31 July 2014

DBS Multiplier Account - Savings Interest Rate of up to 2.08%

Some time back, I came across a promotion from DBS on their DBS Multiplier Account.  Depending on the amount of "monthly banking", the following would be the interest rate for the first $50,000 in the account:

Total monthly banking with DBS or POSBInterest Rate (p.a.)
< S$7,5000.05%
S$7,500 to <S$10,0000.98%
S$10,000 to <S$12,5001.28%
S$12,500 to <S$15,0001.48%
S$15,000 to <S$20,0001.68%
S$20,000 and above2.08%
[Source: DBS Bank website]

The "monthly banking" refers to transactions in an existing linked DBS/POSB account that include any (or all) of the following:
- salary deposited via GIRO from your employer
- DBS/POSB credit card bills
- DBS/POSB home loan
- investment dividends credited

Seems attractive. But it took me a while to figure out what the higher interest rate was applicable to.

I figured that since I had all 4 factors, I would be able benefit from the higher interest rates.  Imagine, a $50,000 multiplier account linked to a savings account that had $15,000 worth of "monthly banking" transactions would attract 1.68% p.a. interest. That's $70 of interest each month! For some reason, the online calculator at the same DBS website indicates $69+ instead. Not sure why. In either case, it sure beats the miserable near zero interest rate of the standard savings account.

As advertised, there are no monthly account fee and no initial deposit required, but required a minimum age of 18 for the account holder. There is a $30 charge if the account is closed within 6 months. Looked ok, so I opened an account to begin with.

Unfortunately, what I didn't read was the fine print that if the amount was less than $10,000 a month, a charge would be levied! Seems I was docked $25 for that folly in that first month. Pretty silly, losing money to the bank instead of gaining from the interest. Sigh.

[Since 1 Jul 2014 though, DBS appears to have revised the minimum requirement to $3,000.]

I raised my savings deposited in that account subsequently and have earned $38.56 of interest over the next two months. So it works as advertised. BUT, do read the fine prints! Caveat emptor.

[Thought: Even CPF-OA returns a better rate at 2.5%. Of course, that comes with the lock-in till retirement if still short of the minimum sum.]

It is actually a multi-currency account but I have not used the foreign currency features. I suppose I could deposit the US$ cheques I sometimes receive from the US$ denominated ETFs into such an account.

If the savings are placed in foreign currencies, the interest rate tables are different. The Aussie$ being the most attractive. But then again, it comes with the forex fluctuation risks and the Aussie$ has fluctuated significantly of late.

Bottomline: If you do have a steady level of "monthly banking" with DBS/POSB and have the cash to spare, this may be worth your while. 

29 July 2014

A Stock That's Worth a Closer Look?

Look at the following set of financials:

ROA (%) 25.91 29.21 34.53 36.20 31.17
ROE (%) 39.13 45.91 56.50 57.63 47.00
DPS (USD) 0.0750 0.3750 0.6750 0.9750 0.9000
EPS (USD) 1.9144 2.3269 2.9208 3.5322 3.6130
[Data dated 29 Jul 2014]

Would you invest in a company like this? Almost zero debt, strong margins, good dividend yield at a reasonable payout ratio of ~40%, strong ROA and ROE, fairly consistent dividend growth, consistent earnings growth, positive free cash flow.

Seems too good to be true? But it really is a real company on the stock exchange. Worth a second look? Guess which company this is?

For the answer, see the follow on post.

Is SPH a Leaky Tap?

"Drip, drip, drip" went my toilet spray (of the toilet bowl). Kinda make me wish for the Japanese type of toilet bowls. All that high  - who needs a spray!?  But alas, this is Singapore. So a spray it is.

The usual suspect as always was a worn out rubber washer. But it seems to be really hard to find one these days. It used to be easy to get one from those old musky and dark looking hardware stores. But these seem to have gone the way of the dodo bird. Old trade, hard to survive.

Looking at the stocks I own, I wonder if any fall into this category of old trade that is on their way out?


Newspapers are still being read, magazines are being bought, even if many are also being seduced by electronic media.  Personally, I'm still a hardcopy guy and would rather read the printed sheets and magazines. Less damaging for my ageing eyes.

ROA (%) 13.10 13.64 9.45 12.52 7.32
ROE (%) 20.36 23.26 17.43 19.44 11.94
DPS (SGD) 0.1600 0.1600 0.1600 0.1600 0.1500
EPS (SGD) 0.2616 0.3085 0.2402 0.3549 0.2656
[Source: POEMS, dated 29 Jul 2014]

SPH should do well with a growing and educated population. Unfortunately, with the population growth tapering off and ageing, probably not going to see much growth there.

Advertisers? They will go where the readers are. The draw of Internet of Things is drawing them away. Too seductive to ignore. So it bodes well that SPH is diversifying itself into the Internet space, buying a string of companies in this realm.

At the same time, SPH has diversified by going into development of commercial properties, making use of its cash hoard. A shopping mall in the city and a couple more in the heartlands. Guess its aim is to secure a stream of regular income from these properties. It has always been seen as a steady dividend champion and this is possibly one way to preserve its dividend stream even as it makes the structural shift from pure print to a mix of print and electronic businesses.

Will it survive the transition and continue to be a strong dividend machine with positive long term growth potentials?

A leaky spray can still be fixed. All it needs is a new rubber. *blink blink*

28 July 2014

Can Insurance Policies Return Better Than 4%?

It's always great to have a weekend extended by a public holiday. It gave me time to update the records of all my insurance policies and do a bit of a review.

These policies include whole life, endowment, investment and unit trust linked policies. The policies vary in terms of payment terms and involved cash, CPF-OA and CPF-SA.  You can see that I pretty much bought about anything in my foolish younger days.

I discovered that out of 11 policies from 3 different insurance companies, only one is projected to exceed a return that is greater than 4%. Even for that one case, it barely crossed the 4% threshold with a marginal difference. One might even say, "statistically insignificant". And it remains a projection with some way to go before 'maturity'.

It's pretty apparent that the whole foray has been one long and massive failure. Might as well have fed the money into CPF-SA.

Of course, part of the payments went to the insurance coverage and I have in some sense benefited. I'm most grateful that I'm alive of course. But considering the sub-4% performance, it still leaves a bitter taste.

In all fairness, I do have to say that the insurance policies were a good start for me nonetheless.  At least I had these to start off with to begin the journey to financial independence.  It was only past my fourth decade that I started seriously learning about investment and hence discovering the many alternatives that could generate better than the miserly 4% returns.

Onward to better returns!

p/s: Have you analysed yours?

25 July 2014

Investing and Dieting - Same Rules, Different Games

My wife and I had the opportunity to do something on our own today and had a sumptuous lunch with a great view. We pretty much consumed our whole day's calorie intake from that one lunch. Guess it's time to hit the gym and swimming pool to make up for the overdose!

It got me into a train of thought about investing and dieting yet again.

My daily budget for food intake is akin to a monthly salary. They both set the opening budget to work within. Everything thereafter is about living within the budget, and/or increasing the budget to work with.

Consider this: My Basal Metabolic Rate is 1,950 kCal.  Given the longer term aim to lose 2 kg a month (~7,000 kCal), the daily aim is then to lose 500 kCal a day. So I have two choices: eat less, or exercise more.  I could either eat no more than 1,450 kCal a day, or exercise 500 kCal and eat up to 1,950 kCal. The answer, as always, is something in between. So, I've taken to exercising 300 kCal and eating up to 1,650 kCal each day.

This has a close parallel to investing.  My monthly salary is $X.  Given the longer term aim to achieve $1.8m portfolio to generate my retirement income upon retirement, the shorter term monthly aim is then to either put aside enough savings from my salary for investment (spend less), or to find other avenues to generate more income to work with (earn more).  The first case of spending less would mean controlling what I spend on - some frugal discipline is needed given all the competing demands. For the second case of earning more, that could be from salary raise and bonus, dividend income, or any other sources of income.

I need to keep my intake within the daily calorie count in order not to gain weight. In fact, as I want to lose weight at a certain rate, it means I need to experience a net deficit.

If I might distill the above thought process therefore, it boils down to:

1.  Establish the end goal - long term aim.
2.  Break that down into more manageable shorter term budget.
3.  Live within the budget.
4.  Grow alternatives to expand the budget.
5.  Stick to the plan.

Slow and steady as it goes, but surely and certainly the end goal will be met. Same rules, just different games.

Good health and great wealth.

Investing and Dieting - Wealth and Health

20 July 2014

A $29,000 Problem to Financial Freedom

Surrender or Wait for Death

Well, we did it. Or she did it rather. My wife decided to surrender her only whole life insurance policy. We concluded that there was really no value in her owning such a policy when there's really no need to have such a sum to protect either myself or the kids.

As a housewife, why is there still a need for her to own this insurance policy? No point waiting for "till death do us part for" the returns from this policy.

The insurance agent was nifty and processed it in due course. The cheque for $29,000+ came in within a week, and is now safely deposited.

A Matter of Choices

Next question, what to do with it? Memories of the squandered $million$ case that went down the tube came to mind. Of course, this is several magnitude less of a problem. A happy problem in fact.

- Leave it in the bank savings account - build up the emergency fund, low interest rate, but risk free?

- Contribute to her CPF Medisave account to bring it to the the limit, earn 4% returns at the same time, but locked in?

- Buy more dividend yielding stocks on SGX, accept the risks of volatility?

- Buy Unit Trust to diversify globally, accept the leakage from annual charges?

- Buy ETFs to diversift globally, accept the risk of poor liquidity?

What would you do? For now, my wife says, she wants to see the sum appear on her savings account first. Feels *shiok* first mah.

Either way, that's also a few hundred dollars (avoidance from not having to pay the monthly insurance) freed up to do other things with. Invest that sum too?

Whole Life Insurance - A Good Deal or a Dead Deal?

19 July 2014

A US Team of Dividend Growth/Value Stocks

Aside from investing in SGX stocks (My World Cup Team (of Dividend Value Stocks)), I also own a smaller portfolio in US stocks as part of my globally diversified investment portfolio. Other regions are held in the form of Exchange Traded Funds and Unit Trusts.

At the moment, my US team looks like this:

  Berkshire Hathaway-B

  Johnson & Johnson
  Proctor & Gamble
  Anheuser Busch

  Wells Fargo
  Union Pacific

  Philip Morris

Berkshire Hathaway is a steady goalkeeper that has proven its worth over the long history since its founding by Warren Buffet and Charlie Munger.

The defensive line of 4 is made up of various companies that are likely to float in good time or bad. Toiletries, consumer medical and household products are things that have high repeat value, regardless the market situation. Oil will always be needed, until alternatives start to make oil irrelevant. But I can't see that happening anytime soon. And beer, will continue to be guzzled, perhaps even more so when things aren't looking good.

The midfield line up is an interesting variety of a financial heavyweight, fast food, large scale retailer and nation-wide train system. Of these, perhaps the more risky one is Target as it continues to face difficulty with its troubled expansion into Canada struggling. The Canadians are really not too enthu' with them.

The forward line up of IBM and Philip Morris will take some time to pan out. It's hard for a smoker to cut a smoking habit. A rapidly growing emerging market will likely generate an increasingly higher demand for their products. Of course, there are many risks given that this is a really unhealthy business and will face regularity pressures with high taxation and domestic product alternatives. IBM ... hmm ... let's see how this IT behemoth transforms itself. It has pretty much given up everything that is a commodity - i.e. the hardware business.

Two interesting key attributes of most of the above companies: (a) many are holdings of Berkshire Hathaway, and (b) they are dividend growth champions! Ironically, Berkshire itself doesn't give out dividends. Warren Buffet has always said that his company can do a better job of capital allocation and it makes more sense for them to invest the money than to give out as dividends. Besides, US tax the dividend payouts. As a Singaporean investor, I would lose 30% from withholding tax for dividends that are paid out.

The first team with the above 11 players are doing well.  However, my bench isn't doing too well - i.e. Coach. My holding in Coach has dropped a third in value.

Coach has been suffering from competitive pressures from Kate Spade and Michael Kors. Its attempt to generate more sales via atfactory outlets has devalued its branding. But still, we see many ladies holding Coach products. The company's financials look good. Let's see if it survives the challenge from the new brands and turn things around over time.

It's an irony isn't it? The problem is the Coach. Muahahah!

G K Goh - More Insider Buying

I examined this company back in Jun 14 and made a small investment into this company.

I liked what I saw, particularly its holding in Boardroom, another SGX company that I had been tracking in view of its consistent high yield dividend.

Its small holding in euNetwork isn't doing as well though. The later is on the Catalist board.

Back then, I had highlighted the insider buying that was going on. Looks like GKG Investment Holdings Pte Ltd has continued with the insider buying spree, adding another 81,000 shares on 15 Jul 2014.

A positive sign? Evaluate and assess.

G K Goh

11 July 2014

Kids Education Revisited - Back to the Future

Kids education - it's such an important part of the early pangs for parents. I had previously shared about my own misadventures on this (Misadventures of the Education Savings Fund). I thought I might do a theoretic study of this and rewind the clock. Were I to start this journey from the birth of my child, how would it have looked like instead?

Below table illustrates the whole plan. Assuming birth in 1999, I would place $2,000 per year for the first 4 years. That gives me 8 blocks of $1,000 which I could invest into a diversified portfolio of unit trust in various regional markets. In particular, equity unit trusts covering (1) US, (2) Europe, (3) Asia Pacific ex-Japan, (4) Global Emerging Markets, (5) Singapore, (6) Asia Pacific Small Caps, as well as (7) Global Bonds and (8) Money Market Fund. That would have given a good diversification.

In subsequent years, I would then top up annually with $500. Basically, the 'ang pow' money. And then top this up with a monthly RSP of $200 per month. Assuming an annualised investment return (ROI) of 6.5%, we should have a tidy sum of well over $100,000 for the varsity funds, assuming $25,000 needed per year for 4-years at a local university.  Rebalance the unit trusts with equal amount in each.

Below profile is based my girl's. Guys would have a further two years to work with. Even if on the eve of year 19, the market were to collapse by (no more than) 30%, the portfolio would still suffice.

Age Year Ad-hoc  RSP (mthly)  ROI Extracted  Portfolio
1 1999  $2,000  $ 200 6.5%  $    4,400
2 2000  $2,000  $ 200 6.5%  $    9,086
3 2001  $2,000  $ 200 6.5%  $  14,077
4 2002  $2,000  $ 200 6.5%  $  19,392
5 2003  $   500  $ 200 6.5%  $  23,552
6 2004  $   500  $ 200 6.5%  $  27,983
7 2005  $   500  $ 200 6.5%  $  32,702
8 2006  $   500  $ 200 6.5%  $  37,727
9 2007  $   500  $ 200 6.5%  $  43,080
10 2008  $   500  $ 200 6.5%  $  48,780
11 2009  $   500  $ 200 6.5%  $  54,851
12 2010  $   500  $ 200 6.5%  $  61,316
13 2011  $   500  $ 200 6.5%  $  68,201
14 2012  $   500  $ 200 6.5%  $  75,534
15 2013  $   500  $ 200 6.5%  $  83,344
16 2014  $   500  $ 200 6.5%  $  91,662
17 2015  $   500  $ 200 6.5%  $100,520
18 2016  $   500  $ 200 6.5%  $109,953
19 2017  $   500  $ 200 6.5%  $  25,000  $  95,000
20 2018  $   500  $ 200 6.5%  $  25,000  $  79,075
21 2019  $   500  $ 200 6.5%  $  25,000  $  62,115
22 2020  $   500  $ 200 6.5%  $  20,000  $  49,053

I guess one adjustment to the above plan would be to keep the contributions from year 16 onwards in bonds and money market funds to mitigate the risk further. And with each passing year thereafter, to shift the contributions to cash-only in preparation for the annual draw down for the 4 years.

If the market does well, there would still be a tidy balance for my little one to get started on her journey to retirement as well.

09 July 2014

5 Wishes for X'mas 2014

X'mas is coming. It's always coming what, right? At worst, it's 364 days away. Darned good excuse either way to make a wish list. So here's my greedy list ... (never know if it might come true!)

Chaos and order begin with the flutter of a butterfly.

1. Give me real ETFs!

Enough of those exotic synthetics already. Then we can have less problems about the average investor not being allowed to invest in ETFs. Let's have real index ETFs and give investor the real means to diversify across market regions with real stocks backing the ETFs. Generate the liquidity as well please. Please?

2. Can I buy just 15 shares of Jardine Matheson Holdings?

It's really a pain given that it's at a price of US$59.84/share in lots of 400 shares. That's quite a fortune at one go. Of course there is the means to buy small lots on the Unit Share board on POEMS. But it doesn't have the same liquidity wor. The spread is even worse.

3. Repeat my order if not transacted.

How hard is it to provide such a feature? Can I have the function on the basic POEMS application for a validity period for my buy/sell orders if it is not transacted within the day? It's a pain to submit a fresh order each day until it happens. That's a lot of mouse clicks you know?

4. To hell with the penny stocks! 

Can we get rid of them for gawd sake? I really hate people selling 1,000 shares at $0.10 when I'm trying to buy 50,000 shares of it. That's just $100. Come on! You're killing me with the sales charges. Enough already. Creep.

5. Bonds galore! 

Why can't those 5%, 6%, 7% coupon paying bonds be made available to retail investors? At $250,000 a pop, they're completely out of reach for most. Why the exclusivity when bonds could really lower the risk profile of an investor's portfolio? Imagine all those education and retirement portfolios aiming to get a reasonably safe yield or 4% extraction for retirement?

Japan Foods - Ajisen Discount

Bought Japan Foods a few days back after having watched this stock for some time. Guess I'm still very much in a Japan mood after visiting the land of the rising sun on a holiday recently. Is this a bias effect?

The company appears to be in a growth phase with reasonably good margins. Scale likely matters in such a business. It appears to be expanding with some initial footprints in various Asia-Pacific countries. Its latest annual report hinted at likely expansion of its overseas outlets.

Financials appear reasonable, though not necessarily with much margin of safety at the moment. Numbers are suggestive of its growth. DPS and EPS has continued to rise year on year after an initial dip, with dividend standing at 2.8%, and more coming. Total dividend payout for 2014 is expected to be 2.6 cents in total, representing a total of 53% of net profit. The Board intends to recommend dividends of at least 40% of the Group's consolidated net profits, an increase from its current 35% level. With that, it has maintained a steady year-on-year increase in its dividends paid out.

Interestingly, the founder, Takahashi Kenichi, who is still driving the company was a mechanical engineer.  And he continues to hold the majority stake of almost 66% in the company. His pay for FY2014 was $716,000, of which 64% was bonuses.

Ratios & Other data
ROA (%)21.4810.1513.8620.5720.14
ROE (%)40.1616.0819.6028.1826.85
DPS (SGD)0.00330.00450.00660.01270.0073
EPS (SGD)0.02880.01500.02150.03700.0421

Peer Comparison Ø

Industry PeerROA(%)ROE(%)P/EP/BVEPSDPSDiv Yield(%)
Japan Foods Holding Ltd18.4324.1814.713.660.04210.00732.80
ABR Holdings Limited5.196.8018.071.600.04080.02503.29
Neo Group Ltd16.6635.4521.166.610.04440.02672.84
Sakae Holdings Ltd4.578.5914.301.490.03840.02003.64
Soup Restaurant Group Limited13.3318.14145.574.65-0.0075-

[Source: POEMS, dated 9 Jul 2014]

From the peer comparison, Japan Foods stands up well in terms of its ROA and ROE.  Its P/E is at a more reasonable level compared to the rest.  In terms of P/BV, it appears to be in the same league as Neo Group and Soup Restaurant, commanding a premium.

What came as an unexpected added surprise was this:

Ownership of the shares came with an Ajisen Family Card that offers various discounts at their restaurants (largely at 10%), though only valid for a year. Cool, nonetheless! And I thought Soup Restaurant was the only one that did this (Soup Restaurant - Slurping with a Discount).

I'm not too impressed with Ajisen Ramen itself though. Have tasted better. Food tends to be too oily. Fruit Paradise is interesting. Its outlet at VivoCity used to be packed. It seems a lot quieter these days though. Have not had the opportunity to try its other bands.

Disclaimer: This is not a call to buy or sell. Make your own assessment before investing.

03 July 2014

Investing and Dieting - Wealth and Health

The whole point of planning for a retirement income is to eventually achieve financial independence to retire on right? That means there is an inherent assumption that one gets to actually retire and live life to enjoy for "as long as you shall live", as my insurance agent might say. So one has to figure out what it takes to be healthy to do so.

Eat Less, Exercise More

Managing one's weight then goes a long way to achieving this goal. "Eat less, exercise more", or so goes conventional wisdom. But where's the joy if I love to eat in the first place? Easier said than done it seems.

Actually, my experience over the past half a year suggests that it really isn't that tough. There are really two important rules to remember to get started:

Rule #1.  Basal Metabolic Rate (BMR). This is the daily calorie (kCal) intake that one needs to maintain the weight. There are several formulas. But no worries, just pick one and go with it. They are about the same anyway - a function of height, weight, age and sex. Simply said, if I eat more than the BMR level, I would gain weight. Conversely, eat less, and I lose weight. Simple.

Rule #2.  7000 calories = 2 pounds (or just under 1 kg). Therefore, if I maintain a net deficit vide Rule #1 over a period of time, I would lose almost 1 kg per 7000 calories of deficit. At a steady rate of 350 calories deficit a day, I would lose about 1 kg each fortnight.

Spend Less, Invest More

If you think about this, the whole concept isn't really that much different from investment - i.e. live within one's means. Overspend, and I end up in debt. Spend less, and there is savings. The Basal Metabolic Rate is similar to the idea of balancing our revenue and expenses.

And if I were to put aside a certain sum regularly, I would build up a healthy level of savings. Attempting to lose 350 calories a day to create about 2 kg weight loss a month is equivalent to putting aside a regular sum of savings into investments to build up a healthy portfolio.

Health is Wealth

It all goes together. I've shed 10 kg over the past 5 months. Join me?

Go go go!