since 1 Jan 2012): 0.00%

Banks have not paid interest yet, especially not in the middle of the month. Don’t expect my savings to soar though, since banks give <1% interest p.a. So if you think putting money in the bank is the best way to keep your hard-earned money, think again!

Inflation rate in Singapore for 2010 is 2.8%, and expecting to hit 5% this year. (http://www.singstat.gov.sg/stats/keyind.html) So unless your money is making more than 5% returns last year, you’re losing money to inflation.

Portfolio

XIRR (since 1 Jan 2012): 901.87%

Some may ask why I use XIRR instead of CAGR. Here’s my CAGR: 3996.11%

Reason for the big difference? I’ve injected cash on 9 Jan… So I’ll stick to XIRR for more accurate tracking of my performance.

Investopedia explains ‘Compound Annual Growth Rate – CAGR’

CAGR isn’t the actual return in reality. It’s an imaginary number that describes the rate at which an (initial) investment would have grown if it grew at a steady rate. You can think of CAGR as a way to smooth out the returns.

Don’t worry if this concept is still fuzzy to you – CAGR is one of those terms best defined by example. Suppose you invested $10,000 in a portfolio on Jan 1, 2005. Let’s say by Jan 1, 2006, your portfolio had grown to #13,000, then $14,000 by 2007, and finally ended up at $19,500 by 2008.

Your CAGR would be the ratio of your ending value to beginning value ($19,500 / $10,000 = 1.95) raised to the power of 1/3 (since 1//# of years = 1/3), then subtracting 1 from the resulting number:

1.95 raised to 1/3 power = 1.2493. (This could be written as 1.95^0.3333).

1.2493 – 1 = 0.2493

Another way of writing 0.2493 is 24.93%.

Thus, your CAGR for your three-year investment is equal to 24.93%, representing the smoothed annualized gain you earned over your investment time horizon.

Read more: http://www.investopedia.com/terms/c/cagr.asp#ixzz1k3sGwNis

However, it doesn’t work if you inject or withdraw cash, affecting the initial value

IRR/XIRR (internal rate of return) will be a better indicator as it takes into account capital withdrawals and injections.

Here’s why and how it works: http://www.jagoinvestor.com/2009/08/what-is-irr-and-xirr-and-how-to.html