Saturday, 23 May 2015

KLSE: VSOLAR-WA with a negative premium that is too good to be true

Is a warrant trading at a premium of -25% sounds too good to be true? It probably is.

VSOLAR-WA was trading at a premium of -25%. This implies that one could earn 25% by simply buying the warrant and converting it to the mother share, with the condition that the mother share price remains unchanged. A few years in KLSE, I can still see new things by now, how exciting is the stock market?

How can I come to know this stock? Well it occupied a conspicuous spot in the trading platform -- most actively traded counter. While a negative premium is certainly "attractive", let's have a glance at its financial summary first:

VSOLAR financial summary
Financial summary for VSOLAR (Source: Malaysiastock.biz)

As you can see, this company has no fundamental and it is not making any profit. The table below details the price of both VSOLAR and VSOLAR-WA with its premium, and how the negative premium "quickly vanished", turning into positive premium. (Historical price obtained from KLSE.my)

Date VSOLAR VSOLAR-WA Premium
22-4-2015 0.380 0.165 -25.0%
23-4-2015 0.340 0.150 -20.6%
24-4-2015 0.360 0.145 -26.3%
27-4-2015 0.305 0.140 -13.1%
28-4-2015 0.250 0.110 -8.0%
29-4-2015 0.255 0.115 -7.8%
30-4-2015 0.255 0.110 -9.8%
5-5-2015 0.260 0.110 -11.5%
6-5-2015 0.210 0.090 0%
7-5-2015 0.205 0.085 0%
8-5-2015 0.210 0.080 -4.8%
11-5-2015 0.170 0.070 11.8%
12-5-2015 0.155 0.065 19.4%
13-5-2015 0.155 0.075 25.8%
14-5-2015 0.155 0.070 22.6%
15-5-2015 0.145 0.070 31.0%

What is left now? Nothing. If there is no improvement in the fundamental of this company, I do not think the price will go up in the "foreseeable future".

You may want to ask: why does this happen? The big fish wanted to sell the shares. Making the warrant to have a negative premium is very easy to attract people to buy, because everyone is hoping that the warrant will "catch up" with the mother share to its reasonable price. Obviously the opposite happened in this case.

While everything written here is in hindsight, I did not touch this stock though. The purpose of writing this is to alert fellow investors and not to fall into this trap in the future.

Saturday, 16 May 2015

NYSE & NASDAQ: what are GAAP and non-GAAP profits?

As a newbie in the US stock market, a first sight at a financial report will often baffle at "GAAP profit" and "non-GAAP profit". What are they?

To start with, Yahoo finance offers a very convenient avenue of looking at the earning release of listed companies in the US. The date and time of the release of the fiscal report are clearly stated (as opposed to KLSE in which you really don't know when will it be released but within 2 months from the quarter end).

For example, this is the Q1 earning of TESLA (NASDAQ: TSLA). 8-K form is the name of form that contains financial results.

TESLA 2015 Q1 Earnings

GAAP stands for Generally Accepted Accounting Principles. It is the standard norms of how companies should present their earnings in NYSE and NASDAQ. In a simple way, what we see on the balance sheet is based on the GAAP profit, i.e. the common way of reporting profit.

However, a company may write-down an asset or restructure its organisation. These actions usually come with large one-time cost that may not be truly reflected in the GAAP profit. As such, a company will also provide “adjusted” earning figures that excludes these nonrecurring items. These effect, usually is one-off, will be regarded in the non-GAAP profit. And because of this, I personally think that it will more accurately reflects the company's performance.

The balance sheet of TESLA:



We see that a GAAP net loss -$ 154 M or $-1.22/share was incurred according to the conventional way of account reporting. After considering compensation expense, non-cash interest expense and deferred profit, its actual net loss is only -$ 45 M or $ 0.36/share, which is significantly less than the GAAP standard way of reporting.

The above exemplifies the use of non-GAAP reporting to account for a more accurate earning which truly reflects the company's performance. There are good and bad with both measures of reporting in the sense that the report could be manipulated to favour the desired outcome. Which one to look at is then completely up to your discretion.

Friday, 8 May 2015

KLSE: INARI-CA, a "successful" trade

Following the recent failed short term trade, maybe I should also write some "successful" transactions.

If AWC made myself stumbling, then INARI-CA could at least offer me some condolences. It was the "secret weapon" that I bet on for the recovery of my capital since Oct 2014. Never happen before that I will buy call warrant "in quantity", after realizing how much opportunity I have lost since then.

At first I was really reluctant to sell -- want to earn more. But the imminent expiry date (the last trading day was 30 Apr 2015) makes me worried and decided to sell a few weeks before expiry. In the end INARI-CA expired at RM 0.090. I cannot imagine the "what if"? Glad that I have overcome my own "mental blockage" to sell a share.

Perhaps SHH can give me another comfort, that I am actually learning to sell a share at good timing. It is trading at about RM 1.20 at the moment. Again, what if?

What if it soars after selling? Let it be. Maybe I buy another share that has better return?
What if it drops after selling? Then no worries.

Monday, 4 May 2015

KLSE: A failed short term trade in AWC

AWC is definitely a failed short term trade. I could have earned a profit of 10% in 2 days, but at the end of the day I ended up losing 10%.

This time, not only my entry price is beautiful, my timing is perfect too.

AWC


I did set a target at the time of buying, i.e. 10% short term trading. This implies a target price of RM 0.490-0.495. The target price is achieved after 2 trading days, I did not sell. A target without strict execution is useless.

Greed has crept in my mind and I "suddenly" decided to increase my target price. While I keep on reminding myself to not make the same mistake, greed has also buried my previous experience.


I do not know what to say, but hoping that I could at least take this lesson seriously.

Tuesday, 28 April 2015

NASDAQ: Amazon soars after earning release

I fail to fathom the US stock market. Amazon (NASDAQ: AMZN) was trading at USD 445 (24-4-2015), jumped from USD 390 on the day preceding the earning release. The "dumbfounding" thing is, the net profit of the latest fiscal report is a net loss of USD 57M / EPS of USD -0.12 (compared with a net gain of USD 108M / EPS of USD 0.23).

Yes, of course you cannot look at net profit alone in isolation from other figures. The revenue jumped 49% to USD 1.6B. The operating cash flow also increased significantly. The main reason for this is reported to be due to the outperforming cloud services and strong retail sales.

Having bought something from them once, I am very impressed by Amazon. The item is of great value, even after including the "international shipping" (which is really not much) and the weakening Australian Dollar. 50% discount is very common. For example, PNY Turbo 128GB USB 3.0 Flash Drive is now selling at USD 40 shipped to Australia. This is equivalent to  AUD 51.2 (based on the current rate of 1 USD: 1.28 AUD). The cheapest you could find on Ebay is AUD 68. The example goes on and on, and applies for all sorts of items.

Amazon has invested a lot to provide all kinds of new services, with a hope that in years to come, they will gain the "market share" and what they have invested in will pay back in avalanche.

According to the earning forecast, even in year 2018 the EPS would only be USD 8.29, i.e. the PE is still sky high. Perhaps this is something you can only find in a "matured" market, that considering really long term growth of a company, Amazon worths to trade at this price. This is something you cannot find in KLSE, and this excites me to involve in NYSE and NASDAQ, a market that really requires a sharp investing insight.

Monday, 20 April 2015

Tasmania, my second destination in Australia

Tasmania is a heart-shaped island located in the south-east of Australia. Locals here like to use short form for common name, e.g. Aussie for Australia; Brissy for Brisbane and Tassie is the name they give to Tasmania.

I always tell myself that I have 3 destinations to go while I am still here: Cairns, Tasmania and Uluru. Cairns trip was "accomplished" at the end of 2013. Last year I went to Tassie. I have little interest in Melbourne or Gold Coast. These places are so common that I will have heaps of chances to visit even after I leave here. But for these 3 places, although not considered as "popular destinations" when you fly from overseas, I am certain that they do not pall in comparison with those "popular destinations".

It was a very enjoyable and memorable self-drive trip of 6 days. Words fail to describe the beauty of Tassie. It is a very well-preserved place. All nature wildlife and forests are very well protected. The clear blue sky and the white clouds of Tassie seem so low and so close to you. The scenery is absolutely impressive.

The two largest cities in Tassie are Hobart and Launceston, with other small towns located all around the island. People here is very nice and have a very laid-back lifestyle which I adore deeply. Big supermarkets here (Coles and Woolies) don't provide plastic bags as in other states to reduce the use of plastic bags. This makes me feel like I am in my beloved hometown Penang.

Seafood is famous here, with oyster tops the list. Mussels, scallops, prawns and fishes, all you can eat here. They are really nice and fresh with Tasmanian salmon to be my top favourite. I have bought some cherry. I guess they are the top quality cherry in the world.

Driving from place to place in Tassie, you couldn't see tall buildings and apartments. It doesn't give you a feeling of a developed place, but it is indeed developed -- the mindset of the people here are developed that they know to protect the mother nature is a priority. All you can see are trees and grasses on both sides of the road, with cows and goats eating grasses. A house is built in a large area of green field, completely isolated from the outer world. Can you imagine how good is the air quality here, and how healthy (good) / boring (bad) is the life here?

Because it is during summer and Tassie is really close to the Antartica, the sky will only turn dark as late as 10:00 p.m.. This is the first time I experience this, as if the dark never fell.

Owing to its geographical location, it can get to 9oC even in the summer. This gives me extra appreciation to the weather in Sydney, although disgusting at times, but is still quite "mild" as compared to other places in Australia.

Some photos.

Stanley is a small town located at the north-west tip of Tassie.


(天苍苍,野茫茫,风吹草低见牛羊)


Bristowe Lavender farm is just amazing. The time we went there is just the season to flower. What a good time to visit Tassie.


There is a wild kangaroo looking for food in wineglass bay.


On the way to Hobart:



Mount wellington is a place where clouds are literally within your touch and you can look out the Hobart city.


Tasman bridge in Hobart city.


Brunny Island is the nearest place to the south pole of our beloved Earth, the crew member said that this "gigantic" seal came from the Antartica. And it is only there for a few months, so we are lucky to see this type of seal.



Last but not least, a shop known as Foxhole Medals has the front mirror stuck with this quote:

"Live your life. Take chances. Be crazy. Because right Now is the oldest you have ever been and the youngest you will ever be."

The quote says it all. Enjoy life.



Saturday, 11 April 2015

About long term investment

This is my 5th year of involvement in KLSE. While surviving KLSE in this period is nothing more than ordinary, I am still glad that I have made it, with a capital growing at a satisfactory rate.

In retrospect, the way I "handle" KLSE is by intraday, short term (<6 months) and medium term (<3 years) tradings.

Intraday tradings were extremely rare, simply because the energy and time spent is too much to bear. Some examples, MAS and CYBERT(don't learn this). All have gone to holland by now.

Short term (<6 months) trading is something that I prefer more. INGRESS, SBCCORP and PRLEXUS are typical examples. Mostly use chart to look for entry price, seeking a return of 10-30% in less than 3 months. Sporadically, there will be chances to earn "fast money" in a few days, i.e. playing rebound, e.g.  PHARMA and TAKAFUL. When this occurs, if you are bold enough, ALL IN.

Medium term (>6 months <3 years) can be torturous at times. But good things come to those who wait. INARI, PNEPCB and SHH are my old buddy now. Return has been very satisfactory. 6 months - 2 years is a period that I am more comfortably to hold a share, because they always end up good return.

Where is my long term investment?

I understand that my current investment style will not last long. When the capital becomes large, so does the stake. At some point, I will like to invest long term -- in the sense to hold a share for at least 3 years.  This is where your "skill" is tested, to see how well you can spot a good counter, as if PBBANK and GENTING in the 1980s, DIGI in the 2000s and DLADY in the 2010s. What type of companies should I look for long term investment?

Are they companies that I really like? For this, I look no further from AirAsia and AAX. It is the airline that enables me to fly between PEN-KUL and KUL-SYD. But sentiment cannot help making decision in the stock market. AirAsia has been dropping for a while, since it hit a top of RM 4.00 in 2012. If you buy AAX since IPO and hold until now then you would have lost a lot. Perhaps there are just too many uncertainties in the airline industry.

Are they companies that I don't like to involve as an individual? This means health care and pharmaceutical industry. Nobody likes to go to hospital, yet everybody needs to go there at some point. Examples include KPJ, PHARMA and IHH.

How about companies that are needed in daily lives? Consumer products. NESTLE, DLADY and others.

At this stage I wouldn't buy any of these securities. I don't look for long term investment now. Long term investment does not make sense to me if the capital is not big enough, e.g. RM 500k. Until then, I can use a portion of this capital to invest "long-term". For now, the first task is still to grow my capital, which is what I have been doing for 5 years.