eCCRIS by Bank Negara Malaysia - a way to check for fraud and your financial status

One of our friends contacted us and discussed about an experience of being scammed. Nothing was lost, fortunately but all the stress and sleepless night endured are a reminder to us that there are certainly many unscrupulous syndicate out there waiting to fish our hard earned money.

Bank Negara Malaysia (BNM) has years ago came out with some remedies and a portal for us to monitor our financial standing. This includes knowing one's payment track record for the past 12 months, total outstanding amount and monthly payment amount. If you've forgotten, it's called the eCCRIS. 

Below is a snap shot of eCCRIS and the link to it is https://eccris.bnm.gov.my/eccris/

Snapshot of eCCRIS of BNM

From the snapshot above, you can see that the details are being provided:

1. When the credit facility is being approved
2. Name of Financial Institution
3. Is it a Joint or Individual account
4. Financial Institution Branch
5. Account number
6. Total Outstanding
7. Instalment amount 
8. Any arrears for the past 12 months (0 means no and 1 means missed or late payment for that particular month)

Just in case you're wondering how the log in page looks like, here you go:

Log In Page of BNM's eCCRIS

Top 20 Warren Buffett's Famous Quotes

Like I mentioned in my previous articles, there is no "right and wrong" in investment as long as it earns you money. However, there are some notable ways that  you may earn your money in a 'safer manner' rather than relying on lady luck. 

Warren Buffett's investment ideology champions value investing and contrarian investment. Let's see what are Buffett's top 20 famous quotes and remind ourselves again on the basics of investing.

1. Rule No. 1 is never lose money. Rule No. 2 is never forget Rule No. 1.

2. Price is what you pay. Value is what you get.

3. It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price.

4. The key to investing is not assessing how much an industry is going to affect society, or how much it will grow, but rather determining the competitive advantage of any given company and, above all, the durability of that advantage.

5. We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful.

6. The best thing that happens to us is when a great company gets into temporary trouble...We want to buy them when they're on the operating table.

7. Someone's sitting in the shade today because someone planted a tree a long time ago

8. If you aren't willing to own a stock for ten years, don't even think about owning it for ten minutes

9. When we own portions of outstanding businesses with outstanding managements, our favorite holding period is forever

10. I never attempt to make money on the stock market. I buy on the assumption that they could close the market the next day and not reopen it for five years.

11. Should you find yourself in a chronically leaking boat, energy devoted to changing vessels is likely to be a more productive than energy devoted to patching leaks.

12. It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you'll do things differently.

13. The most important quality for an investor is temperament, not intellect. You need a temperament that neither derives great pleasure from being with the crowd or against the crowd.

14. I believe in giving my kids enough so they can do anything, but not so much that they can do nothing.

15. Don't get caught up with what other people are doing. Being a contrarian isn't the key but being a crowd follower isn't either. You need to detach yourself emotionally.

16. The best chance to deploy capital is when things are going down.

17. Never invest in a business you cannot understand.

18. Risk comes from not knowing what you're doing

19. In the business world, the rearview mirror is always clearer than the windshield

20. Read 500 pages like this every day. That's how knowledge works. It builds up, like compound interest. All of you can do it, but I guarantee not many of you will do it.

Conclusion
His quotes are words of wisdom after over 75 years of investing. One can argue that Buffett lives in an era where inflation, growth, opportunities are all higher and his recent years bet aren't that successful. However, if you read my list of Top 20 Warren Buffett's famous quotes, you will realize that it talks about personal education/learnings, views on risks and how to tackle risks in investment, cutting losses and even money issues in raising kids. 

As a human, I always believed that we ought to review what we have done especially during this year end break and holidays. Review the year and have a vision on the next. All the best folks!

How companies can make more money after an economic crisis?

Have you ever wonder that there is always a economic crisis and it always followed on with a recovery. And the thing is it's not just any ordinary recovery but stock indexes hitting new highs, property prices spiking etc. This probably is a testament of the saying "what doesn't kill you makes you stronger"! 

Now, let's explore why we always have a recovery after an economic storm? And also how can companies make more money after an economic crisis?

1. Companies are allowed to reduce manpower and salaries during a economic crisis. This will bring down the cost of doing business. Staff is not able to jump over to other competitors easily and forced to accept a lower salary.

2. There are many not so efficient companies forced to shut down permanently. Those who survive will have less competitors to compete with. Those mom and pop shops, those already ailing businesses will be forced to shut during the time of crisis as they are unable to sustain (and profit) even during the good times. The ones left will certainly have better pricing power and consumer might not have a choice but to purchase from the companies and businesses that has survived.

3. It's a human psychology thing - during an economic crisis, people cut back on spending mainly due to fear of losing the job. The "fear of losing their jobs" actually caused job losses and slows down the economy. Hence, when in an economy recovery, people are tired of eating at home (to save costs), reducing holidays and buying gadgets etc, they will start to come out and spend. Once spending comes back, businesses naturally have to hire more people. When more people have jobs to do, spending will go up and malls will be full again. It's a continuous cycle.

4. Companies generally will use this excuse to conduct re-organization, reduce wastages, review contracts, rationalize capital programme and spending. If you work with a mid-size company, you will certainly notice that during good times there are a lot of unnecessary spending (think of your photocopier service, allowances, business travels). If you add those things up then you will realize that it'll lead to a meaningful savings. Every penny saved is money earned. 

5. Some companies will take the bold step to explore new market, new demand during an economic downturn. It's a time where the staff will have less work to do and it's an opportunity to utilize them to explore and look at other new exciting opportunities. This might lead to new venture, new subsidiaries formed and new partnership. 

6. Input costs are lower during an economic crisis and many times you can see the selling prices of products rise faster than the input costs, hence causing a surge in profit for businesses. For example, oil refineries, steel millers, plastic products manufacturers all relied on inputs from oil, iron ore etc. During an economic crisis, the raw material price is always low due to the drop in demand. 

7. Most companies does Kitchen Sinking during an pandemic. It is painful and management will grab the opportunity to do so. For those who is unaware of what is Kitchen Sinking, it include write-offs (i.e. stocks that is too long in warehouse) and impairment/write-downs (i.e. asset prices like property, car values which has plunged during an economic downturn). We have seen companies after the dreaded economic crisis, part of their profit actually came from "reverse impairment". Think about this, during an economic crisis, some companies will be forced to value their land and buildings lower to reflect the current market value. When economy recovers and roaring again, the land and building prices will go up and companies will have to revalue them again. This revaluation exercise will lead to additional "profit" as part of accounting requirements.

How can Young Investors start Investing in Stock Market?

We were requested by some friends to share strategies on how they can start their investment journey. Understand that many are interested but have no or little clue on where and how to start. One of our authors has >13 years experience in investing in the equities market, he started young and is now investing and also trading various financial instruments. We have also shared in our previous article on where you can invest your money (legally)?

The aim of this article is to provide a simple step by step methodology to all our readers. If the way we approach investments does not align with what you have in mind, we seek your understanding as in the market no one is always right and we all learn with positive mindset and spirit. We also assume that the young investors would like to learn some fundamentals and invest in Malaysian stock market (i.e. Bursa Malaysia).

Step 1: Open a Trading Account 
There are a handful of trading platform providers including CGS-CIMB iTrade, HLeBroking, Rakutentrade. I3Investor does offer a list of trading platform providers that you can go through and select what is suitable for your trading needs.

Step 2: Learn Fundamental Analysis
There are a lot of things to learn in Fundamental Analysis. What you can do is to start with understanding of the terms below.
a. Price to Earnings ratio (P/E)
b. Net Tangible Asset (NTA)
c. Current Ratio
d. Return on Equity (ROE)
e. Earning Per Share (EPS)
f. Dividend Yield
g. Price/Earning to Growth ratio (PEG)
h. Price to Book ratio (P/B)

Learning Fundamental analysis is almost a lifelong process as we learn the various valuation methods of the companies (i.e. P/E, P/B or P/NTA, PEG, ROE, Discounted Cash Flow, Sum of Parts, Premium or Discount to peers and/or Book Value). There is no one fixed valuation method and it's often market driven and changes over time when there is new development to the business. P/E is the most used methodology and you will see that Analysts used various combination of methodology to value a company.

Step 3: Practice with a Dummy Account and familiarize yourself
Most of the trading platform providers has dummy account facilities so that newbies can practice trading or familiarize themselves with the system. Take advantage of this while you're learning the Fundamental Analysis

Step 4: Repeat Step 2 and 3 until comfortable with investing
You will need a certain amount of courage to use your own money in trading. So practice until you feel comfortable. You should also read books like 'The Intelligent Investor' and books associated with Warren Buffett. Look for books that are easy to read and understand. 

Step 5: Select a Stock and Start Investing
Step 5 may sound too easy to read than do - yes it is not easy for first timer. Which stock should you select and is the price right to buy now? Remember, "money is what you pay, value is what you get" - this is a famous quote in Value Investing Model. As this article does not intend to make anyone a value investor or momentum investor/trader, we assume that the first time investor will want to keep a stock for some time (i.e. a few months or years). 

Stock picking is difficult hence to ease that burden, do select companies that you know (i.e. Maybank, Genting, Boustead, SP Setia), you are comfortable with and that you believe have a good future (and business is either growing consistently or recovering from a temporary decline).

Step 6: Sharpen your skillsets and understand your personality vs investment
You will need to continue to learn new things and sharpen your skillsets. You may have know Fundamental Analysis and connect the dots on how they tie-in to the stock prices. However, you should continue to learn Technical Analysis where charts will 'hint' you on where is the 'entry' and 'exit' prices. 

You should also ask yourself what is suitable for you - are you going to be a longer term investor or day trading (not investment) is a better choice? It's a very personal question to answer hence I have no answer here for our fellow young investors. For me, I used a hybrid model where I have positions which I hold for a longer term (i.e. using Value Investing and Growth stocks methodology) and I trade some shares over few weeks cycle (i.e. using a combo of Technical Analysis and Fundamental Analysis). To add some thrill to my mundane day, I trade some derivatives like Futures (FCPO, FKLI, Mini-HangSeng Futures) as well. 

Bottom line is you will need to find out what is your "investment personality". However, a word of caution is the most successful investors "hold their position over a longer period of time". Those who got rich like Warren Buffet, Elon Musk, Jeff Bezos, Bill Gates have big positions (a lot of shares) in their companies and they didn't trade it (frequent buy-sell) like traders. Investing in a growing company will certainly yield you a lot of good returns but you will need to select the right stock (going back to Step 5). 

So, who says Investing is easy? No, it's not difficult but to manage an investment portfolio which consistently earns a good returns and beating the market is very very difficult. Even the professional managers have difficulty doing that. But as an encouragement, you will have to start somewhere if you are keen, else it will never happen. Good luck and take action today.

Stocks: Bonus Share vs Dividend - are they the same?

 Recently, we have a lot of market activities and a lot of companies start to 'dish out' bonus shares. One of the latest companies who is proposing a bonus issuance is Public Bank Berhad, our Malaysian home grown bank which has the lower CTI (Cost to Income) and NPL (Non-Performing Loan) in the industry regionally. Others include G3 Global, Amtel, UWC etc.

Public Bank Berhad intend to give out 15.53bil shares to the existing shareholders and the most important question is should you buy Public Bank due to the bonus issuance? The answer to this question is to answer what is a bonus share? 

What is Bonus Share?
Bonus shares are additional shares given to the current shareholders without any additional cost, based upon the number of shares that a shareholder owns. This will increase the issued share capital of the company. However, by increasing the number of outstanding shares, it decreases the stock prices. Bonus share issuance is a 'zero sum game' exercise as the market capitalization technically does not change and investor don't actually gain more vs dividend (although they might if the share price was manipulated upwards later on). There is no tangible payment out from the company's account to the share holders

I would lay down some tangible examples of the benefits of Bonus Shares:
1. Enlarged share base will means that there are more shares to go around for transactions. Hence, for smaller companies it will increase the liquidity.
2. The stock price will be lower and hence perceived as 'cheaper' for retail investors (please take note that in investing, we normally define 'cheap' as low P/E ratio, low P/B ratio, EV etc, not with reference to the price of the share - however, a lot of non-financially savvy and strong retail investors will still assume that 'cheap' means 'low price'). 

How about Stock Split? Stock split is the action taken in which a company divides its existing shares into multiple shares to boost the liquidity of shares. Both Stock Split and Bonus issue is almost similar except that Stock Split will reduce the Par Value of the share. This is merely accounting issue where small and retail investors don't see any tangible difference between these two exercise.

What is Dividend?
A dividend is the distribution of some of a company's earnings to a class of its shareholders. In layman's term, the company made a profit and it channel part of it to its shareholders. It's being paid out from the company's accounts to the bank accounts of the shareholders. It normally has a ex-date where shareholders who owns the share by the 'ex-date' will be entitled for the dividend. We have a lot of companies like Maxis, KLCCP, REITS, Banking who are consistent dividend payers. And these days, the dividends received from Bursa Malaysia listed companies are tax-exempted as tax has been paid at company level prior to distribution.

Is Bonus and Dividend the Same and Should you buy in?
The biggest question in the room will be how should you react to news like Company A is declaring a dividend while Company B is giving out bonus shares. We will explain with scenarios below:

If you buy into Company A (which declared a RM0.50/share, assuming you own 1,000 shares), you will receive a dividend of RM500 (RM0.50 x 1,000) before costs of processing. Your share price will not be adjusted. However, sometimes post dividend the share price will drop a little as investors will have to wait 3 or 6 or even 12 months for the next dividend. 

If you buy into Company B (which declared a 1-for-1 bonus), you will not get any cash in your bank account. Assuming that the share price is RM1.00 and you have 1,000 shares. The share price will be adjusted to RM0.50 and you will have 2,000 shares post Bonus Exercise. The outcome from the result is it will be the same (RM1.00 x 1,000 = RM0.50 x 2,000). However, there will be some advantage as I mentioned above especially if you are holding a small cap stock with limited liquidity. There will be more shares to go around for investors to trade. 

I hope the explanation above will provide some insight to investors to learn and distinguish the difference between bonus and dividend. All of us (myself included) will start as a piece of white paper and we fill ourselves with knowledge as we grow in our investing journey.