Tuesday, April 10, 2018

Recent Action - Comfortdelgro & Vicom

I just want to fill in quickly an update I just made since I just made a portfolio update not too long ago for the month.

I divested all my position at Comfortdelgro at a price of $2.09 today for an overall -9.1% loss (inclusive of dividend). Year to date however, this divestment has returned me a positive 5% gains since the start of the year.



I've been reading and following the development about Grab and Uber since last year and to be honest there are structural issues which I was slow to act upon. With the advent of these technology low capex disruptor, it is a cut throat industry to be in right now, with margins coming in at multi years low. Even Chairman Lim has acknowledged this when he mentioned in the recent interview that they are expecting the vehicle margins to erode further and that they would be looking to new business to supplement their income stream.

The latest news being an acquisition of S$30.2m on the patient transport in Australia and the bus charter in Aussie.

CDG continues to make acquisitions their main priority and to be frank it is difficult to gauge the internal returns they were expecting based on the number of their many small acquisitions.

Even with the uber saga out of the way, the company will continue to face an overhang with their continuously high capex intensive nature and I don’t know if this is still the way forward 10 years later. I think if new technologies can come in and attack the private vehicle, they will soon do it with the buses and conquer other areas too.

Being a strong blue chip in the region, and backed by strong institutionals, I think it’ll continue to do fine, generating profits year after year and distributing dividends to their shareholders. The only worry from here is probably how the management is bringing the company forward on this. I have so far remained a shareholder almost only in the hope of their 5% dividend yield and am not expecting anything much more from the growth part.

Since the start of the year, the selling has somewhat abated and is one of my top performer in the portfolio. It’s a bit ironic that I decide to divest at this point in time but I thought it was a somewhat decent exit and lessons learnt from there.

I documented in my 2017 end of year portfolio that I was slow to act upon the development of the incoming news and I was somewhat forced to average down thinking that the market has mispriced them irrationally. I still think though that anything at $2 and below represents a good deal for a 5% yield and a good trade range, this has somewhat becomes my trading stocks like ST Eng and Singtel which I have continuously enter and exit at multiple various prices.

With this out of the way and with the proceeds, I went to buy 2 counters which I think is more defensives, higher dividend yield (and payout) and better outlook certainty I can forecast.

The first company is Vicom (I will blog about the second company in the next post)

Vicom is an existing position that I already have and I have accumulated more at a price of $6.05.

This is in line with my personal strategy of accumulating a stock with a higher than 5% yield.

FY2017 was a challenging year for the company as it saw a 4% decline in their inspected vehicles which dropped from 488,186 to 468,807 vehicles. In the recent annual report, Chairman Lim commented that de-registration is expected to slow down in the next few years ahead which likely means that we would see a bottoming in progress for FY17. 

We should see a better FY18 numbers with de-registration slowing down and inspection numbers to slowly go up.

While earnings per share for FY17 came in at 29.90 cents, free cash flow came in at $28.9m which translates into 32.6 cents/share. This is mostly due to the depreciation of assets which was added back into cashflow. The company paid a full year dividends worth of 36 cents/share for FY17 which was higher than their free cash flow but I think with the strength of their balance sheets and organic growth returning, I am expecting FY18 payout to be the same. This equates to a 6% yield based on my current price.

I’ll blog about my other company buy tomorrow which has an equally high yield and payout.

Thanks for reading.

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43 comments:

  1. Good exit price , considering the circumstances. Nevertheless, your averaging down was not necessarily a mistake- things like this to happen.
    I have a small holding and even this was bought in 3 tranches- lowest at 1.98. My average price is around 2.20 plus , if dividends are included. I intend to hold on for now.
    Vicom- a good cash cow indeed!!
    Good luck!

    ReplyDelete
    Replies
    1. Hi Garudrari

      Indeed you are right. The few last batch of my average was in the low $2 and some in the $1.9+ I guess thats how I managed to pull the average costs down. A year round of dividend should cover it for you... you are in a good stead ;)

      Delete
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  2. Salute ur swift decision making based on logical reasoning, with no emotion baggage despite it being ur largest position. Demonstrate very well 'dont fall in love with your stock'.

    ReplyDelete
    Replies
    1. Hi Jacky

      Thanks for your kind words.

      A bit sad over the decision and to be honest not too sure if thats the correct move. I have a feeling its a bad move but thats ok I’ll continue to learn from here

      Delete
  3. B,

    Just when I am getting interested. Do you think not matter how grab Uber merger play out, the days of war is over ?

    ReplyDelete
    Replies
    1. Hi SI

      I don’t think it’s a matter of the war over price but rather the disruptor will always be an overhang for comfort. Still, I am not sure if the market is placing too much focus there on the taxi business... I think valuation is rather fair to be honest so I think it’s a fair buy/sell from here at this point.

      Delete
  4. I have been trying to get Vicome at 5.5 to 5.7 but failed to get in. They are cash rich and keep increasing dividends despite a drop in business. The good news is either way CDG gains hee.

    ReplyDelete
    Replies
    1. Hi MIM

      You might be able to get it after xd haha but my guess is it will remain strongly above $5.9 even after xd. I think with organic growth returning, it’ll be hard to see goes below $5.7 unless a big crisis hit which probably means discounts all over the stocks

      Delete
  5. Hi B

    Just curious... how come ur can't see recent post in IN :(
    Any problem??

    @sysy :)

    ReplyDelete
    Replies
    1. Hi sysy

      Oops I havent been posting in IN havent visited them in a while :)

      Delete
  6. Hi B,


    Few days ago you just posted that you bought CDG for your family members, but today you divested all your positions. Is this an impulsive action? Thanks.

    ReplyDelete
    Replies
    1. Hi Anonymous

      I didn’t buy cdg for them recently ;) I bought them when it was at $1.9+ for them a few months back. Theirs still there, I just divested for my share :)

      Delete
  7. This comment has been removed by the author.

    ReplyDelete
  8. Hi B,

    Wanted to know your thoughts on another CDG subsi SBS Transit. Although its currently yield 2+%, given the asset light approach going forward and DTL maturing, do you think it can increase dividends going forward? Thanks.

    Regards,
    KK

    ReplyDelete
    Replies
    1. Hi Risknreturns

      Agree with you. I think sbs is a good growth story which is a lot better than cdg at the moment. Valuation has trended up though in recent months so it really depends on their next growth story.

      Delete
    2. EDWARD JONES FINANCE IS THE BEST PLACE TO GET A LOAN {Jonesloanfinance@yahoo.com},
      God bless you sir, I will not stop telling the world about your kindness in my life, I am a single mum with kids to look after. My name is Emily Thomas and I am from Convention Center Drive, Miami Beach, FL . A couple of weeks ago My friend visited me and along our discussion she told me about EDWARD JONES FINANCE, that they can help me out of my financial situation, I never believed cause I have spend so much money on different loan lenders who did nothing other than running away with my money. I have been in a financial mess for the pass 7 months now, She advised I give it a try so I mailed him and explain all about my financial situation to him, he therefore took me through the loan process and gave me a loan of $390,000.00 at a very low interest rate of 2% and today I am a proud business owner and can now take good care of my kids, If you must contact any firm to get any amount of loan you need with a low interest rate of 2% and better repayment schedule, please contact EDWARD JONES FINANCE email:- {Jonesloanfinance@yahoo.com} OR Text +1(307) 217-5388

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      Delete
  9. Hi B,

    I’m amazed by your decision. Swift and firm. I have some guesses on your 2nd purchase. Let me see if I’m correct when you reveal your post :)

    ReplyDelete
    Replies
    1. Hi Sleepydevil

      Wah you want to take a guess? Hehe

      Delete
    2. Hi B,

      A very random and wild guess.. it’s a counter you once own or an accumulation to your existing holdings now :) Probably starting with the letter ‘F’ or ‘M’. Hehehe :p

      I might be wrong!!

      Delete
  10. Hi,

    For your large positions,
    Will you consider selling in tranches instead of the whole lot? I am not sure if dollar cost average will work in reverse for selling

    Never had such a large position before so hoped to ask someone who might have more experience

    ReplyDelete
    Replies
    1. Hi INTJ

      Yeah it should work the same way too in reverse.

      I dont usually have a habit of buying and selling in batches once I made a decision. Perhaps my personality is more of a binary decision more.

      Delete
  11. This comment has been removed by the author.

    ReplyDelete
  12. If comfort breaks out of 2.10, would you regret?

    ReplyDelete
    Replies
    1. Hi Alucard

      Whats there to regret? Vicom just up 1% since I bought too as well.

      There is money to be made everywhere, dont regret over money in life, it isnt worth your time :)

      Delete
    2. CDG price is 2.19 now, up 4.8% from 2.09 :) :) :)

      Delete
    3. Hi Anonymous

      Congrats :)

      Maybe you want to leave your name next time so I know who am I congratulating :)

      Delete
  13. Hi B,


    You had been holding CDG for quite some time and you were still standing on your conviction in CDG when you posted April portfolio updates.
    But then you divested soon after that....could that be you invested too much capital into it? So you felt unsecured? Thanks.

    ReplyDelete
    Replies
    1. Hi Anonymous

      It’s definitely not because I invested too much capital into it. I actually switch to Vicom and it is about the same amount and saw better opportunities in it but oh well who knows comfort shoots up after that. I guess that’s life, you really can’t predict things like that.

      Im still earning a lot from the Vicom increase as wel but its just less than comfort increase. That’s ok for me. I’m easily satisfied person as long as the portfolio is trending in the right direction :)

      Delete
  14. This comment has been removed by the author.

    ReplyDelete
  15. Hi I am your supporter of your financial blog. Hope that you have made a right decision on this. I have bought a significant amount of comfort delgro shares after reading your posts and are considering to sell it now. However, i really like the fact that comfort delgro is giving more than 5 % of dividend and are trading at historical Low price now.

    ReplyDelete
  16. Your post is really worth appreciating.we are provides
    Expert Share Market Tips

    ReplyDelete
  17. Make sense on CDG and VICOM moves. What's next, M1 ? Keen to know what you think about FLT recent acquisition.

    ReplyDelete
    Replies
    1. Hi Cory

      I'll hold on to M1 for now, I'd like to see the new development for telco in the next few years.

      For FLT, my take is it is a decent acquisitions because the assets in the Europe are getting some foothold and the Reit needs a new injection of assets that are away from their AU nature. I think it'll be good, I'd be happy to add more onto them.

      Delete
    2. I do like the diversification of income from EU. Let's see how they going to raise the funds.

      Delete
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  21. Amazing, CDG is 2.33 even after xd. Hahaha.

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