Looking at Inari to understand Insas(Revised)

Anyone who puts in money in Insas over the last 4 - 5 months would have made decent sum - increase from RM0.50 to now RM0.94, which coincidentally was about the period which I wrote about the company. In this particular article, I wanted to know what makes the sudden rise in the stock price whereas it has been in trading in the RM0.40 to RM0.60 for a long time.

I wanted to know what type of character are behind the owners. As in my previous article, again not much can be known except that it is led by a careful investor, Datuk Thong. To do this, I would like to take a look again at Inari. Inari is a hugely successful invested company made by Insas and I would deem it to be successfully managed by the group of management. Insas has about 36.6% of Inari and on top of that it has about 16% of its warrants. Those holdings in Inari alone is worth about RM292 million according to Inari's price todate.

Inari Amertron is involved in EMS business. Just for knowledge, the largest EMS company in the world is Foxconn or Honhai which many people know manufactures for Apple and many other companies. To provide a simple analogy, EMS is something which some technology companies do not want to deal with as many of these companies largely concentrate on the technology aspects, hence phasing out some of the work to specialised companies like Hon Hai (for Apple). Inari is such for a company called Avago.

Avago, a spin offs from the old HP company and is hugely successful in having a large penetration supplying power amplifier chips and other technologies to most of the smartphones and tablets companies. As smart phones' penetration continues to grow, Avago as expected flies. Similarly, Inari riding on that wave as a contract manufacturer for Avago is enjoying that as well to the extent that its share price becomes one of the most successful IPO of recent times.

Inari's price chart since IPO

I know that Inari is doing well. But I wanted to probe further as I also wanted to know is there any action taken to take advantage of the over-exuberance towards the company. While Avago and Inari are performing, it is a business which I am not able to gather my thoughts or foresee over the next 5 years for example. It is a business which is largely dependent on orders and contracts. Apple's iphone and ipad, and Samsung's Galaxy or HTC's line of products may be using Avago's technology now. This things, as we know can change, which is why over the longer term it is important for Inari to not be overly dependent on Avago although it has been a very good partner.

A look at its financials can be done to sometimes ascertain that.

Based on the above numbers, it is pretty solid with good revenue and PAT growth. Against its free cash flow however, Inari does not seem to be doing that strong. I can partly understand however as one will need to invest quite substantially for it to grow as a EMS player. This I believe is warranted.

PAT and GP margin for last 9 quarters

It mentioned that its margin improved substantially due to economies of scale as provided below.

Would Inari be a good buy for the future and how about Insas? As mentioned before, Insas has some intrinsic value where as a investment company, it is doing decently well. To how much would the shareholder be providing value to its investor, that very much remains to be seen.

Inari, on the other hand would still be very dependent on Avago while Avago would be dependent on its technology for the smart phones and tablet industries. That is a lot of "IFs" I would say and looking at its share price todate, if one is to still jump in - I just have too many questions still. It is now priced at close to Globetronics market capitalisation and how it achieved this is just too strong for a EMS player.

Nevertheless, if it is able to achieve that momentum, the current traded price is still attractive.

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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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