Tuesday, 23 October 2018

Recent Financial Statement Analysis Workshop

More investors are getting interested in using Fundamental Analysis to short list strong company stocks to invest in, especially in a lacklustre market we are going through right now

In fact it is an opportune time to start studying the fundamentals and earnings of companies you are interested in. So one would know where is a good, under-valued price to start establishing position.

I held a seminar recently to share with participants how to analyse financial statements and annual reports. Much insights were presented on extracting relevant figures, zooming into key sections of annual report, and performing company valuation. The objective was to enable investors to digest the financial statements in a practical way, to arrive at investment decisions effectively.

The session was engaging, with many questions asked. I am surprised by the queries thrown up by attendees, some went into portfolio management and a little bit of Technical Analysis that complemented the seminar content.

I am heartened that most attendees found the session useful and the knowledge shared valuable, with 100% feedback that they would recommend this session to others.

Of course there were room for improvement, in terms of the content, more examples and the venue. So these will be incorporated into next session.

Sharing some snippets of the seminar here. If you have missed this round do stay tuned for the next session which will come pretty soon. Check out the outreach tab.

This should be a regular affair going forward.

*Meanwhile, my next seminar on Profitable Shares Investing: 24 Oct, 7pm at Raffles City Office Tower. Sign up here

Wednesday, 3 October 2018

5 Things To Know About Phillip SING Income ETF

There is a new kid on the block for the local ETF scene - the Phillip SING Income ETF (Phillip SING). Hot from the oven, it was launched by Phillip Capital on 1 Oct Monday.

I will share some pertinent points worth noting about this ETF, to aid you in your decision whether to subscribe for it.

The index
Phillip SING tracks the Morningstar Singapore Yield Focus Index (The Index) that comprises a basket of stocks selected using Morningstar's proprietary quality income strategy and factors. The 30 stocks were identified based on a composite score derived from following factors:

  • Quality - quantitative moat score
  • Financial Health - distance to default score
  • Dividend - trailing 12 month dividend yield
I attended an insider briefing for Phillip in-house remisiers and learnt that since 2005, The Index has attained annualised return of 9.6%, comprising capital gain of 5.2% and dividend returns of 4.4%.

More details can be found under Fund Info in this website.

Smart Beta ETF
Phillip SING is a Smart Beta ETF. Contrary to traditional Market Cap Weighed ETF, it employs rules based selection criteria to construct the index portfolio. The rules are centred around the concept of factor investing, where certain company characteristics or attributes are shown to give higher returns or lower risks.

As mentioned earlier, the factors pertaining to this ETF are quality, financial health and dividend yield.

While selection of companies is done using rules based approach, the management of ETF is still done passively that brings about greater transparency and lower cost.

Comparison with STI ETF
Phillip SING grants access to 30 high quality Singapore listed stocks with stable income, some shares would inevitably coincide with components of STI ETF. It makes interesting case to compare the key attributes of both ETFs.

With STI ETF, the 3 local banks take up about 41% of the total portfolio. For Phillip SING, the 3 banks would constitute 23.9%. It is worth noting that The Index caps individual company weightage at 10% of the total pie. This further prevents over concentration in any particular company, a plus point in my opinion.

Source: Phillip SING Income ETF brochure

Looking at industry representation, the top two sectors of Phillip Sing are financials and REIT respectively with 31% and 24% weightage. As for STI ETF, the top two sectors are financials and industrials with 58.3% and 15.3% each. This suggests that Phillip SING has a more balanced sector representation.
Source: SPDR STI ETF website and Phillip SING Income ETF website

Lastly, the gross dividend yield for Phillip SING is estimated to be around 5% with semi annual distribution. Accounting for expenses and costs, its dividend yield should be around mid 4%. In contrast, the annual distribution yield of STI ETF as of 1 Oct is 3.43%, according to its website. Phillip SING seems to have better yield.

Who is this ETF for
Clearly, Phillip SING is suitable for investors who are seeking a viable alternative to STI ETF, due to the latter's heavy concentration in banks and a rather low dividend yield. Furthermore, if The Index past return of 5.2% capital gain is anything to go by, it clearly is more superior than STI ETF returns of 4.08% in the past 10 years, without dividends.

I would think the Phillip SING is also suitable for investors who want hassle free investment to 30 high quality stocks with good income in one instruments. Looking at the ETF make-up, there are some interesting companies there with fairly good yield and stable growth prospects such as Sheng Siong, Raffles Medical and Mapletree Commercial Trust.

Application Details
The initial offer period is from 9am 1 Oct to 5pm 16 Oct. The issue price is $1 per unit, with expected listing date on 29 Oct.

Do note that this is unlike IPO where you need to ballot for the share, you will be allocated the full quantity that you applied for. Minimum subscription quantity is 1,000 units of $1,000.

Subscription fees will be commission of 0.1% or min $10, and a transfer fee of $10 (subject to GST).

Open a Phillip trading account online using this link. After that, fill in an application form, and ensure that sufficient funds are in your account before the cut off date. Simple as that.

Do contact me if you have any queries.

Meanwhile. Do you find it difficult analysing financial statements? Not sure where to start reading annual reports? Do sign up for this seminar where I will break down the financial statements, higlight key segments in annual report that deserve attention, and explain how can one analyse and extract important financial ratios quickly.

Monday, 1 October 2018

Helping You to Start Financial Statement Analysis

Not knowing how to start Fundamental Analysis (FA), in particular reading financial statements, is a common pain point among retail investors. It is especially true for novice, with quite some experienced investors facing the same problem too.

Most of us know the importance of FA and studying financial statements, but most do not have the knowledge and know-how to start. Quarterly earnings statements and annual report are thick documents, inundated with figures, charts, diagram and texts. It can be quite daunting to digest all these info to arrive at a fair opinion on the company. Indeed a headache for many retail investors.

The problem is worsened by availability of information, sometimes too much, with numerous fund houses, analysts, news channels, investment experts sharing their take on a same set of results.  Depending on perspectives and base of comparison, a growth of 30% this quarter is bad; but when compared against sector growth rate of 10%, it could actually be outstanding. Which point of view should an investor take then? Who to believe?

It is thus important to depend on ourselves - our best teacher. Learn proper FA and financial statement analysis and form our own opinions. Check out the numbers, compile the ratios and indicators from the root source of information: company annual report and financial statements. Info from various sources are useful references, but the most important thing is to make our own judgement call.

But where, and how, do we start digesting annual report and financial statements? The fact is, it need not be too difficult. While financial statement is expressed in accounting, we do not need to have in depth accounting knowledge. What we need is the ability to make sense of numbers to form sound opinions. And this can be done by focusing on relevant segments, extracting key numbers, and knowing just enough to make a decision.

A simple analogy is that 99% of drivers do not have knowledge of automobile engineering and mechanics, yet are able to drive a car. Its the same for investing. Put in some effort to pick up the important knowledge, and most can start analysing stocks confidently.

So my next seminar is titled 'How to Read Financial Statements and Annual Report' and it aims to do just that: help retail investors analyse statements and annual report quickly to form a fair opinion about companies.  Content includes:

  • Breaking down the 3 financial statements
  • Interpret company operational efficiency and financial health
  • Compile key financial ratios for peer comparison
  • Read Annual Report Quickly by zooming into 4 key segments

This is not a preview, introduction or sales talk. It is a no-fluff, content-packed session, where I share exactly the same ways I conduct FA with you. Attendees will walk away with the know-how to analyse a company's fundamentals and conduct due diligence in other relevant areas.

You will also get some tools and my self-developed check list which will come in handy in your analysis. Light refreshments will be provided.

If you find it difficult to do a first cut FA on any companies, this session is for you. Any old birds who want to pick up ways to analyse financial statements, this session is for you too.

I am certain that the seminar content, knowledge shared, plus the tools and check list, will benefit attendees. And you will find reading financial statements much easier after the session.

Take action now! Sign up here.

Recent Financial Statement Analysis Workshop

More investors are getting interested in using Fundamental Analysis to short list strong company stocks to invest in, especially in a lacklu...