My First Home Scheme: Home of Trouble Ahead?

Once again, to address the affordability issues of properties, MyFirst Home Scheme (My1st) was launched by government on 8th March 2011. Thanks for addressing the problem faced by young Malaysians working adults. But, does it really worth to even think about the scheme?

Of course, owning a house at young age is a good start to family planning. In fact, we're living in a society where buying a new house tights closely to starting a family. But, this is not necessary a MUST to everyone of us. We must do proper planning before committing for such a long-term loan with such huge amount. Buying a house is not buying an iPad or iPhone.

Only apartments are likely with less than RM220,000 price tags in Klang Valley now

Highlights of My First Home Scheme...

• For those earning less than RM3,000 monthly
• Working in private sector
• Confirmed employees with a minimum of 6 months in the job
• Joint applications are allowed (both in private sector and are family members)
• 100% loan financing for first house purchasing
• Eligible houses: Between RM100,000 and RM220,000
• Both under construction or completed properties
• Repayment period of up to 30 years
• Monthly loan repayment must be < 1/3 of applicants' monthly gross income
• 25 participating banks / financial institutions

Burning questions to participating banks...

1. Does the participating banks offering the same rate as currently practiced?
2. Does the banks really allocate sufficient funds for such loan?
3. Would the bank perform stricter credit checks since many borrowers are young and categorized as higher risk group?

Burning questions to borrowers...

1. Are there any houses out there you still think that is not overvalue? Still berbaloi?
2. Assumed that you found one, does it fit into your desired picture? Safe surrounding?
3. Assumed that you also found one, are you quick enough to snap it?

"Trouble Ahead"?

Assuming that loan rates as BLR-2.2% (BLR currently is 6.30%) and a 100% loan amount of RM220,000, the monthly loan repayment is RM1,063. If an eligible guy take the loan with maximum salary of RM3,000 allowed, the take home pay after EPF deduction was RM2,670 only. This translates into 40% of net income!

Example calculations of monthly loan repayment

Do not forget the legal fees, stamp duty, fire insurance, MRTA, cukai pintu, cukai tanah and renovations fees! I think most of our fresh graduates will buy a new car first. Assuming that the car loan installment is RM500 monthly, this would add up to 58% of net income!

To make trouble bigger, please take note of the changing interest rate environment, which means the BLR would possibly revised upward in the future. Then, your loan repayment will be adjusted higher accordingly. Can you afford your loan repayment then?

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New Fund: PB Asia Pacific Enterprises Fund

Looking good on the long-term growth potential Asia Pacific region, Public Bank is launching its equity fund, the PB Asia Pacific Enterprises Fund on March 8. Managed by Public Mutual, the fund will focus on companies with market capitalization of US$ 1 billion and above in domestic and Asia Pacific, through a diversified portfolio of companies.

By investing in mid-to-large corporations, investors would be better positioned to benefit from the resilient activities in the Asia Pacific region. These type of companies tend to perform better given their leading positions in their respective industries and established market shares, especially during challenging market conditions just as now.

What did Public Mutual's CEO said?

"After a strong rebound in 2009, global and regional equity markets continued their uptrend in 2010 amidst improving economic activities. Despite the recent spike in oil prices, regional equity markets are expected to remain underpinned by reasonable valuations and resilient economic growth prospects over the medium-to-long term."

Fund Features

• The fund may invest up to 98% in selected Asia Pacific markets
• Equity exposure: 75% - 98%
• Exclusively distributed by Public Bank
• Suitable for investors with aggressive risk-reward temperament

www.financemalaysia.blogspot.com

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Berjaya Food: Testing Investors' Appetite?

Listing tomorrow (March 8), Berjaya Food (BFood), through its subsidiary Berjaya Roasters, is principally involved in the development and operation of the Kenny Rogers Roasters (KRR) chain of restaurants in Malaysia. All started when Berjaya Group acquired KRR in 1993, and being the exclusive franchisee in Malaysia, operating 52 outlets nationwide.

Kenny Rogers Roasters

What's in BFood mind?

• Open 8-10 outlets per annum
• Emphasizes healthy food targeting increasingly heath conscious consumers

What Analysts say?

The IPO price was set at RM0.51, and Berjaya Group will still be the largest shareholders after IPO with 70.91% shareholdings. OSK Research value BFood with a RM0.57 target price, based on 7.5x PE, which represents a 30% discount to its closest peer in Malaysia, QSR Brands due to its smaller revenue and earnings base. BFood intends to distribute up to 50% dividend payout.

Past and projected revenue. Source: OSK, Prospectus

More "food" for BFood? 

Berjaya Group does not discount the possibility of injecting its other food businesses into BFood once they turn more profitable. I believe this is just the beginning for Berjaya Group to unlock its value in food and beverages businesses. Potential businesses that may injected includes:

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Hans in Hungary

Since a couple of days I am in Budapest. I am visiting Corvinus University until mid-March.

If I am able to I will come back with some comments on the economical situation here in Hungary, i.e. some observation related to the investment climate.

New Fund: OSK-UOB Capital Protected Sector Strategy Fund

Yet, another capital protected fund for investors by OSK-UOB unit trust management. Following the pump priming efforts by governments around the world during the financial crisis, the global economies have begun to stabilize and signs of recovery are growing strong. The stimulus packages introduced have benefited broad market sectors to a different extent in each sector at each stage of recovery.

"At each stage of the economic recovery, different market sectors will benefit to a different extent. These 4 sectors which are well diversified are expected to capitalize on the different sectors' play", said Ho Seng Yee, CEO of OSK-UOB.

According to Ho, the fund shares a similar strategy with the OSK-UOB Capital Protected Gold Guru Fund that was launched in 2009 and has registered returns of 29%.

Funds' Allocation & Strategy

This is a 4-year close-ended capital protected fund which aims to provide capital appreciation over the medium term whilst protecting investors' capital on the maturity date. To accord for the capital protection feature, the fund will invest primarily in 4-year ZNIDs with the remainder of the capital raised invested in 4-year over-the-counter (OTC) option whose underlying asset is the Multi Sector Strategy ("Sector Option") to generate the returns for the fund.

The Multi Sector Strategy Option

It provides investors an exposure to 4 distinct market sectors represented by exchange traded funds in the Energy, Material, Financial and Consumer Discretionary sectors.

While the Sector Option is denominated in Ringgit Malaysia, the underlying Multi Sector Strategy is based in Singapore Dollars, thus, the Fund's return is subject to exchange rate risk.

Source: OSK-UOB unit trust management bhd

To read the fund's prospectus, please click here .


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How far could Oil price RISES?

As usual, another episodes of tension in the Middle East pushes global oil prices higher, and surpassing $100 per barrel this time. We did seen this kind of scenario before in the Middle East during 1973-74, 1979, and the Iraq war in 1990. Are there any different this time?

Libyan leader Muammar Qaddafi

By Credit Suisse, 

We believe the rise in oil prices is manageable. Each 10% rise in oil prices only takes about 0.1% off global GDP and 0.2% off US growth. With Western wage growth muted, central banks are unlikely to raise rates on account of oil alone.

Our analysts see oil prices below $100 pb this year, supported by the following reason which differs from previous oil crisis:-

1. There is enough spare capacity in the global oil market to deal with supply-side disruptions as long as they are not too extreme
2. The energy intensity of global GDP has fallen by around 40% over the past 40 years
3. There is unlikely to be the same inflationary follow-through as in the 1970s
4. Oil producers are spending their windfall gains

Yahoo Finance: Oil prices since 28th Feb 2011

Potential Losers

Among the countries that are both significant energy importers and where energy accounts for a large part of the CPI basket, we would highlight India, Czech Republic and Poland. We note that China has the fiscal strength to subsidize higher energy prices, while other countries (namely India and Thailand) may not.

Potential Winners

In our view, the potential winners are countries that are net energy exporters and that have a positive output gap. This highlights Russia, Columbia, Australia, Canada, Malaysia and Norway.

The outlook for oil prices...

We believe that the oil price should fall from here. Saudi Arabia is likely to release some of its oil reserves into the market as it perceives a high oil price to be supportive for the Iranian government. Our house view is that oil price could falls below $100. We would only be concerned if the political unrest in the Middle East were to spread to Saudi Arabia.

* This is just an excerpt from Credit Suisse Research report dated 1 March 2011. This may not informative enough for readers to come to a conclusion.

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OSK Stock Picks for March 2011

By OSK Research,

Despite relatively strong results from a number of Blue Chips in February, the market still retreated and ended up in the red so far in 2011. Selling was largely attributed to concerns arising from political unrest in the Middle East although we continue to see limited risk if this does not spread to Saudi Arabia.

Go out and BUY?

Trading Strategy - Buy on Weakness

OSK continue to advise investors to Buy on Weakness in the current volatile market with focus on Banks, especially those that have been sold down recently as we still see robust loans growth of 8.5%. OSK also advise trading in Oil & Gas, Construction and Property counters as the news flow should remain good although they caution that profits will likely to kick in only in 2H of 2011.

March 2011 Top Buys

OSK's top buys did poorly for February, with only 2 stocks matching or exceeding the KLCI namely KPJ and Kencana. For March, as we remain hopeful of a market rebound, we are keeping CIMB, Kencana and SP Setia as our top buys. At the same time, we have added in defensive plays such as Petronas Gas and also retain KPJ.

Source: OSK Research

By Finance Malaysia,

While we are hopeful that the unrest in Middle East will eased soon, without spreading to Saudi Arabia, I think investor should trades cautiously as long as KLCI did not break free from the 1,500 psychological level. In terms of sector, I prefer Oil & Gas and Construction sector mainly because of Malaysia government's "preferred play". I view these sector as more defensive to global uncertainties, as Petronas and government is the main projects sources for O&G and construction sector respectively.

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