Dividend Magic

Saving and Investing towards Financial Independence in Malaysia

Investment

ETFs vs Unit Trusts / Mutual Funds in Malaysia

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Filed Under: Investment, Other Investments 4

This is an an article for Malaysians who are looking for:

  1. A better alternative to Unit Trusts and Mutual Funds
  2. Exposure to equities
  3. An easy way to invest without having to do too much research
  4. Long term, low fee investing

If you do not have the know-how and/or time to do the research and valuations on individual stocks and equities. Fret not, there are a few options out there for us Malaysians. Some better than others.

The Choices

1. Trade Yourself

First off, I’ll have to have this option here. This is what I do, I invest and trade stocks myself. I pay no annual fees or management fees. I only pay brokerage which comes to about RM8 or 0.1% whichever is higher.

This option is available to everyone. If you have the time to do some research and think logically, anyone can do it. To start investing in stocks, you can head hERE for a guide.

2. ETFs

Exchange-Traded Funds would be my choice and recommendation if you don’t want to trade and invest in stocks on your own. Depending on the ETFs you invest in, you can be exposed to all sorts of asset classes in different sectors and regions. There are tons of ETFs around the world, so take your pick.

Specifically, I’d recommend passive index funds if you’re looking to invest long term. Most noteworthy ones can be found in the US ie. the Vanguard S&P 500 index fund. You can learn how to invest in US stocks hERE.

Unbeknownst to many, we have a few ETFs here in Malaysia. The closest we can get to an S&P 500 fund is the MyETF Dow Jones US, which provides you the exposure to the US equity market. Somewhat similar to the S&P 500 ETF that mainly indicates the performance of the US market, there is FTSE Bursa Malaysia KLCI ETF (FBMKLCI-EA). Where the S&P 500 fund tracks 500 shares, ours tracks only the top 30 largest companies in Malaysia.

3. Unit Trusts and Mutual Funds

Last but not least, mutual funds & unit trusts. I don’t like unit trusts because of one huge factor – FEES.

If you take the time to dig in and do some research, you’ll find that most of them don’t even beat the market/index’s returns over the long term. So why pay more fees?

Malaysians are still stuck in the unit trust era with the older generation and I think younger more financially literate investors are starting to realize that there are other options out there.

I’ll have some facts and figures below to demonstrate.

The Actual and Long-term Cost of Fees

Unit Trusts vs ETFs

Mutual Fund Fees

Firstly, I’ll be using unit trusts and mutual funds interchangeably. For the purpose of this article, they are one and the same.

Secondly, we’ll be mainly comparing ETFs vs Unit Trusts here. I do this because I want to draw more attention to our local ETFs in Malaysia which are the closest and better options compared to unit trusts. I want to get Malaysians off high fees and unit trusts.

For those that don’t know what unit trusts / mutual funds are, let me explain it simply. Mutual funds are managed by a fund manager(s) who claim to be able to procure superior returns for investors. You put your money in a mutual fund and they invest it for you, for a fee. That’s it.

The only and most logical question an intelligent investor would ask is:

  1. Can they beat the market’s rate of return?

The short answer? No.

Unit trust holders would argue that there are funds out there that beat the market. Yes, there are but there aren’t many. The fact is that the global majority of actively managed funds just don’t beat the market. And the small number that does, they may be taking higher risks. Sometimes, it’s even down to pure luck.

The next factor would be the fund managers themselves. Funds are only as good as the fund managers that run them. Which is a problem itself because fund managers come and go. A good fund manager does not stay long at a particular fund. This means – a fund does not stay good for long.

The KLSE isn’t a very efficient market when compared to other countries which is why UT funds are still able to outperform our benchmark. This is the only reason they’re still in business. Because some still generate decent returns. However, if you think about it, when there are so many other cheaper alternatives out there that can do the same thing and beat the local KLCI index, is it necessary for you to pay the high fees for a fund manager to do the same thing?

Which is why we find ourselves comparing ETFs to UT funds.

Fees

I’ve written a previous article on the impact of fees which is a tad bit outdated. I realise that front-load charges (or sales charge) have gone down since that article.

To compare the cost of Unit Trusts vs ETFs, we assume the following:

  1. An initial investment of RM100K with no further reinvestment.
  2. A 30 year long term investment period.
  3. 10% return per annum.
  4. A conservative industrial average total expense ratio (TER) to be used. 2% for UTs and 1% for ETFs. Calculated below.
 Unit Trust FundExchange Traded Fund
Sales charge2.50%0.00%
Brokerage fee0.00%0.30%
Clearing fee0.00%0.03%
Initial cost 2.50%0.33%
Yearly TER2.00%1.00%
Initial investment cost
in the 1st year		4.50%1.33%
Subsequent year cost2.00%1.00%

Conclusion

Over a period of 30 years, just from the impact of fees alone, you will lose approximately RM340K or 35% of your returns. The difference in fees is only 1%.

Bear in mind that we are working with very conservative figures here. I know of many unit trust funds that charge much higher fees. And if we take a low-cost fund like Vanguard’s S&P 500 ETF instead, we will be looking at a much, much bigger difference.

The above example is only taking into account the fees you’re paying. I hope the simple comparison above makes the case for seeking lower fees.

If, after looking at the data and reading this, you still find yourself wanting to invest in unit trusts and mutual funds (you’re crazy), I’d ask you to look at online platforms like Fundsupermart. They are the cheapest as an online platform. Please do not get yours with agents who charge high sales charges.

ETFs Available in Malaysia

Back to ETFs, your choices for ETFs in Malaysia are actually many. These are all local ETFs available on Malaysia’s KLSE exchange and can be traded just like individual stocks.

Account opening can be done easily online with brokerages like Rakuten Trade. I list a comparison of all our local brokerage firms hERE.

ETF Malaysia Returns

Above is a list of ETFs found in Malaysia with their returns calculated based on NAV.

In terms of fees (which directly correlates to your returns), ETFs are superior to UT funds.

You may have other concerns with local ETFs. One of which would be their liquidity. You’d be happy to know that as a requirement by regulators, Malaysia’s ETFs are backed by market makers. So, liquidity issues? Check.

While researching local ETFs for this article, I was actually pleasantly surprised to find so many ETFs listed on the bourse. Looking forward to see more innovations and choices from ETFs in the future.

If you are looking for something to track our KLCI index, the FTSE Bursa Malaysia KLCI ETF tracks the top 30 companies in Malaysia by market cap. Another interesting one is TradePlus DWA Malaysia Momentum which uses smart beta (technical analysis) to select the top 20 Malaysian stocks with the highest momentum.

Looking for local ETFs in Malaysia that have foreign exposure, for example, China? TradePlus’ S&P New China economy, and Principal FTSE China 50 ETF both provide you with exposure.

To get exposure to the gold industry which is well known as a safe haven and good for hedging, we have the TradePlus Shariah Gold Tracker.

Choices of ETFs listed on Bursa Malaysia may not be as broad as those found in other countries, we do however still have a relatively good range of selection.

End.

Another similar investment product that I didn’t mention above is actually Robo-advisors. They’re similar in some ways to UTs and ETFs but not so similar that I can compare them all in this article. If you’re interested in Robo-advisors, you can read about my Stashaway portfolio hERE.

As with all investments, be it UTs, ETFs, or Robo-advisors, I’d caution everyone to do their own due diligence and research before making an investment.

It is my sincere hope that Malaysians are more educated and just a little more financially literate after reading this article. May you make better financial decisions in the future.

As always, Facebook, Instagram, and now YouTube! Follow, keep up to date.

Invest Singapore by CGS-CIMB Securities

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Filed Under: Dividends, Investment 2

InvestSG 2020

Interest in overseas investing has been huge lately as we look for bigger growth opportunities and higher yields. I know for a fact that Malaysian investors have always gone on to invest internationally, Singapore, Hong Kong, China, the EU, and the US are common countries.

We have one of the world’s most robust stock market right next door – Singapore. The equivalent of Bursa in Malaysia, Singapore’s stock exchange is operated by Singapore Exchange Limited (SGX).

CGS-CIMB Securities (formerly known as CIMB Securities) will be bringing us Invest Singapore on 18 November 2020. The event is aimed at Malaysians and to introduce Singapore’s stock market with many experts lined up.

Event details:

Date: Wednesday, 18 November 2020

Time: 9am – 1pm

Link: http://bit.ly/InvestSingapore-DM

Invest SG

Invest SG Schedule

Updated as of 1 November 2020. Changes to the schedule can be viewed via the link above.

Invest SG Schedule

Slots I’m Interested In

Singapore’s Economy

Despite us being neighbors, I as a Malaysian am still unsure about Singapore’s economy and market conditions. Hoping to gain some insights during the 9.35 am session with Jamus Lim, Song Seng Wun, and Lim Say Boon.

It’ll be beneficial to those that plan to invest in Singapore stocks as well. Doesn’t hurt to have a macro view of a country as a whole before you invest there.

New Trends in the REITs Sector

I’m especially interested in the REITs listed on the SGX, specifically data center REITs.

At the 10.20 am – 10.45 am slot, there’ll be a topic on this moderated by CGS-CIMB Analyst Lock Mun Yee together with REITAS CEO Nupur Joshi, ARA LOGOS CEO Karen Lee and Keppel REIT CEO Paul Tham.

I know most Malaysian investors have already bought into some or are actually eyeing them. Data centers REITs like Keppel REIT has actually been doing well recently. So, if you’ve been wanting to invest in Singapore REITs, this will be the slot to watch.

Navigating Singapore 

CGS-CIMB Securities provides one of the most comprehensive research coverage of over 2,000 stocks in the SEA region. You can get limited access to these hERE. As a client of CGS-CIMB, you’ll be able to get full access.

The 12.00 noon session features investing strategies for stocks listed on the Singapore Exchange.

Geoff Howie from SGX will be talking about momentum and volatility. As for Lim Say Boon, Chief Investment Strategist for CGS-CIMB, he’ll be sharing his views on REITs, property, banks, and more.

CGS-CIMB Securities, a broker in Malaysia & Singapore

CGS-CIMB Securities International Pte. Ltd. (“CGS-CIMB”) is a 50-50 joint venture between China Galaxy International Financial Holdings Limited, a wholly-owned subsidiary of China Galaxy Securities Co., Ltd, and CIMB Group Sdn. Bhd.

Through a network of local offices, branches, and strategic partners, the Group has a global presence in over 20 countries. Well-positioned as Asia’s leading financial services provider, CGS-CIMB has a core focus on well-researched and in-depth analysis on financial products.

With a focus on value creation, CGS-CIMB Securities offer a suite of investment and financial solutions for retail and institutional clients.

Their businesses include:

– Derivatives (CFDs, Forex)

– Equities Trading

– Equities Research

– Fixed Income

– Institutional Equities

– Leveraged Products

– Prime Services

– Retail Trading & Investing

– Wealth Management

Zero Commission Promotion

CGS-CIMB Securities is offering ZERO commissions when you buy Singapore stocks from 19 November 2020 to 28 February 2021. There will be more information on this during the event so sign up for Invest Singapore to find out more.

Final Thoughts

I’ll be looking forward to InvestSG on 18 November 2020.

This isn’t another course offered by financial gurus you see on FB taking your money and telling you what stocks to invest in. Instead, you’ll be listening to experts speak and given a macro view of a new market and whole new industries to invest in. What’s more? It’s free.

So sign up, make time for it and I guarantee you’ll learn something from this.

The fully virtual event will run from 9 am to 1 pm. It’ll be half a day of learning. If you missed it earlier, registration can be done hERE.  

Also, you can stay updated with CGS-CIMB here:

Review of pitchIN – Malaysia’s Equity Crowd Funding Platform

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Filed Under: Investment 2

What is Equity Crowd Funding (ECF)

Equity crowdfunding is the act of raising capital from the ”crowd” through the sale of securities (shares, convertible note, debt, revenue share, and more).

I’ll be using pitchIN as my example here because I only have experience in using pitchIN as an ECF platform. There are many other platforms in Malaysia but right now, pitchIN is the largest and in my opinion safest.

Raising Capital from the Crowd

The ”crowd” includes individuals and institutional investors alike. Anyone can partake in the offering. There are however certain restrictions in place ie. an individual has to be of age. Also, there are limits on how much capital an individual can invest based on their income, net worth, and financial knowledge.

pitchIN groups its investors into 3 different categories.

  1. Angel Investor
    Gross Income of more than RM180,000 per annum.
    An angel investor is entitled to invest a maximum of RM500,000 per annum in total in any company.
  2. Sophisticated Investor
    Net personal assets of more than RM3 million with experience in investing.
    A sophisticated investor can invest freely on pitchIN up to any amount.
  3. Retail Investor
    If you’re not in the aforementioned two groups, you belong here together with me.
    A retail investor can invest only RM5,000 per company and a total of RM50,000 per annum.

Equity Crowdfunding

With equity crowdfunding, companies are selling securities, giving investors skin in the game and a slice of the company.

On pitchIN, investors typically become a shareholder of the company with all the associated rights and benefits.

Pros of ECF

ECFs are a high risk high return form of investment. I’d rank it as one of the highest among all other asset classes.

Your potential return can range from 2x to 100x in a few years if you invested in a well-managed startup.

Individual investors like you and me can get access to start ups for a few thousand ringgit. The risks are high but so are the returns. As with all investing, remember to always do your own due diligence.

Risks and Cons of ECF

The Company Dictates the Terms

The terms and conditions of a deal and offering are dictated by the issuing company. It is imperative that investors especially retail investors take note of this.

Familiarize yourself with how companies raise capital. For example, if you’re in the first round of a start-up’s fundraising exercise, you’ll want to make sure you are protected as an early investor. You don’t want your shares to be diluted when the company goes for its second round of fundraising.

Exiting and Cashing Out

ECF is a long term game.

As an early investor in a private company, your avenues for cashing out and taking profit are limited. You either wait for the company to get big enough and lists on the stock exchange or you find yourself a private buyer.

In my experience on pitchIN, every company out there will tell you they’re aiming for an initial public offering (IPO) in X number of years.

And until platforms like pitchIN provide for a secondary market, those will be the only two options available to you.

Lack of Follow Ups from Management

This is one of my biggest irks with investing in a private company. Their obligation to minor shareholders isn’t much. pitchIN does try to have management engage more with their investors but from my experience, companies don’t try as hard after taking your money.

They’ll woo you with presentations, video calls and nicely done financial projections in the beginning. But after receiving your investments, be prepared to hear nothing from some companies.

At the end of the day, you’re just a minority shareholder and you basically do not have rights. You can vote, but your vote won’t matter. So make sure you do your research on a company’s management team before you invest. You want responsible people at the top that will work for the good of the company and its shareholders.

My Investments on pitchIN

I invested in two companies so far on pitchIN.

I treat my investments here as very high risk with similar potential returns and may even expect them to completely go bust. I invest in these companies with a long term (5-10 years) horizon.

My investment with MHUB was back in October 2019 which makes it a year old now. Oxwhite’s crowdfunding process ended in January 2020 which makes less than a year old. Both are relatively young and I’m excited to see how they’ll continue to develop.

One of my regrets was Kakitangan. I didn’t invest in them because I was still doing my research on the company itself as well as pitchIN as a platform.

Moving forward, pitchIN itself will be doing an ECF offering soon which I again, am mulling over. Is anyone considering investing in pitchIN?

What companies have you invested in and what are your experiences with them? Have they been good to you as shareholders?

US and International Stock Broker Comparison

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Filed Under: Investment, US Stock Investment 10

Looking to trade and invest in US and international stocks as a Malaysian?

I’m initiating this article because I’ve received messages from readers with concerns about the current broker I’m using – eToro.

Many have quoted an article by the Edge highlighting that eToro isn’t licensed under the Securities Commission of Malaysia (SC) right now. I’ve continued to use eToro because they are licensed by Australia’s SC equivalent – Australian Securities and Investments Commission (ASIC).

Nevertheless, I’m inclined to give Malaysian investors alternatives to eToro because at the end of the day, choices help us make decisions. And I don’t want anyone to use our local brokers because as you’ll find out later, the fees you pay is downright crazy.

Another important thing to note is – like eToro, all international brokers I’ll be mentioning that are actually worthwhile to open a brokerage account with are not licensed with SC. They do have jurisdiction in different countries though which I’ll mention later in the article.

Local Brokers

Let’s start off with what NOT to use. Here’s an example of a local broker I used to trade – Hong Leong Investment Bank.

I actually made a significant amount from investing in Berkshire Hathaway (B shares) and Vanguard’s S&P 500 ETF. I didn’t keep track of the fees I paid to purchase those stocks but trust me they weren’t little. But, holding the stocks for the long term helped mitigate that.

What I didn’t realize was this..

Why you shouldn’t use local Malaysian brokers to trade internationally.

This is the supposed dividend I was to receive from my Vanguard ETF. USD20. After deducting all the fees – I’m left with 52 cents. Thank you local brokerage.

I hope I’ve made the case for not using our local brokerages to trade US and international stocks.

Moving on!

eToro

eToro Malaysia Review

I’ve written an in-depth review on why I am using eToro hERE.

Pros

  • Zero Fees
    To put it simply – they charge zero commission and zero fees for US stocks.
  • Regulated
    eToro might not be regulated under our local SC but they are under Australia’s ASIC. Which actually has higher standards compared to SC.
  • Fractional Shares
    eToro allows you to buy a fraction of a share. With the MYR falling always, this allows us Malaysians a lower entry point. You don’t have to fork out $450 for one Tesla share. Instead, you can start off with $100 or even $10 for that matter.
  • Easy and Intuitive User Interface
    The easiest to learn and use. The charts are simple and straightforward. If you’re looking to go deep into charts and volume of a stock, eToro wouldn’t be suitable for you.
  • Copy Trading
    If you’re looking to just copy someone’s portfolio, you can do so with just a click on the platform. I’m on eToro as dividendmagic and my portfolio is always available to be copied here: https://www.etoro.com/people/dividendmagic

Cons

  • You can’t trade every stock
    eToro does not have every stock in the US and internationally listed on their platform. They do have all the big ones as well as more popular stocks on there though which works for me.

Sign up

To sign up and open an account with eToro, head hERE.

Tiger Brokers

tiger brokers dividend magic

Pros

  • Regulated
    Tiger Brokers is again not regulated under Malaysia’s SC but they are regulated under SC’s equivalent in Singapore – the Monetary Authority of Singapore (MAS)
  • Listed on NASDAQ
    Tiger Brokers is a listed public company backed by Interactive Brokers Group Inc (IBKR) and Xiaomi (amongst others).
  • In-depth data
    Tiger provides much heavier data and charts for its users. Its level 1 data is sufficient for me but if you want heavier stuff, you can pay for higher level access.

Cons

  • Fees
    Unlike eToro and TD, Tiger charges fees. For trading US stocks, you’re charged US$0.01 per share or a minimum amount of US$1.99 per trade. This does not include forex charges which have been waived by Tiger for now.
  • You can’t trade every stock
    Tiger has much more stocks available for trading in the US and internationally compared to eToro. However, they don’t have stocks from the London stock exchange right now.
  • No fractional share trading
    Unlike eToro, you don’t get fractional share trading with Tiger Brokers. The cost to purchase a single share would be higher for some companies.

Sign Up

You can sign up with Tiger Brokers hERE and use the code DIVMAGIC for the following benefits:

  • Free level 2 Data for US stocks for 30 days
  • 1 commission-free trade for US or HK stocks (after the account is approved and opened)
  • stock voucher worth up to SGD 100 depending on the amount funded
Tiger Brokers referral

TD Ameritrade

td ameritrade dividend magic

TD Ameritrade has been around for a long time and a household brokerage name alongside IBKR. I’m picking TD instead of IBKR because of IBKR’s custodian fees of $10.

Pros

  • Zero fees
    TD, like eToro charges zero fees for US stocks including ETFs
  • Regulated
    Like eToro and Tiger and almost all other international brokers, TD isn’t regulated under SC. TD Singapore however is regulated under Singapore’s MAS.
  • Listed on NASDAQ
    TD Ameritrade, the parent company of TD Singapore is listed on NASDAQ.

Cons

  • No fractional share trading
    Unlike eToro, you don’t get fractional share trading with TD Ameritrade. The cost to purchase a single share would be higher for some companies.
  • Long Account opening time
    It is tedious to open a TD Ameritrade account. I’ve learnt from experience. It’s been a few months now and they are still processing my documents.

Sign up

To sign up and open an account with TD Ameritrade Singapore, head hERE.

End.

Right now, I actually have signed up for all 3 brokers.

A summary of all 3 can be found below based on my experience and research. I’ll continue to update the table and my reviews of both US and International brokers as I try and test them out.

I primarily trade with eToro because of their zero commissions. If however, I want to purchase a certain stock which eToro does not have on their platform, I turn to Tiger Brokers.

I also use Tiger Brokers for their more in-depth data provided.

And the big question as to why I’m not using TD? Their sign up process is long and tedious. I registered months ago and right now I’m still waiting for them to approve my documents.

Lastly, a few things to note when investing in the US. You should know by now that Malaysians are taxed a 30% withholding tax as foreigners by the USA. Which is why dividend investing isn’t that great when investing in the US.

Instead, I focus on capital gains there. Because as Malaysians, we don’t pay capital gains tax like our US counterparts. I leave dividend investing to local stocks, and focus on growth and capital gains in the US.

You can check out my US holdings and portfolio hERE. Onwards and upwards!

For the next article of the Investing Series, check out article 005 – Best Dividend Stocks in Malaysia.

As always, Facebook, Instagram, and now YouTube! Follow, keep up to date.

Duopharma Biotech Berhad (DPHARMA 7148)

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Filed Under: Guest Posts, Investment 3

The following article is written by a close friend – Wilson Wong.
He is an investor and works in the pharmaceutical industry.

I’ve found his analyses of companies to be really good and asked him to write this piece on Duopharma. It was his introduction and recommendation that put the company on my radar and eventually into my portfolio – the Freedom Fund.

As always, this is his take on things and you as a reader should always do your own due diligence before investing.

Also, both the investment and pharmaceutical terms used here might be a little advanced for some, if you have questions, please do leave a comment at the bottom of the article.

I thoroughly enjoyed reading this and I hope you do as well.

DUOPHARMA

History

Duopharma Biotech Berhad, previously a subsidiary under CCM Berhad underwent a demerger in 2018 as part of a restructuring exercise for companies under PNB’s portfolio. A main reason for Duopharma’s demerger is to focus on building a strong pharmaceutical business.

Over the years, Duopharma has grown into Malaysia’s leading pharmaceutical company in terms of sales volume and no.2 in sales value (behind Apex Healthcare). 

Duopharma’s portfolio consists of 367 generic drugs covering some of the very common therapeutic classes such as diabetes, cardiovascular disease, respiratory disease and many more. 

On the consumer end, Duopharma boasts a portfolio of 70 different supplements. Its products include a few household brands such as Champs, Flavettes, and EyeGlo.

For readers who are not clear about the pharmaceutical business, every drug that is discovered or developed by a company has a 20-year patent.

During the patent period, the drug will be termed as a branded drug which only the original manufacturer is allowed to market and sell. Branded drugs usually command a higher price as the original manufacturer aims to recoup its R&D costs as well as to maximise profits within said 20-year period.

Think of this as your most advanced cancer drug which can cost you up to 6 digits annually. After the patent expires, other companies are then allowed to manufacture these drugs. As competition comes into play, the price will of course be lower. The same drug will be sold under different brand names at a more affordable price.

A good example would be Panadol. The next time you’re at a pharmacy, try asking for generic paracetamol. Then compare the price difference.

Duopharma, Pharmaniaga to Undertake Fill and Finish Process for Covid-19 Vaccine

14 July 2020 – our current Science, Technology and Innovation Minister Khairy Jamaluddin announced that the Prime Minister had agreed to this proposal and it will be executed once a vaccine is available. Investors immediately flocked towards these 2 stocks, causing a brief limit up on 15th July before an eventual price retrace.

A few days later, our health DG briefly mentioned that the vaccine might be available as soon as the end of this year. Both Duopharma and Pharmaniaga stock prices again immediately rallied with extremely strong buying sentiment. They both closed at RM2.85 and RM4.03 respectively (up by close to 100% before all announcements).

Duopharma – The Pros

Higher margins

Compared to pharmaceutical companies such as Pharmaniaga, Duopharma in general, has a higher overall margin. This is understandable as both companies essentially have a very different business model although general investors tend to lump them together.

Duopharma primarily focuses on manufacturing generic drugs and selling them to hospitals/government while Pharmaniaga focuses on logistics and distribution services for drugs. 

Even though Pharmaniaga essentially monopolizes logistic and distribution services in Malaysia with their sheer amount and reach of distribution centres in Malaysia (that’s how our drugs can reach even the most rural hospitals), we cannot ignore that this also comes with a very high operational cost. It acts as a double-edged sword for Pharmaniaga.

Strategy to venture into niche drugs

Among all other pharmaceutical companies in Malaysia, Duopharma clearly outlined that they wanted to focus and develop a basket of niche drugs to meet the market gap. This is an interesting strategy and could pay off should they succeed in their venture.

Moat in Insulin production

I first encountered Duopharma when I was studying the price of insulin in Malaysia and realized that Duopharma offers the cheapest insulin to our public hospitals.

For those with a brief understanding of diabetes, you will know that all diabetic patients will eventually end up relying on insulin. As it turns out, Malaysia has one of the highest diabetic populations in the region.

Duopharma’s insulin contract was extended by the Malaysian government at the end of 2019 and is estimated at a value of around RM91.06 million. Looking back at their financial report in 2019, as much as RM283mil of revenue is derived from the public sector. By combining both numbers, insulin contributes a huge chunk to Duopharma’s bottom line.

Duopharma – Future Prospects

Acquisitions in Korea

In line with Duopharma’s strategy to foray into the development of niche drugs, the company acquired stakes in both Pangen Biotech (8.9%) and SCM Lifescience (5.8%). By partnering with both firms, Duopharma has access to the development process of biotherapies.

As of FY2019, PanGen had obtained product registration approval for Panpoetin, the EPO biosimilar co-developed with Duopharma Biotech, from the Korean Food and Drug Administration (KFDA) on 28 November 2019 and is in discussion to set up a joint biological manufacturing plant in Klang.

As for SCM Lifescience, they are on track with Phase II clinical studies for chronic graft-versus-host disease (GVHD) and Phase I clinical study for acute pancreatitis. Also, the company will embark on Phase 1 clinical trials for stem cell treatment for atopic dermatitis.

Launch of new bio-similar

This is again a bit technical and might be difficult for readers without pharmaceutical knowledge to understand. For certain breast cancer patients, they can be treated with a targeted treatment called Herceptin (trastuzumab). Duopharma had managed to manufacture a biosimilar of trastuzumab with Zuhera as the brand name. Again a biosimilar will be cheaper than the original biologic drug (almost similar to generic drug vs branded drug). This will again help Duopharma gain more sales and provide an affordable option to patients who cannot afford branded drugs.

Other expansion plans

Aside from developing revenue streams from niche drugs, Duopharma is also aggressively expanding its facilities. Over the last financial year, Duopharma completed its Highly Active Pharmaceutical Ingredients plant, upgraded its soft gel and liquid manufacturing line and is set to upgrade another Oral Solid Packing line in 2021. With the higher manufacturing capability, we should see a growth in revenues. 

Duopharma – Risks

Losing out in government contract

Traditionally, Duopharma is relying a little too much on government contracts and will see it’s earning affected if they lose out in tenders. The management has acknowledged this issue and has since been working on improving sales in the private sector as well.

Clinical trial results

Clinical trials are always hit or miss. Should SCM Lifescience fail any of its clinical trials, it might affect potential new revenue streams for Duopharma.

Is it still worth buying Duopharma?

With the current price, the short answer is “NO”. Even with a government contract to manufacture Covid-19 vaccine pre-filled syringe, it will not propel Duopharma earnings by 2X and I doubt the growth will even be anywhere close to 50% yoy.

We need to remember that Duopharma does not develop the vaccine, they are just getting the vaccine and packaging it into syringes. Of course, if you are a speculative trader who spotted a nice chart pattern or indicator and can stomach the risk, Duopharma and Pharmaniaga will definitely be one of the few active stocks in the next few trading days. However, for long term investors looking for a good company, Duopharma is definitely worth keeping in the watchlist. 

by Wilson Wong

For more analyses on companies, I have a list hERE.

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My Portfolio is Built on Frugality

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Filed Under: Financial Independence, Frugal, Portfolio - Freedom Fund 17

The Freedom Fund – A Product of Good Offense and Defense

I’ve been asked often about how I managed to amass an RM400K (almost RM500K) portfolio at 30. This post isn’t about showing off and flaunting my portfolio, so I hope it doesn’t come off that way.

I can narrow it down to two basic parts – Offense and Defense.

The first and most obvious is your ability to generate income and returns – your offense. With a high income, be it from your day job, side hustles, a business, or from your investments, a good offense is directly proportional to your increase in wealth.

However, based on my experience, a good and solid defense is perhaps much more important than your income. A solid defense is equivalent to having a high savings rate and being frugal.

Let me start off by saying that playing good defense and being frugal isn’t for everyone. I am not telling you to follow and copy what I do to the letter, but this is how I was brought up and how I built my Freedom Fund.

My Childhood / Youth

I’d like to think that my childhood and good early parenting helped make me the person I am today.

I am from a middle-class family. We’ve had our fair share of ups and downs. We’ve never gone hungry or without a meal but food was never EVER wasted.

I got RM10 per week from my mum during primary school. Thus, the first lesson in budgeting was born. If I spent all RM10 on Monday on nasi lemak and french fries, I’d starve for the week during recess. Even at that young age, I managed to save some money every week. That money was then used to buy stuff like erasers for that eraser flipping game.

Fast forward a few years, high school was pretty much the same. I had a bump in allowance of course but I was still saving money every week. I recall looking on enviously at my friends who all had iPods. I had to save money for a year before getting my own. That feeling of achievement at the end though, was worth it.

University – One of the biggest regrets I have to this day is that I didn’t take the time to apply for scholarships after my SPM. I surprisingly got really good results but no one taught me about scholarships.

I had the opportunity to study abroad as well with my parents offering to fund my studies in Australia. Instead, I completed my education locally to save my family money.

Back then, I was fortunate enough that my parents were able to pay for my education. However, I took out a PTPTN loan anyway as the interests were lower than FD rates. It was a no brainer for me. I took my parent’s money for my education and placed them in FDs. And after 3 years of education, guess what? PTPTN was giving out a 20% discount for those who settled their loans early. At the age of 21, I had made a 20%+ return. This was to be my seed money.

Another thing that helped fund my portfolio initially was that I took a part time job when I was studying. The money was one thing but it helped built character and a sense of gratefulness when I eventually entered the workforce full time. So parents, even if your teenage child doesn’t need to get that part time job, I think you should make them work anyway.

Entering the Workforce

In the first week of entering the workforce, I followed my seniors and colleagues around. We mainly ate in the mall costing me RM15 – RM25 per meal. This was when I was on an RM2,800 salary. Thankfully, I smartened up pretty quickly and my staple food was economy rice – chap fan.

I had breakfast at a nearby kopitiam – eggs, toast and coffee for around RM5. Lunch was economy rice which cost me around RM10 or if I’m feeling rich, RM13. I had my dinners at home. This was my life for 4 years. Of course there were times when I splurged occasionally. Birthday meals, dates, the usual.

During this time, if memory serves, I had a savings rate of around 50%. This was when I started buying stocks. I spent the day at work and in my free time, I analyzed stocks. Sunway, Nestle and Scientex were my very first stocks and I still hold them to this day.

Being Frugal Today

A Penny Saved is a Penny Earned

Today, as you can tell from some of my posts on social media, I do splurge a little on food and travel. But let me assure you, every other day I am still in essence a frugal person.

I still play good defense and it is in my nature to be frugal. I still go for that economy rice (now RM15) when my friends and colleagues go for lunch at the nearby bistro.

I still turn off the lights and appliances when I leave the room. I even do it when I’m not in my own house / property.

I still do not turn on the tap to the maximum when washing the dishes.

I make sure to have a fan in my room and office so I don’t turn have to turn on the air conditioning. And at times when I am hot and I have to, I set it to 24°C. That’s the lowest I’ll ever go.

I practice most hacks on frugality like waiting a week before making a big purchase. I pay myself first when I get my salary. I buy in bulk whenever I can. And I love credit cards for their cashback and points.

All these might seem a little extreme to you, but this is how I live. It isn’t tiresome for me (it might be for the people around me), but I believe these are good habits to have. And all these, in a huge way has helped me immensely in wealth creation.

Because a penny saved is a penny earned, a penny earned is a penny invested and compounded.

A few of the stuff I use to save, earn points etc can be found hERE.

Despite everything I’ve laid out, remember to treat yourself to that occasional good meal, to travel and experience the world once you’ve built up your portfolio. Use your dividends and passive income for some leisure. Just remember to flip that light switch off before heading for that holiday.

End.

Both defense and offense are equally important on the road to financial independence. With my savings and frugality, I wouldn’t have much of a portfolio if I did not invest my money. So remember to always invest. And invest for the long term.

I apologize if you came here looking for tips on how to invest and how to pick stocks and build wealth. But the truth is, with me at least, it was discipline and good solid defense.

It’s a boring route and definitely not for everyone. So please do not feel bad about yourself if you are a big spender. Your huge income capabilities could very well outweigh your bad defense.

It is however my intention and wish that perhaps after reading this, you just might turn off that switch when you leave the room.

Do not confuse frugality with being cheap.

Onwards and upwards!

For the next article of the FI/RE and Savings Series, check out article 003 – Passive Income in Malaysia.

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