Early Retirement vs Semi-Retirement

Early Retirement
A study conducted by Melbourne University shows that after working for intense long hours will cause brain damage. For workers age 40 years old and above, the ideal number of working days should be just 3 days per week. This will keep the brain active yet will not over exert oneself due to undue stresses.

Seriously, who does not want to work just 3 days a week? I always believe in there is a price to everything. If you work for 3 days a week, I will think this is considered a form of part time work or sharing of work. Part time work can be considered as a subset of semi-retirement. Be it semi-retirement or early retirement, you need to be financially and psychologically prepared. Before you think about early retirement, you need to envisage what sort of lifestyle you want to live when you are retired. With this in mind, then you can work backwards to decide what is to be done to get you there.

Step 1 - Set your retirement goals. When will you like to retire? At what age, will you like to retire? How long will you be retired for? During your retirement, what sort of monthly income or draw down from savings will be required?

Step 2 - You need to work out your personal balance sheet to understand your personal assets and personal liabilities. You can also make use of CPF retirement calculator or some of the online retirement calculator tools to make some simplify forecast and estimation. You can also determine the differences to make up for in order to achieve your retirement goal.

Step 3 - If there is no gap to fill, congratulations, you are well prepared for retirement. If not, proceed to Step 4.

Step 4 - You may want to increase your time frame for wealth accumulation, delaying your retirement age.

Step 5 - You may want to reduce your post retirement monthly income or draw down amount per month.

Step 6 - Reduce your present monthly expenses to increase your monthly savings.

Step 7 - Increase the rate of return of your investment. Remember higher return comes with higher risk.

Most of the people feels that to retire is to stop all forms of work, they will depend on their passive income to maintain their lifestyle to enjoy the finer things in life. If your definition of early retirement is to lead a more prudent lifestyle, reducing your expenses which is more practical and sustainable.

Semi-Retirement
Most of us in their mid-life will strive to have work life balance to have more quality time with the family. I am sure you too will like to have early retirement. The age group between 40 - 50 years old will be commanding the highest income level during their working lifetime. However, this is the age group where their family expenses will be  highest as well due to children education, ageing parents and home mortgages.

If you will like to maintain a certain level of lifestyle and your savings cannot last for the entire duration, you can consider another form of retirement. You can find a part time job to keep yourself active while maintaining your lifestyle.

Many Singaporeans are over dependent on their CPF as the main source of retirement fund. However, you can only draw down after an age of 65 years old. If you wish to retire before 65 years old, then you need to have other source of income.

For early retirement and semi-retirement, the expense will be at a similar level compared to your working days. Early retirement is to enjoy the same level of lifestyle, usually people will not reduce their expenses. In the worse case scenario, it will be even higher than before.

In order to retire earlier, you need to do the following:

1) Be very thrifty
2) Invest alot

When it comes to investment, do not have a gambling mentality in order to make money in the shortest time, thinking this will allow you to retire earlier. What if you are wrong? This will set you back in terms of your retirement fund and retirement age.

If you are 40 years old this year and will like to retire at 55 years old, you have 15 years to save and invest to lead the retirement life you desire. If you have already accumulated sufficient CPF, you can consider contributing to your CPF voluntarily to earn a higher interest and reduce your taxes.

3 Tips towards Semi-Retirement
1) Ensure that you have sufficient savings to cater for retired lifestyle. A part time job will have lesser income than your full time job. You can depend on your part time job to save up on your retirement fund.

2) Part time employee may not have health and medical benefit, you need to ensure that you have sufficient health and medical insurances. A drastic medical event may wipe out your retirement fund if you are adequately covered by insurance.

3) Part time income may not be stable and as high as full time employment. Therefore you need to change your spending habits. For example, cook your own meals or eat mixed vegetables rice instead of going to posh restaurants.

China Port Industry

Stock Code: 00144.HK
Company Name: China Merchants Port Holdings Co. Ltd

Business
CMPort is the largest and a globally competitive public port developer, investor and operator in China with investments in China, Hong Kong and overseas. Its nationwide port network includes coastal hub ports in Hong Kong, Taiwan, Shenzhen, Ningbo, Shanghai, Qingdao, Tianjin, Dalian, Zhangzhou, Zhanjiang and Shantou. It is growing its presence in South Asia, Africa, Mediterranean and South America. In 2017, the total throughput handled reached 100 million TEU.

CMPort's Ports in China

Hong Kong modern container terminal co., Ltd (MTL) was established in 1969 was the first container terminal in Hong Kong, and is one of the Hong Kong's largest container terminal operator. China merchants international owns a 27% stake in the company, the container terminal in Hong Kong tsing container terminal has seven container ship berths and two feeder berths, along a total length of about 2432 meters.

China Merchants Container Services Limited (CMCS) is one of CMHI's wholly owned subsidiaries. It is a mid-stream service provider, owns quay resources, equipped with rail mounted gantry cranes. Located in Tsing Yi island, the company can access to an array of transportation infrastructure.

In port related business, there are Tianjin Haitian Bonded Logistics, QingDao Bonded Logistics, China Merchants Bonded Logistics (Shenzhen), Shenzhen Haiqin Project Management Company and Asia Airfreight Terminal.  Asia Airfreight Terminal is an air cargo terminal based at Hong Kong International Airport for premier passenger and cargo hub. 

Financials 

In the latest interim 2017 report, the ports operation increases by 1% from HKD 12,161 million and HKD 12,043 million. Bonded logistics operation dropped by 16% to HKD 281 million from HKD 335 million. Port-related manufacturing operation increased by 40.4% to HKD 9,265 million from HKD 6,599 million. Total revenue increased from HKD 3,847 million to HKD 4,055 million whereas cost of sales increased from HKD 2,206 million to HKD 2,291 million in 2017. The operating profit doubled in 2017 to HKD 2260 million. This is due to other income and gains. Dividends increased due to special dividend.

Current Assets is HKD 19,590 million and Total Liabilities are 34,743. 

Cash and cash equivalent increased to HKD 15,424 million from HKD 5,263 million. There is a disposal of subsidiary which amounts to HKD 8,543 million. CMPort raised capital as well. 

Overall, CMPort is operating profitably and has the scale of operations. 

Counter: 01199.HK

Company Name: Cosco Shipping Ports

Business

Cosco Ship Port's network of terminals extends to 31 ports worldwide, covering the main five port clusters along the Chinese coast, Southeast Asia, Europe, the Mediterranean and the Black Sea. In 2016, throughput reached 95 million TEUs.

Financials

In the interim 2017 results, the cash dropped from HKD 834 million in 2016 to HKD 332 million in 2017. Long term borrowings increased by HKD 130 million in 2017 compared to 2016. 

From the Income Statement, the revenue is relatively flat while cost of sales has increased slightly from HKD 167 million in 2016 to HKD 177 million in 2017. The company made a gain on disposal of a joint venture which amounts to HKD 283 million. Subtracting this from the Profit is HKD 200 million which is still a good improvement from 2016. 

On 24 March 2016, the company disposed all issued shares in Florens Container Holdings to China Shipping Container Lines (now known as COSCO SHIPPING Development) for a total consideration of USD 1,241,032,000. Upon completion of disposal, Floreans Container Holdings ceased to be a subsidiary of the Company.

The Group's net cash generated from operating activities amounted to US$70,129,000 (1H2016: US$167,844,000) in the first half of 2017, of which included capital gain tax of US$39,365,000 in respect of the disposal of Qingdao Qianwan Terminal. 

The net debt to total equity ratio was 20.1% (31 December 2016: 14%) which is still healthy.

There's a lot of re-organisation within the group through sale and disposal of entities, this will shift money across individual entities.

Operations Review

According to International Monetary Fund, global trade volume in 2017 is estimated to grow at 4%, an increase of 1.7 percentage points compared with 2016. Buoyed by increasing international trade, China's foreign trade continue to improve. According to China Customs, the country's total import and exports (in RMB) in first half of 2017 recorded a growth of 19.6% compared with last year. The throughput of container terminals in China increased 8.8% to approximately 115,000,000 TEU which was 6.3% higher than same period in 2016.

The rise in international trade, as well as launch of mega-vessels, all increased calls at hub ports will enable the Group to achieve encouraging results in container terminals business.

The recovery of international trade and the increase in calls by shipping alliances enabled Yantian Terminal to achieve a satisfactory performance for the six months. The co-management of COSCO-HIT Terminal and Asia Container Terminal effective from 1st January 2017 served as an additional growth momentum to the terminals leading to a surge in the throughput of the two terminals by 42.8% to 1,694,130 TEU for the period.

There are other ports such as CIG Yangtze Ports 01719.HK, Xinghua Port 01990.HK, Dalian Port 02880.HK, QHD Port 03369.HK, Xiamen Port 03378.HK and Qingdao Port 06198.HK.

Warren Buffett's advice to survive a market downturn

For the last 53 years, the company has built value by reinvesting its earnings and letting compound interest work its magic,"Buffett wrote. "Year by year, we have moved forward. Yet Berkshire shares have suffered four truly major dips. Here are the gory details."

March 1973 to January 1975 - 59.1% decrease
10/2/87 to 10/27/87 - 37.1% decrease
6/19/98 to 3/10/2000 - 48.9% decrease
9/19/08 to 3/5/09 - 50.7% decrease

All four of those big drops coincided with major market moving events.

59.1% plunge from March 1973 - January 1975 occurred when the US economy was mired in an ugly recession resulting from the oil crisis and fallout from the Bretton Woods agreement. The benchmark S&P 500 lost as much as 44% during that time.

The 37.1% drop during October 1987 happened after Black Market stock market crash. The S&P 500 bottomed out at a loss of 34%.

The 48.9% slide from June 1998 to March 2000 occurred just ahead of the dotcom bubble's burst. The S&P 500 actually gained 27% during this period.

The 50.7% plunge from September 2008 - March 2009 occurred during the darkest days of the Great Financial Crisis. The benchmark S&P fell 44% over this time.

"This table offers the strongest argument I can muster against ever using borrowed money to own stocks,"Buffett wrote.

There is simply no telling how far stocks can fall in a short period. Even if your borrowings are small and your positions aren't immediately threatened by the plunging market, your mind may well become rattled by scary headlines and breathless commentary. And an unsettled mind will not make good decisions."

Buffett concluded that big drops are great opportunities for those who are not in debt.

To reflect on his words on the February minor correction, I was straddled with a huge debt in AAPL options position which cause me to lose focus on the bigger picture. It was a good opportunity to buy into undervalue companies then. Never be in an over leveraged position.

If you can keep your head when all about you  

    Are losing theirs and blaming it on you,  

If you can trust yourself when all men doubt you,

    But make allowance for their doubting too;  

If you can wait and not be tired by waiting,

    Or being lied about, don’t deal in lies,

Or being hated, don’t give way to hating,

    And yet don’t look too good, nor talk too wise:

If you can dream—and not make dreams your master;  

    If you can think—and not make thoughts your aim;  

If you can meet with Triumph and Disaster

    And treat those two impostors just the same;  

If you can bear to hear the truth you’ve spoken

    Twisted by knaves to make a trap for fools,

Or watch the things you gave your life to, broken,

    And stoop and build ’em up with worn-out tools:

If you can make one heap of all your winnings

    And risk it on one turn of pitch-and-toss,

And lose, and start again at your beginnings

    And never breathe a word about your loss;

If you can force your heart and nerve and sinew

    To serve your turn long after they are gone,  

And so hold on when there is nothing in you

    Except the Will which says to them: ‘Hold on!’

If you can talk with crowds and keep your virtue,  

    Or walk with Kings—nor lose the common touch,

If neither foes nor loving friends can hurt you,

    If all men count with you, but none too much;

If you can fill the unforgiving minute

    With sixty seconds’ worth of distance run,  

Yours is the Earth and everything that’s in it,  

    And—which is more—you’ll be a Man, my son!

Source: A Choice of Kipling's Verse (1943)

Hutchison Port Holdings Trust FY 2017

Overview
Global trade outlook remains positive due to continued growth in economic activities in the US, Europe, China and India. Shipping lines are moving into mega vessels to attain capacity and fleet optimization to achieve cost efficiency. In addition, focus has shifted from port performance to supply chain performance to drive competitiveness and operational efficiency. Hong Kong remains a strategic transshipment hub and a preferred gateway to the Pearl River.

Financial Performance
Revenue in 2017 dropped 3%, HKD 11, 551 million compared to HKD 11,912 million in 2016. In 2017, 64% of the revenue is derived from China.

The total CAPEX sheds by 52% to HKD 841 million in 2017 compared to HKD 1,765 million in 2016.  The CAPEX in 2015 was HKD 2,042 million. In 2014, the CAPEX was HKD 1,106 million. I think the CAPEX should be considered a normal level at HKD 1,000 million level.

The Distribution Per Unit (DPU) has dropped to HKD 20.6 for the overall year.

From the Income Statement, the key item for me is the Interest and other Finance Costs, it has increased by 22% from HKD 701.2 million to HKD 856.9 million. The overall operation is seen to be undergoing cost cutting measures but the profit is still lower than previous year. The Profit after Tax drops by 30% to HKD 944.2 million from HKD 1,356.6 million. Rising interest rates environment coupled with increased new borrowings (FY 2017 was HKD 11,736.8 million and FY 2016 was HKD 9,426.6 million).

1. Payout Ratio is 200%.
2. Dividend will continue to drop as revenue drops and interest expenses increase. Double whammy situation.

7% price correction on 2nd February is too steep

Based on 1st February 2018, the National Development and Reform Commission has reduced the tariff rate for origin and destination foreign trade containers at Shenzhen - Yantian ports from RMB 1400/TEU to RMB 980/TEU. Through Yantian International Container Terminals which contributes 64% of HPH Trust's revenue, it contributes less to the bottom line as a 50+% owned subsidiary of HPH Trust. YICT's Average Selling Price is already lower than the new tariff rates, this will allow the port operator to negotiate for better terms. I don't think this will affect HPH Trust.

I will conduct a study on the China ports to understand the competition HPH Trust is up against. I will dispose HPH Trust when the price has reverted back to the mean (when my losses are less significant).

CPB:NYSE Campbell Soup Company

Introduction
Campbell is in the business of providing high quality soups, simple meals, beverages, snacks and packaged fresh meals. Led by Campbell's brand, the portfolio includes Pepperidge Farm, Bolthouse Farms, Arnott's, V8, Swanson, Pace, Prego, Plum, Royal Dansk, Kjeldsens and Garden Fresh Gourmet.

2nd Quarter Results for period ending 16/02/2018

• Net sales compared to prior year, organic sales decreased by 2 percent.
• Earnings before Interest and Taxes (EBIT) increased 19 percent and adjusted EBIT decreased 4 percent.
• Earnings per share (EPS) of $0.95; adjusted EPS increased 10 percent to $1.00

Campbell Fresh did not meet expectations. Sales did not recover and Campbell expects beverage performance to pick up in second half, turning back to profitability. Sales performance of Global Biscuits and Snacks, particularly Pepperidge Farm and Kelsen are doing well.

The acquisition of Pacific Foods were completed to increase the brand presence in the organic soup and broth market. The planned acquisition of Snyder's-Lance will expand the snacking business.

Gross Margin decreased from 37.4 percent to 35.1 percent. Marketing and selling expenses decreased 5 percent to $228 million due to lower advertising and consumer promotion expenses.

Net interest expense increased 14 percent to $32 million reflecting higher average interest rates on the debt portfolio and higher levels of debts.

The company gave a fiscal 2018 outlook on EPS to be increased by +2 to +4 percent or $3.10 to $3.17 per share.

Moat

• Branding
• Cost of finance is low because of the size of company

Operating Performance
Return on Assets 2017 is 11.4%
Return on Equity 2017 is 56.1%
Return on Invested Capital is 18.77%

Valuation
Price/Sales is 1.79
Price/Earnings of 16.14
Price/ Forward Earnings of 15.55
Earnings Yield 6.19%
EV/EBITA is 10.21
Fair Value is about USD 48 - USD 50

Latest updates
Campbell's update at CAGNY on 21st February triggered a steep 7% price decline. My guess is CEO Denise mentioned about the ongoing discussion with a key customer will cause the sales to be sluggish. This is due to the dispute with Walmart. Walmart wants to continue to fight with Amazon and will exert its purchasing power to pull down all prices. Campbell will need to pull down the prices or go home. Rising cost of production eat into Campbell's margin. The company needs to work on its cost saving campaign.

The market has already priced in a decline in margin on Campbell's products.

JD:NASDAQ JD.com

I was shown an article by APS' Mr Wong on JD.com as a bubble in making. This contradicts to my previous findings on my investment thesis. I went back to research on JD.com. I was combing the internet for all the developments of JD.com when I chance upon this website. The author provides a very in-depth research on JD.com and Amazon.

• China's 2nd largest eCommerce company reported profit in third quarter. JD.com posted net earnings of 1 billion yuan, its highest profit in the three months to Sept. 30.
• JD.com expects revenue for the quarter ending in December to be 107-110 billion yuan which equates to a rise of 35-39 percent. The marketing campaign in November will affect the bottom line.
• JD.com is investing in logistics infrastructure in South East Asia, expanding in Indonesia.
• In China, JD.com is focusing on "white glove" platform focusing on imported food, fashion and electronics.
• Thesis for the company is eCommerce retailing is a logistics business, the lowest cost will win the race.
• JD.com differentiates from Alibaba in terms of its faster delivery times, authenticity quality products, and great customer service.
• JD.com has invested from the start on its logistics network in China whereas Alibaba is relying on partnership with 3rd party carriers (eg. China EMS).
• EV to Revenue ratio points towards undervaluation when compared to its competitors. EV to Revenue of JD is 1.29x, Amazon is 3.68x and Alibaba is 16.69x. This company serves the world's largest population, loyal customer base, logistics advantage and industry tailwind.

00700.HK Tencent

Business Overview
Tencent is a leading internet services provider in China, established since 1998 and has achieved steady growth in its user-oriented approach. Tencent Holdings Limited is listed as 00700.HK in Hong Kong Stock Exchange.

Business - Social Networks
1) QQ
QQ is an instant messaging platform with diversified functions and services. QQ has also introduced CM show which delivers tailor made interactive experience for youngsters. Users can access QQ Wallet and use mobile payment to top up for online shopping and bank transfer.

2) Weixin/ Wechat
Wechat is now the dominant messaging platform in china with social media entertainment, real time communications and payment ecosystem - WeChat Pay. It has reached more than 938 million monthly active user accounts as of the first quarter of 2017.

3) Entertainment
Tencent has a wide range of entertainment services such as Tencent Games, Tencent Literature, Tencent Comic, Tencent Pictures, Tencent Video, etc.

4) Platform
Tencent Open Platform is built for its partners to enable them to connect via QQ, Weixin, Qzone and YingYongBao to gain traffic and revenue through open APIs across PC, mobile and multiple devices.
Tencent has its own cloud services for corporate  and individual users. It provides developers with cloud servers, cloud databases, cloud storage and cloud computing services.

5) Artificial Learning
Tencent AI Lab is moving into machine learning and big data, it has 50 world class scientists and 200 experienced engineers in China and US. The key focus areas are machine learning, computer vision, speech recognition and natural language processing.

Tencent is focus on growing its revenue from both online advertisement and online gaming.
Strengths of Tencent

• Strong brand portfolio
• Multiple and resilient revenue streams
• Product innovation
• Growing ecosystem - network effect
• Strong and reliable suppliers/supply chain - 20% stake in JD.com
• Automation

Weakness of Tencent

• Require investment into new technologies which will continue to require high CAPEX into R&D, currently Tencent is expanding into other countries will require more capital injection.
• Attrition of employees
• Resources are drawn too thin with rapid expansion plan

Opportunities for Tencent

• Economic growth can lead to increase in customer spending
• Move online to offline channel

Threats

• Rising pay in China
• Require breakthrough in innovative products
• Intense competition from other industry players
• Change in consumer behaviour
• Rise of new technology to disrupt existing strength

Valuations
I do not need to go into this as Tencent is not cheap at the moment. Tencent will be on my watchlist.