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Ichi the Killer

Bursa Malaysia stock trading portfolio of nobody really important.

Tuesday, October 31, 2006

Really?

I've been seeing many writings and blogs on the Internet recently, some insinuating and some even directly claiming, that our current PM has been merrily dishing out economic and financial goodies to family members ever since he took over the mantle of leadership. Indeed, it almost seems like a shark feeding frenzy, with everyone jumping on board to have their bite (or rather, stab). After reading all this, the ordinary man-on-the-street would inevitably transform into an expert on this topic and happily parrot the same things over teh tarik at their local mamak stall. Often, I can tell even people whom I know have no idea what they're really talking about, except to repeat what they've read in the popular blogs. But you should see the amount of conviction with which they speak.

I might be wrong, but I would have thought most Malaysians should have become immune to such allegations against politicians by now. What I find surprising though, is that so many of these "reports" and allegations are even allowed to appear at all in the alternative media nowadays and against a sitting PM, at that. Does this hint at a more open and freer society?

Anyway, I would like to relate a personal story here which may or may not mean anything to others. Late last year, when Habib (name later changed to Scomi Marine / SCOMIMR) was completing its acquisition of Singapore-based Chuan Hup, I read about the soon-to-be completed Tg Bin and Jimah IPP power plants. Now, Chuan Hup was supposed to be the region's largest coal-carrier, with more than 180 vessels to its name. Realising that both the new IPP's were to be coal-fired and bolstered by my belief that coal-fired plants would become increasingly popular in Asia due to rising energy and other costs, I bought into SCOMIMR. I had also read somewhere that each plant when fully commissioned and running at full capacity would require 2-3 mil metric tonnes of coal per annum (hope I've remembered this correctly).

For those who don't know, all IPP coal requirements are not sourced by the IPPs themselves, but actually bought by a unit of TNB called TNB Fuel Services and supplied to the IPPs. I thought it was gonna be a no-brainer that SCOMIMR would get the coal carrying contracts from TNB. After all, it was buying Chuan Hup, supposedly the region's largest coal-carrying entity. And we all know SCOMIMR is part of which group. And we all know who is a major shareholder of that group. And I knew who was going to be buying the coal.

Well, as it turned out, the Letter of Intent to SCOMIMR came out in April 2006 and was finalised in July. The final volume for the region's LARGEST coal-carrier was 500,000 mt per year. Apparently, the remaining millions of mt per year were parcelled out to several other smaller carriers. So, instead of the bonanza I was expecting, I sold my shares (for a small gain) and since then the stock has slid to below 0.80. Now, what do you wanna say about that?

/ichithekiller

Friday, October 20, 2006

EOD Update (20 Oct 2006)

Think the bottom for SCOMIMR has been reached recently, only managed to get hit on half of intended starting position today though. Earnings still strong, fuel costs should be down, really can't see the reason for recent sharp sell-down. This will be 2nd round getting into this counter, after selling off entire position previously. Thankfully, managed to avoid most of the slide, with reasonable gains preserved previously.

Latest purchase:

SCOMIMR: +5,000 (0.715) ... Total 5,000


/ichithekiller

Tuesday, October 17, 2006

EOD Update (17 Oct 2006)

Many analysts and the press have been predicting a mini bull run for Bursa Malaysia, with the 1,000 target being bandied about. Even the much respected icapital suggested that in its latest commentary (positive market direction, not 1,000-point CI). Well, the last 2 days' market would seem to contradict that. Nevertheless, there seem to be more counters taking turns to make their moves nowadays ... will just have to let the market play it out and see. Meanwhile, just in case....

Latest disposal:

IJM-WB: -2,000 (1.50) ... Balance 15,000


/ichithekiller

Monday, October 09, 2006

Regarding Returns

Came across this statement in one of the porfolio updates which is featured in one of Malaysia's "leading" financial and business publications.

"Last week, Yi-Lai's shares traded ex for a 5 sen dividend, which we have adjusted accordingly. Yi-Lai has been a high dividend yielding stock. Since we bought these shares at RM1.03 in June 2003, we have received total dividends of RM0.545 per share, bringing our cost down by 53% to RM0.485. Against its current share price of RM1.15, our returns now stand at 137%."

Now, let's put aside the Time Value of Money for a moment, although it's arguably the most basic tenet of finance and investment (Why? Because 100% over 10 years is a helluva lot of difference from 100% over 1 year, for example). Forget about that, let's take the statement at face value. A return of 137% over a period of about 40 months (June 2003 to October 2006) is certainly a respectable feat and not to be sneered at.

But waaaiiiitt...., what's that about dividends received "bringing our cost down by 53% to RM0.485"?! So it seems that the 137% return was achieved by DEDUCTING RM0.545 (total dividends received over 40 mths) from 1.03 (the purchase price) to arrive at a brand-spanking-new cost of, get this.... 0.485! Now, isn't that a nice, small, low number? So, proceed to take the current price of 1.15 (which is actually 11.6% above the 1.03 initial cost after 40 mths) over the new cost price and wallah....137% returns are yours to book in!

Now, let's think about the concept of investment. One puts in a certain sum which represents the cost and anything else received or paid back to you after that represents your return, right? Isn't it as simple as that? If you deposit money into a bank and after 12 months it pays you 8% interest, isn't your return 8%? Do you say no, let's put that aside as cost reduction first? What kind of financial concept is that? Then, isn't it the same for all financial investments?

What if, instead, we considered dividends received in the example above as part of total returns instead of "cost reduction"? Well, adding the 11.6% capital gain to the 52.9% return from dividends to date would give a total return of 64.5% over 40 months. Still decent, but a far cry from 137%, right? (In fact, it's less than half).

Just to press this point further, let's take the above cost reduction example to the extreme. Assuming the model portfolio in question does not dispose of this share in the interim, it's entirely possible to receive another RM0.455 in total dividends over the next 3 years. Following this reasoning, the new adjusted cost would be RM0.485 - RM0.455 = RM0.03. Assuming then that your wonderful stock suddenly plummets from RM1+ down to RM0.33 on some really bad news.... would you be worried? Of course not, just sell the damn thing, take your 1,000% return (RM0.33 / RM0.03) and give yourself a nice pat on the back. After all, not every ordinary Joe regularly pockets 1,000% returns, you know ... you've done well for yourself.

/ichithekiller

p.s. Since I'm no mathematical or financial genius, if I've made any errors in calculation or assumption, please let me know. I will gladly change my views if I can be shown the error of my ways. I too would like to get to the bottom of this mystery as to why investment professionals and amateurs alike regularly condone and use this type of return calculation for individual stocks.

p.p.s On a total return basis, i.e. total $$$ at the end of the day, the piggy bank balance would be the same, though, whichever method of calculation is used.

Thursday, October 05, 2006

EOD Update (5 Oct 2006)

Muhibah underwent a mild correction today, dropping from 2.17 to a low of 2.04 before recovering almost completely to close only 1c down at 2.15. Looks like the more "speculative" counters are starting to show some positive activity once more, with MOBIF, IRIS, WIMEMS, etc. posting strong gains today. Meanwhile, GPACKET is testing a new all-time high again at 4.16.

Latest purchase:

ACB: +7,000 (0.745), 2,000 (0.75) ... Total 9,000


/ichithekiller

Wednesday, October 04, 2006

EOD Update (4 Oct 2006)

LKT continued its upward move today... closing up another 14c at 3.88 (day high 3.92). Nylex closed up an impressive 16c at today's high of 1.30, but Tamcorp closed down 1/2 a sen at 0.485, after hitting a high of 0.50 earlier. Nevertheless, I have a feeling it will go higher before the week is over.

Latest purchase:

AMMB-WB: +1,000 (0.625), +4,000 (0.63) ... Total 5,000


/ichithekiller

Tuesday, October 03, 2006

Special Update

Something popped into my mailbox this morning and I have to say it really brightened up my spirits... such creativity and comedic value deserves to be shared with everyone, I think. Check out the "complimentary" pantun at the end...




Monday, October 02, 2006

EOD Update (2 Oct 2006)

GPACKET finally broke 4.00 again today, closing up 20c at 4.10 (day high 4.12). MTOUCHE was up 4c, while OSKVI moved up 8c to 2.94. CYMAO moved up another 9c to close at 1.44, but PWORTH still not moving, closing flat today.

I still can't really make head or tail of the LIONDIV deal and what's left for LIONDIV shareholders...

Latest purchase:

LBALUM: +5,000 (0.815) ... Total 5,000

Latest disposal:

LIONDIV: -1,000 (5.10) ... Balance 4,000


/ichithekiller