GMG Global: A Brief Analysis

From the website, GMG Global is a Singapore-based plantation group dedicated to long-term investments in Central, West Africa, and Asia.

GMG is an integrated producer of natural rubber engaged in the planting, growing, tapping, processing, marketing and exporting of natural rubber. The Group's emphasis is on producing premium rubber products for Europe, American and Asian markets.

GMG focuses on centrifuged latex and tyre-grade rubber; in addition to two supplementary products: block rubbers of latex and skim; "centrifuged latex grade rubber" used in gloves, condoms and adhesives industry and "tyre grade rubber" used in the manufacture of tyres (for cars, commercial trucks, machineries, etc).

In 2008, there was a shift in the shareholding structure of GMG with Sinochem International Corporation acquiring 51% of the GMG shareholding. Sinochem is publicly listed on the Shanghai Stock Exchange, and comprises a diversified international group specializing in the trading, manufacturing and transportation of chemicals, plastics, and rubber and metallurgy products. In the field of rubber business, Sinochem is placed at the top in the PRC in terms of natural rubber sales.

Besides having its first processing facility in South Kalimantan (P.T. Bumi Jaya), GMG expanded further into Kalimantan with a 75% stake in a joint venture (PT GMG Sentosa) and completed takeover on 15 January 2010 of a processing facility in Pontianak, West Kalimantan, that has an annual production capability of 25,000 metric tons.

Recent Developments

There was a recent leadership change in the management in GMG Global. In July, GMG Global's Chairman Xian Ming, who is also from Sinochem International Corporation, was appointed as CEO, replacing Elson Ng. The latter is part of the GMG Global's original founding members and stays on as an advisor to the company. Taking over the position of Chairman was also another Sinochem International Corporation individual, Zhang Zhengen.

More recently in September, in response to a query to SGX over a sharp spike in trading activity, GMG said that was currently in discussions with certain parties to acquire a foreign company in Southeast Asia which is engaged in rubber production and trading. However, GMG said no agreement has been reached on the Proposed Acquisition, and there was no certainty as to whether such Proposed Acquisition will take place.

GMG also added that it was also in the process of embarking on a new rubber related project in Africa. To that end, it has since setup a JV company in Cameroon specifically for the development of natural rubber plantations.

Financial Results

portfolio end of october

I am currently working on an analysis of GMG but the portfolio has slipped quite a bit from the previous week. My short term forecast was correct in that the 3,200 was not breached by the end of the month.

HDB Should Return To Cost-based Approach

I fully agree with the letter writer. If the problem is really too high public housing cost, the solution is to revert to the cost based approach which has worked fine. If the cost based solution was not working fine in ensuring access to cheap public housing to Singaporean couples, the relevant authorities should bring out the issues. Other wise, Singapore will have a sub-prime mortgage problem. Already, we read of stories of people living on beaches in tents, or young couples putting of marriage. The latter definitely has an impact on Singapore birthrate.

 

HDB should return to ‘cost-based’ pricing

mypaper October 27 2010

THE various propertymarket cooling measures announced so far have not addressed these two fundamental issues: Root cause behind high prices of new and resale HDB flats. The high prices of HDB flats will naturally push up private- property prices. Thus, this issue affects all Singaporeans, even those aspiring to own private property.

In Marine Parade during the 1 9 7 0 s , p r i c e s o f new three-room, four-room and five-room flats were $17,000, $20,000 and $35,000 respectively. In 1990, new five-room flats cost around $70,000. Such prices reflected a “cost-based” pricing approach then.

But, following the property bull run in the mid-90s, HDB switched to a “market-based” pricing approach, and has confirmed that “the prices of new HDB flats are based on the market prices of resale HDB flats, and not their costs of construction”. In 2000, t h e t o t a l break-even cost (comprising construction, land and other related costs) of a new five-room flat was estimated at about $120,000.

However, under market- based pricing, HDB will first look at the prevailing market price of, say, $260,000 for a five-room resale flat. It will then pick a slightly lower figure of, say, $200,000 as the selling price for the new flat – despite the break-even cost of $120,000.

HDB will then say the newflat buyer is getting a so-called “market subsidy” of $60,000, which is the difference between the resale flat’s market price and the new flat’s selling price. There is not really a “cash subsidy” for the buyer, while the HDB makes a profit of $80,000 for each flat sold.

The financial losses reported in HDB’s audited statements could well come from “transferpricing” accounting between HDB, the Singapore Land Authority and the Ministry of Finance.

A plate of chicken rice costs $3 at a coffee shop and $20 at a hotel coffee house. It would be illogical to say that every person eating chicken rice at a coffee shop is getting a “market subsidy” of $17 per plate!

HDB’s “market-based” pricing approach is the root cause of the continual rise in the prices of new and resale flats, which is detrimental to flat buyers.

Why is HDB not doing the right thing, as a not-for-profit, low-cost public-housing developer, by pricing new flats on a cost-based, break-even basis, passing on to Singaporeans the economy-of-scale cost  savings from its huge developments?

HDB flats are public housing developed using public funds. Thus, HDB must be transparent and accountable by disclosing detailed cost figures for all its housing projects.

Are new flats really affordable now? While even a taxi driver could say that he was able to afford a $35,000 five-room flat previously, he would be right to worry how his children could afford to buy a similar flat costing close to $500,000 now.

It is misleading for HDB to say that its flats are “affordable” without clearly specifying that a 30-year loan period is assumed. If one were to stretch a home loan for as long as 30 years, even private property would become “affordable”.

For a couple with a combined monthly income of $8,000 , a 30-year HDB loan of $500,000 with a 2.6 per cent interest rate and $2,000 monthly loan instalment may appear to be affordable.

But, at the end of 30 years, they would have coughed up a whopping $800,000 in total capital and interest repayments. A financially prudent loan period would be around 15 to 20 years.

MR SEE LEONG KIT

Shoulder Socket Pain

The portfolio fared worse compared to the previous week. The main culprit was Etika falling to $0.415, after the shares were trading XB. Asiatic Holdings also took a hit but was insignificant overall. I am still considering whether to sell Asiatic, TPV and Stratech while adding more money, to increase my stakes into existing counters. It has been my intention to consolidate the smaller holdings, but the loss on Stratech has been putting me off for quite a while.

Sidenote, after coming back from a wedding dinner that ended around 12, I had difficulty sleeping. For strange reasons, my left should socket felt a numbing pain, keeping me awake from 530 am onwards.

Memstar Technology : Not That An Investment Proposition?

This write up was prompted by the following comment

nicholas said...

Hi there,

Was wondering what do u think about MEMSTAR? Thanks. Hope to hear from you soon :)

October 22, 2010 9:45 AM

Some facts about Memstar Technology from various sources

Stocks Discussion With A Knowledgeable Reader

2010/9/19

Hi there.

I have been actively reading your blog and share some of your views. I am particularly confident in some of your stocks such as GMG Global (which I have invested in) and Etika. However, recently I am looking to invest in another penny stock and Elite KSB has been of particular interest to me.

Can you give me some advice and if you have any research reports on them? Cos they seem very low profile and very thinly traded. Do you see any short term potential for them? Any target price you have in mind? I also believe the food industry wil boom in the coming year.

GMG global is another holding of mine... I believe in their fundamentals and have increased my stakes in them. Can you shed any views on them?

Why Do Most Stock Bloggers Prefer Anonymity

And why do most people who want to deal with your money plaster their face all over their blogs?

I some times have the urge to post a photograph of my face. I reckon that with my face on this blog, I provide some sense of security. If you can see how I look, you may think that my high forehead gives me ESP that helps me stay abreast of the stock market.

However, there are plenty of anonymous stock bloggers, myself included. I guess the reason is that while we would love to keep track of out portfolios, we do not really want people - especially strangers online - to know what is our net wealth. The negatives outweigh the positives.

Then there is another group of bloggers, those that potentially stand to gain direct business from traffic from their website. They are not shy to flaunt their credentials and share their analysis on many stocks. But these people do not tell you what is the size or gains from their portfolio. If you knew how their portfolio performed, there is even a higher chance that you may not trust your money with him or her.

Then there is another group of investors slash money managers. They appear on the mainstream media - may be because they were successful - and share with the public how they achieved their financial wealth. They too do not go to exact details but only vague generalities: make more, spend less!

Lesson here is that you have to be careful of everyone, including me. Who knows, one day, after achieving enough designations, I would want to become some one in a position that benefits from you moving your money. May be I will write a book and boast of the huge profits which were tracked on line. Let the reader beware.

Stock Market No Meat Short Term

I have mostly been inaccurate in my market calls (at least in terms of magnitude), nonetheless, I am sticking to my short term call ( 2 weeks till the end of October ) that a short term correction or market pause is imminent. Specifically, I do not see the 3,200 barrier to be sustained during the above mentioned time period because of the upcoming mega IPOs. While the mainstream media has played up the new issues, they will be a terrible drain on liquidity.

Another reason I am bearish in the short term is that what we have been observing is a strong run up in penny stocks. This strongly suggests that participation is not from the smart money but rather from brokers trading from their own account. With the MAS widening the band that the Singapore dollar can trade against the US, it is my opinion that the speculative hot money will flow out. I myself was anticipating that the MAS hold it at the 1.35 level. With the Singapore dollar strengthening further, it will discourage funds from putting money here, even though borrowing costs are relatively low.

I am just guessing the short term direction because the 3,200 level got broken much later than most people expected. Furthermore, if the US Fed really does plan to print more money, it will have a positive near term effect on the markets, if the money is directed to the financial institutions, rather than the man on the street.

And I am not sure if you notice this, on one hand America is printing or wants to print more money while at the same time asking China to re-value its Yuan peg. This reeks of economic bullying while at the same time, an accurate reflection of how American politicians intend to solve their own problems - at the world's expense.

Stocks I May Discard

The portfolio edged up slightly higher than the week before. Biosensors erased most of the gains from the previous week, but luckily, GMG helped make up for lost ground, breaking past the 30 cents barriers.

There are a few mega-IPOs on the horizon and it will definitely suck up the liquidity in the system, for better or worse. Meanwhile, there has been nothing heard out from China Animal Healthcare as to when it will list in Hong Kong. As per post title, I may consider selling away some of the laggard stocks and so I will be in the hunt for new ones. The likely candidates are Asiatic, Stratech and TPV.

Salary Poll: 40% Of Readers Make More Than $75k Per Annum

The poll that has been going on for almost a month received lukewarm response. Readers were asked how much they were paid a year including bonuses.

To my surprise, 41% of the 53 who voted made more than $75,000. That works out to be around $5,700 a month if we were to factor in a 13 month component. The full results follow:

Less than $30,000       :           8

$40,001 to $50,000     :           6

$50,001 to $75,000     :           5

$75,000 and above     :           22

I wished the poll could have more field but then it would have become a pay survey, easily obtainable at other websites. Fields I would have included are how many years in the same position, education, etc.

My guess as to the demographics of these 53 readers, are that they are English-speaking. Those that are the highest paid are probably very long into their jobs. Those falling into the less than $30,000 segment are most likely students and fresh graduates.

Anyway, you can try to read this http://timetohuat.sillypore.com/2010/10/09/the-serial-job-hopper/ . The write up talks about how job hopping can be better for the individual in terms of accelerating pay increments and how companies actually condone this practice, while lamenting why staff do not stay.

Penny Stocks Rally

I could not believe my eyes when several of my penny stocks surged. I did a double take and saw that the STI was only marginally higher. My guess is that there is rotation from the blue chips to the penny plays. Stay nimble.

By the way, for those of you who haven't yet voted on the salary poll, please do so and tell your friends about it. I think I will put in more effort for the post relating to this poll. So far the response has been good and I think it can be better. Thanks in advance.

New Job, New Challenges

The portfolio slipped a little due to the addition of C&O into the investment portfolio tracked. A quick peek at my spread sheet showed that I have invested about $18,500 of my own money from salaries.

There was not much in terms of corporate action. The excitement over Biosensors has come down quite a bit. Shares of Etika International have started trading on an XB basis. Sidenote, China Animal Healthcare has issued a circular for shareholders to vote on its listing in Hong Kong.

Having said all that, I would like to apologise to you for not updating this blog as often. The bulk of the reason stems from the fact that I am no longer able to devote as much time previously to tracking listed companies. Nonetheless, I have learned quite a bit on the new job. But the traveling time is making me sleep earlier and less likely to run to keep fit and to pass my IPPT.

Anyway, I would like to ask if anyway knows how to calculate my portfolio return on an IRR basis? I tried the Excel formula advice on one website, but it can only count my returns as if I invest on a quarterly basis.

Further, come next year, I will most likely reduce the frequency of my portfolio updates. Instead, I will use graphs to measures. As I say this, I realise that I have yet to build up my saving for future committments and that most of my money is in stock!!!

Anyway, I'm telling myself that once I hit that $20,000 mark in terms of own money pumped in, I better look towards saving for marriage and probably housing.

IMF's Concerns Of A Currency War Politically Biased

BBC News - IMF chief's warning of a currency war "real threat"

Read the above. My take on it remains consistent, that as long as we live a economy based on fiat money, currency fluctuations will be volatile, and more so going forward. This is because the United States printed huge amounts of money to bail the bankers out. It would have been better if those money went to the man on the street, to help stimulate demand.

Unsurprisingly, I was informed that the 1.30 Singapore dollar can now buy the Green back. Tagged to the same headline is that local deposit rates are being driven down close to 0.10%! For those who follow interest rates, you would have noticed that this may mean that future CPF rates will be depressed as it is going to be pegged to the market.

I am not frightened by a global currency crisis. As long as everyone goes down, it is alright for the stocks I am holding. But if a currency crisis occurs at a regional scale, certain equities might come down.

That said, the whole US-China currency dispute is just a smoke screen for US politicians to avoid real economic change. This is not the first time that the US has manipulated its currency. Previously, it "forced" the Japanese to revalue the Yen and further before that, Nixon took the Green back of the then agreed gold standard. Even if China were to re-value the Yuan to more competitive levels, the problem with the US economy will still remain - too much concentration of the unproductive financial services.

Cool Tool At SharesInv.com

Here is a nifty tool you can use at Shares Investment's website. You find any stock, click on it, then try to find the "comparison" tool bar. Some of the functions on the website are locked, but you can still use this "comparison" tool.

This shows 4 things, namely the intraday change, its trailing Price-to-Earnings, Price-to-Book ratios as well as how many subscribers have the stock on their watch list (I think).

What I like about this function is that it allows me to quickly see at a glance how a stock's PE and PB are in relation to its peers. However, it does not show who exactly you are comparing with in terms of constituents to its benchmark index. For such comparison, you will have to use your Internet platform's stock screen.

As mentioned before, I do recommend using the stock screens provided by DBS Vickers. There is also a slight problem because I do not know where they get their data from as some of their calculated fields differ from what I can get.

That said, tools that allow for comparison of key characteristics does not imply to individual discretion. Nonetheless, such tools are useful as a first step when you are buying stocks.

Thought For The Weekend: Do S-Chips Have The Money In The Bank?

A confluence of un-related events have led to this post. I am preparing to go to the library to return books as well as head to the bank to do some manual transfers. This month will be a tough month for me as I have several commitments, namely a wedding dinner, a trip to nearby islands as well as an important birthday.

What prompted this post was that the Chinese show that my mother was watching, had a scene whereby the boss tried to get his employee to confess as to whether the latter embezzled money. It brought a smile to my face because shortly after the worst of the GFC, several Chinese companies listed here, reported accounting issues. It was definitely farcical when the Business Times carried pieces of how auditors were led on a wild goose chase, when they tried to verify money in the bank or had hired fake "bank employees".

Due to the strong stock market, a lot of S-Chips got lifted to very high levels. They since come down and look unlikely to recover. Some of them have since been suspended or de-listed, despite supposedly having high cash and equity levels. Now that the worst of the GFC is over, it will take some more time for such fraudulent companies to surface belly up. Which S-Chips do you think its piggy bank is empty?

Weekly Update

The portfolio dipped slightly lower than last week. I bought C&O Pharmaceutical Tech but I did not add to the portfolio yet. I will include it for the next portfolio watch.Outlook wise, I am very positive for the month of October, with 3% being my guess.

While some may point out that October has experienced most of the stock crash, I believe that this month will carry on last month's run up in anticipation of end year fervor.

9 Months In, Portfolio Still Looks Good

Earlier, I guessed that the STI would rise 3% on-month. However, in a good way, the STI rose 5% due to mixed economic signals from America. On a year-to-date basis, the portfolio rose 42.2%, compared to 31.4% when we visited it in August.

 TBC