Update - Sold QL

The past few months has been spent on office project. Huat Fund has been neglected for quite some time. During these few months time, I have added another 2000 units of AirAsia at RM1.65 and sold all 3000 units of  QL at RM4.30. I have been looking around for some new additions to Huat Fund. Hope to be able to find one and provide the write-up here. Below is the Huat Fund portfolio as of Friday:

March Update

It has been a while since the last update. Here is the summary of the transactions done:

1) JTiasa sold at RM1.69 for a paltry 7% return. It was a good sell in the end. Just take a look at its current price of RM1.37.

2) Purchase of additional 2000 units of Inari at RM3.30. This makes Inari to have a weightage of 33% of the total portfolio. Such high dependence is highly risky but as long as you know what you are doing, it should not be a problem. I am confident that Inari will be higher in two years time. 

Some comments on the market:

The oil price is really tanking and it seems that bad news are all over the oil sector. Being a major oil exporter, Malaysia is naturally impacted. Petronas just announced to slash 1000 jobs and to reduce capex by 15 to 20 billion ringgit. This will have major effect on the economy. 

AirAsia is finally gathering some steam and moving north. All the provisions for AirAsia Indonesia and Phillipines have been done last financial year so that they can start afresh this financial year. Look forward to a sustained rally. It would not surprise me if it goes back to RM2.50. 

Then there is the risk of "Brexit" in June. I personally think the risk is minimal but market will be trading sideways or slightly down until then. Then we can have chance to buy in before June. 

Lastly, as of now, Huat Fund is really low in cash and looks like this:

Happy New Year 2016

It has been a long time since I updated this blog. In the past two months, I have been trigger happy, adding some new members to Huat Fund as well as increasing holdings in Inari.

Welcome, 

Fibon, Maybank, OCK and Jaya Tiasa. 

The short rationale behind these purchases:

Fibon: This is a speculative purchase to get short term gain.

Maybank: This is a move to shift into dividend orientation, Maybank at this price is really attractive because its overseas operation is till growing yearly. Long term buy.

OCK: The company recently expended into Myanmar and will reap the rewards soon. Medium term buy.

Jaya Tiasa: This is also a short term buy to gain revenge over the earlier loss. 

Huat Fund is running low on cash after adding all these new members. It is a pity because the current China fiasco presents a good opportunity to accummulate more stocks. 

Huat Fund looks like this today:

Additional capital injection & Overdued Write-Up on OpenSys

Good news, there is an additional capital injection of RM20k from my mom. Although this is getting more challenging (10% return on their capital will be RM9.755k ), I am up for it=). 

Since XC is not around for two weeks, I can spare some time to write up on OpenSys. 

OpenSys is an MSC-status company that provided solutions to financial industry. OpenSys also pioneered the design and development of a class of non-cash dispensing self-service kiosks called Efficient Service Machines (ESM) that accept deposits and payments using cash, cheques, credit and debit cards. ESMs allow banks, insurance and utility companies and government agencies to improve customer service, extend market reach and reduce operational cost. 

Financial review:
The growth that OpenSys is experiencing is exceptionally good. From the picture below, we can see that OpenSys has roughly managed to achieve the same revenue as the whole of 2014. This is largely attributed to the higher sales of Efficient Service Machine (ESM), Cash Recycling Machine (CRM) and the Business Process Outsourcing (BPO) in the FY2015 Q1. In the FY2015 Q2, the sales is almost similar to the FY2014 Q2. Lets hope that OpenSys will achieve higher sales again in Q3 =). All in all, the financial of OpenSys shows green light all over.

Pulling factors:
1)CRM
The main attraction of OpenSys is the Cash Recycling Machine (CRM). OpenSys partnered with OKI Electric Japan – the original inventor of cash recycling technology thirty-three years’ ago. 

At the moment, we have both cash deposit and ATM machine at banks. To mitigate the high cost of cash, the technology trend in recent years is to merge the separate functions of cash dispensing or cash-deposit into dual-function machines called CRM. CRMs can accept cash from depositors and dispense them to withdrawers so that the cash is essentially “recycled” – resulting in lower cost of ownership in the area of unused cash float, cash maintenance, cash handling and space rental. This means, the bank does not need to dispatch their staffs to replenish the ATM and cash deposit machines. As the banks continue to find ways to reduce their cost, CRM is fast becoming a must for them. So, expect more banks to install CRMs during recession. Besides savings of 25-30 percent in capital expenditure and operational cost, CRMs also provide better service levels to the banks’ customers because they have lower downtimes due to the automatic replenishment of cash in the machines. 

At present, the total number of cash-dispensing and cash deposit ATMs in Malaysia is approximately 15,000 units with an annual growth rate of about 5 percent. The penetration rate of CRMs currently stands at a mere 4 percent of the installed base. If the banks in Malaysia start to install CRMs

at their new branches, and trade-in their older ATMs for new CRMs due to its indisputable cost benefits, OpenSys can profit from it for the foreseeable future.

In March 2014, OpenSys secured orders for several hundred units of CRMs from two major banks in Malaysia worth over RM20 million. I suspect these banks to be Hong Leong Bank and Public Bank. Below is a list of the ATMs at respective banks:

2)BPO

Other than the CRM segment, OpenSys provides business process outsourcing (BPO) for bill payment kiosks to utility (Telekom), insurance and telecommunication companies in Malaysia. Our bill payment kiosks allow their customers to pay bills, reload prepaid cards and renew insurance premiums using cash, cheques, credit and debit cards. In return for managing the infrastructure for these organisations, OpenSys charges a fee for each payment transaction performed by their customers, resulting in steady recurring income.

3)Cheque Processing Machine

Besides that, OpenSys claims to command a hefty 85% market share in intelligent image-based cheque deposit self-service machines in Malaysia. The image-based cheque processing systems

are made up of front-end scanner devices and software applications to seamlessly capture cheque images and data and sending them to the central bank for straight-through cheque clearing and settlement. This paperless cheque clearing process that minimises the physical movement of cheques whilst converting cheques into electronic fund transfer instruments saves the banking industry hundreds of millions of ringgit per year. 

Although the cheque processing fee of 50 sen commencing 2 January 2015 is expected to reduce the cheque usage, the decline will not be significant as the business community is still very reliant on cheque as it is a time-tested payment instrument with an intrinsic audit trail and also easy to use without computer access. Even if the decline is significant, this could only mean good news to OpenSys as it would be more economical for banks to outsource the cheque processing to third parties like OpenSys. 

4)Dividend and Bonus Issue

OpenSys consistently gives semi-annual dividend payment of 5% (not dividend yield) for the past four years. This amount is not much but should be a reward for the shareholders. Recently, on 27th October, OpenSys completed a 1-for-3 Bonus Issue. The rationale for this move is to improve the trading liquidity for this stock but I suspect that there might be more things to come, for example, move to Main Board.

Risk:

1)The management is undecided on the burgeoning cash

OpenSys currently has some 5mil Fixed deposits, 7mil Short Term Investment and 9mil Cash& Bank Balances. Although having cash is good, OpenSys apparently has too much cash until the extend that they can invest it in unit trust aka short term investment. In this case, it would seem that the management has no idea on how to manage these excess cash. Thus, it would be recommended to give out more dividend to the shareholders. 

After the bonus issue, I have decided to add another 30000 units of OpenSys at RM0.305. Other than that, I have also averaged up on AirAsia by adding another 3000 units at RM1.48. After these transactions Huat Fund looks like this:

Second Annual Review FY2015

Today Huat Fund turns two. Fortunately, Huat Fund has been able to achieve the minimum return rate of 10% for the second consecutive year.

At the end of the first year FY2014, Huat Fund's fund size was RM84k due to a market correction at that time. Lesson learnt from that episode is to keep calm during the correction and do not follow the selling crowd. During FY2015, Huat Fund duly recovered and the current fund size is RM119k.


For FY2015, Huat Fund has return of RM35k, equivalent to a 41.6% return rate. The current paper gain is RM12k. This time round, the all the stocks in the portfolio are in the green with Inari being the main contributor.

 FY2015 proved to be an active year for me as there are opportunities abound in volatile times like this. Being active is not necessarily good as I would have pocketed another RM10k if I had not sold the stocks in March this year. The total realized stock profit and stock dividend are RM14k and RM2.3k respectively. Below is a summary of the realized stock profits for this year. Note that Westport has been sold (I did not write an update on that).

For the year ahead, I would expect USD-MYR exchange rate to recover to sub-RM4.00 because ringgit is undervalued at the current rate.

Globally, China is clearly slowing down and the world is still looking for the next source of growth. We can expect a stagnant market in the next 12 months.

Meanwhile in Malaysia, more banks(CIMB, RHB and Affin) are doing VSS at the moment in an effort to reduce their cost. Companies in other fields are doing the same as well. The outlook for local market is gloomy as people will spend less and feel that their ringgit is "smaller". The property sector will remain subdued. We can expect more rebates =). For the next Financial Year, I will focus on stocks that can withstand cost cutting measures and also recession. In fact, I have already have one such stock in Huat Fund right now. Make a guess!

Risk-taking Opportunities

The Bursa Megasale is still ongoing and I have decided to participate in it, mainly because I see some short term opportunities as some stocks are trading below their 52 weeks high. During this week, I have added additional 20000units of Opensys @ RM0.33 [patience - the review is still underway =) ], 3000 units of AirAsia @ RM0.96 and 20000 units of Hovid @ RM0.43.

 Bear in mind that these buys are classified as tactical asset allocation, which means that this is a short term strategy. Huat Fund looks like this after these transactions:

Ongoing Bursa MegaSale

Sorry guys, I am still unable to provide an update on Opensys. At the moment, I have a very special project XC. 

However, due to the ongoing MegaSale on Bursa, I have added 20000 units of Opensys. In the meantime, I am collecting some investing ideas as in stocks to research so that the cash in Huat Fund can be put to work soon.

In addition, I have also added 2000 units of Westport into Huat Fund. This is purely for short term purpose since I noticed that this stock had fluctuate between RM3.90 and RM4.60 for the past few months. 

Huat Fund looks like this now: