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Why you should not buy IPOs As Sheng Siong is launching its IPO next month, I expected a few calls as whenever an IPO is launching. And if you are my client, you know my answer. I decide to write this article so everybody can benefit...

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Questions to ask your Financial Adviser Every Sunday morning when I read the newspapers, I always see articles or advertisements regarding "Financial Advisers". Nowadays, just like the once prestigious word "Banker", which is misused in the...

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Revision to Nomination of Insurance Nominees Regulation With the onset of the Mental Capacity Act ("MCA") coming into effect on 1st March 2010, the Insurance (Nomination of Beneficiaries) Regulations 2009 ("the Regulations") will be amended to effect 2 changes: The...

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The ABCs of the Financial Advisers Act The title, Financial Adviser, is always mis-used in the industry and misunderstood by the consumers. On 10 October 2002, the Financial Advisers Act came into effect and all financial institutions are...

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Moratorium Underwriting by Aviva It is a common that insurance companies do not cover pre-existing condition. Typically, pre-existing conditions will be excluded with little or no chance of them being covered, even after a number of treatment-free...

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2012 Performance of SGX IPOs

Posted by Ivan Guan | Posted on 17-07-2012

Category : Stocks

Tags:

Despite much frustration in global stock markets, Singapore IPO has been hot for this year.

Over 2012, Singapore Exchange (SGX) has listed five new companies on the Mainboard and three new companies on Catalist. The next company to be added to the Mainboard is IHH Healthcare Berhad which is scheduled to list on 25 July.

Post IPO Performance of SGX Main Board and Catalist

Company ListingDate IPO Price 1st Day Closing Gain/LossOnListing

Date

 Closing Price on 12 July 2012 Gain/Loss to offer Price
Cordlife Group Ltd 29-Mar-12 0.495 0.680 +37% 0.530 +7.1%
Bumitama Agri. Ltd 12-Apr-12 0.745 0.980 +32% 1.07 +43.6%
Civmec Ltd 13-Apr-12 0.400 0.555 +39% 0.985 +146.3%
Global Premium Hotels Ltd 26-Apr-12 0.260 0.285 +10% 0.245 -5.8%
Starland Holdings Ltd (Catalist) 27-Apr-12 0.220 0.315 +43% 0.114 -48.2%
Swee Hong Ltd 23-May-12 0.225 0.275 +22% 0.265 +17.8%
Maxi-Cash Financial Services Corporation Ltd (Catalist) 22-Jun-12 0.300 0.390 +30% 0.435 +45.0%
Neo Group Ltd (Catalist) 11-Jul-12 0.300 0.465 +55% 0.415 +38.3%

Source: SGX, close of business 12 July 2012

IPO Fever is Back

Posted by Ivan Guan | Posted on 12-07-2012

Category : Stocks

Tags:

Just one month ago, TheEdge wrote an article “IPOs have ’0′ friends right now“, quoting the keenly-anticipated initial public offering of Formula One had been shelved and London-based jeweller Graff Diamond pulled its Hong Kong US$1 billion IPO 24 hours before its was expected to be priced.

In Singapore, the IPO fever is just getting hotter. Food catering group Neo Group jumped 55% from its IPO price $0.30 to $0.465 on its first day of debut.  Maxi-Cash, which was listed end of last month, is also trading more than 40% above its IPO price now.

The mega dual listing of Asia’s largest health- care operator IHH Healthcare has been over-subscribed by a whopping 100 times!

People just have short memories. It seems everybody has forgot how disastrous the very recent Facebook IPO %sC/strong>was and how poorly many other IPOs in Singapore have performed in the past.

Well, the musical chair game has begun.

OCBC Bank Another $1b Preference Share Sale

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Posted by Ivan Guan | Posted on 05-07-2012

Category : Stocks

Tags: , ,

OCBC Bank plans to sell $1 billion worth of preference shares to major investors in the next few days to shore up liquidity. The last issue was in June 2008 and August 2008, right before global financial crisis.

The bank will be offering a coupon rate at 4% that will be paid twice-yearly.

The payout is non-cumulative, which means that if the bank does not pay dividends this year, it is not obliged to make it up the following year. The shares will be callable after 5 1/2 years in 2018. This placement will be offered only to institutional investors and sophisticated investors, with a minimum tranche of $250,000.

Preference shares and other perpetual securities have been very popular with retail investors lately, but many do not understand the risk of investing in preference shares.

If you think Preference Share price will not drop, take a look at how OCBC 5.1% Preference Share performed since inception. It has dropped as much as 15% during financial crisis.

Below are past preference shares issued by OCBC:

  1. January 2003 – Amount: $500 million; Dividend: 4.5 per cent
  2. May 2003 – Amount: $396 million; Dividend: 4.2 per cent
  3. January 2005 - Amount: $400 million; Dividend: 3.93 per cent
  4. June 2008 - Amount: $1.5 billion; Dividend: 5.1 per cent
  5. August 2008 –  Amount: $1.5 billion; Dividend: 5.1 per cent

Stop your Facebook IPO Dream and Join Goldman Sachs

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Posted by Ivan Guan | Posted on 22-05-2012

Category : Stocks

Tags: , , ,

Although IPO mania is commonly seen in financial market, the global enthusiasm of Facebook IPO is rare and massive. Months before Facebook listing, people started rubbing their hands to get a slice of the pie. Facebook Pre-IPO shares were trading at $40 at www.sharepost.com. There were even funds set up and marketed as “Facebook fund”, which is in my opinion, just another financial scam.

After all, who does not know Facebook? The story of a young entrepreneur worked his way out from a computer lab and became a billionaire before 30 years old is so sexy and real, the stock is just like a new Lamborghini car which you can touch and feel. If LinkedIn can double its share price on the first of trading, why shouldn’t Facebook?

Unfortunately, the dream never came true. During the second day of trading, the shares sank 11.3% to $33.90 from its IPO price of $38. If you have bought Facebook Pre-IPO shares, you would have lost 15% in a single day.

What went wrong?

I have discussed whether you should buy IPO in my early post, let’s just talk about this IPO money spinning machine today. Who makes money from IPO? Most probably NOT YOU.

When LinkedIn was listed, who got the first bite? $1.6 billion for Reid Hoffman, the co-founder; $39 million for Goldman Sachs, the investment bank.

What happened to Facebook?

Goldman Sachs, the investment bank and the fund manager had planned to raise $1.09 billion selling stock in Facebook IPO, cashing out almost half their stake in the social network. According to bloomberg report.

Goldman Sachs created a special-purpose vehicle to bundle the holdings under one name and sell the stock to wealthy clients. That kept it from running afoul of securities rules mandating that companies with at least 500 investors meet U.S. Securities and Exchange Commission reporting requirements.

Want to get rich overnight? Stop the IPO dream and join Goldman Sachs!

Genting Perpetual Securities Subscription Result

Posted by Ivan Guan | Posted on 18-04-2012

Category : Fixed Income, Stocks

Tags: , ,

Perpetual Securities have become the hottest cake in town now.

Genting Singapore last month raised S$1.8 billion from a perpetual securities issue–the largest ever single tranche Singapore-dollar bond deal.

This month, its retail offering of up to $500 million in perpetual securities has been subscribed fully.

As at the close of offer on Monday, valid applications amounting to $731.3 million were received under the public offer. A further $3 million in application monies was received for the reserve tranche.

In a statement, Genting Singapore said it will sell about S$497 million of the securities via a public offer. It will sell about S$3 million in the reserve offer, equal to the amount of subscriptions.

The notes will bear a 5.125% annual coupon until Oct. 18, 2022, and 6.125% thereafter.

You can read the announcement here.

While many people are begging the institutions to take their money, it is interesting to note that many investors are not even sure what they are getting into. Even the main stream media journalists got it wrong. You should read this article: Perpetual securities not the same as perpetual bonds published in Straits Times Forum.

Has STI rally surprised you?

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Posted by Ivan Guan | Posted on 13-02-2012

Category : Stocks

Tags:

I haven’t blogged for a few weeks as I was overseas. When I was back, I felt so hilarious to see the newspaper headlines every day saying “investors were all surprised by the recent market rally”.

Back in early January, horrible stories covered newspapers every day. “Professionals” and “Analysts” who used to advocate how cheap the stock valuations were have given it up and started to caution investors. Many investors I met have “cashed out” from the stock market. Any new bond issue like CapitaMalls Asia bond was the hottest cake in town.

At that time, I was like an evangelist going around telling people to take the opportunity to top up their equity holdings. However, the message can hardly be communicated through. I was so frustrated and wrote an article called “how can you outperform Warren Buffett in 2011“. How? Holding Cash lor…

Take a look at the STI weekly chart below, the market was yelling at you! (I will not explain how to interpret this chart here) But how many of you chose to believe your emotion and your stock broker’s tips? How many of you ended up selling your stocks at the bottom of the market?

When I visited my home during Chinese New Year, I was shocked to know that my mother’s stock broker asked her to sell all her stocks before the New Year. (Yes, my mother chose to believe her stock broker than me!) He even successfully embedded this strong message into my mother’s mind that any stock cannot be held more than one month. I am sure that this broker had a happy new year counting the big commission he has earned from his “good” advice.

 

How can you outperform Warren Buffett?

Posted by Ivan Guan | Posted on 20-01-2012

Category : Stocks

Tags: ,

If you have not noticed, Warren Buffett has “underperformed” S&P 500 index in 2011. Buffett’s Berkshire Hathaway slipped 4.7% in 2011, while the Standard & Poor’s 500 index ended essentially unchanged.

What would you have done to outperform Warren Buffett in 2011? Simple, Hold Cash!

This reminds me of an interesting story. Recently, I was doing an investment portfolio review for one of my clients. His portfolio was down 4% in 2011 (wow, it outperformed Warren Buffett!), and he did not seem to be very happy because it was still negative. So I asked him, “what would you have done if I did not manage your portfolio and you were investing on your own”. His replied surprised me, “I would have held cash and I would not have lost money!”

When I recalled his investment risk profile, he indicated that he was balanced and could accept fluctuations with modest return. I also remember that when his portfolio has made some profit in 2010, he came to me to request some top up.

This incident, like some other similar cases, happened in the past few months when the investment market was in chaos. I cannot help thinking that by holding cash in 2011, did you really outperform Warren Buffett?

In Aug 2011, I posted a chart of typical DIY investor behavior as below.

Typical DIY Investor Behavior

Most of the investors will just hold cash at the worst possible time when the market is at the bottom. Straits Times Index has gone up more than 6% year to date. If I were to hold cash for the client, would they ever had these gains?

Many may have forgotten that in 2010, shares of Warren Buffett’s Berkshire Hathaway (Class A) have finished the year with a gain of 21.4 percent for 2010, far outperforming the benchmark S&P’s 12.8 percent gain.

Can any investor make money from the market by not investing?

Petrol Price and The Golden Cross

Posted by Ivan Guan | Posted on 05-01-2012

Category : Commodities, Stocks

Tags: ,

If you pumped petrol these few days, you may have noticed a big sign board at the petrol station stating “Petrol Price Has Changed!” Today, ExxonMobil Synergy 5000 is selling at $2.12/liter.

If you have been following my blog, I have already warned at end of Nov that investors should not neglect the oil crisis outside euro zone. Brent Crude Oil has shot up since mid of December and has exceeded US$113 per barrel today.

Ironically, when Euro and US are pictured as doomed places and all the “analysts” and “professionals” yell that 2012 is another crisis year, Dow Jones Industrial Average Index has just reached its Golden Cross (a technical bullish indicator) when its 50-day simple moving average crossed above the 200-day simple moving average.

Source: StockCharts.com

Next time when you pump petrol again, don’t just sign the credit card slip. Take a look at the price and see what does it tell you.

The Dangers and Risks of Investing in REITs

Posted by Ivan Guan | Posted on 24-11-2011

Category : Property, Stocks

Tags: ,

Many financial news recently advocate investing in REITs amid volatile markets. Investors are sold the ideas of high dividend income, downside protection, asset diversification, blah blah. However, the dark side of REIT industry is hardly mentioned.

I am glad to see MAS will consider further guidance to REIT industry as reported in Business Times. “Central to this brewing debate is the $1.57 billion sale of Keppel Land’s entire stake in Ocean Financial Centre to K-Reit Asia – a plan that was criticised by shareholders for both the timing and price.”

This, is a classic example of the conflict of interest between uni-holders of REIT and the REIT sponsors.

While REITs start to gain popularity since beginning of this century in Asia, it is obviously oversold just like the ETF industry. You must understand that the managers’ and shareholders’ interest (especially for minor shareholders) are not always inline.

You should also always bear in mind that REIT, is by nature a security traded in stock exchange. Many investors focus on dividend payouts when investing in REIT, but isn’t Total Return (capital appreciation + dividend) the ultimate objective of any investment?

The shareholders of REITs are always at the mercy of the managers. Whenever the managers need money for acquisition or upgrading, they issue rights or private placements. Share dilution is a constant risk when investing in REITs.

Take CapitaMall Trust for example, on Nov 1, it issued 139,665,000 New Units at an issue price of S$1.79 per New Unit in connection with the Private Placement, the share price tumbled from previous day’s high S$1.925 to as low as $1.775 on the next day. That is more than 8.4% drop in a single day!

Next time when someone tells you REIT is a safer investment, think twice.

The Mysterious Up and Down of Sheng Siong IPO

Posted by Ivan Guan | Posted on 01-09-2011

Category : Stocks

Tags: ,

Sheng Siong stock crashed 10.71% today!

This is so ironic because today’s news paper headline was “Voracious appetite for Sheng Siong shares“. It cited some “market watchers” trying to explain the 70% run up of the stock since it debuted on Aug 17. The reasons given were like recession-proof, defensive nature and attractive dividends, institutional interest blah blah…

I feel so pitiful for those who chased the news and bought the share at $0.57. Based on $0.50 closing price, that is 14% loss for those people. I am sure from tomorrow, the news will turn around and offer complete different views, on hindsight of course.

Sheng Siong Price since launched (souce: yahoo finance)

I’ve written a few posts cautioning investors against speculative activities in this uncertain time. The crash of gold is a perfect example. I’ve also highlighted the risk involved in investing IPOs.

Many would argue that those who bought at IPO would have already made 60% even after today’s crash. The truth is, as highlighted in today’s news article, that nobody really knows why the IPO has went up 70% before today.

While I definitely “missed the boat” since you know I was not interested in this IPO in the beginning. Given the countless reports of possible recession and gloomy economic outlooks, many retail investors who bought it at the IPO price, in my opinion, would have sold it, with little or no profit, in the first couple of days.

The share was traded with top volumes even when STI is heading south. “The significant price movement.. could attract the attention of some retail and intra-day traders, thus creating a self-reinforcing cycle and contributing to the overall volume.” I’ve heard many unties and uncles bought the stocks in the past two weeks when the price just cannot stop shooting up.

Just think about it, if there is really institutional interest, why Sheng Siong IPO was merely 1.3 times oversubscribed? (If you even call that oversubscribe, how about Mapletree Commercial Trust IPO oversubscribed by 8.38 times?)

Warren Buffett once said: “When the tide goes out, you will find out who is swimming naked.”

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