Scholar? Straight A? Big Fish, Small Fish? Let’s talk about Financial Sense

A scholar? Straight A, Good JC student? Unfortunately, I am neither. While I will be proud to showcase my “O” and “A” certs dotted with more “B” than “A” grades, displaying another achievement of mine (a 27-year-old investor) is perhaps more fitting as a financial blogger.

Counter	Units	Price	Allocation (%)
Penguin	588700	0.15	35.16
China Fishery	260000	0.092	9.53
Fischer Tech	18000	0.905	6.49
TTJ	29000	0.41	4.73
Silverlake	39500	0.575	9.04
Moolahsense	1	$12,200	4.86
Cash*		$75,800	30.19
Total SGD		$251,117.50	100.00%

As of end Oct 15, my portfolio stands at approximately $250,000. [Portfolio update: Sold some China Fishery, Penguin and XMH.]

While I do admit I am a “father-mother” scholarship holder, this does not take away my financial achievement. During my second year of university, I had asked myself: “what could I do to differentiate me from my peers?” You see, I was an average undergraduate who hailed from Innova Junior College - yup that 20 pointer JC, the privileged few which could accept me.

I realized financial literacy was something we had learnt little during our school days but is one of the most useful and relevant skill for the real world. It was something I knew that will get me ahead of the rat race – financial security meant less stress and the ability to take on more risk to advance a career. Furthermore, with financial sense, an individual is equipped with the knowledge to accumulate more wealth and like it or not; money is one of the stress factors of family ties. The lack/struggle to attain financial resources is a source of strain between a couple’s relationship.

Hence as financial bloggers, it is paramount that we continue to offer relevant financial information and nuggets of truth; while clutching at the straws of hopes that readers will become financially sensible from our articles and apply it to their everyday lives. It is important for us to share information and ideas (some of which I have blogged about) such as:

• Working Hard, Saving Well 
• How insurance works and why certain, if not most, insurance policies may not be best for our financial future but definitely beneficial to the agent’s pockets
• Good financial habits such as “Income - Savings = Expenses” aka paying yourself first
• Realizing things like diamond rings are a financial mistake and perhaps its time to challenge societal norms
• Learning to invest wisely through value investing, "ETF vs Unit Trust"

I hope I will be able to continuously dig out more information and share on investment analysis and financial knowledge. Of course during this journey, it is unavoidable I will make financial and investment mistakes.

Can Osim Turnaround its Fortunes?

Osim is synonymous with its massage chairs. Besides the massage chair business, it holds other retail brands as well such as GNC and TWG Tea. Interestingly, the major market and revenue contributor to Osim is North Asia, to be exact China.

Signs of trouble in China?

While the Chinese Government has painted a moderately strong outlook on China, Osim’s result is showing otherwise. 9M current FY results has reported an overall decline of 12% revenue and a 44.4% fall in profits. This shows how cyclical Osim’s products are and the exposure it has to the China market. While its share prices have fallen to S$1.36, the question now is: Is Osim an undervalued buy with its growth story seemingly over.

With the slowing Chinese market, Osim has reported the third consecutive double digit decline in sales. While the company is still generating positive cash flow with a strong balance sheet, I still think Osim is rather too high a price. At an estimated EPS of 6 cents (and same amount in forecasted cash flow generation); $1.36 signals that the company is selling at about 22x PE. With its neutral growth story, I do find a PE/P/FCF of 22x as high.

Furthermore, I am not sanguine on Osim’s strategic investment in Trek 2000. There are many better companies out there for strategic investment and diversification. 

Outlook

In its commentary, Osim has signaled it is positive in sustaining its no1 position in the Chinese market. While I believe that is true, being no1 in a slowing market is not a positive as well. It remains to be seen how will Osim turn around its fortunes, especially when it has an upcoming convertible bond to redeem. 

Peer to Peer Lending: How I invest and minimize my risk

Some readers may have noticed: Under “My Portfolio” section, I have listed Moolahsense as part of my portfolio. What is Moolahsense?

Moolahsense is a peer to peer lending website where registered users are able to lend money directly to a company who is doing a fund raising campaigns. While the returns seem high, do note that the registered users assumes a large risk where the company may default anytime. Fortunately, the money registered users lend to these companies are similar to bonds; however these bonds are only enforceable in Singapore.

How I screen companies

My criterion is simple and that is to only “invest money” in companies which are past the startup stage of their life cycle. The reason is because matured companies have an operating track record in that business unlike start-ups. It indicates a lower risk of default as compared to start-ups whose business are new and cash flow is tight. 

It is worth noting in Singapore; almost 9 in 10 businesses fail within their first one-two years of operation. In addition, I go for companies that plan to use the proceeds to finance projects or to expand outlets. I will do my online searches to verify the company’s operations.

The second criterion is to check the debt to equity ratio and interest coverage ratios. Like many listed companies, I prefer companies who have a debt to equity which is lower than 0.6. Also, a higher interest coverage ratio indicates the company’s ability to repay debts. A higher interest coverage ratio indicates a stronger financial position.

Moolahsense Portfolio

Below is a screenshot of my portfolio.

Moolahsense Portfolio

While the returns is high, do note the risk is high too as there is a possibility of losing your entire capital unlike shares, I will recommend that only well-versed individuals invest via moolahsense. This is because understanding of finance and due diligence is really needed to invest in peer to peer financing.

Steps to take to accumulate more wealth

Some have asked how I had accumulated $200,000 at a young age. Below were some steps I took.

Save a significant portion of salary

Don’t live a paycheck to paycheck lifestyle, save a portion of your salary for investments and future consumption.

Don’t put too much Money in Bank accounts and FD

I hate putting a lot of money in saving accounts because the interest rates of these accounts are very low. The only advantage saving accounts have is the liquidity it provides. I suggest to place approximately $10,000 in these saving accounts unless a major expense is coming. This is because $10,000 equates to approximately 3 months expenses incurred by ordinary Singaporeans.

The rest of the money should be placed in Singapore Saving Bonds (SSB) or stocks. This is because the SSB provides a higher interest during the initial years and this interest becomes higher if you keep it with government longer. Furthermore, the SSB is relatively liquid where you are able to make a withdrawal in one month. This will be handy in situations where you need the money. Also, there are no conditions we have to meet to enjoy these returns unlike the OCBC 360 and UOB account. 

For starters, I will recommend Singaporeans set aside some money to bid for SSB once a year. Fixed Deposits in banks are a definite no no given the current climate. They lock you up for a period of time and offer rates only in the region of SSB's. I will only consider SGD denominated FD if the interest offered is at least 2% per year.

Buy Term and Avoid Whole Life/Endowment/ILP

I have shown how buying a term policy and investing the rest in CPF and STI ETF is likely to yield a better return than whole life. You can read it here. This method is likely to empower you to accumulate more wealth than insurance plans.

Investing when Young

This is very important. Investing does not mean putting money in bank FDs or insurance policies. It is to invest in the stock market.

Yes, the stock market is a casino to the layman. However, there is still a way to grow one's wealth in the stock market. That is via the SPDR STI ETF or Nikko AM ETF. Both are index funds and are good instruments to help grow your wealth.

For individuals with a sound understanding in finance and accounting, it is likely the stock market will not be a casino to you. This is because the wealth of experience and knowledge you have accumulated will help discern between the value traps and stocks with true value. If discerning these stocks are still a challenge, it is advisable to stick to the 2 ETFs mentioned above.