Friday, November 29, 2013

Credit Card Interest Rates: What You Need to Know

This is a guest post and the opinion is strictly from the writer himself.


Credit cards allow you to pay for everything you need: basic necessities like food, school materials, and gas. You don’t even have to carry money around. Just a piece of plastic and you’re all set. You can use it to pay not just for anything, but to almost anywhere in the world through online shopping.

There are some credit card owners, however, who apply for credit cards so they can buy big purchase-items such as a van, or maybe a trip to Europe, or just about any other thing that usually takes the average consumer months to save for. Of course, when you borrow money through credit card, you will be charged with interest rates by your bank.

Here is a lowdown on what you need to know about credit card interest rates:

1.     APR (Annual Percentage Rate)

This is the charge you get when you fail to pay your monthly charges in full. Not paying your credit card balance for the month will result in your balance being carried over to the next month. When this happens, you will incur interest charges for the outstanding balance you did not settle last month. The APR can rapidly increase without you realizing it when you’re not careful. To prevent APR charges in the future, make sure to pay the full amount of your credit card bills every month.

2.     Annual Charges

          Credit cards will normally require you to pay a fee for each year that you use them. Some credit card companies waive their annual fees for the first year as part of their credit card promotional offer. For these types of credit cards, you can start paying when you reach the second year of use. Annual fees can cost anything from RM38 to RM800.  

3.     Balance Transfer Charges

        Balance transfer fees will be charged to you when you want to lower the interest rate you’re paying by switching to a new credit card because the credit card you currently own charges you with high interest rates. By switching to a new card, your interest rate can temporarily be turned to zero for the first year. You will also incur balance transfer fees when you own many credit cards, and you want to simplify payments for all of them. You can then pay for your outstanding balance for all your credit cards with the use of just one credit card. Balance transfer fees can charge you a minimum transaction fee of 2% or higher, as it will be based on how much balance you want to transfer. In doing balance transfer transactions, you should remember that the outstanding balance you can transfer can be limited by the credit limit capacity of your new card.

4.     Cash Advance Charges

         When you absolutely need cash, and you have no other options available, sometimes you may be tempted to make a cash advance on your credit card. This is when you withdraw cash from your credit card account thru an ATM machine. The interest rate for these kinds of transactions is normally around 4% of the cash amount you have withdrawn. It can also charge you a fixed fee for cash advances–whichever is higher. Interest rate charges for cash advance transactions are not fixed, as these can also be based on how long it will take you to settle your cash advance loan.

5.     International Transaction Charges

-          These additional fees are charged to you when you travel abroad and use your credit card to pay for meals, rides, shopping and so forth. Call your bank before traveling to learn about the international transaction charges. International transaction charges usually amount to approximately 3% of what you pay for across the seas.

6.     Overlimit Charges

     Surpassing your credit card’s limits also comes with additional charges. Although the interest rate charge is low, it is still money wasted, so better control your spending and try not to exceed your credit limit.

7.     Underpayment Charges

-        When you pay your monthly credit card fees, make sure you are paying the minimum amount required or more than the minimum amount required. Paying less than the minimum will lead to an underpayment charge. This will be added to the regular interest rates you normally incur.
Owning a credit card comes with the responsibility of paying on time and paying beyond the minimum amount required every month. Learn about all the interest rates that come with owning a credit card such as the APR charges, annual charges, balance transfer charges, cash advance charges, international transaction charges, overlimit charges, and underpayment charges so that you can avoid paying for all these in the future.

About the author:

This article was prepared by Compare Hero for Intellect Point. Compare Hero is Malaysia’s leading credit card comparison website. Compare a broad range of financial products, from credit cards to insurance plans. 

Thursday, November 28, 2013

When the tide gets low ... Part 2

Market will readjust by itself, but many times over the short term it may act irrationally. When times are good, you will see companies issuing bonus shares, splitting, some exercises to make their companies become more attractive - however those exercises do not construe to any particular intrinsic value improvement.

I can talk about bonus shares, shares split but they are just an accounting exercise. Coincidentally, 2 companies that I have invested in Wellcall and Oldtown are succumbing to those - which leads to nothing much. Overall, the most basic thing is the valuation - PE ratio, cashflow and other more fundamental stuffs.

The most recent trick to make their shares even more attractive and yet very misleading is issuance of warrants but without anything else followed by it. During school days, I was taught or learned that warrants act as a sweetener in case the company is doing a rights for example. Issuing warrants here though without any other issuance to tag with (hence pure additional warrants shares) is just an exercise to make the owners rich and speculators seemingly stupid at following their game plan.

The last 2 times I saw that in Instacom and more recently EA Holdings issuing warrants without rights is displeasing. In fact, I feel that SC has to check on this and relook at this policies. Why do companies issue warrants only? Enrich themselves - the owners. There is no real benefit to the company and no real commitment from the largest shareholders. They do not want to commit to putting more monies into the company through rights if the company needs money. What they want is issue the new warrants - push up the shares. Step 2 - sell the warrants to some freshies (new players) whom are just happy to follow the trend.

Don't believe me? Look at Instacom's owners - how long since they issued the warrant to then dispose off those warrants.

EA Holdings is another. One can have a look at the share's trend.

I remember I did provide the warning signs 1-1/2 years ago. My fear during then on EAH was right smack accurate. Chances are the net effect would be more people will lose money if they are followers than those who gained from the speculation. You can see it through the company. But yet gambling is into many peoples blood. They don't do the check first, then invest.

Seriously, the way the market is being treated and approached, it is getting dangerous. Another example, Sumatec - a company which has nothing but a MOU with a vague oil and gas business proposition but yet may be worth close to RM1 billion is just insane!

Wednesday, November 27, 2013

When the tide gets low, you know who is swimming naked

Warren Buffett used to say this and I like this particular quote by the oracle the best. It basically says that among the competitors in the industry, you only look for the best and during good times, it is hard to identify the best because everyone seems to be doing well. This happens to many of our Malaysian companies in several industries - among them oil and gas, banks, properties etc.

However, recently one industry seems to have some challenge i.e. the palm oil industry - and yet they are still enjoying good market price although it has dropped from RM3,100 to some RM2,300 per tonne.

In one of my early article during FGV's IPO, I was warning that yes FGV has one of the largest landbank among the palm oil guys but we do not really value the company based on that. What should be looked at is the efficiency in terms of processing and as what I have thought FGV is not one.

3Q13 results for FGV
The recent drop in palm oil price has not even reached a bad level and we know that economies will not stay positive all the time. But look at what FGV has suffered. Imagine, what would happen if palm oil price drops to below RM2,000? It won't happen? I don't know, but when other palm oil companies were just experiencing some 20% drop, FGV is suffering much worse.

The quote by Warren Buffett has its relevance for all industries and one is to take note as we are seeing many companies have been enjoying for a long time. Good times does not last forever.

Sunday, November 17, 2013

Analysis of Maybank Part I: Business Performance

This is a guest article and the opinion is strictly from the author.


I love the banking sector as long-term success really hinges on management’s ability to both effectively allocate funds to generate a decent return as well as manage risks prudently. In this series, I will be analysing Maybank to see if it would make a good long-term investment. Part I of this series will cover Maybank’s business performance while part II will look into Maybank’s risk exposures and valuation. Is Maybank the addictive nasi lemak kukus that people line up 20 minutes for or the 2-day old basi nasi lemak? Let’s find out.

Maybank achieved returns on average assets (ROA) and returns on average equity (ROE) of 1.23% and 14.11% respectively for the 6 months ended June 30, 2013 as compared to Public Bank which achieved ROA and ROE of 1.42% and 20.95% respectively for the same period. Maybank will be benchmarked against Public Bank as Teh Hong Piow just has the secret recipe for making an awesome bank. There are 2 main reasons why I think Public Bank has a higher ROE than Maybank:
1)     Public Bank is more financially leveraged than Maybank as evidenced by its lower capital ratios. As at June 30, 2013, Publick Bank’s tier 1 and total capital ratios was at 10.823% and 13.196% respectively while Maybank’s was at 12.152% and 14.763%  respectively. While higher financial leverage may result in higher ROE, it can also make the company more exposed to insolvency risk.

2) Public Bank has a significantly lower operating cost structure than Maybank. Public Bank had an efficiency ratio of 0.42 while Maybank had an efficiency ratio of 0.58 for the 6 months ended June 30, 2013. The efficiency ratio can be thought of as the number of cents in operating expenses incurred to earn each Ringgit (before taxes). In Public Bank’s case, it has to spend around RM 0.42 cents in operating expenses to earn RM 1. I heard rumours of how Public Bank has the traditional Chinese businessman kiam siap (penny pinching) style of management which is really awesome if you’re a shareholder. I know that my main man Warren Buffett digs a culture of frugality, especially in a commoditized business such as banking.

Maybank’s net interest margin is line with that of Public Bank. Public Bank had a net interest margin of 2.02% while Maybank had a net interest margin of 2.01% for the 6 months ended June 30, 2013. While Public Bank earns a higher yield on its loan portfolio and investments, Maybank has a lower cost of funds.  Maybank’s cost of funds was 1.47% while Public Bank’s cost of funds was 2.19% for the 6 months ended June 30, 2013. Maybank’s and Public Bank’s yield on average earning assets was 3.35% and 4.11% respectively for the 6 months ended June 30, 2013. All said and done, I prefer Maybank’ position as a lower cost of funds is a straightforward advantage while a higher yield could result in a higher charge-off rate. I will look into the charge-off rates of both banks in part II of this series as it relates to their ability to manage credit risk.

Maybank has done well in terms of growing its deposit base. Maybank experienced customer deposit growth of 7.30% over the 6 month period ended June 30, 2013. Maybank also grew customer deposits at a compounded annual rate of 11.28% for the 6-year period of 2007-2012. Deposits are a much more stable source of funds to expand the loan and/or securities portfolios. Banks that rely heavily on debt securities to fund their operations face the risk of not being able to meet their obligations during tough periods when liquidity dries up in the money and capital markets. We’ll look at Maybank’s liquidity risk in part II of this series.

While not great, Maybank’s ROE of 14.11% is still respectable. Charlie Munger (Warren Buffett’s badass partner) once said: Over the long term, it's hard for a stock to earn a much better return that the business which underlies it earns. If the business earns six percent on capital over forty years and you hold it for that forty years, you're not going to make much different than a six percent return - even if you originally buy it at a huge discount. Conversely, if a business earns eighteen percent on capital over twenty or thirty years, even if you pay an expensive looking price, you'll end up with one hell of a result.” If Maybank is able to sustain a ROE of 14.11% over the long-term, I think an investor would do very well holding on to the stock.

If we go back to the nasi lemak metaphor, we can establish that both Maybank and Public Bank are decent tasting (Public Bank tastes better but not by a huge margin). Not worth lining up in the rain for, but definitely something I won’t mind eating once every week. However, just because something tastes alright doesn’t mean it won’t give you the runs, you need to make sure the ingredients used are not of inferior quality. Join me in part II of this series where I will look into the risk exposures of Maybank to find out if the stock is a sound long-term investment. Thank you for reading and I hope you can find the time to pay the Greedy Dragon Investment blog a visit. Take care.

About me: Hi, my name is Justin Teo and I run the Greedy Dragon Investment blog which discusses my stock picks, opinions on the business world and value investing principles. I passed the level 1 CFA exam and graduated from Monash with a degree in banking mid this year. I may be young and do not have any professional experience, but I’ve been investing for a few years now and I think I’m pretty good at analysing companies. But don’t take my word for it, judge me by my analysis. I’m currently willingly unemployed as I plan to work on my project portfolio for track record purposes and just chill for the rest of the year.   
Disclaimer: I’m not encouraging anyone to follow my opinions. I’m not a professional wealth manager. I may make errors in my calculations and analysis. I may choose not to follow conventional ways of calculating certain figures and they may differ significantly from the actual figures you may get using conventional formulas. Whatever investment decisions you make should be based on your own independent judgement. I will not be responsible for any of your losses.    

Side note:  Some if not all of the figures in this article are calculated by myself and may differ from the actual figures that you may get using conventional formulas. Please let me know if you’re interested in how I calculate any of the figures in this article.

Wednesday, November 13, 2013

Budget 2014: Up to 61% tax incentives for youths through PRS

This is a guest article and the opinion is strictly from the writer.


Now, I know Budget 2014 is almost 2 weeks ago but I am surprised no one really puts this into perspective.

In fact, many are unaware of this very fact because GST and removal of sugar subsidy stole the limelight.

I am referring to the RM 500 one off incentive (read: almost like cold hard cash) to Private Retirement Scheme  (PRS) contributors with minimum cumulative investment of RM 1,000 - to be implemented from Jan 2014 onwards for a period of five years.

Let me explain.

If you are in the mid to late twenties, chances are that your annual chargeable income falls in the range of RM 35,001 to RM 50,000. The tax bracket for this income group is 11 percent..

That means, your actuals monetary savings for any tax relief eligible to you is 11 percent of the tax relief amount itself.

If you invest RM 1,000 into any of the funds by any PRS fund providers, you get RM 110 worth of tax savings.

With this tax savings of RM 110 and the RM 500 incentive, you are getting RM 610 of tax incentives.

But then it gets even better.

Most of the tax reliefs are “expenses type”, which means you need to spend money to get the tax savings. Things like computer purchase, insurance premiums, etc.

But this PRS contribution is one of the few “savings type”  tax relief. Just like when you invest in any unit trusts or shares, your investment may grow over time.

If you visit Private Pension Administrator (abbreviated PPA - the central administrator for PRS) website now at, and check under Providers > PRS Funds Information > Daily Fund Prices, you can see the investment returns of all PRS funds from all providers.

One of the top performing funds yielded a year-to-date return of slightly more than 18% in just under a year.

Although past performance is not an indicator of future performance, if this performance continues, you are essentially getting RM 180 return out of the RM 1,000 you invested.

Add this up with RM 610 we calculated earlier, you are getting up to RM 790.

That’s 79% return.

Not many stocks could give you a minimum 61% return and up to 79% return within a year.

As an independent financial adviser, I can tell you wealth accumulation is not just about investing. We should always adopt a more holistic approach - this is a very good example of tax savings which indirectly translates into surplus. You could treat this as your investment return which is guaranteed.

Every single savings count. The wealthy mind their money, and they say - “if you don’t take care  of your money, money won’t take care of you”

Even if you don’t qualify for individual BR1M handouts, grab this opportunity highlighted above starting 2014.

This is a community message to all youths by Lieu Ching Foo, the founder of  personal finance blog - 

Note: besides the RM500 incentive for those below 30 years of age, the government has provided tax incentive with relief up to RM3,000 for those who puts in his / her money into PRS, in its budget for 2012. The relief is for first 10 years from assessment year 2012.

Friday, November 8, 2013

Airasia: Is this the beginning of its deterioration

I always believe that co-operation between government and private has to have both parties playing to the tunes. Malays have this saying that "you need both sides of your hands to clap. A single side does not clap itself." The fact that Airasia has a change in its management structure shows that something had to be done internally and there could be things that we do not know.

The fact that now the liaison chief has to appear and apologise so soon shows that one side is so powerful and the other probably has to obey. I mean what did the Airasia X's CEO said that caused him to be needing to apologise. And worse still, the apology is on another person's behave - unbelievable. It is like you work for your company and out of principle, you refuse to apologize due to something which you yourself believe is not wrong and forced to say sorry - you refuse to and your boss is doing it on your behalf. Let me know, how you feel.

I never know that Tony Fernandez as a CEO would succumb to such a low especially after the "Apprentice" thingy. Now, Airasia is a very respectable company due to the things that it had done. It has helped to increase the revenue of Malaysia Airport substantially. Without Airasia, KLIA2 may not be needed. Without Airasia, there may not be another Malindo. Without Airasia, many travellers would still be travelling at a much premium prices and agreeing to Ling Liong Sik's remark of MAS international routes subsidizing the local routes. Without Airasia, many budget travellers may not use KL as the transit and perhaps not spend that money in Malaysia. Without Airasia, many more would not be hired. With Airasia, our income from tourists probably increased. With Airasia, many more travelled. With Airasia, more potential businesses made happened.

So what is the problem with Airasia? Yes, it may be cocky at times, but still the benefits that Airasia had created... Business is business. Airasia needs to be profitable, squeezed the hell out of its suppliers, customers but still people use them. It is judged by its performance but not needing to succumb to such a lowly behavior. If Airasia feels that it need not advertise with Utusan, what's wrong with that?

I see CIMB smartly advertises with Malaysiakini. Because they have done their homework on who reads what. Who are their target market.

After all these, I am still sad to see that it needs to apologize. For business that is...but what about the benefits it has brought?

Thursday, November 7, 2013

The new RM1 billion company?

In many cases, I would use market capitalisation to value a company's worth. After all, it is best to evaluate how much the market values a company assuming that the market is efficient - hence the efficient market hypothesis.

However, we know that market is not always efficient. In fact, it is not efficient a lot of times, and we take advantage of that.

I have just read that iProperty, the invested company by Catcha has just gone past RM1billion in market cap. Is it worth that much? Now, my question is that is has been a business that has been operating for quite some years, and in fact has been listed since 2007 in ASX. I don't remember it makes money in any particular year and in fact look at its accumulated losses.

The latest 6 months P&L reads as such...

To me, this is not a company that can be worth RM1 billion - in fact very very far unlike Jobstreet and MYEG. Those 2 are really in their own league, but iProperty is not. IProperty has a decent number of competitors whom may be competing very hard such as, In properties, sellers, agents are posting up units for sale for free - unlike a job website. I really can't see much that to be as valuable as it is mentioned what is provided by the market.

Note: I do like though for its informative website...

Tuesday, November 5, 2013

Westport: no movement after IPO - what's next?

One of the things which I like to do in investment is to do some comparison among the players and have a feel in the stock. Well, the word "feel" sounds scary as it is more of an art rather than a science. There is no PE or any other valuation methods involved. My "feel" is largely successful in picking DKSH and before this blog was up - Digi. When I said feel, DKSH was not going to be a RM200 million company with what they have done. So was Digi after Telenor took over and we started to see good management (especially the early very successful marketing strategy of the yellow man, if you remember), it was not meant to be a RM3 billion company when Maxis was much larger.

Now, that same comparison is I am going to do with Westport. What do I feel as in comparison against Northport (NCB) and PTP (under MMC Corp). What do I feel about it getting listed after so many years? Just note that the listing is a way for the current shareholders to sell part of their shares - parties such as Li Ka Shing's Hutchison, Gnanalingam's family etc.

On business perspective, I really like Westport as you can see from its financial results. I like it for its focus, maybe older (first generation) management. It has however a second generation whom dwells in the largely failed QPR initiative, selling some of their stocks (after first generation did not) but with a good follow through results. Its financial performance does say something as below:

At its market capitalization of around RM8.5 billion, it is trading at slightly below 24x PE and maybe a forward PE of around 21x.

The question is this - Westport with only port operations is worth RM8.5 billion. Against its competitors, NCB which manages Northport (at RM1.7 billion, while also owning Kontena Nasional) while PTP (among the group of companies under MMC Corp) which is now worth around RM7.8 billion). Just for your information MMC Corp besides owning 70% of PTP, these are what it owns.

With that comparison, should Westport be worth RM8.5 billion? Westport is handling around 7 million TEUs while PTP (around 7.7 million TEUs) and Northport (around 3 million TEUs). This shows that Westport is largely efficient as in managing a similar volume versus PTP and with its parent's other very significant holdings, Westport's value alone overwhelms MMC Corp.

One can argue, we should not look at MMC Corp as it never really bother to price its shares to market anyway. One should not look too far beyond the practice in Tradewinds Plantation where it was later delisted with very good delisted price for the buyer.

But what about Northport? It has been a company which has been largely unexciting in terms of share price although over the last few years, dividends were good. Between the management, I would however vote for Westport but should it be priced that highly against Northport?

The sale by owners

This particular IPO by Westport is quite unique as in they do not raise capital, but it was more of a partial sale by its shareholders. My question is that, why? Pump in more money into QPR? Or is it just that they are able to garner a very good price? If that is the case, then at RM8.5 billion, Westport is very fully valued.


There is still good growth to come out of port operations, but this business is still very competitive. On top of that, the business is also one which needs large capital expenditure which makes me wonder on the non-capital raising thingy through the IPO.

You know what is the other weird thing, the second gen (young - below 40s) sells more than the first gen...(much older - 70 year old). Or could it be not as simple as that?

Just a note, the last few large IPOs in which case the owners have been largely the ones selling rather than raising capital were underperforming against the ones mainly concentrated on capital raising. In investment, I believe in feeding the hungry rather than the fully fed.

Monday, November 4, 2013

Is taxes such a "taboo" word?

Ever since human being lived in a tribe, that was probably when taxes was initiated. The proposed GST had so many people debating whether it should be implemented in Malaysia whereas there are already 160 countries in the world already doing the same - some countries charging as high as 21%. Now what confuses me is that we hate to be the worst as in one of the most corrupt country in the world (which I love to despise as well), but when comes to implementing GST in which case we are one of the last country to implement it, we lament about it. It is regressive, we say. We like to be the odd one out in this case.

We call it taxing the poor, we do not mind more of the government's revenue to be from petroleum tax (does anyone know that 40% of the government's revenue is dependent on one way or another on petroleum?). This is surely a cause for concern, but yet we are all for a more regressive way for government to tax i.e. corporate tax, taxing the rich whereas we know the rich are the ones that have more avenue to move abroad ANYTIME, petroleum tax, a corporatised government etc. (yes, Malaysian government are in business in a large manner - CIMB, Maybank, Sime Darby, IHH - to name a few)

We want to compare with Singapore (especially) and Hong Kong but we can't accept GST and calling it a way for the government to tax the poor. Singapore has GST. Singapore has low corporation tax, low rich people tax. Why is it that Eduardo Saverin (one of the founders of Facebook) moved to Singapore just about before Facebook was about to be listed - to avoid the US tax structure. What is US loss is Singapore's gain. Similarly, there are potentially many more cases of what is Malaysia's loss is Singapore's gain - brain drain!

If you are working class middle income, living in Singapore and Hong Kong (due to many factors such as real estate, transport etc) is stressful, but yet these people are willing to move to Singapore because of its currency strength, low taxes, government efficiencies. But yet have you heard of the saying that, in every other area, besides being a tax haven for many corporations and rich individuals "the Singapore government will tax you back everywhere else, even if you drive to the city, you will get taxed. That's where they are smart and we are not."

Singapore government understands that by taxing 15% off your USD1 billion profit is USD150 million for them whereas 25% tax by the Malaysian government on zero profit is zero revenue for the government, but at the same time we are subsidizing on petrol, rice, sugar (now no more), amenities through attracting low value-added jobs. We like to hire foreigners whom work in the palm oil plantation, construction, some labour intensive manufacturing sector but less-likely to hire individuals who are earning high enough to pay large taxes.

Every low value added job and less-profitable company that we attract is actually a loss to the country, but we have not been thinking that far, aren't we? We do not want companies that are attracted to Malaysia due to its ability to hire foreigners whom are lowly skilled as by doing this, we are subsidizing these companies and people through the subsidies on transportation system, food, schools, hospitals and many other areas. Imagine we already have some 2 million of these people, who are contributing very little tax revenue and that comprised to about 7% to 8% of the total population we are subsidizing.

The more the country is in subsidy mode, the more I am thinking we are benefiting the low income foreigners than the general Malaysian ourselves. Low income foreigners do not buy car (highly taxed), they seldom go to restaurants, watch movies. But yet they eat rice, take buses, LRTs which are largely subsidized.

GST is a system which is addressing that leakages and it is a more sustainable revenue even when our wells dry up, corporations have their ups and downs, individuals comes and go. Regressive we call it? Then why are we lamenting? Think hard on that!