Capital gain versus dividend ? which one is better? by OOI KOK HWA

Capital gain versus dividend ?which one is better?

Personal Investing - By Ooi Kok Hwa

DESPITE the high FTSE Bursa Malaysia KL Composite Index levels, a lot of investors have been complaining about not getting the desired returns by investing in the stock market.

This is because they are holding shares in companies that have poor fundamentals, and the majority of the sestocks are still selling at very cheap prices.

As a result, most investors not only incur capital losses due to low prices but al so not get any dividends from these companies. In this article, we will look into the importance of capital gain versus dividend.

When we look at the performance of listed companies, we find that the majority of companies t hat have performed well in terms of stock prices are companies that pay good dividends; for example Nestle (M) Bhd, Dutch Lady Milk Industries Bhd, Public Bank Bhd etc.

Most investors are aware of these stocks that pay good dividends. However, some would not consider buying into these stocks because to them, the stock prices are too high or too expensive.
Instead, some investors prefer to take the chance and buy penny stocks, which they think are cheap and have higher probabilities of getting huge capital gains.

Unfortunately, most of them find that after a few years, they are still not receiving any dividends from these stocks, while the stock prices are still far from their targets, some of them even below their purchase prices.

Investors wh o buy stocks that pay good dividend s need to have the mindset and habit of holding stocks for long-term.

Normally, people who prefer to invest in di vidend-paying stocks will not speculate on these stocks but keep them for the long-term as the companies have been rewarding them with good dividend payments over the years.

Companies that pay good and consistent dividends also reflect the sharing attitude of the companies and the owners.

There have been instances wher eby some listed compan ies, when in need of funds, would raise the money from investors through various types of capital calls.

However, when the companies start to accumul ate excess cash, they do not reward investors with special dividend payments.

Instead, if their stock prices were selling below the net cash per share of the companies, they woul d consider taking the companies private so that they can have direct access to the cash.

Hoping for capital gains Many companies refuse to pay dividend s to investors because they claim they need to retain profits for future expansion.

Even though there are cases where future expansions turn ou t to be successful and generate good profits to the companies, there are als o cases where expansion projects fail.

We notice that st ock prices for companies that either pay very low or no dividends would fluctuate according to t he overall sentiment of the stock market, whereas stock prices for companies that pay good dividends tend to be relatively more stable.

Most investors know the need to buy low and sell high to make money. However, most do not know when to sell their stocks. We cannot sell a stock just because we have bought it cheap.

According to Benjamin Graham, we should only sell a stock when the fundamentals of the company deteriorates.

We should not sell the stock if the stock price is temporarily above its intrinsic value as it is not easy to identify a company with good quality management.

Besides, this type of company usually pays stable and growing dividends as it usually has a fixed dividend payout policy to reward investors.

However, most investors may sell their stocks too early. Companies that are unable to pay dividends are usually companies that incurhigh capital expenditure for future expansion.

These companies not only do not have any excess cash to pay dividends, they also have high gearing and need to retain all profits for expansion. Hence, investors who buy these stocks will have to bear higher risks.

In short, it is safer to buy into companies that p ay good dividends.

As mentioned earlier, companies that pay good dividends reflect the attitude of the companies and the owners, whether they are willing to share profits with minority shareholders.

This is important as we have growing cases of companies with issues on corporate governance.

Ooi Kok Hwa is an investment adviser and managing partner of MRR Consulting.

I AM WHO I AM by Namewee

BJ CORP DIDNOT GET SPORTS BETTING LICENCE?

Gaming: Najib says no sports betting licence yet for Ascot Sports
The finance minister has yet to issue a sports betting licence to Ascot Sports Sdn Bhd and is in the midst of discussing the licence’s terms and conditions, Prime Minister Datuk Seri Najib Razak said. The government was still obtaining feedback from various quarters on the proposal to license sports betting in Malaysia “with the view of reducing and subsequently
eradicating unlicensed betting in Malaysia”. (Financial DAILY)

announcement to SC on 12.5.2010

The Minister of Finance has given its approval for the re-issuance to Ascot of the licence
to carry out sports betting operations upon certain terms and conditions.
Ascot proposes to commence its sports betting operation in the 2nd half of the year 2010
with its retail betting operations being housed at 220 selected Sports Toto outlets, subject
to relevant approvals being obtained. In addition, Ascot also proposes to provide
telephone betting services to customers who wish to register accounts with them. The
primary focus of Ascot will be on sports betting on soccer games in the initial stages with
the aim of increasing their product service offering to other sports in the future subject to
the terms and conditions of the licence.

PPB

FROM THE EDGE----the unexpected things can happen to any company/stock no matter how good they are.

PPB continues slide
Written by Surin Murugiah
Thursday, 20 May 2010 09:28

KUALA LUMPUR: PPB GROUP BHD [] extended its losses in early trade Thursday, May 20 and fell 12 sen to RM16.30 with 241,400 shares done as at 9.15am.

On Wednesday, the stock lost 5.79% or RM1.02 to RM16.60, the sharpest decline since Oct 24, 2008 when it fell 6.71%.

It saw RM1.21 billion erased from its market capitalisation after its 18.4% associate company Wilmar International's Indonesian subsidiaries had been reported to be under probe for alleged unlawful value-added tax-restitution claims.

Meanwhile, Wilmar International's stock price fell by 6.9% on Wednesday on tax fraud allegations. After Wednesday's close, the company provided further clarification to SGX on the process of claiming VAT refund, which is very straightforward.

The company also said its internal records in respect of the VAT refund claims vis-a-vis export sales will stand up to scrutiny.

OSK Research in a note Thursday said that besides the announcement to SGX, the company also clarified that its COO Martua Sitorus was not personally under investigation for the tax fraud allegations.

"We believe the market will be relieved as Martua was the person who spearheaded Wilmar's expansion in Indonesia. After (Wednesday's) selldown, Wilmar is trading at under 15 times PE for both FY10 and FY11.

"Should the company be able to sort out the issue, the stock will be a bargain even at these levels. While the stock may still weaken somewhat from here, we believe it is now cheap enough for investors to start nibbling on. We are encouraged by the company's strong stand on the issue."

OSK Research reiterated its buy call on Wilmar with target price of S$7.35.

BCorp: Right time to list F&B unit

from the star business online
BCorp: Right time to list F&B unit( but I have sold almost all BJcorp last few days!)
By DANNY YAP
danny@thestar.com.my
PETALING JAYA: Diversified group Berjaya Corp Bhd (BCorp) believes the “timing is right” for its food and beverage (F&B) business to be listed on Bursa Malaysia and the company plans to list the business under the name of Berjaya Food Bhd (BFood) by the second half of the year.
In an e-mail to StarBizWeek, the management of BCorp said it was timely to raise the profile of its Kenny Rogers Roasters (BRoasters) restaurant business via its listing.
BRoasters is 100%-owned by Berjaya Group Bhd, a wholly-owned subsidiary of BCorp and the proposal is to inject BRoasters into BFood, the yet-to-be-listed entity.
The management said the Roasters restaurant business had potential and expected its shares to appreciate over time with its listing on the exchange.
The first BRoasters was established in Malaysia way back in November 1994.
On whether other franchise chains of BCorp would be injected into BFood, the managemnet said: “We may consider if the franchise chains are ready and profitable. At present, only BRoasters is ripe for listing.”
The management said BRoasters’ revenue had grown from about RM23mil in the financial year ended April 30, 2005 (FY05) to about RM52mil in FY09. After-tax profit had increased from a mere RM1.5mil in FY05 to RM7.9mil in FY09 (excluding exceptional items).
A local analyst said BCorp could be on an acquisition trail to boost its F&B business via BFood.
“The company is using BRoasters and its assets as a vehicle to list under a new name (BFood) as BRoasters had the profitable track record to qualify for main board listing,” he said.
The analyst said it was likely that other F&B chains within the group and possibly F&B chains not within the group could be a target of acquisition to enhance the value of BFood over time.
“The acquisition can be ‘organic’ or F&B chains outside the group,” he said, adding that acqusition would be the fastest way to grow, provided the F&B chains acquired were profitable.
Currently, BCorp owns 47 restaurants and 16 independent franchisees that are mostly F&B related, including Starbucks, Wendy’s, Papa John’s Pizza and Krispy Kreme Doughnuts.
In addition, BCorp also owns KRR International Corp, the owner of the KRR brand worldwide.
The diversified group also has other businesses, including gaming outlets, property develoment, trading, insurance, among others.

DAIBOCHI, SEB,OVERSEA,BJ CORP,POS,SUPERMAX

from the EDGE
CIMB research rates Daibochi (target price: RM4.60) and Tomypak (target price: RM 4.66) as Outperforms -ability to pass on rising raw material costs to their customers -double digit pretax margins recorded for 4 straight quarters, trend should continue in 2010 -potential catalysts for both stocks 1) further margin expansion
2) contracts from major non-F&B companies
3) attractive dividend yields of 5-6%

××××××××

Seremban Engineering Bhd (SEB) to expand capacity -to raise RM17m from its IPO and use half of it to fund group's capital expenditure, expected to be listed in the 2Q -1 SEB shares for every 15 Success Transformers shares -rights issue price RM0.85 Ex date: 12 April 2010

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OSK Research says Oversea has a well established presence with over 30 years of culinary expertise, earning them recognition across the region.Targeting to open one new outlet in Ipoh and a café outlet in Klang Valley by 2011, Overseas plans sights to expanding abroad via a new licensing program to operate food service outlets under their brand name."For its listing on the ACE market, we think the offer price of RM0.23 at 7.8x FY10 EPS is fair given that its earnings is relatively smaller as compared to its peers which are trading in the range of 9-11 times price-to-earnings ratio," it said.
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BERJAYA CORPORATION BHD [ ] (BCorp), whose share price hit an 11-year high of RM1.77 in intra-day trade on Tuesday, announced on Wednesday, a net loss of RM155.12 million on the back of RM1.66 billion revenue in its third quarter ended Jan 31, 2010 (3QFY10), was mainly due to non-cash dilution effects amounting to RM150.46 million when its interest in BERJAYA LAND BHD [ ] (BLand) was diluted from 56.44% to 53.25% upon maturity of the BLand ICULS on Dec 31, 2009.
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Pos Malaysia has recommended a first and final dividend of 12.5 sen per ordinary share less tax. The dividend was subject to shareholders' approval at its forthcoming AGM.Shares of Pos Malaysia rose to a four-month high of RM2.34 in intra-day trade after the government announced that Khazanah Nasional would divest its 32% stake. On Tuesday, Pos Malaysia also jumped 19 sen (+9.2%), its largest gain since May 18 last year.

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SUPERMAX CORPORATION BHD [ ] is expected to reap the immediate fruits from the US Healthcare Reform Bill as the glove maker is set to increase its export of medical examination gloves to the US market by 5% to 7% in FY10.
IOI Corporation Bhd may write back the impairment loss made in the financial year ended June 30, 2009 (FY09) on a joint-venture property project in Singapore towards the end of the current financial year since the value of property has risen in the island state

NEM steers away from race-based affirmative plan

Very ambitious and strong commitment to change
FROM THE EDGE FINANCIAL DAILY
KUALA LUMPUR: The New Economic Model (NEM) proposed by Prime Minister Datuk Seri Najib Razak takes a fresh approach to the country’s affirmative action and targets to more than double the income per capita of Malaysian households by 2010.( good!though I doubt it can happen so soon!)
In unveiling the proposals for the NEM prepared by the National Economic Advisory Council (NEAC), Najib said that the renewed affirmative action policy in the NEM would focus on raising income levels of all disadvantaged groups. ( this is the correct and long awaited move)
“It will focus on the needs of all our people — those living in the long houses in Sabah and Sarawak and poor rural households in Semenanjung Malaysia (Peninsular Malaysia), who often feel disconnected from the mainstream economic activity,” he said at the opening of the Invest Malaysia 2010 here on Tuesday, March 30.
According to the NEAC report, the focus of the NEM should be on the bottom 40% of Malaysia’s income strata — both individually and regionally as this group was disadvantaged and required special attention. This 40% of the households earn less than RM1,500 per month.
One of the three objectives under the NEM is to raise income per capita of Malaysian households that currently is US$7,000 (RM22,890) to US$15,000 by 2020, said Najib.
He said that it would be no easy task to achieve the goals set by the economic model but the rewards would be great.
Another salient observation from the NEAC report is that 80% of the workforce has education up to the Sijil Pelajaran Malaysia (SPM) level.( yes, a lot of dropouts even Chinese before SPM )“This is not in line with a high-income economy,” the prime minister said. “Creating a high-income nation will mean higher wages throughout the economy. Even wages for blue-collar workers will be based on them acquiring higher competencies, with their performance more readily benchmarked against international competitors. With more skills, comes greater responsibility, and better, higher paying jobs.”
The NEAC, headed by Tan Sri Amirsham Abdul Aziz, handed the report and recommendations for the formulation of the NEM to Najib. It would now be discussed by the various stakeholders in the government which include the component parties of Barisan Nasional, before being incorporated into the 10th Malaysia Plan scheduled to be unveiled on June 10 in parliament.
The final blue print for the NEM would only be firmed up in August when the 10th Malaysia Plan is approved.
Najib said that the renewed affirmative action policy would be market-friendly, merit-based, transparent and must be based on needs and not race.( hopefully WHATEVER POLICY CHANGE ,this time will be REAL!)
“For instance, one important consideration will be developing a competitive and transparent tender process, with set and clear rules for the whole bumiputera community, made of both Malay and other indigenous groups. This is set out as a common-sense enhancement of our policies for a new economic reality and where inclusiveness is a key component in our new economic model. In practice, this approach will mean greater support for the bumiputeras — a greater support based on needs, not race,” he said.
Apart from creating a higher-income economy, the other two principles of the NEM are sustainability of the economic activities and inclusiveness that will ensure no one is left out of the wealth-creation process.“
There is little value in pursuing a future based entirely on wealth creation. Pursuing growth that depletes resources and displaces communities will have dire consequences for future generations. This is a false and futile choice,” he said.( TRUE,VERY TRUE!)
He also realised that there would be some opposition to the NEM as it required a change in mindset.“
In the short term, there will be entrenched opposition. Some economic sectors may experience adverse effects. The process of change is never easy, and there will be painful moments. But for the long-term strength of our nation, we cannot afford to duck these issues any longer,” he said.In assessing the results of the NEM, Najib said that it should encompass the whole spectrum of measuring wealth such as equity ownership, other financial and non-financial assets, and access to wealth-creating opportunities such as long-term concessions and contracts.“
Even in measuring ownership, it should go beyond equity to include other properties, business assets such as retail, landed properties, commercial building, intellectual property and other services as well as managerial positions,” he said.
IMPLEMENTATIONS!
IMPLEMENTATIONS!
IMPLEMENTATIONS! PLEASE.