Professional Documents
Culture Documents
Contents..................................................................................................................... 1
Introduction ............................................................................................................... 2
1.0 Company Insights.................................................................................................3
1.1 Armstrong.........................................................................................................3
1.2 TPV Technology Limited....................................................................................3
1.3 CSC Holdings Limited........................................................................................3
1.4 Keppel Land Limited..........................................................................................4
1.5 Ezra Holdings Limited........................................................................................4
1.6 Midas Holdings Limited......................................................................................5
1.7 Raffles Education Corporation Limited..............................................................5
1.8 Star Hub Ltd......................................................................................................6
2.0 Portfolio’s expected rate of return........................................................................7
3.0 Portfolio’s expected rate of return .......................................................................8
4.0 The risk factors of the portfolio.............................................................................8
4.1 Credit risk.......................................................................................................... 8
4.2 Liquidity risk .....................................................................................................9
4.3 Capital risk........................................................................................................9
5.0 Advantages of the Portfolio..................................................................................9
6.0 Recommendations..............................................................................................11
6.1 Growth............................................................................................................. 12
6.2 Yield................................................................................................................ 12
6.3 Income ............................................................................................................12
6.4 Risk.................................................................................................................. 13
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Introduction
Many investors in Singapore are on the lookout for an opportunity to invest their
money in unorthodox manner. The reason behind this practice is due to banks
offering very low interest rate on ones capital. Due to this many investors are
turning towards the stock market to gain higher returns for their capital. This is
done in the form of investing on portfolios for an expected level of return. This
portfolio consists of different companies with varying fields of specialization.
The portfolio which will be analyzed in the following report consists of eight
companies who are listed in the Singapore Stock Exchange (SGX). In order to make
a portfolio attractive it is important to make sure investors have a clear
understanding of the risks expected and the advantages of investing in this
particular portfolio. This is because many companies share a relationship with each
other in market which evolves on a day to day basis.
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1.0 Company Insights
1.1 Armstrong
Armstrong Industrial Corporation Limited was established in 1974. They were
listed on SGX on 6th December 1995. They are the leading foam and rubber
components manufacturer specializing in Noise, Vibration and Heat
Management for the automotive and electronics industries. They provide
innovative solutions for dampening, insulation, sealing, cushioning and
related applications. Armstrong produces high performance precision die-cut,
rubber molding, vacuum forming & heat press molding, EPP molding
components required for the assembly of diverse end products of OEMs.
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which include residential, commercial, industrial and infrastructure projects.
Founded in 1975, it has been listed on SGX since 1998.
Through the years, they have developed an experienced and well trained
team of offshore crew and shore based executives. It’s a diversified
organization which makes it earnings from 70% of sales in offshore support
services and the rest from marine services. Ezra has built up a well
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respected track record by maintaining quality and value with strong network
of clients that include all majors and national oil companies. This was
possible through the combined efforts of their four businesses – Offshore
Support Services, Marine Services, Deepwater Subsea Services, and
Construction & Production. Ezra Consistently strives to create value for their
clients and stake holders.
Midas Holdings limited was listed on the Singapore Stock Exchange on the
17th of November 2007. It is an investment holding company that capitalizes
on two products whose demands are very high in the People’s Republic of
China. The first being large section aluminum alloy extrusion products and
the second being polyethylene pipes. This is largely due to China’s
transportation, power and infrastructure industry growing at an exponential
growth. Midas Holdings LTD has captured a large part of the market share in
PRC due to the quality of their products and services. As a result of this
factor they are one of the countries leading manufacturers.
Midas Holdings LTD Procurement Division was set up in November 2005 and
they were based in Beijing. Besides its role as a central procurement centre
for their business divisions, it also serves to leverage on the existing supplier
and customer relationships to expand their current product range to both
existing and potential customers.
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Diploma, Degree and Masters Qualifications. They were listed on SGX on 24
January 2002. Their vision is to be the premier education Group in Asia-
Pacific. They are committed to provide quality education through their
network of institutions in the Asia pacific region to develop industry relevant
skilled professionals.
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2.0 Portfolio’s expected rate of return
A firm’s cost of equity is given by the Security Market Line equation
According to Appendix 2:
Km= 37.35% (use the slope of excel based on the calculation from Apr 1
2009 to Apr 1 2011)
According to Appendix 1:
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H Star hub 0.783 0.301022 0.5
= 0.4313
Portfolio risk
=1.173
So based on the calculation, the expected rate of return is 43.13% and the
portfolio risk is 1.173. Use the portfolio could diversify the risks and pay back
the investors with higher return.
It is important to note that since the companies in the portfolio are very
diverse the companies in the portfolio are exposed to many kinds of financial
risks such as market credit risk, liquidity risks and capital risks.
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mainly in the form of trade and other receivables. Many companies in the
portfolio have no major accumulation of credit risk. That being said it is
important to note that the companies in the portfolio have measure in place
to observe and maintain their credit risk.
All the companies in the above portfolio have very low liquidity Risk. This is
because they have a sufficient amount of cash, assets and marketable
securities that enables them to meet their financial and operational
commitments.
In addition to the above, the various companies are also exposed to risks
associated with accurate financial reporting. Management monitors the
Group’s capital using a ratio calculated as debt divided by net assets. Debt
comprises total borrowings and net assets are calculated as total assets less
total liabilities.
From the calculation done in chapter three it can be seen that the portfolios
risk factor is 1.173. This in comparison with the return which is 43.13% is
quite acceptable. This is because in a market which is very volatile and
experience a lot of fluctuation in the share prices this rate is very generous
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and more than any bank could match. The risk factor included is also
acceptable due to the size of the returns.
The other reason for investing on this portfolio is that all the companies in it
have very high expected rate of returns and by diversifying the investment
the risk factor is brought down. This is because higher the expected rate of
return higher the risk. Based on this principle a bulk of the investment goes
into companies which are identified to be blue chips.
The companies which were identified to be as blue chips are shown in the
table below.
From the above table it can be seen that the companies even though they
are categorized as blue chips, gives investors more than 30% return on their
investment.
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The companies which were associated as high risks are shown below.
That being said it is very important to note that the portfolio is still very
profitable since it consists of 5 blue chips which have very high returns and
three high risk companies with sizable returns.
6.0 Recommendations
It is very important to note that there are many factors that investors have
to take into consideration before deciding to invest in a portfolio. Due to this
current day investors have many tools available for them to conduct their
own studies in order to make smart and safe investment decisions.
There are four key factors that should be considered by an investor and they
are:
• Growth
• Yield
• Income
• Risk
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6.1 Growth
This factor basically considers the rate at which the money that’s invested
appreciates during the duration of the project. Therefore it is very critical
that investors make a note of how long they want to invest their funds. If
their looking for a short term investment they should look into portfolios
which would provide them with a steady and safe growth rate. In the case of
long term investors have to be aware of the fact that their investment is
exposed to fluctuations that would occur in the market during this period.
Long-term investments that are influenced by factors such as the inflation
rate may lose money in the short term, but they can still grow over an
extended time frame.
6.2 Yield
This term takes into consideration the interest or dividends an investor earns
during the period of their project. This is also a very critical factor that needs
to be taken in to consideration. This is because if this is an investment one is
making with the idea of retiring they should whether the yield they receive
can fund their lifestyle since they no longer work. Stocks and stock mutual
funds can yield the highest percentages but also have the greatest chance of
loss.
6.3 Income
This factor is in a way very similar to yield. This is because one has to take
into consideration whether the yield generated is a significant part of their
income they receive. If this is the case they have make investment choices
that ensures the amount of yield the portfolio generates remains consistent
and reliable. They should give careful consideration to where and how often
they want to reinvest their money, as it could have a major affect on their
financial security.
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6.4 Risk
The last but by no means the least important factor that should be taken into
consideration is risk. This is because an investor should be aware of how
much of their investment they stand to loose in case of an economic down
turn. Do they stand to loose some or all of their investment.
Whereas in the case of aggressive investors they are prepared to take high
risks in order to achieve high returns and are willing to expose their fund to a
volatile, or fluctuating, market in the hope that they have the opportunity to
receive a greater return on their initial investment.
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