SIME slumps and PNB bumps

I was actully debating on selling off the rest of my SIME shares acquired during the financial meltdown in 2008, the week before the announcement on its financial losses of nearly 1bil due to its projects' cost overruns in Bakun and Qatar . The share trading was suspended on Thursday 13 May as I was wondering what had happened and later realised that it could be due to the negative news on its financial performance.  I was a bit late as the stock started to slump.

I was quite happy to receive SIME dividend last week only to face with the decline in my share values. But for the life of me, what I do not understand is why it takes so long to find out about this massive overrun? Has someone been hiding it all this while?  Surely the regular financial meeting and the risk department inputs could have detected this debacle earlier and limit the losses. And  wither the auditors?

It is easy to just remove the CEO but what about the officers who are directly looking after those projects? And what has the board been doing before this? As one of the many share holders I am terribly disappointed with the apparent weak governance of this GLC which is overseeing the wealth of the country. It is as if they just got up one morning and found that their money was gone. Where is the monitoring mechanism which is so critical in any organisation or has complacency set in especially if one is on the job for a very long time?

The government has to balance experience and performance in any individual it appoints to head its revenue-generating companies that is why in some cases a person stays too long at the top for his experience and when this happens, there would be a give and take, and give-me- more- time kind of  attitude. What is more disturbing is when they start recruiting only members of their families to the jobs and not the best talent. Well it is happening in one of the largest GLCs and let us hope the people concerned are aware of what they are doing and be responsible for any misfortune befallen them due to this "pally-pally" attitude.

For us the investors who have not gone out on this cost overrun issue, we hope that better corporate governance be practised and that officers be made more forthcoming in their reporting of problems to the management and more transparency between the management and board of directors. Quite often management tends to be rather hostile against their respective  board as they think the board is interfering with their day to day operations. So the tendency is to keep wrongdoings under wrap till they are too big to handle and too late to remedy.

The decline in SIME share value does not seem to be that worrying though I lost quite a substantial amount on paper so far today. I hope the strong fundamentals will keep this stock well afloat. And yet one of the strongest fundamentals is good governance and this must be maintained at all times. I will have to leave SIME  at some point but I do not want to do so now when it is being battered like this.

I am, at this time, thinking of PNB which is the main shareholder of SIME, I hope the dividend of PNB unit trusts' investors would not be affected too badly. ASD, ASM and AS1M's dividends will be declared in June to September and many are expecting a good income. I am also a PNB unit trusts' investor so looks like a double jeopardy for me.

The Greek Financial Crisis... It is all greek to me till now.

When I see the value of my portfolios drastically going up and down and actually more going down these past days, I knew something is happening in the wide world. We are all connected financially. Whatever happens in countries with strong economic group power, we will definitely be affected. My overall market gain was wiped off by almost 90% early this week before the EU announced its multi-billion Euro bailout package for Greece.

Now why a country like Greece is going on the brink of bankruptcy? I believe bankrupt means you cannot pay your debts. I fail to understand why you borrow so much in the first place if you cannot repay in the second place? Usually when one borrows money one will have a plan about repayment based on one's income unless one is suddenly incapacitated due to disease or accidents. When we borrow, doesn't it mean that we have to monitor our spending and perhaps find ways to generate more income to sustain ourselves?

Through my readings I found out that the previous Greek governments have been borrowing a lot and spent so much to pander to their voters. The public spending was bloated and tax evasion was rampant as a result they have built up massive budget deficit. Their expenditure is more than their income and they continued to borrow as if there is no end to the money flowing in. So when the time comes for them to repay those creditors, they suddenly find their coffers are empty.

The credit rating companies like Standard and Poor and Moody in April 2010, downgraded Greek government  bonds to junk and from there the creditors pull a stop and foreign investors start to shy away from investing in the country. No money, no services. And more importantly the feared "contagion effect" that will cause a financial tsunami in countries with similar large-deficit problems, what is grouped as the PIIGS ( Portugal,Italy,Ireland,Greek and Spain). The investors will also turn away from these countries and the Euro will fall. Imports from countries like the USA will be more expensive and recession will set in. USA which is trying to recover from the financial meltdown in 2008 will be affected as well.

So to avoid a similar domino effect following one of America's great investment banks, the Lehman Brothers' bankruptcy in 2008, the EU led by the thrifty Germany has decided to lend billions of Euro to Greece to pay for their debts at the same time to put in place austerity measures to prop up the economy. Some measures are so austere that some Greeks rebelled, rioted and burned their banks. Why is it  always the man on the street that has to suffer? The German tax-payers/voters are also unhappy why they have to fork out their hard-earned money to help the spendthrift Greek who they reckon will default on the loan anyway.

The Greek problem has been succinctly put as due to "Irresponsible borrowings from irresponsible lenders for an irresponsible lifestyle". They spend today as if there is no tomorrow. And what humiliation when one has to depend on the handout of one's neighbours to survive? This is also a good lesson for individuals to heed.

In the meantime investors' confidence is shaky and very much dependent on short-term news, activities and development. One day I see my gain  shoots up only to fall the next. You cannot create sustainable wealth in this volatile environment.

And how I wish the political leaders would be more responsible in managing their countries and stamp out those corrupt practices which lead to unfair wealth distribution and injustice. Malaysian politicians please note because we can still afford to spend like nobody's business now as the oil is still flowing but please do not stretch it!

The oil will stop and it is a question of when not if.

Skin allergy and the offending agent (allergen)

A few weeks ago I stayed at a relative's house when one evening her elder boy of seven complained of generalised itchiness over his extremities and trunk with face-sparing. I took one look and diagnosed it as an allergic reaction. So we looked at what kind of food/medication he had been taking. The mother attributed the rashes to heat as the weather had been  unusually warm with hardly any rain. I did ask weather the mother had used a different clothes detergent but did not get a specific answer. Anyway we applied calamine cream over his body for relief.

The following evening he suffered the same problem and again we applied the cream. I then went off to stay in my new house the following evening when my relative rang up and told me her 17-month old baby was also  experiencing the same rashes and was extremely  irritable. I asked her to take off his pampers and see whether the part of the body was also affected, if not then it has to be the clothes detergent then she finally admitted that she had just changed the brand of her detergent. Yes, the area covered by pampers was unaffected. I told her to use clothings not washed by the new detergent and see how things were.

In fact my relative, out of fear had gone to see a doctor who diagnosed the condition as some kind of viral infection! The good doctor was going to give medication and an injection when I told my relative to hold on and use only calamine lotion and monitor her child's condition.

She rummaged through her cupboard for clothings not washed by the new detergent and put on her kids and within 48 hours the rashes subsided. So as his elder brother's rashes. The little boy was once again his normal self who usually  responded to a question of "Are you okay?" with the letter "K".

It is only a conjecture but I feel that clothes washed in  an automatic machine somehow are not well-rinsed as a result traces of detergent still stick to the fabrics and this chemical get into contact with the skin of susceptible individuals and cause what we call "type IV delayed  hypersensitivity reaction" causing the itchy rashes. To cure it just get rid of the offending agent.

A good clinical history will preclude the use of unnecessary medications and possible adverse reactions.

PRTASCO- Invest and Make Money

I have some cash coming my way following the conclusion of a successful contract. I was debating where to put it so as to make it work for me. It is no use putting in the bank due to the low interest rate. After some calculation I found that if I were to put it in Amanah Saham 1 Malaysia (AS1M), the dividend would not be as much as the calculation will be proportionate to the period the money stays in the fund despite the expected rate of seven percent.

I was scouting for a good and consistent dividend-paying company in the stock market. There are quite a number but many whose share unit price is relatively high. For example TM and AEON is such a company but their price is more than RM3 so if I were to park 30,000 units in TM   I have to fork out more than RM90,000.00 just to get RM3,900 (before tax) at a dividend rate of 13 sen. For AEON it is much higher as the share price is above RM5.

After some research I decided to invest in a construction company, PRTASCO whose dividend's history looks impressive and the share price then was only RM1.03. So acquiring 30,000 units was fine at RM30,900 (exclusive of market fees). And right on the dot, the company announced a 5 sen dividend to be paid in early June. This is not bad getting RM1,500 within three months while you sleep.

If you look at it,  the current dividend yield of PRTASCO at 4.7% is slightly better than TM at 3.75%.  This is a risky way of multiplying your money though . What if the share price suddenly plunged? Dare not think of it.... it's just like what happens if a gargantuan  meteorite hits earth tomorrow?...

To make me sleep much better and to balance my risk appetite, I have already parked some of my savings in Amanah Saham 1 Malaysia (AS1M) whose unit price is RM1, for five months till the dividend is declared in September. The price is fixed so I am not worried about market volatility. Moreover the dividend yield is expected to be high so why hesitate?