My investment record (49) Dec 2020

The estimated holding period return for my portfolio is 7.79%

The estimated holding period return for KLCI is 4.30%

Due to the good performance of my portfolio in the past two months, my current return has slightly outperformed KLCI and Fixed Deposit. A summary chart is as below. 

Trading Activities

1. Sold off BAT (4162). With current CMCO in place and continue competitions from illegal cigarette and E-cigarette, BAT has limited upside potential to increase its revenue and profit further. Hence I sold it off to search for better investment opportunity. 

2. Buy LPI (8621). At a price of RM 13 with projected dividend of 70sen, LPI forecast dividend yield will be more than 5.3%, considering the fact that the company is still growing steadily albeit slowly, this makes it a good place to put my money. 

My investment record (48) May - Nov 2020

The comparison of the estimated holding period return between my portfolio and the KLCI is as follow:

For comparison of my portfolio vs KLCI annualized return in the last 1Y, 3Y, 5Y and since inception, see below

Trading Activities

May

1. Buy LPI (8621)

June

1. Buy PB Bank (1295)

2. Buy Tune Protect

3. Buy Astro (6399)

July

1. Sell Symphony Life

2. Buy Astro

Aug

1. buy HLFG (1082)

2. Sell Symphony Life (1538)

3. Sell DKSH

4. Buy Astro (6399)

5. Buy MNRB (6459)

6. Buy LPI (8621)

7. Buy Magnitech (7087)

8. Buy Hup Seng (5024)

September

1. Buy Ambank (1015)

2. Buy HLFG (1082)

3. Buy Astro (6399)

4. Buy LPI (8621)

October

1. Buy LPI (8621)

November

1. Buy Takaful (6139)

2. Buy Astro (6399)

3. Buy LPI (8621)

My investment record (47) Feb - April 2020

The estimated holding period return for KLCI in the  Feb-2020 is -2.86%  (with dividend included). Holding Period return for my portfolio is -5.66%. 

The estimated holding period return for KLCI in the  March-2020 is -8.54%  (with dividend included). Holding Period return for my portfolio is -18.81%. 


The estimated holding period return for KLCI in the  April-2020 is 4.55%  (with dividend included). Holding Period return for my portfolio is 12.32%. 

For comparison of my portfolio vs KLCI annualized return in the last 1Y, 3Y, 5Y and since inception, see below

Trading Activities

For the past 3 months, Malaysia's economy and stock market were severely impacted by the outbreak of COVID-19. During February, I was still in buying mode which includes addition of Public Bank (1295) & Astro (6399). This quickly became a mistake as both stocks were considerably cheaper during subsequent market downtime. 

Hence, my trading decision after March was centered around the following questions

1. Whether the business model of the company can still sustain post-COVID19? 

I believe companies where their future survivability in doubt are Airasia & TWREIT. 

2. Whether there is still a growing potential for the company, or I have to sell now to preserve cash?

Stocks that I subsequently sold were Symphony Life (1538), BAT (4162), YOCB (5159) & FIAMMA (6939)

Summary list of stocks bought/sold as follow:

Addition of Public Bank (1295)

Disposal of Symphony Life (1538)

Disposal of BAT (4162)

Disposal of Airasia (5099)

Disposal of TWREIT (5111)

Disposal of YOCB (5159)

Addition of Astro (6399)

Disposal of FIAMMA (6939)

My investment record (46) January 2020

The estimated holding period return for KLCI in the  Jan-2020 is -3.35%  (with dividend included). Holding Period return for my portfolio is -4.43%. 

Trading Activities

1. Disposal of HEIM (3255)

I believe current market is abnormal in the sense that the consumers' stocks (like beverage, FMCG, etc) are getting a very high valuation while finance stocks (like banking and insurance) continue to be undervalued. At the time of writing, HEIM is trading at P/E ration around 27 while the banking stocks are trading at P/E ratio below 10. Hence the rebalancing. 

2. Addition of BAT (4162)

The price drop further to below RM14, with an estimate EPS of around RM 1 to RM 1.2, its dividend yield becomes attractive. 

3. Disposal of Coastal (5071)

This stock has limited upside potential now as the O&G business is still lackluster. Hence the sale to reserve some funds. 

4. Disposal of Airasia (5099)

This is an event-driven sale. The Wuhan coronavirus outbreak is going to hit Airasia X hard with a large portion of its route connected to China. Better sell now until there is a sign of subsiding of the virus. 

5. Addition of Tune Protection (5230)

The addition happened before the Wuhan Coronavirus outbreak gets serious. The reasoning behind this is the stock is currently trading at forwarding P/E below 10 and dividend yield of above 5%. 

6. Addition of Bermaz Auto (5248)

This analyst summarizes the prospect for the stock. 

7. Addition of Takaful (6139)

The share price took a hit recently due to RHB terminating the takaful bancassurance agreement with Takaful. However, as the termination only starts at August this year, and the revenue of Takaful still growing strong with chances of reestablishing bancassurance agreement with RHB again, I believe the stock is oversold in relation to estimated forward P/E of about 10. 

8. Addition of Astro (6399)

The stock is trading at forwarding P/E of about 10, the recently signed transponder agreement is going to save the company and increase EPS by roughly RM0.01 starting 2024. Astro then becomes a good dividend stock with high dividend yield in the coming years. 

9. Addition of Padini (7052)

Although the outlook will be uncertain due to the impact on tourism by Wuhan Coronavirus, the stock is currently trading at a historically low P/E level.

10. Addition of LPI (8621)

This is a regular buy for a good stock like LPI. Although the price wasn't cheap from P/E sense. 

All the costs involved with property investment in Malaysia

You heard your friends/relatives got rich by buying a property few years back and sold it for double the original purchase price,

You heard some of the success stories where the people who did compress loan to purchase multiple properties at once got rich in the process.

You read the book Rich Dad Poor Dad and understand that leverage could be the key to build your road to financial freedom.

There is a new launch of a property project in town and the developer is offering a discount, or you decided the market is good and start looking for the second-hand property market.

You want to start investing in a property and hoping that the rental can cover full or partially the monthly installment. But you need to know all the costs associated with property investment, which summarize as below

1. Upfront Cost 
This article from Imoney summarizes well, in general aside from the downpayment, you need to pay
- Stamp Duty for purchase and loan agreement (from 1.5% to 3.5%, depends on your purchase price)
- Legal fee for SPA & loan agreement (around 1.8 - 2.0%)

2. Renovation & maintenance cost 

To make your property tenable, you need to buy some furniture, do some repair painting, replace the electrical appliance etc. 

- Let assume for a new house you need around RM 5k to 10k to make it tenable, then spend another similar amount every 5 years. 

- And every year spend a small amount to fix those pipework/electrical issues/wear and tear. 

3. Fixed Costs per month,

Regardless whether you rent the property out or not, you still have to pay the

- Assessment Rate (around 7% of estimated rental income) and Insurance

- Management fee and sinking fund for condominium/serviced apartment 

- Depreciation charge: this is one of the cost most people often overlook. To understand this, you have to imagine a 10 years/20 years old property cannot ask for the same price as a new launch property. The building and facilities will be aged, people will need to incentivize (receive a discount) to live in an older property compared to a new one. Typically we should expect a depreciation rate of 2% (assuming the property can last 50 years) 

4.  Cost related to renting out

- Quit rent, being the lost income when you are unable to rent your property out

- Agent fee, if you hire a property agent to look for tenant (typical 1 - 1.25 months per year)

- Income Tax: Legally, you have to declare the rental income when filing for income tax, thus depending on your current last tax bracket, you could end up paying 3% - 24% of your rental income as tax.

5. Selling Cost
This article from Imoney summarizes well, in summary
- Real Estate Agent Fees (up to 3%)
- Legal fee for SPA (around 0.8% to 1.0%)
- Real Property Gain Tax (RPGT, 5% for profit when selling the property after the fifth year).

My investment record (45) December 2019

The estimated holding period return for KLCI in the  Dec-2019 is 2.02%  (with dividend included). Holding Period return for my portfolio is 1.19%. 

Trading Activities
1. Addition of HLFG (1082)
I will continue to add this as long as the P/E ratio is below 10

2. Addition of BAT (4162)

The price drop to below RM15, with an estimate EPS of around RM 1 to RM 1.2, its dividend yield becomes attractive. 

General Market Discussion

Malaysia market in 2019 is not performing well due to the following factors

- The outflow of foreign capital 

- Declining corporate earnings

- Slowing property market

- Uncertainty of US-China trade war that impacts investment sentiment

- Lower Crude Palm Oil Price

For 2020, the future outlook is mixed

+ Crude Palm Oil Price climbing back up to MYR3000 level, this will help plantation earning

+ The economy is projected to continue expansion at a rate of 4.4-4.6%, with no major downside risk. 

-  Both residential and commercial property market seem facing oversupply issue

-  BNM may proceed with another rate cut in 2020, which will hurt banks' earnings. 

Why I don't like Mutual Fund/Unit Trust

I am not a big fan of investing in mutual fund in Malaysia, the reasons are as follow:

1. Their return is misrepresenting based on the current benchmark method. Most of the funds benchmarked themselves against KLCI, with dividends excluded. I don't why they never consider the effect of the dividend in calculating the actual return of KLCI, perhaps it's due to the fact that it will complicate the calculation. But as KLCI has a dividend yield of around 3% (see here). This will greatly impact the return of KLCI presented in the long run. 

For example, the KLCI index value is around 1751 in 29th December 2014, on 27th December 2019, the index value is around 1610.61. If you calculate the KLCI return based on the index movement around, you get a value of -8.02% or annualized to be -1.66%. However, the index value is just representing the price movement of all 30 constituents stocks, and stocks pay dividends that don't show up in the index. so if we assume KLCI pay an average dividend of 3% over the past 5 years, the actual return of KLCI would be 1.34% per annum or annualized to be 6.89%. 

2. You cannot compare yourselves to the looser only, you need to benchmark against the risk-free option. KLCI was performing badly for the past five years due to a variety of reasons: Impact of Crude Oil price crash and fall in CPO price, a badly managed economy hampered by GST & SST, slow-growing banking industry profit due to increasing capital requirement, and declining profit in the telecom industry, and the exit of foreign capitals following strengthening of US Dollar. Looking from hindside, while a wise move for the investors will be not investing in KLCI at all, they always have a risk-free option at their disposal, which is investing in Fixed Deposit or Government Bond. For the record, the last 5 years the Malaysia 10Y Government Bond Yield average is around 3.8% (see here). That means an investor can invest risk-free and earn an estimated return of 20.5% over the last five years. I don't think many of the mutual funds in the market can beat that. 

3. When computing short term and middle term investment, they always omit the entry charge. 

Take Public mutual growth fund, for example, the publicized 5 years return is 13.17%. But they have a sales charge as high as 5.5%. So if you invest 1 million 5 years ago, your actual return is only 6.84%. 

4. Past performance does not guarantee the level of future returns. This is the excuse clause for lackluster fund managers. But the irony is that it is the long term past performance that the fund is advertising to the public, lure investors into investing in the fund, and justify the management expenses. In other words, a fund manager who made some good/lucky bets in the past (especially during and after the 2009 global financial crisis), can continually advertise his historical performance and justify the high management expense charged. 

Take Icapital Biz (5108), a close-end fund with inception since 2005 for example, they have a really good ride from 2005 to 2010 with annualize return close to 20%. But from 2010 onward, the fund manager decided to start hoarding more cash, perhaps in anticipation of a major crash that never happens. As a result, their performance dip. If you start investing in the fund from 2010, your 9 years annualized return estimate to be around 2.9%, which is definitely less than risk-free options (Fixed Deposit or government bond) and KLCI (with dividend included). 

5. The management expense ratio is unjustifiable for funds that cannot beat the risk-free return. 

The average management fee for the mutual fund/unit trust is 1.5%, higher than its peers in the US. And most importantly, the fund managers earn their fees and salaries almost risk-free as the management fee is based on NAV (Net Asset Value), while continuing to make an educated bet using the investors' money. 

In other words, there is more incentive for the funds to earn the management fee through recruiting activities to lure more investors in, such as using a lower benchmark, emphasize on the need to hold longer-term when short term performance is bad or advertise on short term performance when they are good. There is less incentive for the funds to focus on growing the existing capital of current investors at a rate that is above the benchmark.