Why Padini is the leading Malaysian fashion retailer

There is no doubt that I like retail business and I like the leading player best. Hence there is no doubt that I have bought and sold some of them - like in buying into Bonia and Wing Tai.

The thing about retailing business is that I personally felt that Malaysia is doing extremely well. I in fact like Malaysian retailing than Singapore or Bangkok or Jakarta for that matter. In Asia, besides Hong Kong, there has been some positive work done by Malaysian retailing industry and I would in fact commend the good work partly due to the government's policies for retailers.

The one player targeting the middle income group which I do get attracted to and continue to do so is Padini, so much so that I am selling Bonia and buying more Padini this time around. The latest portfolio can be found here.

Why am I calling it the leader among the Malaysian retailers? It has executed well where the other Malaysian companies have yet to really achieve. The reporting season for the quarter ended Sep 2013 is just over and although I do not want to dwell too much on the results, Padini to me has been consistently performing. It is in fact the only one which has modelled and able to achieve the hugely successful model among players like Zara, Gap, H&M, Uniqlo etc. It is successful in selling its products through its own outlet and that to me is very important as relying too heavily on retailers like AEON and Parkson would have limited its growth.

In accounts, I am just as concerned about the assets as much as the liabilities. To me, cash where how fast the business can generate cash is very important and that goes with the receivables. Through its own outlets, it is almost cash business (for credit cards transactions). The most challenging part though would be the turnover i.e. how fast is it turning the inventories to cash. Over the last 8 quarters or more, I have noticed that Padini is able to achieve that consistency, which means that it has probably been very comfortable with its strategies of maintaining a certain level of inventory while able to bring in the sales. One way of looking at that is its inventory and receivables against sales. If a company is able to find that consistencies, that's amazing.

What has been successful for Padini is however a bit of concern for Parkson as shoppers nowadays seem to get to the idea of buying from a specialized retail shop. That means, traffic is getting away from retailers such as Isetan and Parkson. That seems to happen to Parkson in its last few quarters results although I am not so sure of Isetan. AEON is slightly different though.

What about DKSH and Malaysia Airport? Malaysia's strength in the retailing business seems to benefit them as well - as there are more people transacting and more people moving around, perhaps to shop i.e. between KL, Penang or KK and any other cities. That's definitely good for those 2 companies.

My money into Keuro? Really long term thingy, and it does not seem that the West Coast Expressway project is dropping. With that, I still feel that its current price is way too low for a highway concessionaire.

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Credit Card Interest Rates:What you need to know

Credit cards allow you to pay for everything you need: basic necessities like food, school materials, and gas. You don’t even have to carry money around. Just a piece of plastic and you’re all set. You can use it to pay not just for anything, but to almost anywhere in the world through online shopping.

There are some credit card owners, however, who apply for credit cards so they can buy big purchase-items such as a van, or maybe a trip to Europe, or just about any other thing that usually takes the average consumer months to save for. Of course, when you borrow money through credit card, you will be charged with interest rates by your bank.

Here is a lowdown on what you need to know about credit card interest rates:

1.     APR (Annual Percentage Rate)

This is the charge you get when you fail to pay your monthly charges in full. Not paying your credit card balance for the month will result in your balance being carried over to the next month. When this happens, you will incur interest charges for the outstanding balance you did not settle last month. The APR can rapidly increase without you realizing it when you’re not careful. To prevent APR charges in the future, make sure to pay the full amount of your credit card bills every month.

2.     Annual Charges

          Credit cards will normally require you to pay a fee for each year that you use them. Some credit card companies waive their annual fees for the first year as part of their credit card promotional offer. For these types of credit cards, you can start paying when you reach the second year of use. Annual fees can cost anything from RM38 to RM800.  

3.     Balance Transfer Charges

        Balance transfer fees will be charged to you when you want to lower the interest rate you’re paying by switching to a new credit card because the credit card you currently own charges you with high interest rates. By switching to a new card, your interest rate can temporarily be turned to zero for the first year. You will also incur balance transfer fees when you own many credit cards, and you want to simplify payments for all of them. You can then pay for your outstanding balance for all your credit cards with the use of just one credit card. Balance transfer fees can charge you a minimum transaction fee of 2% or higher, as it will be based on how much balance you want to transfer. In doing balance transfer transactions, you should remember that the outstanding balance you can transfer can be limited by the credit limit capacity of your new card.

4.     Cash Advance Charges

         When you absolutely need cash, and you have no other options available, sometimes you may be tempted to make a cash advance on your credit card. This is when you withdraw cash from your credit card account thru an ATM machine. The interest rate for these kinds of transactions is normally around 4% of the cash amount you have withdrawn. It can also charge you a fixed fee for cash advances–whichever is higher. Interest rate charges for cash advance transactions are not fixed, as these can also be based on how long it will take you to settle your cash advance loan.

5.     International Transaction Charges

-          These additional fees are charged to you when you travel abroad and use your credit card to pay for meals, rides, shopping and so forth. Call your bank before traveling to learn about the international transaction charges. International transaction charges usually amount to approximately 3% of what you pay for across the seas.

6.     Overlimit Charges

     Surpassing your credit card’s limits also comes with additional charges. Although the interest rate charge is low, it is still money wasted, so better control your spending and try not to exceed your credit limit.

7.     Underpayment Charges

-        When you pay your monthly credit card fees, make sure you are paying the minimum amount required or more than the minimum amount required. Paying less than the minimum will lead to an underpayment charge. This will be added to the regular interest rates you normally incur.

Owning a credit card comes with the responsibility of paying on time and paying beyond the minimum amount required every month. Learn about all the interest rates that come with owning a credit card such as the APR charges, annual charges, balance transfer charges, cash advance charges, international transaction charges, overlimit charges, and underpayment charges so that you can avoid paying for all these in the future.

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Credit Card Interest Rates: What You Need to Know

Credit cards allow you to pay for everything you need: basic necessities like food, school materials, and gas. You don’t even have to carry money around. Just a piece of plastic and you’re all set. You can use it to pay not just for anything, but to almost anywhere in the world through online shopping.

There are some credit card owners, however, who apply for credit cards so they can buy big purchase-items such as a van, or maybe a trip to Europe, or just about any other thing that usually takes the average consumer months to save for. Of course, when you borrow money through credit card, you will be charged with interest rates by your bank.

Here is a lowdown on what you need to know about credit card interest rates:

1.     APR (Annual Percentage Rate)

This is the charge you get when you fail to pay your monthly charges in full. Not paying your credit card balance for the month will result in your balance being carried over to the next month. When this happens, you will incur interest charges for the outstanding balance you did not settle last month. The APR can rapidly increase without you realizing it when you’re not careful. To prevent APR charges in the future, make sure to pay the full amount of your credit card bills every month.

2.     Annual Charges

          Credit cards will normally require you to pay a fee for each year that you use them. Some credit card companies waive their annual fees for the first year as part of their credit card promotional offer. For these types of credit cards, you can start paying when you reach the second year of use. Annual fees can cost anything from RM38 to RM800.  

3.     Balance Transfer Charges

        Balance transfer fees will be charged to you when you want to lower the interest rate you’re paying by switching to a new credit card because the credit card you currently own charges you with high interest rates. By switching to a new card, your interest rate can temporarily be turned to zero for the first year. You will also incur balance transfer fees when you own many credit cards, and you want to simplify payments for all of them. You can then pay for your outstanding balance for all your credit cards with the use of just one credit card. Balance transfer fees can charge you a minimum transaction fee of 2% or higher, as it will be based on how much balance you want to transfer. In doing balance transfer transactions, you should remember that the outstanding balance you can transfer can be limited by the credit limit capacity of your new card.

4.     Cash Advance Charges

         When you absolutely need cash, and you have no other options available, sometimes you may be tempted to make a cash advance on your credit card. This is when you withdraw cash from your credit card account thru an ATM machine. The interest rate for these kinds of transactions is normally around 4% of the cash amount you have withdrawn. It can also charge you a fixed fee for cash advances–whichever is higher. Interest rate charges for cash advance transactions are not fixed, as these can also be based on how long it will take you to settle your cash advance loan.

5.     International Transaction Charges

-          These additional fees are charged to you when you travel abroad and use your credit card to pay for meals, rides, shopping and so forth. Call your bank before traveling to learn about the international transaction charges. International transaction charges usually amount to approximately 3% of what you pay for across the seas.

6.     Overlimit Charges

     Surpassing your credit card’s limits also comes with additional charges. Although the interest rate charge is low, it is still money wasted, so better control your spending and try not to exceed your credit limit.

7.     Underpayment Charges

-        When you pay your monthly credit card fees, make sure you are paying the minimum amount required or more than the minimum amount required. Paying less than the minimum will lead to an underpayment charge. This will be added to the regular interest rates you normally incur.

Owning a credit card comes with the responsibility of paying on time and paying beyond the minimum amount required every month. Learn about all the interest rates that come with owning a credit card such as the APR charges, annual charges, balance transfer charges, cash advance charges, international transaction charges, overlimit charges, and underpayment charges so that you can avoid paying for all these in the future.

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Budget 2014: Up to 61% tax incentives for youths through PRS

Now, I know Budget 2014 is almost 2 weeks ago but I am surprised no one really puts this into perspective.

In fact, many are unaware of this very fact because GST and removal of sugar subsidy stole the limelight.

I am referring to the RM 500 one off incentive (read: almost like cold hard cash) to Private Retirement Scheme  (PRS) contributors with minimum cumulative investment of RM 1,000 - to be implemented from Jan 2014 onwards for a period of five years.

Let me explain.

If you are in the mid to late twenties, chances are that your annual chargeable income falls in the range of RM 35,001 to RM 50,000. The tax bracket for this income group is 11 percent..

That means, your actuals monetary savings for any tax relief eligible to you is 11 percent of the tax relief amount itself.

If you invest RM 1,000 into any of the funds by any PRS fund providers, you get RM 110 worth of tax savings.

With this tax savings of RM 110 and the RM 500 incentive, you are getting RM 610 of tax incentives.

But then it gets even better.

Most of the tax reliefs are “expenses type”, which means you need to spend money to get the tax savings. Things like computer purchase, insurance premiums, etc.

But this PRS contribution is one of the few “savings type”  tax relief. Just like when you invest in any unit trusts or shares, your investment may grow over time.

If you visit Private Pension Administrator (abbreviated PPA - the central administrator for PRS) website now athttp://www.ppa.my, and check under Providers > PRS Funds Information > Daily Fund Prices, you can see the investment returns of all PRS funds from all providers.

One of the top performing funds yielded a year-to-date return of slightly more than 18% in just under a year.

Although past performance is not an indicator of future performance, if this performance continues, you are essentially getting RM 180 return out of the RM 1,000 you invested.

Add this up with RM 610 we calculated earlier, you are getting up to RM 790.

That’s 79% return.

Not many stocks could give you a minimum 61% return and up to 79% return within a year.

As an independent financial adviser, I can tell you wealth accumulation is not just about investing. We should always adopt a more holistic approach - this is a very good example of tax savings which indirectly translates into surplus. You could treat this as your investment return which is guaranteed.

Every single savings count. The wealthy mind their money, and they say - “if you don’t take care  of your money, money won’t take care of you”

Even if you don’t qualify for individual BR1M handouts, grab this opportunity highlighted above starting 2014.

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The Value of Patience

Price-value gap

Theoretically, with higher trading volumes, the price-value gap should narrowdue to better price discovery.   Yet, in reality, this is not the case. 

The increase in trading activity actually widen the price-value gap; often increasing the noise in the system and leading to spikes in volatility that we see often in the stock market. 

An explanation, which is not surprising, is the majority of market participants are speculators and not investors.  

Rather than narrowing the price-value gap through better price discovery, theexact opposite is the result.


What can you do as an investor?

In this world, an investor who is hostage to short-term performance pressures will feel nothing but discontent. 

The only requirement for successful play is the willingness to adopt a different set of rules.  

Of these, none is more important than the value of patience.


Let's learn from Buffett:  Having a patient attitude to investing

Time and patience, two sides of the same coin - that is the essence of Buffett. 

His success lies in the patient attitude he quietly maintains toward both Berkshire's wholly owned business es and the common stocks held in the portfolio. 

In this high-paced world of constant activity, Buffett purposefully operates at a slower speed.



Learning points

A detached observer might think this sloth-like attitude means forgoing easy profits, but those who have come to appreciate the process areaccumulating mountains of wealth.  

The speculator has no patience. 

The investors lives for it. 

The best thing about time is its length.

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Four Steps to Prepare for a Crash

But for the sake of argument, let’s pretend that Time’s cover is wildly bullish and did send a legitimate bear signal to the world. Or maybe tapering will sink stocks. 

What would be the proper course of action for investors in a bear market? 


1. Understand your time horizon 

If you invested 10 years ago for an event this year, you might seriously consider selling your stocks and converting them to cash — but that’s regardless of where you think the market is going. If you need the money in the short term, it doesn’t belong in the market. If you have longer than a few years to invest, don’t worry about a crash as long as you… 

2. Make sure your stops are in place 

The Oxford Club recommends a 25% trailing stop loss. The stops protect gains as stocks rise and ensure that no single position results in a devastating loss. Since stocks are up so much over the past four years, even if you do get stopped out, you should get out with a profit. This strategy also ensures that you have plenty of cash to get back into the market at lower prices. During the financial crisis, Oxford Club Members were stopped out of positions in 2008 and took profits on many stocks that had risen during the previous bull. That freed up capital to get back in during the lows of 2008 and 2009, resulting in some huge winners, including Discovery Communications (Nasdaq: DISCA), up 255%, and Diageo (NYSE: DEO), up 171%. 

3. Review your portfolio 

If you haven’t done so in a while, take a look at the stocks in your portfolio. Make sure the companies are still operating at a high level. If you own Perpetual Dividend Raisers — stocks that raise their dividend every year — examine when the company last raised its dividend. If the company is continuing its streak of annual dividend raises, generally speaking, you should be fine for the long term. 

4. Be ready to buy when things are bleak 

It takes a lot of guts to buy stocks when it feels like the market is falling apart, but that’s how the biggest gains are made. Whether you’ve raised capital by selling stocks whose stops were hit, or you have money set aside, buy stocks after a market slide. You might not catch the bottom, but since stocks go up over the long haul, getting them at a discount will add significantly to your returns. Regardless of the predictability of the magazine cover theory or any other signal, long-term investors should not get caught up in the day-to-day market noise. You will make money as long as you don’t panic in the face of a sell-off. 

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Nine lessons to learn from Seth Klarman

SO WHAT DO WE KNOW ABOUT HOW KLARMAN INVESTS? HERE ARE SOME INSIGHTS INTO HIS APPROACH.

What’s your advantage over others? 

The investment markets are crowded. Thousands of professional investors spend their days trying to find the next big thing, but they can’t all win. In order to get ahead you need to do something or know something that others don’t. This is not easy. Are you really smarter than the crowd?

Buy what others are selling

Going against the crowd can be profitable. People often sell assets due to temporary, short-term factors. This offers opportunities for investors who can take a longer view. Examples of such situations are litigation, fraud, financial distress and ejection from an index.

Go where others don’t

Following on from the above two points, it makes logical sense that you are unlikely to make a lot of money buying FTSE 100 shares, as professional investors follow them too closely. Look at lots of different asset classes. For example:

• Opportunities often exist in ‘spin offs’ – smaller businesses sold by bigger companies. Professional investors often sell holdings in these companies because they are too small and this temporarily depresses their value, spelling a buying opportunity.

• Research bonds in bankrupt companies: often these bonds sell for a fraction of what they are worth. If the company is turned around, investors can make massive gains. There are often similar opportunities in distressed property.

• Don’t confine yourself to domestic markets. Foreign markets are often less crowded and can be subject to levels of political and regulatory uncertainty that present opportunities. In the preface to the sixth edition of Benjamin Graham and David Dodd’s book, Security Analysis’, Klarman uses the example of South Korea in the early 2000s where investor pessimism saw multinational companies selling for as low as one or two times their annual cash flow. Smart investors made a killing buying these stocks.

Focus on risk before you start thinking about returns 

Research shows the pain of losing 50% of your money far outweighs the pleasure to be had from making a 50% return. To be successful as an investor you must focus your research on the risks of a company’s business model and its industry. Remember that the first rule of investment is not to lose money. Also remember – and this is particularly pertinent to technology companies – that today’s good business may not be tomorrow’s winner (see my colleague Tim Bennett’s points on the importance of economic moats for more on this).

You are buying a stake in a business, not a piece of paper 

Investment success comes from buying the cash flows of businesses for less than they are worth. These cash flows come from the real world, not punting numbers on a computer screen. So focus on free cash flow rather than profits. And look at balance sheets to see risks like too much debt or big pension fund liabilities.

Know when to sell

Value investors start selling when assets are 10-20% below what they think they are worth. Owning fully valued assets is a form of speculation – you are betting on someone paying more than they are worth, not on the market recognising the true value of the assets.

Don’t invest with borrowed money 

The ability to sleep well at night is more important than a few more percentage gains.

Don’t rely on the market to provide your investment returns 

If bond coupons or stock dividends (paid out by companies) can provide a large chunk of your returns, you are less reliant on fickle and volatile markets for capital gains. Buying bonds below their redemption value is another good strategy.

Don’t be afraid to do nothing

Always hold cash when cheap assets are scarce. Be prepared to wait.

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