My Investment Record (20) - 1st May 2015

Market Overview

US 1st Quarter GDP data came out surprisingly weak with growth of 0.2%, 

Fed is holding its move on next rate hike, consensus now looking at the earliest hike in september, 

Market become nervous, 

KLCI pare its early gain in the month and end up with 12 points lower than opening of the month (1818.27 pts currently). 

And here the theory,

A meltdown of the market usually triggered by sheep herd behaviour, where exiting of one group of investors follow by another. 

In Malaysia case, it will most likely be foreign investors who sell off first, then local retail investors who under margin call, and finally the remaining local retail investors. Institutional investors (like EPF, ASNB, Public mutual) etc seldom sell off as they investing strategy is to hold for long term. And the institutional investor often become key stopper of the fall/crash. 

And when market become sentimental, anything could happen and it will be likely those who ride the first wave (whether selling from a peak or buying from a trough) will gain in this cyclical market condition. My prediction is KLCI will remain cyclical in current level at least until Q2 economy data is out, if the outlook is positive only then a move to break 1900 pts become possible. 

Current Return and performance

The estimated holding period return for KLCI in the past period (1st April 2015 - 30 April 2015) is -0.42% (with dividend included). Holding Period return for my portfolio, is 1.09%. Total holding period return for my portfolio since the inception is11.22%, annualized to be 4.07%, this is far lagged behind KLCI total return of 20.76% (annualized, 7.33%) and just about the same as return from Fixed Deposit according to current market rate.

Trading Activities

1. Disposal of  PohKong (5080), When i first start my investment portfolio, i made a few mistakes which resulted in poor performance of my portfolio compared to KLCI, This include, ignore how the huge inventory level (even the inventory is ready to sell) can influence the performance of particular company (in this case, gold inventory to PohKong and Tomei), ignore how the controlling stake holders can  act in the interest of its own while sacrificing the interest of minority shareholder (PohKong, few chinese stocks). The only chance to correct those mistakes is when the shareprice rise according to tide. Which i did for Poh Kong recently.  

2. Disposal of  Public Bank (1295), Public bank is a good stock that seldom disappointing its shareholder,  But viewing its current share price level and in anticipating of upcoming volatile market condition,  partial disposal of it is one of my strategic move to accumulate some cash and prepare for any short term slump in share price. The strategy might or might not paying out. 

Poh Kong (5080) Pk TOMEI (7230)

Key Summary

Both shares trade at attractive price to earning ratio. TOMEI, having an International presence which expand rapidly during past few year, was recording declining net profit margin and ROE. Poh Kong, while having strong performance these past year, seemed to overpay its director.


Before the analysis 

The jewellery retailer industry seem to be a never-will-lost-a-cent kind of business. Poh Kong and TOMEI, the two industry leader, had never recorded a year with loss. Hence, the question left for the investor, is which one outperform the other. In order to do a comparable study, we need to single out the numbers that is affected by their size, ie : Total revenue, profit after tax, net earning per share. 

Hence, the ratios that can gauge the relative strength of the management team , would be ROE, Net Profit margin, Average Revenue per store  ( for major ) , and Fixed asset utilization factor (revenue/fixed asset), Sales/inventories ratio (minor consideration) . Other factors that may aid in the decision are dividend rate and  director effect (net profit / total director remuneration package).


The Key Parts.

Note:
* Poh Kong had undergo major share capital expansion, hence PER based on non-diluted earning per share before cannot give a true picture on companys earning power.
** TOMEI group has 70 retail outlet in Malaysia with 18 retail outlet overseas (7 in Vietnam, 11 in China) . Whether the overseas retail kiosk contribute the same revenue per store for TOMEI, is a subject worth exploring further.

The Good About POHKONG,
The net profit margin is better,
The current PER is more attractive.
It achieved a higher revenue per retail store.

The Good about Tomei.
Average Return on Equity is higher.
Asset utilization, revenue/inventory, director factor are all better.


In Conclusion
Both companies are distributing dividend at the rate comparable to the rate received from Fixed Deposit. The major exception is that, the FD rate fluctuate according to Bank Negara Policy, while for Both companies, with ROE well above 10%, you can expect your dividend rate (related to historical cost of purchase) will keep growing at foreseeable future.

The choice of choosing which company to invest is rather personal, but if we are confident in the future of gold and jewellery industry as a whole, we could consider a diversification by investing in both the largest and second largest player in the field.

Tomei Bursa Saham Link 
PohKong Bursa Saham Link