Saturday, June 30, 2007

Is there any hope for Nextnation? What about MNRB?

Like those who have bought Nextnation around the 60c level, I am much aggrieved by the dismal quarterly results just announced. My worst fear was confirmed when the profit figures turned red. From a profit of 4.463m in the previous corresponding period, it now shows a loss of 251,000. Its revenue at 21.533m as against 17.782m has, however, shown an improvement. As to why the profit has gone into the red while revenue has increased, only the management has the explanation. I hope this is not in anyway another accounting irregularity.

Earnings per share for the year ended 30.4.2007 is 6.4c as against 6.9c the previous year. This is before the private placement of 60c per share cum the bonus issue of 2 for 1.

Chart-wise, the stock is traded to a high of 35c and a low of 26c after the bonus issue, where it appears to be well supported. I have no idea what’s in store going forward. There were some SMS scams and some bad publicity going on about the company. Action speaks louder than words. Perhaps it’s best to follow your chart. As for me, I am holding on to my stake and hoping for happier days. I am not a trader.

What about MNRB?

MNRB is a reinsurance company. Its business activity is the underwriting of all classes of general reinsurance business.

As at March 31, 2007, MNRB has a paid-up capital of 211,866,000 shares of RM1 each. Its top four major shareholders are: Amanah Raya Nominee 48.18%; Pemodalan National Bhd 11.43%; EPF 5.83% and Amanah Raya Nominee 3.29%. Its EPS at 61.4c is commendable.

An interim dividend of 20 sen per share has been paid. It has proposed a final dividend of 26c per share. At it last traded price of 5.35, the dividend yield is 8.598.

MNRB has 1.6 billion under investment. This stake is surely worth very much more in view of our bullish market.

Linde AG has offered to buy MNRB’s shares of 4,488,000 in MOX at RM15 per share. The offered price is now raised to RP17 per share. These shares were bought in 1981 for RM914, 463. At RM17 per share, this will give a capital gain of 75,381,537.

MNRB shall be going to Dubai in the near future. Its prospective earrings and dividend payments look likely to be enchanced in future years.

The above comments should not be construed as a recommendation to buy or sell. You buy or sell at your own risk absolutely.

Saturday, June 23, 2007

Lady Luck is Essential

Bird-fighting has been a gaming activity in our country for a long time. Some people call this a spot; others say bird-fighting is the poor men’s race course. It is easy to own a bird but not easy to identify a good bird to buy. Besides, a good bird can cost up to ten thousand ringgits. I had bought one on behalf of a friend for that amount.

There was a time when I was interested in bird-fighting. In a bird-fight, live betting is usually on. The bets are normally quite small, more for the fun rather than the money. However, in certain fights, bets can go up to a hundred thousand ringgits. Actually these bird-fights are very exciting and interesting. If legalized, bird-fighting can be turned into a tourist attraction. You need to see your bird fights to feel the adrenalin flow or the thrill.

I have a friend who is popularly known as Guaranteed To Win (GTW). He used to live-punt on these fights. Live-betting means as the fight is on, bets are on-going. If you know how to read a fight and the body language of the birds, you can more or less predict the outcome.

AT one time GTW had nine wins in a row. He felt elated and started to boast about his ability of reading a fight. “Guaranteed to win” he went about bragging his skill.

Soon after, some thing strange happened. He started to lose. Every bet he betted he lost. Even when the bird which was about to win would suddenly surrender as soon as he placed his bet on it. Eventually he lost all that he had won. Now he no longer talks about birds and has gone back to taxi-driving to earn his livelihood.

When lady luck smiles at you, everything will go smoothly. When you are in a loosing streak, your skill, for no obvious reason, becomes unskillful.

Winning is easy when lady luck is smiling at you.

Saturday, June 16, 2007

The Wisdom of Playing a Loser’s Game

In the book Extraordinary Tennis for Ordinary Tennis Player, Dr Simon Ramo pointed out that professional players and amateurs play differently. Professionals attack by playing powerful and tricky shots to win points. Amateurs, except for a gifted few, must play defensively to win. While professionals seldom make mistakes, amateurs make many mistakes if they play aggressively. So to win the game, amateurs must make fewer mistakes than their opponents. This is called, “the loser’s game.”

In the stock market, amateurs will do well to play a loser’s game to win. You cannot afford to play like the professionals. You do not have the skill or the resources to do that. You have to invest intelligently and play the market in your own terms. Appended below are some common mistakes you need to be aware of and avoid as well:

  1. Listening to rumors and taking advice at face value.
  2. Going after penny stocks that have no value.
  3. Overtrading and trading on thin margin.
  4. Buying in a downtrend.
  5. Buying a stock because of its name.
  6. Holding on to a falling stock. Hence failure to protect your capital.
  7. Averaging down indiscreetly.
  8. Failure to allow a winning stock to complete its uptrend.
  9. Confusing price with value; not knowing what is cheap and what is low-priced.
  10. Bargaining for a bid when you should buy or sell at the market.
  11. Overact to good news or bad news.
  12. Trying to make quick money without knowing the risk-reward ratio.
  13. Failing to know the importance of buying sound and solid companies.
  14. Not knowing fundamental and technical analysis.
  15. Overestimating your own abilities.
  16. Buying a Proton for the price of a Mercedes.

The fewer mistakes you make, the more is your chance of winning.

As for trading, this is what Benjamin Graham, the mentor and teacher of Warren Buffett, said, “Everyone knows that most people who trade in the market lose money in the end. The people who persist in trying it are either unintelligent, or willing to lose money for the fun of the game, or gifted with some uncommon and incommunicable talent. In any case, they are not investors.”

In every field, however, we do have the exceptional and the gifted few. If you are one of them, I salute you!

Friday, June 08, 2007

From 60 to 1.15 in less than 18 months

Someone I know asked me in 1996 whether it was okay to buy Sin Heng Chan at 60 ringgit a share. I had sold 200 units at 55 two days ago. I told him that at that price it would be madness to buy. He said his wife got the tip from the horse’s month that Sin Heng Chan was sure to reach a hundred within a month. He further told me that one Tan Sri, a close friend of his wife had given the tip. I warned him that if he wished to try his luck, he should put a stop order at 55.

Sin Heng Chan did hit 60. From there the stock headed south very fast and by Jan 1998 it was traded at a low of 1.80 before it rallied to 4.68. Then it came down again! By August 1998, it hit a low of 1.15. A year or so later, the stock closed at 4.10 before it was suspended for restructuring. On June 8, 2007, the stock closed at 83.5 sen per share.

I understand that he (the person who got the tip) bought 2000 shares at 60 a share and had failed to use a stop-loss. Because of a tip and the failure to use a stop-loss, he had lost over 100 thousand ringgit in just one deal of 2000 shares.

From this instance, you can imagine the madness of the investing or speculating crowd at that time.

The KLCI closed at 1,352.39 today. Its all time high at 1,374.33 was established two days ago. Our present bull market is entirely different from the previous bull markets. This one has great disparity between the blue chips and the second liners.

The 2nd board index closed at 106.10 today. This is only a fraction of its historic high of 682.99. Most second liners, even the ones with good fundamentals, have not been restored to their previous glories. Some examples are:

HSL as at Mar 1997 high: 36.00; now 3.88

Ranhill as at Sep 2003 high: 9.85; now 1.70

MNRB as at Dec 1996 high: 9.00; now 4.64

DRB as at Jan 1994 high: 11.30; now 1.83

FSBM as at Feb 2000 high: 10.50; now 1.47

Choo Bee as at May 1997 high: 4.82; now 2.38

Oriental as at Feb 1997 high: 9.00; now 5.50

For those who have bought any of the above stocks at its historic high, they are still licking their wounds. Hopefully, the market will continue to be bullish going forward. Until the second liners catch up and close the gap between them and the blue chips, the market is unlikely to crash for the present.

Disclaimer: This commentary is the opinion of the writer. It should not be construed as a recommendation to buy or sell. You buy or sell at your own risk absolutely.

Friday, June 01, 2007

The fiasco of Transmile

The fiasco of Transmile was a sorry sight to behold. Right from the opening bell, the stock gapped down from 8.90 to 6.25. It was limit down.

In the afternoon, the stock came down further to 5.20 before moving up to 6.00. Volume traded amounted to 17,597,800 units which was moderately high. At the end of the day, a black long-lower shadow candle appeared. This looks bullish and there is hope that the price may move up come the next trading day. Much will depend on the outcome of the investigation that is now ongoing. Better be safe, better avoid this counter until the dust settles.

It is incredible how a blue chip counter like Transmile can have irregularities in its accounts. Those who are responsible for the scandal should not be let off easily. A through investigation should be made and proper action without fear or favor should be taken. Confidence in the stock market must be restored before investors moved out with their money.

A lawyer says that Transmile is now open to legal suits. If you are interested to know more, here is the link.

There is also an article at Blisswind.