Inphyy Corner

Contra trading is not the cause

Securities Association of Singapore
19 October 2013

In the past week, there has been significant press coverage on the now infamous trio of designated stocks - Asiasons Capital, Blumont Group and LionGold Corp.

The deflation of the bubble created by these three and other closely associated stocks have widespread impact on the industry and have affected investors ranging from hedge to long funds and retail traders alike across various intermediaries such as the private banks, foreign and local brokers.

There seems to be a misguided perception that contra trading was the singular cause for the bubble.

It is evident that a wide spectrum of traders participated in these counters through various means including leverage via margin accounts or other forms of leverage via brokers and private bankers.

To blame the current woes solely on contra trading defies logic when the extremely high trading volumes were contributed also by other leveraged means. Why are other forms of trading, ie margin or other forms of collateralised trading, not to be blamed?

In fact a greater portion of the trading losses may be residing in these leverage accounts as seen in a report in The Straits Times yesterday, “LionGold shares force-sold by banks”, on a bank force-selling of a position held by a prominent Malaysian personality.

Perhaps the crux of the issue lies not with contra or other forms of leverage trading but the failure by the industry to recognise and react in good time to the possibility that certain elements or parties may be seeking to exploit the system.

Arising from this incident, the industry as a whole - SGX (Singapore Exchange), SAS (Securities Association of Singapore), SOR (Society of Remisiers) and SIAS (Securities Investors Association, Singapore) - collectively could be more vigilant in safeguarding our market from being exploited by various elements which may affect the integrity of SGX as the market place, to the detriment of our investors.

There should, however, be a balanced approach to avoid stifling the market. There are examples of well-timed and self-initiated intervention by certain participants to try to remove the bubble pressure building up in some of the counters to lessen the impact on both investors and the intermediary of a full-blown meltdown.

Blaming the current outcome on contra trading is too simplistic to the point of being naive.

Contra trading has little to do with essentially a gross mispricing of a given counter. If contra trading is to be blamed then perhaps margin trading played a greater role in sustaining the bubble as positions can be held indefinitely as long as margin ratios are maintained. Do we also ban margin or collateralised trading?

We need therefore to see the wood from the trees.

Keppel Corporation set to exceed S$6bn order wins in 2013

Given robust potential orders.

"We believe Keppel’s order win momentum will continue to gather steam in the next few months, underpinned by robust potential orders in the pipeline," said DBS.

"Year to date order wins stood at S$5.3bn, and looks set to exceed our full year expectation of S$6bn," it added.

DBS gave its optimistic outlook given four potential sources of order wins. This includes PEMEX’s six jack up orders totaling US$1.3bn; Golar’s FLNG projects following recent conclusion of FEED study; Transocean’s orders of up to 10 jack up rigs worth US$2bn to be awarded as early as end Oct; and a potential first drillship contract by end of 2013.

Keppel Corporatin remained DBS's preferred pick in the large cap O&M space. "Its solid execution track record, global yard network, and world-class proprietary designs are unrivalled."

Mirach Energy's KM-607 Commences Production

Oct 14 13

Production had been delayed due to the need to enhance surface facilities, including the procurement and installation of a new well-head, which could be carried out only after obtaining PT Pertamina's approval.

The current daily production at KM-607 averages at approximately 220 barrels of oil per day ("bopd"), on natural reservoir pressure without the need for a lifting pump.

The cost of drilling and completing KM-607 is estimated at $0.85 million. With the addition of KM-607, total daily production per day at KM is now approximately 360 barrels of oil per day. KM-603, KM-610 and KM-611: Drilling and well perforations had also been completed at KM-603, which reached a depth of 470 metres targeting the Suban-7 (S7) layer.

Currently, well-testing is underway before recommendation for production on this well. Total drilling and completion cost for KM-603 is estimated at $0.6 million. KM-610 drilling was just completed to reach a depth of 460 metres and well-logging had commenced. This would be followed by perforations and well-testing and analyses.

KM-611, which was producing at around 36 barrels last month, is now producing at a slightly better rate of 40 to 45 barrels of oil per day. KM-611, which was producing at around 36 barrels last month, is now producing at a slightly better rate of 40 to 45 barrels of oil per day. KM-603, KM-607, KM-61- and KM-611 were the four wells that were approved for drilling by PT Pertamina. The Company had received approval to drill the next five wells this year.


✤✤✤✤✤✤✤✤
Bought this stock 0.28 back Aug 2013. What make me monitor this one perhap it is due to market sudden "Black Gold Fever" and influence by Rex Intl listed.

Watching both is like reading rabbit and turtle story.
Mirach Energy price push all the way up to 0.54 before called it a day. Same like Rex Intl bought and sold with profit number of times.

On 7 Oct. FEAR took over SG market plus 3 sisters Asiasons, Blumont, LionGold saga created chain reaction... penny stocks crash! Mirach Energy closing bell 0.275.

Vested few days ago.

When To Run Your Winners?

By David Kuo - October 20, 2013
The Motley Fool

A very successful investor once told me that good investors are not always the ones that have the greatest ability to pick winning shares. Instead, he pointed out, they are generally those who are willing to cut their losses if things are not going right.

In his view, bad investors hug losses for too long and snatch profits far too early. The upshot is that they end up with small profits and huge losses.

So is the successful investor suggesting that we should run our winners and cut our losers?

Watering the weeds

The concept of “running your winners and cutting your losers” is so entrenched in stock market investing that many accept it to be gospel. But life is never that simple.

Peter Lynch once said: “Some people automatically sell their ‘winners’ – stocks that go up – and hold on to their ‘losers’ – stocks that go down, which is about as sensible as pulling out the flowers and watering the weeds“.

He went on to say: “Others automatically sell their losers and hold onto their winners, which doesn’t work much better. Both strategies fail because they are tied to the current movement of the stock price as an indicator of the company’s fundamental value”

Peter Lynch is right, which explains why he was immensely successful as a money manager. Between 1977 and 1990, his Magellan fund averaged 29% return a year.

Point is, if we use the market as a guide to determine the true value of a company, then we are almost certainly on a hiding to nothing. We need to remember that shares move up and down for lots of reasons. And most of those reasons have nothing to do with the underlying business at all.

The thorny question

So rather than trying to predict what other investors may or may not buy and sell; second-guess what American politicians may or may not do and attempt to forecast when the US Federal Reserve may or may not taper, try instead to base your investment decisions on something more tangible. That is always going to be more rewarding.

For instance, look for companies that produce things that can generate reliable revenues. That would be a good place to start. Here in Singapore, we have lots of businesses that fit the bill. Some of those companies are integral components of the Straits Times Index (SGX: ^STI). So you don’t need to venture too far to find them.

So where does that leave us with regards the thorny question of running your winners and selling your losers?

“Running your winners” should, in fact, refer to the companies you already have in your portfolios. In my view, winners are companies that are increasing their profits, improving their competitive position, rewarding shareholders with decent returns on equity and those that can pay increasing dividends. They should be kept.

Run your losers

On the other hand, businesses that are losing ground to competitors, slipping into cash flow problems, losing their competitive edge and generally showing signs of decline are losers. They should be cut.

The upshot is that we should not judge a ‘winning’ company by its share price performance after we have bought it. There is nothing more irrelevant to an investment decision than our original buy price.

Regardless of whether the shares rise or fall, what counts is how the underlying business is doing. Another thing that matters is whether the valuation reflects what is going on in the business. In fact, if the share price falls after you have bought it, you might even want to run your losers by buying more.

As I started with Peter Lynch, I will let him have the final word because I don’t think I can put it any better than he has done.

The legendary investor said: “A price drop in a good stock is only a tragedy if you sell at that price and never buy more. To me, a price drop is an opportunity to load up on bargains from among your worst performance and your laggards that show promise“.

Those sage words come from an investor who would have, in 1977, turned $10,000 of your money into $270,000 in 13 years.

OUE's proposed commercial REIT to acquire Lippo Plaza

Oct 18, 2013 - PropertyGuru.com.sg
Romesh Navaratnarajah,
Senior Editor at PropertyGuru

Singapore-listed developer Overseas Union Enterprise (OUE) is looking to include Shanghai’s Lippo Plaza in the initial portfolio of its proposed OUE Commercial Trust.

Last month, OUE announced plans to set up a commercial-focused REIT in Singapore, although it did not provide any details on the size or timing of an IPO. Nonetheless, sources with knowledge of the deal said the REIT could raise up to S$700 million through an IPO in Q1 2014.

In a stock exchange filing, OUE revealed that it will acquire Lippo Plaza from Hong Kong-listed Lippo China Resources. However, the 12th, 13th, 15th and 16th floors in the 36-storey office tower will be excluded from the deal.

OUE and Lippo China Resources are both controlled by Indonesia’s influential Riady family, with Stephen Riady, son of Lippo founder Mochtar Riady, the executive chairman of both companies.

Aside from Lippo Plaza, the group said its REIT also plans to acquire the OUE Bayfront office development (pictured) in Singapore.

Singapore Airlines booked for another weak quarter

S$41m core operating loss forecasted.

"We expect the Singapore Airlines (SIA) Group to report core operating loss of SGD41m for 2QFY3/14F (2QFY3/13: +SGD70m; 1QFY3/14: +SGD82m) when it releases its results on 12 Nov 2013," said Maybank Kim Eng in its results preview for the airline.

Maybank reasoned that breakeven load factors are rising on the back of spiking jet fuel prices and plummeting yields, despite recent reports of a robust passenger load factor. Its SilkAir regional carrier as well as its cargo division are also seeing weaknesses.

Here's the full results preview from Maybank:

Cargo unit to drag group further into the red. We expect the Singapore Airlines (SIA) Group to report core operating loss of SGD41m for 2QFY3/14F (2QFY3/13: +SGD70m; 1QFY3/14: +SGD82m) when it releases its results on 12 Nov 2013. Across the core business units, we expect breakeven load factors to head north sequentially on higher jet fuel prices and downward pressure on yields. Overall, group earnings would have to be supported by its associates and the joint ventures of SIAEC. We reiterate our HOLD call on SIA with the target price trimmed to SGD10.20. Prefer exposure to SIAEC (BUY, TP: SGD6.19), its profitable engineering arm.

Strong loads at SIA supported by weak yields? SIA reported very strong passenger load factor of 81.1% in the quarter. Nevertheless, we suspect this upbeat figure was achieved under very weak yields in view of management’s guidance for continued downward pressure on yields. Based on data from the Airline Reporting Corporation, we estimate that average airfares for the premium and non-premium markets between the US and Asia have contracted by 6.1% YoY and 5.3% YoY, respectively, over the same quarter last year. In our view, the softening airfares reflect the weak market conditions on long haul routes. We expect core operating loss of SGD22m in 2QFY3/14F for the parent airline.

Load factors for SilkAir at historical low. SilkAir’s 2QFY3/14F load factors fell to a historical low of 69.0%, marginally below the breakeven load factor of 69.5% in the previous quarter. Consequently, we expect the regional carrier to report a weaker operating profit of SGD9m.

Cargo loads continue to fall despite grounding of freighters. In response to the weak global cargo markets, SIA has removed four of its 13 freighter aircraft from service. However, the sharp contraction in traffic continued to weigh on its cargo business. We expect losses to widen to SGD65m in 2QFY3/14F.