Buy DXN (KLSE 5074)

I started buying in this stock DXN (KLSE 5074) last 2 months, when the price fell down to RM1.31 due to the Japanese crisis.

DXN Holdings Berhad is the investment holding and management company of DXN Group. DXN´s high regard for quality earned the company many outstanding citations and recognitions from various health and business organizations. Along with the solid foundation and sustainable development, DXN has rapidly diversified into other business activities, which include property, renewable energy, information technology, etc. In its core business of network marketing, the rapid global expansion of DXN is recognized internationally by its vast growth of members worldwide and its amplification of footprint in key strategic locations. With over four million registered distributors worldwide, DXN is solidifying its position as the world leader in Ganoderma products.

I actually knew about this company quite sometimes ago, long before i actually invested in stock market. Is because my girl friend is one of the leader in DXN network marketing. She had been staying with DXN for >7 years now, and enjoying handsome passive income.

So actually i'm quite familiar with the network system DXN is using, and with the system, i believe that the network marketing segment will continue to boom around the world. With the recognized certificates (TGA, GMP, Halal & etc), of cause with great products and marketing plan, DXN is ranked 40th direct selling worldwide in "DSN Global 100", also it had enter 154 countries for now. With 'One Dragon' concept, DXN able to control the cost, and able to come out with affordable quality products.

The EPS ended Nov 2010 is RM0.174, with the price of RM1.31, the PE is ~7.5. The net profit CAGR is ~11%, up from 2006 RM21m up to 2010 RM39.5m. With my own understanding on this company, the global market is still booming, and initially i expect the EPS for 2011 to be ~RM0.20.



However with the weakening USD, and do take note that 90% of DXN business is coming from export. Thus i believe that the EPS might be impacted, and expected to hit RM0.16 per year. Thus with the PE of 10, and with the continuous strong growth of DXN, the target price for year 2011 will be ~RM1.60.

Also the ROE for this company is meeting my expectation, which is average ~15% for the past 5 years.

Bank Negara’s one-two punch

KUALA LUMPUR: Against market expectations, Bank Negara Malaysia (BNM) yesterday raised the overnight policy rate (OPR) by 25 basis points (bps), citing concerns on inflation.

BNM also increased the statutory reserve requirement (SRR) ratio by 100bps to 3%. Though the interest rate hike was widely unexpected, it may be an indication that the economy — as well as inflation — is gathering strength.

“The hike in the OPR is somewhat a surprise. While it would reflect a tightening on BNM’s part, we should not view it negatively as it indicates that BNM feels the economy is doing well, therefore the hike is made possible,” OSK director of research Chris Eng told The Edge Financial Daily yesterday.

Of 16 economists polled in a Bloomberg survey previously, only seven anticipated an increase in the OPR. Nine had expected the OPR to stay unchanged at 2.75%. The increase marks the first change in the OPR in 10 months.

The interest rate benchmark was last revised in July 2010, when it was raised by 25bps to 2.75%. Prior to that, the OPR was tightened twice by a magnitude of 25bps each, from a low of 2% during the recent global financial crisis.

Most economists had expected the first hike to take place later in the year, as the OPR is gradually returned to its pre-crisis level. Meanwhile, the SRR hike is seen as a pre-emptive effort to curtail the build-up of excess liquidity, which BNM said could result in financial imbalances and create risks to financial stability.

The SRR, BNM said, is an instrument to manage liquidity and does not signal the central bank’s position on monetary policy. This is the second increase in the SRR in just over a month. The central bank had just raised the SRR by 100bps, from 1% to 2%, from April 1, 2011.

The increase in the OPR will result in an increase in the country’s BLR (base lending rate) as it is conventional for banks to adjust the benchmark lending rate accordingly.

“This will result in higher BLR. The banks usually will adjust their BLR immediately, while deposit rates will lag, depending on maturity. As a result, the banks tend to gain when interest rates are raised,” an economist said.

However, an analyst also noted that the two recent increases in the SRR may affect banks’ margins, as they may not be able to fully pass them down through a higher BLR. “The reversal of CIMB Bank’s decision [end March] to increase its BLR after the last SRR hike, as well as comments from BNM suggest that only the OPR should be used to dictate the BLR,” he added.

Nonetheless, the analyst also noted that any margin squeeze for banks could be alleviated by not raising deposit rates as much as the quantum of the hike in lending rates.

The SRR is the amount of funds that banks have to keep with BNM interest-free, for the central bank to manage liquidity. It is calculated as a percentage of a bank’s eligible liabilities.

Domestic spending and the property market could be hit by the higher BLR, as spending moderates in anticipation of more increases. “The increase in BLR will likely hurt lending as consumers and businesses turned cautious in anticipation of further hikes. This will result in some impact on consumer spending and business activities,” said the economist.

However, he added that the overall impact on the economy may be minimal given that further increases are likely to be gradual, and interest rates are still low. CIMB Research recently reported that loan applications for residential property showed a strong rebound in March with a 74.1% increase from the previous month.

While the property market remains buoyant, the quantum of the increase was a surprise to industry observers, especially given that it had fallen for four consecutive months before March.

In a report issued on Tuesday, CIMB Research noted that the rebound could have been driven by borrowers who rushed to lock in low interest rates, in anticipation of higher borrowing costs in the near-term. Additionally, the research house noted that investors continue to view property investment as a defensive hedge against rising inflation.

Moving ahead of the curve
Analysts noted that BNM has been ahead of the curve as far as interest rates are concerned in the past few years. Just before the 2008/09 global financial crisis hit, central banks around the region were raising interest rates as commodity prices and inflation soared.

However, BNM kept the OPR at 3.5%, a level that had remained unchanged since April 2006. When the global financial crisis struck, the OPR underwent three consecutive cuts from November 2008 to February 2009, and was trimmed by a total of 150bps to 2%.

After the end of the crisis and as growth started to pick up, BNM was among the first central banks in the region to increase interest rates in March last year. It is now taking a more hawkish stance again, and appears to be looking to “normalise” rates as growth and inflation gain momentum.

An analyst expects the process of “normalisation” of interest rates to ultimately bring the OPR back to around the 3.5% level, barring external shocks. The next monetary policy committee meeting, the fourth for the year, will take place in two months on July 8.

“In the region, despite some moderation, growth has remained strong, supported by robust domestic economic activity. Global inflation has, however, increased on account of rising energy and commodity prices,” said BNM yesterday.

Inflation rose to its highest point in two years, climbing 3% year-on-year in March. For the first three months of the year, inflation rose 2.8%. The latest data on inflation, for the month of April, is due for release on May 31.

“Although the global recovery is expected to continue going forward, downside risks have increased, arising from the potential for higher energy and commodity prices, possible supply disruptions following developments in Japan, and the heightened volatility in capital flows to emerging economies,” said BNM.

Central banks in the region are also grappling with the same concerns. The Reserve Bank of India (RBI) lifted its benchmark rate by 50bps to 7.25% on Tuesday, after the country’s wholesale-price inflation sped to 8.98% in March, exceeding the central bank’s forecast of 8%.

Prior to that, a Bloomberg survey polling 25 economists saw the majority predicting a mere 25bps increase in the country’s repurchase rate.

“Current elevated rates of inflation pose significant risks to future growth. The inflation rate will remain close to the March level over the first half of 2011/12, before declining,” said RBI governor Duvurri Subbarao.

In the Philippines, inflation reached its highest point in two years. The consumer price index climbed 4.5% y-o-y in April, according to the National Statistics Office in Manila.

Written by Sheikh Al-Zaquan
Source from: http://www.theedgemalaysia.com 

How to start trading US stock

Last week, finally i had my US stock account opened, and i applied through TD ammeritrade, which is a reputable online brokerage based at US.

I chosen this online broker as it is reliable with good support, from the experience of few of my friends. Also i'd tried out the tools that you can get them for free after signed up. The trading tools are amazing, both for technical and fundamental analysis.

Also i'm an iPhone user, so i'm enjoying using the iPhone real time trading tool as well.

The application steps are easy, you can straight go and apply online by yourself. Or you can choose to be referred by me, which you will be able to enjoy special offer which is 500 free trades. To be referred by me, please drop down a comment of your full name and email address, or email me at danielong1982@yahoo.com with title of "TD Ammeritrade application".

After you filled in the online application form, you need to print the completed form (Open Your Account.htm) out, and then you need to sign on it. Bear in mind to save this page after you finish filled in the details. Else you will need to reapply later or filled in the form manually.

The documents that you will need are as below:

1. W-8BEN - this is the only form that you need to mail to them.
2. Photocopy of your passport.
3. Your bank statement with your full name on it.
4. You pay slip - this is optional.
5. Online account application form (Open Your Account.htm), which is the one that i mentioned to save the page after you fill in the details online.

After your account being approved, you can start to fund your accounts. You can find the details from this page. I personally chose to electronic transfer my stocks from other online account.

Please feel free to drop me any questions.

Also i'm going to start introduce US stocks start from next week, stay tune.

Invest in emerging markets through ADR

One of the reason i invest in US stock market is due to American depositary receipt (ADR), which is a stock that trades in the United States but represents a specified number of shares in a foreign corporation. 


I would like to invest in emerging markets stocks, as i believe the emerging markets provide a better opportunities. However emerging markets economies having possibility of fall back due to not-completely-resolved civil war or a revolution sparking a change in government. Well, the higher the risk, the better the reward. With thorough study on a company, i believe the risk will be minimized till the level which is acceptable.


Advantages of investing in ADR not only provide you the easiest way to invest in emerging markets, also by having it listed in US stock market, the financial data and news will be more transparent with the control of Securities and Exchange Commission (SEC). As the control of the stock markets in emerging markets might be not really transparent, and it will harm the advantages of the share holders.


Emerging markets that i focus on will be Brazil and India which are from "BRIC nations" formed by Brazil, Russia, India & China. India is one my favorite as is the world 3rd largest economy, and is one the fastest growing country in Asia, it aims for economic growth of 9 percent to 9.5 percent through 2017. I like Brazil as its the world 8th largest economy with economy growth of 7.5% for year 2010, and it also has huge oil reserves and a fast-growing domestic market.


For those who interested in investing in ADR, you can actually find out more about ADR in www.adr.com.

How to Prevent, Control & Cure Diabetes?

Last Friday i was on leave, and had a walk at a QBM in the afternoon. My usual hanging spot will be the bookstore, as i believed in ancient Chinese saying "书中自有黄金屋，书中自有颜如玉" which means somehow like this "A book holds a house of gold; a book holds a face as smooth as jade".

Went through the Popular books of the month whereby Popular member will enjoy 20% discount, there are many books that i intended to have actually. One of them that caught my attention is  "How to Prevent, Control & Cure Diabetes". I would like to have this book as i'm a bit concern of Diabetes, which few of my elder family members did suffer from this long term illness, and to prevent is always better than cure. Statistic showing that ~3% of the Malaysian population is suffer from Diabetes, and half of them might not even realize. One of my intention to start this blog is to create awareness of health conscious.

As most of you know, books at Popular are wrapped most of the times, and i can't really know the contents. So i decided to move to my next favorite bookstore - Boarders, to see if i can have a quick glance on the contents for those books.

No luck to find that book from Boarders, and i actually spend 3 hours at Boarders and eventually i forgot that i would like to buy the book from Popular. I admitted that my memory is a bit lousy sometimes.

And yesterday when i was at QBM again, i went back to Popular trying to look for the book again. Guess what, the book had gone, sold out... Rest of the discounted books were still there, only this book was gone. It told me that Diabetes is really a major concern for Malaysian, and people start to look into it.

Again i'm on leave today while writing this blog, i will be going to Gurney Plaza later, hoping that i can find it in MPH, which is another bookstore. :)

Also, today onwards i'm going to share more on the health info that i know and hope everyone of you will benefit from it.

Poisonous Cosmetic

Read an article regarding poisons found in cosmetic products which declared by the Health Ministry. The affected products are BML HB Lotion, Shana Night Cream, Natasya Gold Herbal Cream, Biotox Whitening Hydro Cream, Yoko Whitening Cream and Sue Beauty Night Treatment Cream.

They contain scheduled poisons such as dexamethasone, hydroquinone and tretinoin which caused various side-effects to consumers and is written that the use of dexamethasone, hydroquinone and tretinoin in cosmetic products were prohibited and could only be used with the advice of health professionals.

 The ministry's Pharmaceutical Services senior director Datuk Eisah A. Rahman said that Tretinoin can cause redness to the skin, peeling, discomfort and sensitivity to sunlight while hydroquinone can cause redness to skin, discomfort, skin discolouration, hypersensitivity and a gradual blue-black darkening of the skin.

"It also inhibits the pigmentation process and this attenuates the ability of the skin to protect our body from harmful UV rays, which can lead to the risk of getting skin cancer." .

Eisah said that dexamethasone, a steroid, when used topically, can cause skin irritation, dry skin, acne, thinning of the skin and increased risk of skin infections.

Prolonged use of topical steroids may result in systemic side effects such as suppression of the adrenal glands, metabolic disturbances and immune response impairment.

She said that anyone who is in possession of the products is advised to immediately cease selling, distributing or using it.

Please help to forward this article to those who you think might be using above mentioned products.

Hot tips from me?

Some of my friends always asked me, whether there is any hot tip that i can let them know. I will always answer them there are no tips, and i don't invest based on any hot tip. Personally, i don't believe in hot tips, as i knew that i'm just a small retail investor now, and i don't believe that small retail investor can get any hot tips.

What I invest the most currently is the stock market. I like it because i think it is simple, and you just need a small capital to start. And i did encouraged my friends to invest in stock market as a start, as even if they lost money, i hope they will learn from there.

Stock market is easy for me as they are easy accessible in this information age. All the financial data, company background and etc can be easily found online. This is true especially for US stock market, the company are highly transparent. Well, KLSE still need some improvement to achieve that, but i do see improvement from time to time.

To enter the stock market, what you need as basic is to learn how to read a financial statement. This is vital for you to know whether the company is healthy or not. I will never buy a stock of a company that is weak in financial statement, unless i'm pretty confirm (>90%) confident that the company will have a break through in coming years.

Being able to interpret a financial statement is the most fundamental for an investor. For this, i will be recommend  a book "Warren Buffett and the Interpretation of Financial Statements". This is a book related to how Warren Buffett find a good company to invest in. I will probably write a review for this book soon.