Wednesday, October 18, 2017

Recent Action - Ho Bee Land

I initiated another small position im another developer, this time Ho Bee Land for 10,000 shares at $2.51.

Some of you may have recalled that I used to own this company in the past (See Here) which I have since divested so it is not a company which I am not unfamiliar.

In any case, I have re-initiate the position for another short-term momentum play given how aggressive the developers are in the market these days doing their restocking of their land bank.


I'll put down some of my thoughts in the summary below:


  • Recurring Income Stream of prospective $150m
Hobee recurring income stream is extremely strong with its crown jewel Metropolis with its 100% occupancy contributing 60% of the total recurring income stream at about $85m. With some undergoing rental reversion this year and the positiveness in the commercial sector ticking up, I am expecting another positive rental reversion in this one.


The company also owns 6 investment properties in the UK:


- 1 St Martin Le Grand
- 60 St Martin's Lane
- 39 Victoria Street
- 110 Park Street
- Apollo & Lunar House
- Lombard Street


You might have recalled that the company divested Rose Park earlier this year at a 41% divestment gain and recently bought the Lombard Street at around 5% cap rate.


The investment properties in the UK is expected to bring in a full year recurring income stream of about $65m, or 40% of the total rental income.


  • GBP Strengthening against the SGD
The company has a natural hedge against the currency as it incurred its debt in GBP.

While this is a non-cashflow item, still the strengthening of the GBP against SGD will increase the value of it's NAV since the company will not incur translation losses in its comprehensive income.

Since the brexit low of 1.70, the exchange rate has risen close to 1.80 as of today writing.




  • Overseas Venture Project


The overseas venture project is the one which I used to have concerns in the past, especially after seeing its China JV write down impairments a couple of years ago for its Tangshan properties which they co-owned a 50% stake. Thankfully, the trend has been reversed as the company recognized profits from its China projects in its 1HFY17, mainly from the sales of their development in Yanlord Western Gardens which to date is 70% sold. The Tangshan development is also starting to sell with to date 30% sold.


The Australia project in The Pearl in Melbourne and Rhapsody in Gold Coast have almost been fully recognized in the book already.


  • Singapore Sentosa Properties
This is the big key re-driver in my opinion given how the company impaired its Sentosa properties last year with a huge $36.5m in their book.

Given how aggressively UOL has bidded for landbank Nanak Mansions recently as well as CDL in its Amber Park, the URA PPI index is showing a bottoming in the Q2 of this year. We might well see the start of another property boom in the market.

The company's properties in Turquoise, Seascape and Cape Royale are not worth that much in the book at about 26 cents, but if they can sell out, it might be worth noting if Mr. Chua is turning his strategies again in the local market sector.

For the moment, it does look like he is focusing his strategies in the UK where he sees better opportunity.


  • Market Depth Volume shows decreasing sell queues
This is something which I've been monitoring for a while.

The sell queues seem to be decreasing and it is well absorbed by the buyers so far. Still, being a rather low number of floating shares in the market, it is not easy to follow big brothers UOL and CDL.

The company share price hits an all time high of $2.55 back during the 2007 boom. It'll be interesting to see if they can break their all time resistance.

  • Dividends Yield Not Great But Sustainable
The dividend yield is nothing to shout about and is not my primary objective for buying the shares.


Still, knowing that they payout around 5 to 6 cents dividend, which amounts to about $34m, the company can well afford the dividends.


Summary


Like mentioned in the beginning, the probability swings on the momentum given how developers are leading the pack. It is worth taking a bit of risk for the much bigger upside reward that these companies might present.

They have been undervalued for a long time, this year might be their time to give it all up.







Tuesday, October 17, 2017

My Wisdom Tooth Surgery Experience

I know this is a bit random but anyway I just want to share about my experience for my wisdom tooth extraction which may benefit those who wanted to do it.

In the past month or so, I have been having gum infection in my right mouth and it is affecting my work,  sleep and mood and I get frequent headache every now and then.  It was a horrible experience that I am simply too lazy to do anything,  even writing this blog.

Anyway,  so I went to my regular doctor visit at Orchard Scotts Dental attended by a friend of mine,  Dr.  Kelvin Chua and so long story cut short,  he advises me to extract out two of my wisdom tooth that impacted the right side of my mouth.

There are no impact yet to the two wisdom tooth on the left side so he gave me an option whether to keep for now o to take it out anyway.

Being humji (not a big fan of visiting dentist since young),  I decided to proceed with just the extraction of the two wisdom tooth on my right mouth that causes pain.



I've been hearing stories about how painful it is to extract out wisdom tooth so my expectations were elevated and I prepared a lot mentally for such pain. Sad.

So the day has finally come,  that day is today and I went a bit early just to allow room for myself to take a deep breathe (I've been doing the same since young whenever I had to attend a major exam).

Dr. Aidan Yeo is the surgeon dentistry who will be doing the extraction. Just google his name and you'd soon find out he is the best in Singapore,  absolutely top notch according to a few friends.


Procedure

He started by explaining a few administrative things before asking me to lie down. After cleansing the area, he injected a few doses of anaesthetic to the gum area. I'm not too afraid of the needles so I would rate the pain 1/10.

We waited for about 2 minutes for the effect to spread through the gums area before starting his procedure.

So he started with the top tooth first. I felt a bit nudge and that was it,  all it takes is about 7 seconds for the tooth to come off before I was even aware.  Level of pain 0/10.

The bottom tooth was a little more complex because more than half the tooth was rooted to the gum so he had to cut the gum area before extracting out. It definitely feel a little difficult because he was nudging it out a few times but not really successful. So he proceeded to cut the teeth a bit more,  nudge a bit more before it was done. This one took a bit longer but still relatively fast to the normal surgery.  All he took was a mere 4 minutes to do it. I experienced just a very minor pain when he was trying to nudge it harder the first time round but thankfully no big deal after that. Level of pain 2/10.

He then proceeded to sew the gum area and the nurse helped to clean up the wound with the gauge and thereafter they allowed me to lie down over the next 10 minutes to rest.

Tadaaa...  Here comes the grotesque part.

Goodbye Wisdom Tooth!!! 

I was given a 5 days medical leave and quite a bit of medications for antibiotics and painkiller if I needed to.


Finances

Since this is a finance blog after all,  this is probably the part where it would interests most.

The bill came up to a total of $1,737.15, out of which $1,028.65 was claimable via medisave.

So I had to top up the difference in cash amounting to $708.50.

If we look at the breakdown,  the top tooth was considered a normal extraction so it was cheap at $300. The bottom part was more difficult so it was charged a surgery price at $1,250. The rest was medication costs at $78.65.



I'm still biting on the gauge to stop the bleeding as I write this so I'll see if I can update anything again over next few days once swelling has subsided.

Hide my humsum face,  😂 

Thanks for reading.

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Friday, October 13, 2017

What Is A Good Investment?

I received an interesting email today from a reader who surprises me with a very basic yet intriguely mind stimulating question.

He asked me what makes a good investment. I had to think a while before replying him and thought it'll be a good point for discussion. 

A good investment in my definition is something in the future that you can derive a greater value than what was invested in the beginning. The key word there is "greater value" and this aspect can be both known or unknown.




One example of a "known" aspect is putting your money in a triple A credit rating government bond or in the local context the Singapore Savings Bond (SSB)  for instance,  which yields investors a return of about 1.2% to 2%. What this means is if you put $10,000 today,  this amount will grow to more than $10,000 sometime in the future with a very high known probability. 

The other example of an unknown aspect is putting our children to school. Now,  we know that with all the rising school fees and the additional tuition costs it isn't easy to raise a kid.  In fact,  so many parents follow the traditional norm these days that it is taken for granted that education is a known aspect of good investment.  We know that isn't necessarily true but many people still view it that way. 

In the stock market arena,  a good investment doesn't have to be a good company as well. 

Buying and identifying a good company isn't the hardest part of investing. We all know the supposedly good companies. In fact,  one google search of the top 10 market cap in the world is all it takes for me to identify the good companies. What is difficult about investing is assigning a valuation to these companies and buying them below what they are worth. Buying good companies can turn into a poor investment if we are complacent. 

On the contrary, a good investment can also be buying distressed companies far below what's their worth.  In fact,  we see this all the time with corporate m&a and buyback.  The underlying reason is similar in nature. Buying a distressed company can turn out to be a good investment. So to those people who thinks that buying a sunset company like SPH "will surely" lose money, it may not be the case. 

Does a good investment means you need to buy something that is fanciful? Let me think for a second what are the hot in right now.

What about cryptocurrency in the form of bitcoin?  Does making money from a popular investment is a better investment than making money in a pillow strategy? I am not suggesting investing in bitcoin is a bad idea.  In fact,  it can be one of the best investment if the world is using them eventually.  We just don't know it yet at this point. 

So going back to the reader who emailed me, these are basically my thoughts on the topic. I don't think all of us have to agree with one another just because we are the same species but the human mind is so different and diverse. You would have your very own definition that forms your thoughts and strategies. 

I'd like to ask the readers.  What is your definition of a good investment? Does it have to come with a particular set of rules, time horizon or anything like that? 

Thanks for reading.

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Monday, October 9, 2017

How Do You Define Your Time?

As financial bloggers, we've always been saying that time is an important resource that is scarce in our lifetime. 

Time is a fixed currency and is probably the only thing that is constant. All of us had 24 hours a day to allocate our time with and it is up to us how we define them.

Time in the context of this article is focus and energy, which everyone has a limited supply of.

Now, I see my time in the context of three general categories:



Professional - Active Work and Career Related Matters.

Social - Activities that involves gathering around with people, families or friends that are important in my life.

Leisure - Activities that are hobbies to me like traveling, blogging, watching movies, etc

Of course, there are endless possibilities that we have not included in our time such as exercising and resting but that's why all the more we have lesser resource to allocate with.

I see professional as doing things for the better of others for something that you get in return for. For example, as a salaried worker, you exchange your time by staying at your cubicle for 8 hours serving your clients and stakeholders in exchange for the salary you get at the end of every month. Similarly, you can be a swimming instructor who gives your students a class every morning on the weekends. The nature of such means that you have a responsibility of giving by taking something. 

On the other hand, leisure can be related to hobbies that you are interested in exploring for the happier inner of your own self or others. For example, I classify blogging under this category simply because I am doing it for leisure. When I have the time and ideas to start writing, I write. I do not write because I have deadlines to meet or expenses to worry at home. If I were to take blogging as a serious full time job in the future, I may struggle with doing so and ended up liking it a lot lesser.

I guess the purpose of this post is to enable us to understand the primary force of allocating our time resourcefully. 

There are people who unfortunately struggle to keep up with the daily expenses by having to allocate more time professionally than leisurely and I salute them for doing so. They do what they did because circumstances doesn't allow them to choose otherwise. In this case, they are clear on what they were doing.

For the rest, how do you define your time by allocating optimally?

Thanks for reading.

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Friday, October 6, 2017

"Oct 17" - SG Transactions & Portfolio Update"

No.
 Counters
No. of Shares
Market Price (SGD)
Total Value (SGD) based on market price
Allocation %
1.
Comfortdelgro
70,000
2.00
140,000.00
23.0%
2.
M1
67,000
1.78
119,260.00
19.0%
3.
Fraser Logistic Trust
80,000
1.08
86,400.00
14.0%
4.
First Reit
30,034
1.355
40,700.00
6.0%
5.
Vicom
6,600
5.70
37,620.00
6.0%
6.
Warchest*
190,000.00
31.0%
Total SGD
613,980.00
100.00%

It's time for another update for the month once again.

I've been so busy with work recently that I don't have much time to monitor and research the market much. Other than returning from our holiday trip in Penang, I've also been assigned to go to the Bangkok office for a week hence the running here and there. I've also had some issues relating to my health (toothpain) as I needed to extract out my wisdom tooth later in the week, so that's another thing that I am worrying about.

It seems like I did quite a bit of divesting as I trimmed down the number of stocks in my portfolio as I went heavier in cash nowadays, I guess I really am not able to find anything with compelling value. I am currently monitoring some hotel developers like Grand Hotel Central and FEO as I think they'll do well in the next couple of years with the sector. I'll have to wait for the right time for this.





During the month, I made a full divestment for Fraser Commercial Trust (FCOT) at $1.37 after they announced that their anchor tenant, Hewlett Packard, will not be extending their lease at Alexandra Tech Point. It's quite weird because I actually know much earlier that they will be moving to Depot road through the course of my job but for some reason I didn't expect them not to announce it to the public yet only until recently. In view of the uncertainties, I am out of this first meanwhile and will hunt for something else.

I also divested the rest of my CDL Hospitality Trust (CDLHT) at $1.63, which represents a pre-rights price of $1.71. Some might recall that I used to have this as my top position earlier in the year before I divested them bits by bits. I had a bit of doubts in my decision when I consider this because we all know the hospitality sentiments are now turning back up, but for some reason I am not very comfortable with the valuation they are now. It just doesn't seem there are too much margin of safety here at this price.

I used some of the proceeds to accumulate more positions in Comfortdelgro and M1 as I tried to build a bigger position in these two currently. I am just adding them a bit each month as and when my cash allows as I still have belief in them that most of the bad news have been priced in by the market, even to the extent too much reaction from them.

You can view the full detailed transaction here.

Networth Portfolio

The portfolio has decreased from $620,386 in previous month to $613,980 this month (-1.1% month on month; 38.9% year on year).

To be frank, the second half of the year has been a year of underperformance as it did nothing but down in general and I do not expect my performance to turn around anytime soon. On the other note, I do not have any properties and banks in my portfolio either so it'll be a matter of time before I trail the market. But let's see how it goes by the year end.


The earnings season is here again and I am looking forward to it once again as I will kick start monitoring closely the companies I have in my portfolio.

Thanks for reading.

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Monday, October 2, 2017

Nature of Bodyclock

I haven't been writing for quite a while so I thought I'll write an impromptu on something that suddenly came up to my mind. 

Have you ever experienced a moment when you feel so passionate about something that you forgot the time? Or have you ever experienced a time when you feel so despair and tiring that you don't feel like doing anything? 

I wanted to relate this feeling of mine that I have recently. 


Perhaps it is the traveling post-school holiday at Penang that makes me indignantly lazy.  Maybe the other mind is saying the catching up of work and the continuous never ending backlog that I've been working on that doesn't give me a clear indication of light at the end of the tunnel. To add to that,  I've also just been assigned to our office in Thailand which adds to that backlog even further. Maybe it's just new challenge I am seeking. Heck,  I haven't been able to check much on market status for most of the time these days. 

It can cut a frustrating figure not to find that one important light in our life. Morning starts with sunrise and evening ends with sunset and another day is passed.

A lot of people relate to this as a relax and wait frame of mind and this can be toxic and detrimental to human self being without being consciously aware. What we actually want is a relax,  engage,  envision,  and expect mindset. It doesn't have necessarily have to be work but anything important in your life such as health,  family,  art,  volunteering,  etc. 

The hunger for things grows and dies in me at different timezone at certain time.  At times,  I can be so engaged in writing that I spend many hours at it while at times I just want to spend my lazy hours couching by the sofabed in my living room. This is what they called the eat when you are hungry,  rest when you are tired and sleep when you are sleepy. 

Still finding the tune to how body nature works... 

Thanks for reading.

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Saturday, September 16, 2017

Comfortdelgro Hits 3-Year Low

Comfortdelgro hits not only a new 52 weeks low last Friday but also a 3 year low. The last time they hit around this share price was around in Jun 2014. That was right before the contracting model announcement takes place for the public transport.

I just did a quick comparison to see how they fare in terms of earnings between the two.

It seems on a glance earnings was pretty much on par. While operating profit came in slightly lower in 2017, finance costs came in much better due to the lower borrowings they have (stronger balance sheet), hence overall profit was higher. If we just annualized the FY2017 earnings based on the half yearly, we'd get about $320m for the full year. That's a big IF earnings had bottom already.




If we break it down by division, we actually don't see a lot of difference with what they are 3 years ago. Public transport is evidently higher with bus and rail leading while margins are marginally higher. The taxi division is actually rather flat, with margins coming in at around 11.7%.

Based on the fleet size published from the LTA, it appears that 2017 has dropped to as low as 2011 and not 2014. So there are something to reconcile here. Perhaps it could be that utilization is higher or the revenue they charged is now higher. Given that margins are rather similar, it appears the latter is more unlikely.





On Friday after market, LTA announces that SMRT had won the tender bid for the Thomson East Coast line with $1.7b over 9 years. That's 30% lower than what SBS Transit has come up with their proposal. Given that margins are only hovering slightly less than 10%, I'm quite skeptical on how they can come up with the 30% lower tender bids. If we are an outsider, we'd never be able to come to rationale the major difference. Of course, one thing good about SMRT is they no longer had to account publicly on their financial statement. We also know who their major shareholders are.

The news will be huge for the media and analyst to over-exaggerate on the failure for SBS Transit for failing to get them. I actually think earnings wise this will not impact much in the short term. It's a massive project filled with potential cost overrun. That's why the government is taking the revenue risk for the first 9 years. A friend who worked in SMRT once told us that it's not easy to make money on the rail. There's a lot of surprises that will hinder the forecast.

Meanwhile, the slide will continue and probably compounded with even more bad news for CDG.


Thanks for reading.

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Thursday, September 14, 2017

The Struggle With Hardwork

My wife and I recently watched a Japanese documentary at home and we began pondering on why the Japanese, and typically the older generation tend to have a different attitude than the newer generation like ours.

Friedrich Nietzsche, one of the famous German philosopher, once said that the most essential thing in human history is that there should be a long obedience in the same direction, thereby results can be attributed to the cause which made life worth living.

The Japanese family that we saw in the documentary aspire bringing improvement in the lives of the consumer. They work hard and for long hours and made constant improvements to the product they are selling in order to make it worth for the customer who consume them. They are willing to take hardship, slowdown to reboot before moving on to identify the rootcause. They do not simply focus on the results directly but on the process that leads them to the eventual success.


Now, the younger generation often have a different mindset of thinking.

We are a lazier bunch of people, no less thanks to the society that shaped us this way. We strive for a work smart, not work hard attitude and are constantly being judged with our efficiency.

The society that we live in demand faster outcome with less desired amount of work. Everything we long for is easy and instant. Consumers want everything that is ready for immediate consumption.

Think of merchants today which are incorporating cashless payment to make it more convenient for the consumers to tap and go. A big yes to convenience but try teaching that budgeting skills to kids who thinks a plastic card can buy everything in this world.

In the midst of the transitioning, our lives have come to resemble those of tourists, wanting the experience of touch and go but not wanting to stay long enough to risk experiencing the realities that comes with inconvenient permanence.

There is hardly any loyalty with employees who stayed a permanent 10 to 20 years like most did in the past. Employees treat companies like a cash machine and employers treat employees like a commodity. Whoever has the upper hand wins and down you go, thank you very much for your "service" and "dedication".

The "short cut" epidemic has reached every aspect of our culture and behavior from health to relationship to career to saving/investing. Some people personally find it difficult to save because they are so accustomed to living life in the spending zone. There are way more people who found it difficult in building up their wealth because of the lack in competency in doing so and in the midst of it fall to prey of a quick scam fast profit.

I had personally struggled with health myself in the past. It is not an area which I had much competency in and also not an area in particular which I enjoy. But I know it is important to get myself fit and health back in shape. Since then, I started to take interest in the food I eat, the nutrients my body needs and the rest that my brain requires. They are hard work no doubt. Put a sinful fries or instant noodles in front of me and I can sniff it from 5 yards and beyond. It's a struggle. When I fell ill, I knew I had hit the nails on my head but will continue to be inobedient afterwards. #Trueconfession.

We are humans and whether you like it or not, we are all vulnerable to temptations of some sort that you are weak in. It is in our human tendency that we cut corners and choose the path of least resistance to dress up our cowardice and weakness in disguise and in doing so, we began to relentlessly making ourselves weaker and more probable to losing the race.

Take action before it's too late, even if your inner self had already knew about it.

Thanks for reading.

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Tuesday, September 12, 2017

Is SPH Worth Taking A Look Now?

Every once and then, there would be companies in focus that would be the major target for the short seller. These are mostly sick companies because their outlook are bleak. If you recall in the early of 2016, we had similar cases with oil and gas companies. Keppel and Sembcorp took the most hit and they were depressed to levels that everyone just want to shun on it.

SPH has been a grandfather stock for a very long time. Long time shareholders would know that they used to get to as high as $18 to $20 before doing a split back to $5. The GFC event in 2008 brought them down all the way to $2.40 before rebounding sharply when the market recovers. This was despite the start of the decline in the media print and ads as people start to read less hardcopy and go more digital. It didn't deter shareholders though as the company continued to pay decent dividends that goes from 24 cents for a few years after the gfc and only the past few years that they began reducing it to levels they can sustain.




With the current share price hovering at around $2.58, perhaps it's worth to take a look at what the company is worth. Let's break them down by parts.

1.) SPH Reit

This is the most straightforward play.

The Group owns 69% of SPH Reit which is currently valued at 1.05x P/BV at 99 cents. This is rather fair value considering that they use a rather aggressive cap rates to value their properties at 4.3% cap rates as compared to other retails CMT and FCT who are using a 4.9% cap rates.

$0.99 x (2,559,633,342 / 1,614,973,980) x 69% = $1.08

2.) Seletar Mall

The company held 70% stake in Seletar Mall in the highly anticipated divestment to the Reit in due time.

The latest appraisal for the mall is at $495m using a cap rate of 4.9%, again rather fair comparatively.

$495,000,000 / 1,614,973,980 x 70% = $0.21

3.) Bidadari Site

SPH and KDDL managed to outbid its competitor by winning the tender bid at the Bidadari site a couple of months ago at an agreed price of $1,132m. The book value of the land will be $1,132m x 50% = $566m based on its 50% stake. 

The Group will be redeveloping the land site for mixed commercial and residential use in due time so we can expect them to earn a margin on it by slapping a conservative tag margin of 15%. We can also see this 15% as a potential upside to the rnav.

$1,132m x 50% x 1.15 / 1,614,973,980 = $0.40

4.) Healthcare

The Group announces its maiden entry into the healthcare sector when it bought Orange Valley healthcare for $164m. The net asset value for OVH is at $71m, so the company is paying around 2.5x. Still, I think the right way to value this is using earnings multiple on the sector.

Orange Valley runs five nursing homes in Singapore with more than 900 beds and charges about $2,700 per month for each bed. Assuming 100% full utilization, it works out to be 900 x $2,700 x 12 months x  = $29m. This is just the topline margin. Based on the last earnings result from OVH, the company earns an EBIT of about $6.5m. Slapping an earnings multiple of 25x (based on competitors) and translating this into EPS, we get about:

$6.5m x 25 / 1,614,973,980 = $0.10

5.) Stake in M1 & Other Investment

The group has a 13% stake in M1, which is a small part of their market cap.

With M1 share price hovering at $1.80 and the other investment worth around $250m on the book, this works out to be at around:

[($1.80 x 13% x 930,151,000) + ($250,000,000)] / 1,614,973,980 = $0.29

6.) Net cash less borrowing

The company has cash of $233m and a borrowings of $1,484m and they are being consolidated from the group against their Reit.

($233m - $1,484m) x 69% / 1,614,973,980 = - $0.53


Adding point 1 to 6, we get a value of $1.55.

7.) Print, Ads and Media

If the current share price is $2.58, what this assumes from here is that the core media and print business is valued by the market at about $1.

Readership of SPH newspapers have declined since 2009 for about almost 25 over quarters to date and you can see there has been a switch to the growing trend of digital subscription. This is cannibalization in the sense while digital is up, hardcopy is down. This is despite the rather steady print price the group has set for their newspaper.

When consumers switch from print to digital subscription, advertising also drops since advertisers spend less in digital space. You can see how drastically the drop in the ads print revenue from this year to the last and to the previous year. The company continues to face margin pressures over the years as margin drops from a high of 37% in 2010 to 24% in 2016. The company also faces more impairments as the new CEO tries to kitchen sink this year while starting afresh next year, so we should see further impairment towards the year end.


With 9m FY17 media earnings coming in at $57m, we should expect full year earnings to come at around $76m. This translates to about $76m / 1,614,973, 980 = $0.05 or 20x earnings based on $1 price. Multiples for media are never cheap to begin with, even when they were doing decently fine all these years.

This is a big key here as the new CEO tries to redevelop a switch into digital over the longer term which should involve restructuring in the interim.

Final Thoughts

The drop in the share price has accounted for a lot of the drop in the media earnings as well as the bleak outlook.

I think it is safer to look at SPH as a special situation play than hoping for the media industry to recover, which is a way long shot and a big question mark.

Dividend sustainability would be key. I just suspect the company would be able to retain around 17 cents dividend payout for the next 2 years as the company divested some of their non-core investment. Do note that this is a return of capital not a return on capital though. They divest these investment assets and will not be able to generate further roic on the investment so you get it back as a capital repayment form.

Short sellers are having a field day these days, owning 30% of the overall volume in day trades over past couple of days.

There are always silver at the end of the lining if we managed to look at it closer.



Sunday, September 10, 2017

Two Faces Perception of Masks


Variant Perception is a concept defined by Michael Steinhardt as a view that is materially different from the consensus and that you have a belief that it has an average probability of being correct.

For many, the fear of standing out negatively overrides their desire to stand out positively. By following the herd mentality, you are cushioned by the many views that are supporting the reasons for the fact that makes you comfortable. The problem is usually the case where valuation gets higher and as investors you are paying that comfortability for a premium with lesser margin of safety.

On the other hand, being a contrarian is lonely because you are going against the crowd for most of the time. They are usually slow, infrequent in nature and are an outcast by most standard which most people don’t quite understand at the beginning. You’ll get plenty of questions which will make you rethink on your thesis and on the extreme you may begin to doubt yourself if that strategy even works after all.



Variant Perception can be a very useful strategy because it identifies a lot of value opportunity which was shunned by the general public masses and that is usually where the greatest distortion between value and fair price lies in between. That does not mean you will not make any losses in the interim, you will still do, but the aversion is far greater when most of the things have been priced in.

We always hear the famous quote of our favorite investor, Warren Buffett saying this:

“The first rule of investing is Don’t lose money”

“The second rule is Never forget the first rule”

This does not mean that investors should never incur the risk of any loss at all and completely avoid any investment. What this really mean is that over several years of investment, your portfolio should not be exposed to appreciable loss of principal which is defined by a permanent loss of capital.

Take an example where you are being assured that the probability of an event happening is 51% as opposed to losing at 49%. If this statistics hold true, then it will make sense to go for the win with the higher probability. That doesn't mean you will not make losses, you can still do as the probability of losing is still there, it is just that probability is lower. The problem is if this statistic thesis does not hold true 100% percent of the time, which almost always happen to an investor who are subject to various market and perception forces.

The other thing that is exciting about this Variant Perception is being a contrarian it is never wrong to change your mind if the thesis has changed. I think there are plenty of people who shy away from openly admitting their decisions are wrong and failed to take action from it. The funny thing about this is you can be wrong but taking the required action to make it right and you can be right but taking the wrong perception to think you are right when you could be wrong. Sounds complicated right?

What this means in simplistic manner is that if you are wrong, hands up and admit them and then learn from the mistakes as this will be better in the long run than hiding in the shell and think it is alright.

The greatest investor of all time, Buffett doesn't make losses? No la, he still did, he just learned from his mistakes a lot better than us.


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Tuesday, September 5, 2017

"Sep 17" - SG Transactions & Portfolio Update"

No.
 Counters
No. of Shares
Market Price (SGD)
Total Value (SGD) based on market price
Allocation %
1.
Comfortdelgro
61,000
2.18
132,980.00
21.0%
2.
M1
61,000
1.78
108,580.00
17.0%
3.
Fraser Logistic Trust
80,000
1.07
85,600.00
14.0%
4.
Fraser Comm Trust
40,377
1.39
56,124.00
9.0%
5.
First Reit
30,034
1.33
39,945.00
6.0%
6.
CDL Hospitality Trust
24,000
1.59
38,160.00
6.0%
7.
Vicom
6,600
5.70
37,620.00
6.0%
8.
OCBC
34
11.08
     377.00
1.0%
9.
Warchest*
121,000.00
20.0%
Total SGD
620,386.00
100.00%

I am doing again an early update because it's the school holidays and we will be traveling again for a short holiday to Penang for about 5 days after today. We are geared up and ready for another round of experience.

There's a mix of both good and bad during this month. The month started badly and news surrounding the North Korea keeps appearing. To make it worse, there are tons of news about how Grab is going on all out to capture the Singapore market to fight off Uber. This sets the tone for short sellers to make a big hit on the market. The good news is it gives me a good opportunity to accumulate. Love it. Keep it going guys.



I started off by divesting all my shares in Katrina after a disappointing short stint which didn't work out. I made a loss of about 7% but it wasn't particularly huge from the absolute amount point of view. I was disappointed to see the earnings result despite increasing the number of outlets, margins was heavily squeezed as the company tried to move from the traditional dining to online delivery model. While it appears that its a good move, it seems to me that it is cannibalizing the dining numbers more than bringing in additional revenue. Anyway, F&B is always a tough one. I keep reminding myself not to engage in this sort of environment but always digress. Naughty me.

I also divested Guocoland at a price of $2.30 after just holding it for barely a month. This was a good 22% over a large absolute profit so this brings in the most impact coming into this month. I had a target price in my head of around $2.30 when I bought in and didn't want to wait until their value is fully realized because you never know what to expect out there from a HK listed owned parent group. I always felt that HK developers are trading at such steep discount for such a long time that I am not convinced the value will be fully priced by the market. Anyway, it's money in the pocket first that matters.

I also load up about 21,000 shares of First Reit at $1.33. This was a pure move of trying to increase yield for the longer term, giving a decent yield of about 6.4%. The company is buying the Siloam hospital and the management has done well over the years to increase the DPU steadily.

I also recently initiated a small position in Vicom which I blogged here. I am still watching the deregistration number and it still looks high over next 1 to 2 years, so it is unlikely we will see improvement in the near term. The yield is fairly decent and I am playing out a thesis that they might distribute the cash they have on hand. 

I also accumulated a little bit more shares in Comfortdelgro and M1, which are currently my biggest two positions. Both have been battered really bad so I am sitting on a loss currently. To think that after all these bad news are in, I am actually only down 6% so far for Comfort and 5.5% for M1, inclusive of dividend, so they are not as bad as I thought. Still, I think no light at the end of the tunnel, and short sellers are still lurking, so maybe another round of accumulation for me next month.


Net Worth Portfolio

In a market like what we experienced today, I am pleased to find that the portfolio has trended well in the right direction from the previous month of $612,564 to $620,386 this month (+1.3% month on month; +39.3% year on year). This portion includes capital injection, and of course the dividend just received recently too.


Cash portion has also gone to comfortable level back at 20%, so it'll be ready for any further accumulation should weaknesses persist.

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