Views on Youngsters Not Having Enough Savings

On the radio this morning, the DJ was talking about our youngsters not having much savings and invited callers to share their views. The comments that came in include:

• CPF is good enough.
• I'll save, if only my boss is prepared to pay me more!
• I love online shopping, how to save?

CPF is Good Enough

Oh dear, oh dear. CPF, where got enough? It's only enough for the lower income groups. They don't demand as much and so they can get by with the little income stream post retirement. Alternatively, you better have a lot of kids who are good to you. These youngsters might want to read (1) CPF as an asset that generates income (by SGYI), and (2) my past musings on CPF.

Ignorance.

I'll Save, if my Boss is Prepared to Pay Me More!

If he/she does pay you more, you think you'll save? The more you get, the more you spend. That's lifestyle inflation. It's the discipline to always set aside a sum for investment or savings that's going to make it work. Pay yourself first. Take a pay cut - i.e. slice a portion away from the monthly salary to park into savings or investments.

Lack of ownership.

I Love Online Shopping, How to Save?

I don't know how much online shopping one needs. Are those wants or needs? Beyond a certain point, it's just an addiction. Piles of junk and untouched items taking up space and collecting dust thereafter. The pack rat in a modern form.

Indulgence.

Concluding Remarks

It seems the young can't see the need to save and invest. Retirement needs is a future that is still far away.

It is really hard to ask the young to think so far ahead. Living by the day is pretty normal isn't it? Each eve to the next paycheck, the bank account tends towards zero.

We learn so much maths in school, but we never taught our kids to apply the same maths towards financial planning. Wouldn't it be so much more interesting?

Chapter 1 - Algebra, zzz.
Chapter 2 - Calculus, zzz.
Chapter 3 - Graphs, zzz.
:
Chapter 10 - Financial Planning - how it all comes together!?

Education.

4 Ways to Reduce Spending (aka Spend to Save?)

Spend to Save? That's a tagline that's such an oxymoron. But here goes with my 4 ways to reduce spending.

Credit Cards

Dr Wealth shared about 6 ways to reduce monthly expenses without compromising lifestyle. One idea was to use credit cards whenever we can so that we can score points and benefit from the card discounts. He also made an important point that this would go well only if one has the discipline to pay off in full each month, and not to allow ourselves to fall into the debt trap. It's really a silly idea to owe credit card debts. It's a downhill spiral that squeezes away our hard earned money paying interests. Worse, it's easily 24% per annum! I'm pretty disciplined.

I use a few Visa credit cards and found several to be good deals. The UOB One card and the Citibank Dividend card offer various cash rebates. Comes in the form of either a quarterly cash-back to offset the bills, or credits to offset the next payment at selected merchants. So I use the credit cards wherever possible for payments and have benefited substantively from these rebates. It all adds up. Worth a thought?

And, be stingy. Don't pay the annual card fees. The banks are going to hate me for this. Seek the waiver when the fee is due. Often, it's just a phone call away. Most banks have automated this process. I'm not even going to agree to pay half. They've always waived the fee, so long as there has been some spending. I'm 'ngiaow'.

Groceries

We need to buy groceries and numerous household items on a regular basis, unless you're the type of family that doesn't even cook at home. One of my brothers is like that. He has a fetish about keeping the whole house clean, all the time. We say he's "ko tak". His kitchen is really a museum, for display only.

I believe the wider community of modern working class is almost certainly going to buy a lot of stuff from the supermarkets. Their omni-presence and ubiquity is really a blessed convenience. Thank god for urbanisation! Whether it's NTUC, Cold Storage or any of the smaller chains, I guess we'll shop. When spoilt for choice, parking convenience, store crowded-ness, cleanliness, variety and freshness of food are perhaps other considerations by which we differentiate them.

I would advise, go get the darn NTUC Fairprice Card if you're shopping at NTUC supermarkets frequently. The points really add up very quickly. And it gets bigger, the bigger your family is. The points are redeemable to offset against payments and can be done at their check-out lines. Quite convenient, really. Except, when the cashier happens to be blur. Which happens, often enough. The elderly aunties (cashiers), sometimes a bit lost with technology. Forgive them, they're earning a tough living. Try again with a different cashier next time. The money is still there. Or as my daughter would say, "Chill."

And speaking of "chill", for Cold Storage, use the Citibank Dividend Visa Card. It's a few percent worth of rebate.

I'm sure there are many more options like these.

Restaurants

Credit cards often have offers for restaurants. Many restaurants also offer their own membership cards. I mentioned before the pleasant surprise I had when I bought shares in Soup and Japan Foods. Both offer their store discount cards to shareholders. See (1) Soup Restaurant - Slurping with a Discount and (2) Japan Foods - Ajisen Discount. The discounts feel like a form of dividend aren't they? Slurp slurp.

Transportation

And finally, transportation. Need to travel right? Our legs can only take us so far.

If you commute by train, you might want to sign up with Travel Smart Rewards.  It used to be called InSinc (see Insinc with the Times). Points are generated based on the time of travel on the MRT. These points are then spun in a snake-and-ladder game to generate prizes. Prizes are good and seems frequent enough. I've been receiving a few dollars a month. They have enabled a crediting arrangement so that the winnings can be credited into your bank account directly.

If you drive, then back to using your credit card. I get additional discounts when I use the Citibank Dividend Visa Card to pay for petrol at Shell stations, along with the Shell Card for points (redeemable rebates). I've a Shell station right round the corner, so that works really great for me. Again, there are various credit cards with similar arrangements with different petrol stations. Pick one that works for you.

Concluding Remarks

So there you have it, 4 ways to reduce spending. It's coming to lunch time. Time to go fetch my daughter and to run some errands. Let's see now, supermarket, lunch, petrol, and ...

Disclaimer: As far as buying the above shares go, study the companies carefully and make your own decision. The price may not be right. I'm not advocating a buy or sell. I bought Soup way back when it's price was far lower.

A Stock That's Worth a Closer Look - Handbags or Trash?

About two weeks ago, I posted the financial data of a particular stock and wondered if it was A Stock That's Worth a Closer Look?

The company is experiencing positive free cash flow, has negligible debts, and pays out a decent yield of 3.9% at a payout ratio of about 40%. Its PE ratio is in the region of 11x, distributions have stayed below earnings, and earnings continue to grow. All the above would be "green" by my book for a stock screening.

The only blips: (a) a price to book value of almost 4x; and more significantly (b) it has experienced a drop in price of more than 40% in the past year! The question is, why?

The company has pretty decent margins and likely has some brand attractiveness. The financials as mentioned above would suggest that it is well managed as well. So why the sharp drop, of a magnitude not unlike the Great Financial Crisis?

Is it a hoard behaviour? A gathering of Orcs welcoming Doomslayer? Does it then create an opportunity?

The stock concerned is none other than Coach, traded on the NYSE. It is facing intense competition from Michael Kors and Kate Spade. Has it gone out of fashion?

Supposedly it has diluted its branding due to its over dependency on discount store sales. Its sales in the US have dropped somewhat. But its Japan and China sales appear to be doing well.

When last I visited one of their US outlet stores a few years back, it was filled with tourists - of the Chinese kind. The store was crowded, and noisy. The check out queue, had a queue.

I see many ladies slinging one to work, though I wouldn't be able to tell if it's an "original" or a "chiong" ('copy original'?) item. My wife tells me however that Coach is passe. She's the one who knows the fashion of the day. Me, I just pay. If the ladies don't bite, they must really be in serious trouble.

So is this a McDonalds facing off the challenge of Chipotle and Yum? Or is this a Kodak facing the challenge of a digital age? Is this a Buy or a Sell? For now, my wife is holding onto her Coach bags, and I'm holding on to my Coach shares. Hers may be suffering from depreciation, mine may be suffering from deprecation. Time will once again tell.

Disclaimer: The usual reminder - do your own analysis and decide for yourself.

Giving from the Heart - 80 Good Deeds

It was another one of those evening. Tired from another day of work, Alf reached home at the throes of sunset. Each evening, he would open the mailbox at the lift lobby. Always, looking forward to one day receiving a letter that says, "You've won a million dollars!"

There was never any reason to believe it would happen. He didn't have any known rich relative, nor done anything to expect such unexpected gratitude. But there was always "hope". Then again, "hope" was a 4-letter word. But one could always hope for some long lost but rich distant relative to appear one day. Never know.

On opening his mailbox, he was faced with the usual stack of letters. "Bah, tree killers." But it was certainly more acceptable than receiving numerous unsolicited phone calls in the past.

There was the usual sprinkling of letters promoting some new condo sales at all ends of the island, and property agents touting sales made at his condo with bold declarations of several units sold at a million bucks each. "Looks like a lot of millionaires from here" he thought.

Some of these leaflets used to include lovely magnets with nice photos of the agent and contact numbers. Some certainly looked more pleasing to his eyes than others. He had loads of those pasted on his refrigerator. So that was a lot of nice looking people on his refrigerator. Seems like there were less of these nowadays. Must be a cost cutting thing going on. Times must be getting hard for property agents.

And then, a letter seeking donation to a charity organisation.

"Dear, you think we should make a donation?"

Alf's wife glanced over and peeked at the letter, "Good to do good deeds."

Alf studied the letter further and made up his mind to do so. The letter also indicated that the organisation would automatically update IRAS for income tax purposes.

Curious, what's that about he wondered?  Researching further on his Samsung S5, he discovered that for every dollar donated to recognised charities, he would receive 2.5 times the value in deductibles to his taxable income.

"Dear, did you know that if I donate $4,000, I would receive $10,000 deduction off my taxable income? At a tax bracket of 18% that I'm at now, that means I would avoid $1,800 of tax I otherwise have to pay.

"You mean you only need to spend $2,200 to donate $4,000?"

"Guess that's one way to look at it." He shrugged.

Alf's wife contemplated this new insight. "You know what? If you donate $50 to each charity, you can donate to 80 organisations?"

"That's a fascinating idea!" He was feeling excited already. 80 good deeds. Why not? Good karma too. He was getting really excited.
--

With apologies to much better written stories by other financial bloggers (esp. Bully the Bear) for the inspiration. 8)

Try this:
Secrets of Millionaire Dwarfs [Bully the Bear]

2 Great News from Changes to the SGX Stock Market

I couldn't be happier with the latest announcements on the changes for SGX. There are several changes upcoming but I would single out two in particular: (a) the minimum value of a share will be 20 cents, and (b) the minimum lot size would be reduced to 100 (it's typically 1,000 today).

A Penny for Your Thoughts

With share prices requiring a floor of 20 cents, it means that many penny stocks would have to ante up to consolidate the shares to get above the minimum sum.

It's a real bugbear when you're trying to buy 50,000 shares at 10 cents a piece and somebody decides to sell you just 1,000 shares! On my gawd, that's only $100 in total and the sales charge alone add another $30 to it. Geez. [Palm slap face]

Wonder what's the impact for Qian Hu? Hmmm .....

100 is a Good Number

Then there's the minimum lot size. Some shares are trading at over $10 per share. Buying 1,000 shares today would require an outlay of $10,000. Worse are those Jardine family of shares, with many trading at several tens of dollars per shares. Takes a family fortune to buy anything.

Granted, I could try my luck buying from the "Unit Share" board on POEMS. But liquidity is just too low. Trying to get anything transacted is like balloting for a new flat in the good old days. Wait long long. But of course, not as bad as waiting to strike Toto.

With the latest changes announced, I look forward to getting my hands on Jardine Matheson Holdings (JMH) and Dairy Farm at some point in the near future. 100 shares of JMH at US$60 would still be a pretty hefty sum. But at least, it would be more within reach.

Would the greater accessibility cause these stocks to suffer increased volatility? It could work both ways.

Santa Claus is Coming to Town

The later change is actually detrimental to the earlier. 100 shares at 20 cents is $20. We really need to get to a minimum of $1 per share to make any sense. Alternatively, can sales charges drop even lower?

Looks like two of my X'mas wishes are coming true (Wish List for X'mas 2014). Three more to go. Got to believe there's a Santa Claus living in the North Pole.

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 POSB	Interest Rate (p.a.)
< S$7,500	0.05%
S$7,500 to <S$10,000	0.98%
S$10,000 to <S$12,500	1.28%
S$12,500 to <S$15,000	1.48%
S$15,000 to <S$20,000	1.68%
S$20,000 and above	2.08%

[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. 

A Stock That's Worth a Closer Look?

Look at the following set of financials:

Stock Data
Market Capitalization (USD 'mil)	9,494.59
Common Shares Outstanding ('mil)	274.1520
52 Week High (USD) (29/07/2013)	58.710
52 Week Low (USD) (16/07/2014)	33.390
52 Week Return (%)	-41.850
Average Volume ('mil)	4.4025
Beta	1.13

Financial strength
Current Ratio	2.87
Quick Ratio	2.14
Long Term Debt to Equity (%)	0.02
Total Debt to Equity (%)	0.04
Interest Coverage Ratio (TTM)	-
Free Cash Flow to Firm (TTM) (USD 'mln)	521.13

Margin
Gross Margin (TTM) (%)	71.09
Operating Profit Margin (TTM) (%)	27.35
Net Profit Margin (TTM) (%)	18.95

Dividend §
Annual Dividend per share (USD)	0.9000
Dividend Yield (TTM) (%)	3.91
Dividend Yield (Annual) (%)	3.90
Payout Ratio (TTM) (%)	40.60
3-Year Growth Rate (%)	33.89

Valuation
Historical P/E Ratio	9.58
P/E Ratio (TTM)	10.55
P/BV (latest interim)	3.97
BVPS (latest interim) (USD)	8.7152
EPS TTM (USD)	3.2817

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?

SPH

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.

Stock Data
Market Capitalization (SGD 'mil)	6,674.71
Common Shares Outstanding ('mil)	1,616.2461
52 Week High (SGD) (31/07/2013)	4.327
52 Week Low (SGD) (29/08/2013)	3.845
52 Week Return (%)	-1.390
Average Volume ('mil)	2.1671
Beta	0.57

Financial strength
Current Ratio	4.82
Quick Ratio	4.75
Long Term Debt to Equity (%)	49.15
Total Debt to Equity (%)	49.23
Interest Coverage Ratio (TTM)	14.53
Free Cash Flow to Firm (TTM) (SGD 'mln)	-277.09

Margin
Gross Margin (TTM) (%)	53.58
Operating Profit Margin (TTM) (%)	34.28
Net Profit Margin (TTM) (%)	29.98

Dividend §
Annual Dividend per share (SGD)	0.1500
Dividend Yield (TTM) (%)	3.60
Dividend Yield (Annual) (%)	3.60
Payout Ratio (TTM) (%)	156.61
3-Year Growth Rate (%)	-2.13

Valuation
Historical P/E Ratio	15.70
P/E Ratio (TTM)	20.11
P/BV (latest interim)	1.92
BVPS (latest interim) (SGD)	2.1739
EPS TTM (SGD)	0.2073

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*

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?

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.

Related:
Investing and Dieting - Wealth and Health

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?

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

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:

Goalkeeper:
  Berkshire Hathaway-B

Defense:
  Johnson & Johnson

  Proctor & Gamble

  Chevron

  Anheuser Busch

Midfield:
  Wells Fargo

  McDonalds

  Target

  Union Pacific

Forward:
  IBM 

  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.

Related:
G K Goh

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.

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.

Stock Data
Market Capitalization (SGD 'mil)	107.88
Common Shares Outstanding ('mil)	173.4660
52 Week High (SGD) (28/11/2013)	0.815
52 Week Low (SGD) (16/10/2013)	0.470
52 Week Return (%)	32.860
Average Volume ('mil)	0.0176
Beta	0.02

Financial strength
Current Ratio	2.79
Quick Ratio	2.71
Long Term Debt to Equity (%)	-
Total Debt to Equity (%)	-
Interest Coverage Ratio (TTM)	-
Free Cash Flow to Firm (TTM) (SGD 'mln)	2.80

Margin
Gross Margin (TTM) (%)	81.59
Operating Profit Margin (TTM) (%)	13.70
Net Profit Margin (TTM) (%)	11.64

Dividend §
Annual Dividend per share (SGD)	0.0073
Dividend Yield (TTM) (%)	2.80
Dividend Yield (Annual) (%)	2.80
Payout Ratio (TTM) (%)	53.04
3-Year Growth Rate (%)	18.10

Valuation
Historical P/E Ratio	14.71
P/E Ratio (TTM)	14.71
P/BV (latest interim)	3.66
BVPS (latest interim) (SGD)	0.1693
EPS TTM (SGD)	0.0421

Ratios & Other data
ROA (%)	21.48	10.15	13.86	20.57	20.14
ROE (%)	40.16	16.08	19.60	28.18	26.85
DPS (SGD)	0.0033	0.0045	0.0066	0.0127	0.0073
EPS (SGD)	0.0288	0.0150	0.0215	0.0370	0.0421

Peer Comparison Ø Industry Peer ROA(%) ROE(%) P/E P/BV EPS DPS Div Yield(%) Japan Foods Holding Ltd 18.43 24.18 14.71 3.66 0.0421 0.0073 2.80 ABR Holdings Limited 5.19 6.80 18.07 1.60 0.0408 0.0250 3.29 Neo Group Ltd 16.66 35.45 21.16 6.61 0.0444 0.0267 2.84 Sakae Holdings Ltd 4.57 8.59 14.30 1.49 0.0384 0.0200 3.64 Soup Restaurant Group Limited 13.33 18.14 145.57 4.65 - 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.

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!