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Tuesday, September 25, 2012

Astro IPO Research target price RM3.09

As what I have expected, analysts are coming up with medium Astro Target Price. I had already expected they mostly will not used PE ratio or Dividend Yield basis in their Astro Research analysis.
 
My basis is simple. Astro PE ratio is high, Based on Astro IPO price of RM3.00, Astro PE ratio is 24.8x based on Astro EPS of RM0.121 (profit of RM626.62 million).
 
Astro dividend yield is low. Astro dividend yield is only 3% based on Astro dividend payout ratio of at least 75% (assuming at 75%).
 
If I apply a PE ratio of 20x, then Astro target price will be RM2.42 only. If based on 30x PE ratio then fair value will be RM3.63. But Astro cannot justify the PE ratio of more than 20x. This is because for the next few years, the growth is low or negative. Most KLCI counters are trading below PE ratio of 20x.


ECM said Astro target price is RM3.09 is based on DCF valuation (WACC: 7.4%, β: 1.5, terminal growth: 1%).

Reported in The Star newspaper, according to industry executives, Astro's management has guided for "lower" earnings and margins for FY13 and FY14 as the company converts the current batch decoders to high-definition, the cost of which is borne by Astro. This earnings erosion is, however, expected to recover by FY15. Based on Maybank IB Research's net profit forecast of RM408.9mil for FY13 for Astro, the stock has an estimated forward PER of 37.5 times and dividend yield of 2%. 
But because so many people are going for Astro IPO, such as MITI, ESOS, public IPO, etc, Banks or brokers probably are having huge demand for Astro IPO share financing.

Imaging if Astro fair value is RM2.42, IPO price is RM3.00, you think the banks want to lend money to you? But if they don't, bank will have no business.

Many argue that Astro is worth higher, cannot purely based on fundamental, have to take into consideration the market sentiment and the demand for Astro IPO shares. As long as Astro can trade above the IPO price upon listing, then Banks can safely lend the money for IPO share financing.

So many cornerstone investors and good public acceptance of Astro IPO. StarBiz reported that 22 cornerstone investors had been secured for Astro IPO. They include tycoon Chua Ma Yu, Kencana Capital Libra Investment Sdn Bhd, Great Eastern Life Assurance, Myriad Opportunities Masterfund, Nomura Asset Management, Antell Holdings Ltd, Azentus Global Opportunities Masterfund Ltd, Caprice Capital International Ltd, Corston-Smith Asset Management, Gordel Capital, Ochis-Ziff, TPG-Axon International, TPG Axon Partners, permodalan Nasional Bhd PNB and Universities Superannuation Scheme.

But some argue that the cornerstone investors may have their own agenda. There could be other reasons. Maybe they think there is a possibility of someone coming in to buy them out later at a higher price. The funds who showed an interest might be doing so for indexing purposes.


What is your purpose? Long term? Apply and Sell? Dividend? Different purpose different strategies.



Articles:

Why you should NOT apply Astro IPO

http://politemarket.blogspot.com/2012/09/astro-ipo-why-you-should-not-apply.html
 

How to use Growth Share Matrix in stock market, here.
http://politemarket.blogspot.com/2012/08/how-to-use-growth-share-matrix-to.html





Money Back Guarantee IPO
http://politemarket.blogspot.com/2012/09/money-back-guarantee-ipo.html

More on Astro IPO

http://politemarket.blogspot.com/2012/08/astro-ipo.html

Formula in making $1,000,000.00
http://politemarket.blogspot.com/2012/09/formula-in-how-to-make-1-million-in.html


How to measure success in Stock Market
http://politemarket.blogspot.com/2012/08/how-to-measure-success-in-stock-market.html


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Friday, September 21, 2012

Astro Malaysia Holdings Berhad IPO PE Ratio

IPO Price RM 3.00

Opening of application 21/09/2012
 
Closing of application 01/10/2012
 
Balloting of applications 04/10/2012
 
Allotment of IPO shares to successful applicants 17/10/2012
 
Tentative listing date 19/10/2012

MIH 535 Main Market
 
Based on Astro IPO price of RM3.00, Astro PE ratio is 24.8x based on Astro EPS of RM0.121 (profit of RM626.62 million).
 
Astro dividend yield is 3% based on Astro dividend payout ratio of at least 75% (assuming at 75%).
 
Based on the above information on EPS of RM0.121, if I apply a PE ratio of 20x, then Astro target price will be RM2.42. If based on 30x PE ratio then fair value will be RM3.63.
 
If based on future EPS, no information yet. But with low dividend yield, will Astro going to have high growth for the next few years?

Will post again once I have Astro forecast earnings or profit and Astro target listing price.

Articles:

Astro Target price here.
http://politemarket.blogspot.com/2012/09/astro-ipo-research-target-price-rm309.html
 
Why you should NOT apply Astro IPO
http://politemarket.blogspot.com/2012/09/astro-ipo-why-you-should-not-apply.html
 
 
Money Back Guarantee IPO
http://politemarket.blogspot.com/2012/09/money-back-guarantee-ipo.html
 
 
http://politemarket.blogspot.com/2012/08/astro-ipo.html

=====================

Initial Public Offering Of Up To 1,518,300,000 Ordinary Shares Of RM0.10 Each In Astro Malaysia Holdings Berhad (“Astro Malaysia”) (“IPO Shares”) Comprising A Public Issue Of 474,300,000 New Ordinary Shares Of RM0.10 Each In Astro Malaysia (“Shares”) (“Issue Shares”) And An Offer For Sale Of Up To 1,044,000,000 Existing Shares Involving:
 
(i) The Institutional Offering Of Up To 1,258,435,000 IPO Shares To Malaysian And Foreign Institutional And Selected Investors, Including Bumiputera Investors Approved By The Ministry Of International Trade And Industry; And
 
(ii) The Retail Offering Of 259,865,000 Issue Shares To The Malaysian Public, The Directors And Eligible Employees Of Astro Malaysia And Its Subsidiaries (“Astro Malaysia Group”), Eligible Directors And Employees Of Usaha Tegas Sdn Bhd And Its Subsidiaries, Eligible Sales Agents, Independent Contractors, Talent And Subscribers Of The Astro Malaysia Group And Other Persons Who Have Contributed To The Success Of Astro Malaysia Group At The Retail Price Of RM3.00 Per Share (“Retail Price”), Payable In Full Upon Application And Subject To Refund Of The Difference Between The Retail Price And The Final Retail Price In The Event That The Final Retail Price Is Less Than The Retail Price,
 
Subject To The Clawback And Reallocation Provisions. The Final Retail Price Will Equal The Lower Of
(i) The Retail Price And
(ii) The Institutional Price To Be Determined By Way Of Bookbuilding.


Source: Bursa
===============

 
 
Articles:

Why you should NOT apply Astro IPO
http://politemarket.blogspot.com/2012/09/astro-ipo-why-you-should-not-apply.html


Money Back Guarantee IPO
http://politemarket.blogspot.com/2012/09/money-back-guarantee-ipo.html


http://politemarket.blogspot.com/2012/08/astro-ipo.html

=====================
 

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Thursday, September 20, 2012

How to Hedge Bursa Malaysia stock market KLCI with FKLI?


Recently I started investing in Futures and Options to hedge my equity position. I wanted to do it long time ago but the question is how to hedge using FKLI? FKLI is the Futures product for KLCI.
 

The obvious answer will be Short FKLI. If the market up, I will lose money in FKLI but I make from equity. If the market down, my share value will drop but I will make from FKLI. However, with this kind of hedging, what do I make? If market up I will not be making much because I will lose in FKLI.
 

Then I thought of I normally can perform better than KLCI. Meaning if my stocks value up 10% maybe KLCI up just 7%, I make 10% and lose 7%, net make 3%. But this is too little. Although the risk is much lower as I’m not worried about market crash, the return is too little. If during bull run also I will make very little.
 

Then I thought of buying FKLI Put Options OKLI. For example I pay 0.8% every month to buy Options. 0.8% is the maximum that I can lose within a month.
 

If the market down 3% within the month, I make 2.2% (after minus 0.8%)

If market down 0.5%, I lose 0.3%.

If the market up 9% within the month, I lose only 0.8% because that is the maximum I will lose and I will make 9% from equity, the net gain is 8.2%.

If market unchanged, I lose 0.8%.

 

But I was thinking, if the market keep going up gradually, assuming within the year Mr A make 20% from his equity portfolio, but Mr A will lose 0.8% X 12 months = 9.6%. Meaning Mr A will only make 10.4% net. Although market fluctuate within the year, if market is on uptrend, from rough estimate most probably Mr A will make about 14% to 15%%, as compared with 20% if he didn’t hedge.
 

If market down 20%, Mr A will make 20% minus 9.6% = 10.4% from FKLI. If adjusted for market fluctuation, rough estimate Mr A will make about 8% but lose 20% from equity.

 

If I average out the market up and the market down, it appears that with Options, Mr A will make about 2% to 3% for the two years combined as compared with Zero if without Options. But one thing we must understanding, for long term the market is generally on the uptrend. Assuming now is year 2008 where the KLCI was down and at lower range, if we look at the KLCI 10 years ago from 2008 to 1998, 20 years ago 1988 or 30 years ago 1978, the 2008 index point is generally higher.
 

On the longer term, Mr A will keep losing on Options and making from Equity. But because of the losses in Options his profit from Equity will be lower than the profit without hedging.

 

Another issue is why we need to worry about market crash, why need to hedge? If market crash, we will be able to buy cheap stocks and later will make substantial profit once the market recover.

 

After much thought, I have decided not to hedge equity portfolio with FKLI futures. Of course the above is just some rough estimate, I am not a speculator, I am merely doing investing without a need to predict the market because I don’t know how to predict the market.

 

Then few weeks ago, I found a way that “MAYBE” I can actually hedge my equity portfolio, without losing much money from hedging in the long run. Meaning if the market is on the uptrend, I will make from equity but will not lose much from Futures or Options. In fact, with the hedging there is a possibility that “MAYBE” I can make from both Equity and Futures and Options.
 

Is that possible? Let me try it out for one year or go through market crash and I will know the answer.

 

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Wednesday, September 19, 2012

Market Outlook KLCI FKLI and FCPO

For the month of September and until now, FKLI Futures still trading at discount from KLCI, meaning generally investors are still bearish. The huge discount of more than 10 points has been narrowed to only few points now.


FCPO dropped more than 100 points, in response to the drop in soybean oil prices. Wondering how it will perform when it opens on Wednesday.

Thursday, September 13, 2012

Money Back Guarantee IPO

Many people are not sure whether to apply for IPO or not. This is due to reasons that they are afraid of losing money and lack of information on the new IPO stocks. IPO companies generally are unheard of, except those famous IPO.

Some investors have successfully struck IPO but within weeks the share price drop to way below the IPO price. A popular example is the Facebook IPO, where within weeks Facebook share price drop 50% from Facebook IPO price.

Many IPO stocks also trading well below the IPO price within the same day or just days after being listed.

Want went wrong? Most of the times the IPO price went wrong. The IPO price is too high and does not commensurate with the company fundamental and intention of the existing shareholder. Some shareholders sold shares after the IPO stock was listed.

I would suggest a Money Back Guarantee IPO. This is where the investors are given 14 days grace period after listing.

If you are successfully being allotted the IPO shares, and you are not happy with your shares, you can return your IPO shares within 14 days.

There are many reasons why you are not happy:

1) The share price is trading below the IPO price

2) You are being allotted very small amount of shares and is not worth selling. You prefer to return the shares as a form of unhappiness

3) There are negative developments or news during the IPO process or immediately after listing

 
What is the impact of money back guarantee?

1) More people, much more people will apply IPO, this makes company raising fund easier.

2) Higher Underwriting Fee

As usual the investment bank or the merchant banker will continue to underwrite the IPO. Currently they are also the underwriter for IPO, but not for money back guarantee. It also depends on the agreement or the contract signed, example whether Bought Deal or Best Effort Deal, or how the deal is structured or customized, etc. As a result of this, they probably will charge a much higher fee. But this will fall back to the IPO price. If the IPO price is fairly valued (normally at a discount in order to attract investors), then the chances of investors returning the IPO shares are very low. Bankers need to study thoroughly the company and agree on a fair price, rather than a high price like the Facebook IPO. Therefore, not to worry on investors returning the shares, and as a result, not necessary charge a much higher fee.

If the market share price is trading lower than the IPO price, the underwriter should not be panicking because the shares returned are lower than the fair value. Sooner or later they can dispose it.

3) Lower IPO Price

In order not for investors to return the IPO shares, the listed price or future market price need to be higher than the IPO price. Because of this, the IPO will had to be fixed at a lower price. I would not really like to call it a lower IPO price, but rather call it a fairer price.

4) Lower Price Means Lower Fund or Ownership Diluted for the company

If the IPO is set at a lower price, then it means the company is getting less money. In order for the company to get more money, then they will have to issue more shares and ownership will be diluted. This will be very disadvantaged to the company. But at the same time, I have read in many articles saying that many IPOs are for the owners to cash out, so we also need to protect the investors. Once again, rather than call it a lower IPO price, why don’t we call it a fairer price.



Based on the above, if we straightly implement the money back guarantee, we will be faced with many objections saying fewer banks will want to underwrite and less company will want to list. But do we want to continue with the current practice that many public investors are being disadvantaged?

We can always fine-tune the money back guarantee IPO.

Example to have two portions of IPO. For instance, 30% will have no guarantee for the higher risk-taker investors, and another 70% will have money back guarantee for the lower risk-taker investors.


Other articles you may be interested:

For information on Astro IPO news here.

 
IPO is very bad for Bursa Malaysia stock market
http://politemarket.blogspot.com/2011/04/ipo-is-very-bad-for-bursa-malaysia.html


IPO is very good for Bursa Malaysia stock market

 
For recent IPO in Bursa Malaysia
http://politemarket.blogspot.com/search/label/Astro
 

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Saturday, September 8, 2012

Formula in How To Make $1 million in Stock Market

After reading my blog, someone told me he is not interested in making high percentage return, and asked me just tell him how to make $1 million in stock market. Initially I thought he was trying to be funny, but on second thought, I think he has a valid question. After some thinking, below is the “simplified” formula:


To make $1 million in stock market is a factor of (initial capital, Tenure, Injection, Incremental Injection, percentage return, withdrawal)


The elements are:

Initial Capital

Percentage Return Compounded

Tenure

Injection

Incremental Injection

Withdrawal



Please note that the calculation is on compounded annually.

 
INITIAL CAPITAL
This is what you invested at the start. For example you invested $50,000, with annual return of 10% compounded annually, at 8th year you will make another $50,000. To make $1 million, it will be at 32th year. If you invested just $10,000, it will be at 49th year.


TENURE
It is how long it takes to make $1 million. The above example shows 32 years. If you are 30 year-old now, then you will have to wait until 62 year-old.

 
Percentage Return Compounded
Using the above example, $50,000 on 10% will be 32th year. If you want to make $1 million faster, the Percentage Return need to be increased. Example $50,000, if you can get 18.5% per year, it will only take 18 years.  If you are 30 year-old, then by 48 year-old, you can make $1 million.


Injection
This is the amount of additional capital you injected. For calculations purpose, assuming inject annually at the beginning of the year starting from second year.


From the above example, $50,000, 18.5%, 18 years.

If from beginning of second year you inject additional $12,000 every year, it will only take 15 years for you to achieve $1 million.

If you increase to $15,000 per year, it will only take 14 years. If you are 30 year-old, then by 44 year-old you can make $1 million.

Not necessary at fixed interval, you may inject anytime. I put it annually for calculations purposes only.

 
INCREMENTAL INJECTION
This is the incremental amount of additional capital you injected. For example due to yearly increase in salary, bonus, promotion and salary adjustment every few years or change of job with higher pay, inherent something from parents, EPF withdrawal, sell property, etc, on the “average”, every year you inject X% more. Example first year $15,000, second year 9% more at $16,350 and third year $17,821, etc etc.

Not necessary at fixed percentage increase, you may increase any amount at anytime. I put fixed increase percentage for calculations purposes only.

 
From the above example, $50,000, 18.5%, additional $15,000 per year, 14 years.

If every year your annual injection you add 9% more, then it will only take 13 years.

 

WITHDRAWAL
If in between you have made any withdrawal out from your investment, then it will slow down the process or chances of you making $1 million.

 

CONCLUSION
From the above you can see that if you want to make $1 million from stock market, you need to handle all the elements accordingly. To make the process faster and chances higher, you need to invest more initial capital, invest early, make higher percentage returns, inject more additional money and increase the amount in the future and not to make any withdrawal or minimise the withdrawal.

 
Got time I will post on each of the elements. Example how to invest more initial capital, how to injest more money, how to increase the percentage return, etc.


Please note that the above is just a theory for my own case study and in real life situations things are more complicated. But this does not mean that the theory is not true. All the books that we read is also theory, it is how we apply the theory into practical that makes the difference.

 
 
For more information on Astro IPO, here
http://politemarket.blogspot.com/search/label/Astro


For more information on other recent IPO, here
http://politemarket.blogspot.com/search/label/IPO



For more information on other IGB REIT IPO, and target price, here
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http://politemarket.blogspot.com/


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Saturday, September 1, 2012

ASTRO IPO why YOU Should NOT Apply

Astro IPO will be the third largest IPO in Malaysia. Is it worth to apply the Astro IPO? There are few reasons why you should not apply the Astro IPO. But before I tell you the reasons why you should not apply, let me start with the reasons why you should apply.

Why you should apply Astro IPO:
1) To make money. Both the FGV and IHH IPO have listed with decent premium over the IPO price and those who strike are making decent money. What is Astro IPO expected listed price? Many people said will debut with a premium, question of how much only.
 
2) Election stocks IPO. Some said Malaysia General Election is coming and probably can make money. Some may said this is not a General Election stock or a government stock, but please be informed that based on Astro IPO prospectus Khazanah is one of the Astro major shareholders.
 
4) Good track records on IPO listing by companies related to Tan Sri Ananda Krishnan, i.e. Maxis (2009) and Bumi Amanda (2011).
What were the both listed price, premium and IPO price?
 
Maxis was listed RM5.46, above the Maxis IPO price of RM5.00 (Retail price RM4.75)
Bumi Armada debuted with RM0.62 premium at RM3.65, above the Bumi Armada IPO price of RM3.03.
Old Astro IPO 2003 also debuted with good premium.
 
5) Astro is the leading integrated consumer media entertainment group in Malaysia, especially the Pay TV. With Malaysian having higher and higher spending power, more people will subscribe to Astro and for those who have subscribed they will pay more for better package.
 
6) High Barrier of Entry. Pay TV industry in Malaysia has shown that it has high barrier of entry. Many other operators have tried to enter the market but are not doing well.
 
7) Those who hold the original old Astro IPO 2003 with the old stock code 5076, probably is making money when it was delisted in 2010 with delisted price of RM4.30. The old Astro IPO price in year 2003 was RM4.06 (retail price RM3.65).
 
8) Good Astro dividend yield, Astro will be paying at least 75% of profit as dividend.
 
 
REASONS WHY you should NOT apply:
1) Some are predicting that it is not Astro Shariah Compliant, meaning for those who can apply Astro IPO shariah compliant, but if Astro non-shariah compliance, then they may decided not to apply. Whether Astro shariah compliant or not, this may determine whether to apply or not. Many of Astro entertainment activities may not be permissible to shariah. I’m still couldn’t find the old Astro in the old shariah list, maybe is not in or I miss out.
 
 
2) This is not really an Election stock. Although Khazanah is one of the Astro major shareholders, the ultimate control probably is still with Ananda Krishnan, that is why his picture is appearing in Astro IPO new. When we mention Astro, we think of Ananda Krishnan.
 
 
 
3) Astro estimated listing price may not be good. Not a 100% easy money on famous IPO, fundamental still important, even though Ananada Krishnan IPO in the past have listed above the IPO price, look at Facebook IPO, the Facebook share price dropped 50% not long after the IPO.
 
 
4) Some may argue that Astro IPO price is not fixed yet, it may potentially fix at a lower price and therefore, the valuation is cheaper. But there is no guarantee that the price will be fixed lower. Based on past major big IPO, the IPO price at fixed at the higher range. If the price is fixed at higher range, Astro target listing price probably may be near or lower than IPO price due to expensive valuation.
 
5) Many are predicting that Astro research analysis report probably will give a low fair value. Many methods that can be used by the analysts on Astro, the fair value hard to be high. PE ratio is out, discounted cash flow? Dividend yield and book value also out. Astro analysts will find it hard to have high fair value.
 
6) Some people dislike Ananda Krishnan, so they refuse to touch Ananda Krishnan stocks and refuse to apply the IPO. Why? Because some people jealous of his wealth. Just like some jealous of Bill Gates, jealous of our neighbour, etc.

 
7) Although Malaysian spending power is getting more and many companies have failed to enter the Pay-TV market, many said the situation is different now. Many young people have no Astro, although they can afford it, because of work and really no time for Astro. Some have actually turned to Unifi Hypp TV. Nowadays, many of my friends are thinking to terminate Astro because they said no time to watch, and with unifi, they can actually easily download what they want to watch anytime.
 
8) Although those who hold Astro original IPO in year 2003 probably is making money when it was delisted in 2010. What is old Astro IPO price in year 2003? And what is Astro Delisted Price? Old Astro IPO price in year 2003 was RM4.06 (retail RM3.65) and Astro Delisted Price in 2010 was RM4.30. You can see that after 7 years, the price just increased bit only. The dividend was not much and not every year got dividend.
   
9) Astro was listed in 2010 with market capitalisation of RM8.3 billion and now based on Astro indicative price of RM3.60, Astro market capitalisation is RM18.7 billion. An increase of 125% or RM10.4 billion over two years but minority shareholders did not benefited from this increase. I heard from web that the new Astro IPO is without most big foreign operation.

10) What is Astro dividend payout ratio policy? Although Astro will be paying 75% of profit as dividend, the dividend yield is actually very low, about 2.5% only.
 
 
Whether to apply Astro IPO, up to individual decision making. The above is information gathering and own opinion only, for my own case study.
 
 
 
Astro Target Price here.
http://politemarket.blogspot.com/2012/09/astro-ipo-research-target-price-rm309.html


How to use Growth Share Matrix in stock market, here.
http://politemarket.blogspot.com/2012/08/how-to-use-growth-share-matrix-to.html





For more information on Astro IPO, here




For more information on other recent IPO, here


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