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1.4 Comment
From April 2014 to March 2015, Mah Sing Group Berhad (MahSing) has performed
better than the market as it reported a higher average monthly return. MahSing also has a
higher standard deviation than the market which means that MahSing is more volatile than
the market.
The covariance and correlation between MahSing and FBM KLCI are positive values.
As such, MahSings share returns tend to move together with the market; however, only to a
small degree because the correlation between these two stocks is slightly positive with the
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value of 0.292. If the market share price increases, then MahSings share price would also
increase by a small degree.
MahSing, with a beta of 0.7541 indicates that MahSing is less risky than the market.
If the market performance were to increase by 10%, then MahSings share price will increase
only by 7.541%. A beta below 1 shows that MahSing is not very sensitive to the fluctuations
of the market; thus, it is not as risky as the market.
3.0 Diversification
3.1 MahSing Stock and Risk-Free Asset
(Nadaraj, 2015). As such, investors may opt to wait and see before taking the next step (Woo,
2015).
While Yeong (2015) reported that the property market will remain flat with lesser
sales and property launches in the second quarter of 2015 after GST implementation,
MahSing will not be slowing down on launches for ongoing projects to achieve its
RM3.43billion sales target this year (Chew, 2015). MahSing forecasted that GST will
increase its costs, but the increment may be outweighed by the effects of the lower global oil
prices which may reduce manufacturing costs for construction materials. MahSing remains a
positive outlook on their companys sales demand which is supported by strong fundamentals
like the enticing mortgage rates, rising middle income group and stable employment rate that
are driving the property market (MahSing, 2015).
Furthermore, the government, in the effort to spur first-home ownership among
married youths aged between 25 and 40, introduced the Malaysian Youth Housing Scheme
(MYHS) (KPMG, 2014). This scheme is in tandem with MahSings focus on affordable
housing in 2015 where 44% of its residential launches will be priced below RM500,000 (The
Star, 2014). The scheme is said to provide a direct positive impact on MahSings financial
performance with respect to 70% of their customers being 40 years old and below and
additionally, 45% of their 2014 residential launches are under RM500,000 (Kinibiz, 2014).
It was also announced that the partial stamp duty exemption of 50% on all instruments
of transfer and loan agreements has been extended to December 31, 2016; meanwhile, the
ceiling price of purchasing the first residential property has been increased to RM500,000
(KPMG, 2014). As such, the demand for MahSings properties may increase due to the
reduced transaction cost of home ownership (Kinibiz, 2014).
The increment to RM1million as the minimum threshold price in real property for
foreign acquisition will not affect MahSing substantially because most of their properties
attract local buyers. Additionally, the properties which attract foreigners are usually price
above RM1million (Yeong, 2013). Although Lee (2014) reported that about 31% of
properties that ranges from RM500,001 to RM1million were still left unsold for three years
since completion, MahSing has not addressed this issue as a threat to their company.
To curb property speculation activities, the government maintained the RPGT rates
for real property disposals and shares in real property companies as shown in Appendix 7.4.
Effective from January 1, 2015, all acquirers of real properties have to remit 3% of the
disposable price to the Inland Revenue. Despite the RPGT policy revision, MahSing is
confident that the company will not be affected as most of its buyers are owner-occupiers or
investors looking for rental income and these buyers tend to keep properties for a longer time
frame (The Star, 2014).
Despite the cooling measures taken in 2013, MahSing has chartered record-breaking
sales figure of RM3billion, which is 20% growth from 2012 and distributed dividends
slightly over 40% of its net profit (MahSing, 2013). With the recent GST implementation, the
effect from various cooling measures and fluctuations of global oil price, MahSing has
nevertheless achieved RM761million in sales as at April 22, 2015 and is confident of meeting
its 2015 sales target because of its product mix at the right locations and attractive pricing
(Yeong, 2015).
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subsequently affecting the expected portfolio annualised return rate. Furthermore, we had to
assume the negative market return as positive because of the limitations of CAPM.
LOW JIAN LYNN (SID: 13061965)
The financial market was vague and ambiguous to me before I took up finance as my
core subject and especially through this assignment, I found my passion in the world of
derivatives. Prior to the simulation exercise, assumption was made to only purchase blue chip
stocks as these corporations record more stable earnings. Undeniably, choosing blue chip
stocks are considered a safe decision as these companies are usually large corporations that
had already been in the market for a long period of time. Alternatively, we could choose to
purchase non blue chip stocks as we were only given three weeks to maximise our
profitability but that would mean a high level of risk exposure. Intensive research was made
as we scout through corporations from various industries. Ultimately, Mah Sing was chosen
because of their positive financial performance over the years and our decision was proven
worthwhile as we made RM 2450.90 over the past three weeks of the simulation exercise.
In my opinion, the judgement of our investments were only limited to the analysis that
we made when in reality, the stock market are influenced by many internal and external
factors. The fact that we are trading virtually posed as a challenge for us as it was difficult to
estimate the pattern of share prices as our trading volume had no impact on the movement of
the share market making it necessary for us to implement qualitative and quantitative analysis
to identify the trend of the share movement. Investors need to be invariably aware of news
regarding the company invested as it is necessary to obtain the latest news so that decisions of
buying, holding and selling could be made.
Through this assignment, I learned that investors should do thorough research before
investing in a share and not just follow their intuition. Moreover, investors could gain
competitive advantage if they have connections with people in order to get updated with
latest news regarding the company. It is necessary to consider not only internal factors that
affects the corporation but also the external factors and how one could maximise their profits
through diversification using various financial analysis. Although we were bounded by the
word limit in this report, I personally felt that it did not hinder our capability to showcase the
depth of our analysis.
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enhance my understanding in this subject because I was able to apply the financial concepts
in real practice.
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6.0
Brokerage
Record of
Transactions
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7.0 Appendix
7.1 Average Monthly Returns, Standard Deviation, Covariance, Correlation, Beta of
MahSing and FBM KLCI, & Risk-free rate
Monthly closing price for Mah Sing Group Berhad and FBM KLCI is obtained from Yahoo
Finance.
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Monthly closing price and monthly bond index are obtained from klse.info and BPAM.
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Monthly Closing Price for Nestle (Malaysia) Berhad is obtained from Yahoo Finance.
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Nadaraj, V., 2015. Property Market in Malaysia: What To Expect. [online] Available at: <
http://www.establishmentpost.com/malaysians-worried-property-market-malaysia/>
[Accessed 13 May 2015].
Pedone, R., 2014. 4 Defensive Stock Trades to Protect Your Portfolio. [online] TheStreet.
Available through: Academic OneFile, EBSCOhost [Accessed 19 May 2015].
Reeves, J., 2010. Warren Buffett's Priceless Investment Advice. [online] Available at: <
http://www.fool.com/investing/value/2010/02/12/warren-buffetts-pricelessinvestment-advice.aspx> [Accessed 18 May 2015].
Shih, Y., Chen, S., Lee, C., and Chen, P., 2014, The evolution of capital asset pricing
models, Review Of Quantitative Finance & Accounting, [serial online] 42, 3, pp. 415448, Business Source Complete. Available through: EBSCOhost [Accessed 19 May
2015].
Star Property, 2013. A Better Malaysia, No Matter the Winners. [online] Available at: <
http://www.starproperty.my/index.php/articles/property-news/a-better-malaysia-nomatter-the-winners/> [Accessed 18 April 2015].
Statman, M., 1987. How Many Stocks Make a Diversified Portfolio?. Journal of Financial
and Quantitative Analysis, [online] Available at: < https://www.wiso.unihamburg.de/fileadmin/sozialoekonomie/bwl/bassen/Lehre/International_Finance_I/Le
ctures/20080506_Number_of_stocks_in_a_diversified_portfolio.pdf> [Accessed 15
June 2015].
The Star, 2014. 2015 Budget reactions from property companies, industries. [online]
Available at: <http://www.thestar.com.my/Business/Business-News/2014/10/10/2015Budget-reactions-from-industries/?style=biz> [Accessed 29 April 2015].
Wong, W.S., 2014. Safe Haven in Fixed Deposits. The Star Online, [online] 13 September.
Available at: <http://www.thestar.com.my/Business/Business-News/2014/09/13/Safehaven-in-fixed-deposit-But-people-need-to-diversify-so-they-can-take-a-bit-of-riskto-achieve-g/?style=biz> [Accessed 12 May 2015].
Woo, A., 2015. Real Estate: Effects & Opportunities From GST. Smart Investor, 299, pp. 4344.
Yeong, E., 2013. GST may push house prices higher, developers warn. The Sun Daily,
[online] 12 January. Available at: < http://www.thesundaily.my/news/865991>
[Accessed 29 April 2015].
Yeong, E., 2015. No drastic change in property prices. The Sun Daily, [online] 12 January.
Available at: <http://www.thesundaily.my/news/1292390> [Accessed 13 May 2015].
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