Purchase of Ascendas Hospitality Trust, APAC Realty and Sale of Jumbo Group

On 16/4/18, I bought into Ascendas Hospitality Trust at $0.80, and thus will be receiving its $0.0313 dividend later this month. Its shares took a beating recently, and drew my attention as a result. Being in the hospitality industry, its revenues and earnings would tend to fluctuate more as compared to more resilient sectors like healthcare or retail. However, I am attracted to its portfolio of freehold properties in Australia, Japan and now Korea. In the past few months, it has also successfully sold off its China portfolio at a large premium of 178% over its purchase price. This gives me an indication of the capability and foresight of its management. At a NAV of $0.92, my purchase price is at a discounted PB of 0.87 and a yield of ~7%. I do not expect its yield to remain elevated in the future, as it will be returning some of the proceeds back from its China disposal this quarter and future revenue will likely be lower as well. On 11/5/18, I bought into APAC Realty at $0.99. Similar to AHT, its continuous drop in share price within a short period of time prompted me to look further into its business. I found its fundamentals to be strong, and its outlook positive. APAC Realty owns ERA Realty Network, which is one of the biggest property agencies in Singapore. Its revenue and earnings have been growing strongly in the past year, and there is a high possibility of that being superceded this year due to a greater number of units being launched as compared to last year (11,000 vs 4,800). The current property cycle in Singapore is rather bullish, although my personal opinion is that it will not last long. At my purchase price of $0.99, APAC Realty was trading at a ex cash PE of ~10. It is also net cash, a trait that I have always liked. Valuations are definitely not cheap, but I feel that I’m paying a fair price for a good business. However, as its business ebbs and flows with the property cycle, a buy and hold approach might not be the best. I will definitely have to keep a lookout for signs that the cycle is turning in this case.

On 13/4/18, I sold off my stake in Jumbo Group at $0.555, making a loss of 6.14% after accounting for dividends. In its recent quarters, its profits were not growing as fast as I thought to justify its PE. I believe Jumbo Group will continue to exhibit slow growth as it incurs startup costs in its various ventures. It is indeed a long term play, but as I felt there were better opportunities out there in the market, I decided to reallocate my funds.

 

*On 4/4/18, I further increased my stake in HRNet Group at $0.715 as I still believe in its fundamentals. On 27/4/18, I also bought more into Valuetronics at $0.77 as I felt the selling was overdone, likely in response to its key customer’s falling sales. On 28/5/18, I followed up my purchase in APAC Realty at $0.905 when its shares dipped further.

 


Disclaimer: The author owns shares in the abovementioned company. The ideas expressed in this blog should not be construed as an enticement to buy or sell the securities, commodities or assets mentioned. The accuracy or completeness of the information provided cannot be guaranteed. Readers should carry out independent verification of information provided. No warranty whatsoever is given and no liability whatsoever is accepted for any loss howsoever arising whether directly or indirectly as a result of actions taken based on ideas and information found in this blog.

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Purchase of AEM, Nordic, China Sunsine and Sale of AP Oil, Memtech, Best World, ISEC

                                                                                   
On 15/1/18, I added to my stake in AEM Holdings at $3.27 and Nordic Group at $0.57. AEM has been my biggest winner so far, with my initial purchase at a ex-rights price of $0.58. I sold the bulk of my stake at $2.63, but decided to increase my position again due to its strengthening fundamentals. This experience really goes to show how a stock can keep on rising as long as its business keeps growing stronger. The recent sharp jump in its stock price has made its valuations less attractive, but I’m still looking at accumulating more of AEM in the future. Hopefully, there will be an opportunity to do so at a more attractive price. In the same manner, I hope to continue increasing my stake in Nordic at attractive valuations, as I feel it is a very well-run business in the hands of Chang Yeh Hong.

On 19/2/18, I purchased a stake in China Sunsine at $1.25. I feel China Sunsine has a competitive advantage in the rubber accelerator space, where it is the world’s largest producer. Its competitive advantage stems from its ability to adhere to China’s environmental regulations, something which its competitors have been found flouting. This has resulted in a closure of their factories which has seen supply tightening and subsequently a rise in the prices of rubber accelerators –  a chemical needed in the making of tyres. As a result, China Sunsine has seen its sales and profits increase significantly this year. As compared to its nearest rivals, China Sunsine is trading at a discount despite having greater revenues and being more profitable. I believe the stock can continue to re-rate as it expands through the adding of more production lines. At my purchase price, it is trading at a ex-cash FY17 PE of ~7 and a dividend yield of 2.4%. A lot of information regarding the company can be found online. Although my scepticism regarding S-chips has largely stopped me from investing in them (after China Minzhong), China Sunsine is my first exception. I will be watching this space closely in the coming few quarters.

                                                                 
On 9/1/18, I sold off my shares in AP Oil at $0.26, giving me a a loss of 1.99%, with dividends included. I sold it because I wanted to raise funds to focus on my better ideas – a goal which I set out for myself to do this year. Moreover, AP Oil is a value stock that requires time for the market to recognise its undervaluation. In this regard, I found myself more suited to value growth investing where I focus more on the company’s economic moat and management’s capabilities as compared to the traditional cigar-butt investing.

On 16/1/18, I also sold off my stake in Memtech International at $1.20, giving me a gain of 22.9%. Similar to AP Oil, I wanted to raise funds to focus on my conviction picks and I didn’t have as much information as I had with regards to AEM. On hindsight though, I missed out on alot more gains, as Memtech surged shortly after my sale to $1.85 as of 18/3/18. Hindsight is always 20/20, and I will have to be content with my gains instead of mulling over my potential profits. On 20/2/18, I also sold off all my shares in Best World at $1.3, pocketing me a gain of 32.02%, dividends included. I sold it off because I felt that its Taiwan business was deteriorating, which turned out to be true, but its China business more than made up for its drop, resulting in its share price surging to $1.82 as of 18/3/18. Both my stakes in Memtech and Best World would have been one-baggers if I had held on just a little longer. Nevertheless, I treat it as an experience or rather an opportunity to be responsible for my own decision-making as I felt there were legitimate reasons for my sell transactions. On the same day, I sold off my stake in ISEC Healthcare at $0.325, giving me a loss of 1.13%, dividends included. I sold it off for the same reasons as AP Oil and Memtech.

* From the sales proceeds, I followed up my purchase in AEM on 20/2/18 at $5.56, on 23/2/18 at $6.35, in Nordic Group on 20/2/18 at $0.585, and in China Sunsine on 27/2/18 at $1.26. Currently, all the three companies occupy the top three largest positions in my portfolio. 

 

Disclaimer: The author owns shares in the abovementioned company. The ideas expressed in this blog should not be construed as an enticement to buy or sell the securities, commodities or assets mentioned. The accuracy or completeness of the information provided cannot be guaranteed. Readers should carry out independent verification of information provided. No warranty whatsoever is given and no liability whatsoever is accepted for any loss howsoever arising whether directly or indirectly as a result of actions taken based on ideas and information found in this blog.

Reflections on 2017

Looking back at 2017, the year has been full of ups and downs for me. While I managed a decent return in my investments, my career suffered a setback early in the year. It has undoubtedly been a tough year, and I hope I have emerged stronger after all that has happened. I look back in gratitude for how life has unfolded, the lessons gleaned, and the blessings that I have received in the past year.  As we count down to the new year, I am currently nursing a fever that morphed from an innocent sore throat days after returning from Shanghai. It is a timely reminder, that afterall, health is the greatest wealth one can have.

Going into 2018, there are a few things I have set out to do with regards to my finances:

1. Build the confidence to concentrate my holdings
Eliminate, eliminate, eliminate. To only focus on one’s best ideas, one has to get rid of all his other “good” ideas. I found that amongst all my trades, the greatest returns did not come from the group of value stocks, but rather those companies which exhibited strong growth and which I deemed had a strong management team in place. This could perhaps be a sign that I am more suited to be a value-growth investor with a greater focus on the people running the company.I felt I was abit too trigger happy this year, making a tad too many trades in the market. I aim to trade less this coming year, and to instead, focus more on a few ideas which I am convicted about. Diversification can help to reduce the volatility of my portfolio, but I feel that I’m at an age and situation where I am able to take more risk. An interesting analogy regarding concentration vs diversification using nature as an example can be found here: https://www.kitces.com/blog/wealth-limits-diversification-too-soon-concentration-redwood-bush-pear-tree/

2.  Achieve my targeted net worth (not inclusive of CPF)
This goal is more of a private one, since I am not comfortable sharing my figures in a public domain yet. Short to say, the goal is indeed an ambitious one. I had set out a target for myself earlier this year, and my recent figures showed that I had reached 95% of my goal for 2017. My 2018 target will be more challenging, considering that 1) the local stock market has risen significantly since and 2) 2017 was a bumper year in terms of salary due to the positive growth of the local economy. To achieve such a goal would require me to save more and invest well in the coming year. Ultimately, although I have a figure in my head, the stock market does not care about my goals or targets. Thus, this goal is something I will work towards, but not stress myself over if the market does not move favourably in the short run.

In addition, taking a step away from finance, I have also set out a few personal goals which I aim to work towards in 2018:

1. Compare less
How many times have we been envious of people driving around in fast cars, making tons of money in ICOs, or clinching a job which comes with a host of great perks? The road of comparison has no end, and will only lead one to inner turmoil and ultimately, destruction. This coming year, I want to compare less, and focus more on living my life in the present and the now.

2. Fall sick less often
2017 has seen me visiting the doctor quite often for the common flu and sore throat. I have observed that I usually fall ill first with the onset of a sore throat, which then leads to cough and the flu bug. Most of the time, the onset of a sore throat is due to a lack of discipline when it comes to my diet. I tend to eat too much heaty stuff, like chocolates (my achilles heel), chips, cookies, etc at one go. I’m definitely not going to abstain from these foods, but the critical thing here would be to enjoy these a little at a time. I also want to consume less, and a good guide I am looking at would be to eat till I’m approximately 70% full, adapted from the Japanese’s practice of Hara Hachi Bu. In 2018, I hope that I need not take medical leave or even visit the doctor due to an illness.

3. Think more positive thoughts
In line with my previous goal, science has shown that the mind can help to improve the health of one’s own body, simply by thinking positive thoughts.This is more commonly known as the placebo effect. I hope to be a more positive person in the coming year, which I believe will help build my confidence and self esteem as well. Afterall, we only live once. There’s no point in living a mundane, self-defeating life when you can possibly be living your dreams.

Lastly, to the few readers of my blog since its inception, thank you for taking the time out to read my posts. I wish you all great health and happiness ahead. See you in 2018, the best is yet to be!

 

 

 

Sale of InnoTek Ltd, Bund Center, Tai Sin Electric & Addvalue Tech

On the 28/12/17, I sold off my shares in InnoTek Ltd at a price of $0.375, giving me a gain of 9.23%. I had bought into InnoTek earlier at $0.37 and added further to my stake at $0.28 when the market reacted negatively to a bad quarter. It eventually recovered in the last quarter, but as I wanted to concentrate my portfolio, I sold because I realised that InnoTek’s business was one of those which I had the least knowledge of.

On the same day, I also sold off my stake in Bund Center at $0.745, netting me a loss of 7.83% after taking into account dividends. Bund Center is a typical value stock, but it requires a catalyst before the market can recognise its value. This will nevertheless, remain in my watchlist.

On 29/12/17, I sold off my shares in Tai Sin at $0.405, netting me a small gain of 4.11%, dividends included. Tai Sin is a stable stock which gives attractive dividends yearly. However, I do not see it growing as fast as I first imagined it would, and thus upside might be limited. I decided to sell it as I believe that there are more attractive stocks out there.

 

Similarly, I sold off all my stake in Addvalue Tech on the same day at $0.041, netting me a loss of -18.09%. Addvalue Tech was a stock I thought might be the next AEM as it was innovating and creating a new product which could benefit the satellite industry. However, the one thing that was different was that the momentum of sales orders were slow and small and the company was not profitable to begin with. It exists more like a startup where funds are being utilised to bring a product to market. Time is needed before its efforts might pay off. I sold because I feel I did not possess the aptitude yet to invest in such a business.

As mentioned earlier, one of my aims for 2018 would be to build more confidence in concentrating my picks, thus I decided to sell my non-core positions and plough the funds back into my better ideas. Let’s see how 2018 works out and I’m definitely looking forward to the lessons in store for me.

 

Purchase of Cityneon Holdings, Hock Lian Seng Holdings & Sale of ISOTeam Ltd

During these past two months, I have made a couple of trades in the market. On 08/11/17, I bought into Cityneon Holdings at $1.15. I followed up with this purchase by adding to my stake at $1.03 on 27/11/17 and $0.94 on 14/12/17. I believe Cityneon is bringing entertainment to the people, instead of people having to travel to Disneylands, amusement parks, etc. I like that it has a proven and profitable business model which it can leverage on to grow. It now holds IP rights to Avengers, Transformers and Jurassic Park (recently acquired at a forward PE of 5). Cityneon works with a local operator and earns a share from the licensing revenues, merchandise sales and minimum guarantees. This business model reduces the execution risk of Cityneon. The key here in this business would be the curation of the customer experience. If Cityneon can create an experience that dazzles customers, I believe its best days are yet to come. At my initial purchase price of $1.15, Cityneon is selling at a PE of ~30 which is very expensive to me. However, with a full year’s contribution of Jurassic Park and subsequent installation of more travelling sets in the coming year, we will likely see the PE drop.

On 27/11/17, I bought into Hock Lian Seng Holdings at $0.465. I find Hock Lian Seng’s management to be one of the best in the construction industry. The company is net cash, a quality which is very rare in this industry. Chua Leong Hai, its CEO, once said “With this cash hoard on hand, we need not worry about shortfalls in working capital; or for the sake of a shortfall, tender for a deal that will not turn out well for us,”. “More importantly, our cash pile can open doors for HLS.” I certainly agree with him. The company has been very selective on the projects it undertakes, thus its margins have consistently been one of the highest in the industry. I think it is a prudent move to be picky about your projects, as there have been countless cases of costs overruns by many construction companies, leading to losses. As Singapore continues to build its infrastructure (eg. expansion of Changi Airport, MRT lines), Hock Lian Seng can be a major beneficiary. At my purchase price, Hock Lian Seng is trading at a net-cash PE of <5 and PB of ~1.2, not a cheap valuation, but still attractive enough to me.

On another note, I also sold off my shares in ISOTeam Ltd on 17/10/17 and 27/10/17 between $0.35 and $0.355, with the bulk of it at $0.35, giving me a loss of 9.60%. I wanted to focus more on my best ideas and felt that ISOTeam did not fit in neither the value nor growth basket at its current price. I feel that the management has been dabbling in too many business ventures, the most recent being a joint venture for a bike sharing company and a cockroach spray. I do not think that delving into the bike sharing market is a good decision due to the high competition and immature market. Nevertheless, despite my sale, I still think that ISOTeam is a strong business for the long run, especially with its potential growth in Myanmar.

In addition, I nibbled abit more into HRnet Group at $0.82 on 11/12/17 as I feel it is still an attractive price for a well-managed business.


Disclaimer: The author owns shares in the abovementioned company. The ideas expressed in this blog should not be construed as an enticement to buy or sell the securities, commodities or assets mentioned. The accuracy or completeness of the information provided cannot be guaranteed. Readers should carry out independent verification of information provided. No warranty whatsoever is given and no liability whatsoever is accepted for any loss howsoever arising whether directly or indirectly as a result of actions taken based on ideas and information found in this blog.

Annual Portfolio Review (2016 -2017)

During the past year (24/10/16 – 23/10/17), my portfolio grew 30.44% compared to the STI index’s 20.44% return, giving me an outperformance of 10%. The strategy for this year was to invest in a mix of growth and yield stocks. However, I also experimented with value stocks to see whether it suited my temperament. I was considered lucky as I had minimal exposure to banks and property developers – the main drivers of the index’s growth in the past year. Most of my gains were concentrated in the tech manufacturing space, eg. AEM, Micro-Mechanics and Valuetronics. There were also lucky bets that I profited from in a short timespan, eg. Kingboard Copper Foil and GLP.

This year’s performance has indeed surprised me, as I was never fully invested in the market. For most parts of the year, my cash holdings hovered around ~20% as I wanted to keep a warchest during a period of market exuberance. Nevertheless, a year of good performance means nothing if I am unable to do it over the long term. It is only after a whole cycle, which includes a bear market, can my performance truly be judged.

For the coming year, I intend to focus more on larger bets in ideas that I am convicted about. Currently, I find myself more suited to value growth investing as compared to pure value investing. Thus, I will be looking out for more growth companies to invest in. It has been an eventful year in the stock market, with the local market rising strongly. As market valuations get higher, it is important not to get carried away but to remain disciplined and prudent. I am indeed looking forward to 2018, and the challenges that come with it.

Purchase of Memtech International, HRNet Group, Nordic Group & Sale of QAF Ltd

Over the past two months, I have made a couple of purchases in the market. Firstly, on 11/8/17, I bought into Memtech International at $0.965 when it retraced a little from its highs. My purchase of Memtech’s stock is purely on a valuation perspective, as I felt it was still relatively undervalued compared to its other manufacturing peers. It was trading at a PE of ~8 and PB of 0.85 at my purchase price. The company is expanding in the automotive industry, where it is said to be a supplier of plastic parts to Tesla. Its consumer business, where it supplies to the earphone maker Beats, is also growing. However, as I feel I am sufficiently exposed to the manufacturing industry through other holdings, this position is not core and I might sell once the market recognises its value.On the 27/9/17, I bought shares in HRNet Group at $0.72. HRNet IPO-ed at a price of $0.90, which I felt was too richly valued at that point in time. Thankfully, it dropped a couple of months later and I was able to pick up some shares at a price which I felt had value to me. The company is Singapore’s largest HR recruitment agency, owning many popular brands like Recruit Express and Search Asia. I believe that the HR recruitment landscape is a competitive one, where many firms vie for a slice of the pie. In this scenario, scale gives one a huge competitive advantage. At my purchase price, HRNet was trading at a ex-cash PE of ~12. The company has operations in many countries, mostly within Asia Pacific. I nibbled at this purchase as it was in a downtrend, and I wanted to space out my buys. The price has seen recovered a little, but I am monitoring this as I hope to increase my stake in the future.

On 6/10/17, I bought into Nordic Group at $0.51. Nordic was a classic case of a well managed company which I waited too long to act on. I had been monitoring it when it was trading at $0.38, but failed to pull the trigger as I wanted a bigger margin of safety. I think Chang Yeh Hong is a prudent and good allocator of capital as shown in his investments made: (1) Multiheight in 2011 for around S$29 million, (2) Austin Energy in 2015 for around S$26 million, and (3) Ensure Engineering for around S$17 million in April this year. All three investments have added a different dimension to Nordic’s business profile and made it a stronger business as a whole. Furthermore, all three have “contributed profits from day one”. Chang also said in an interview that Nordic’s acquisition strategy “revolves around at least one area of familiarity – either the target acquisition has the same customer footprint and a new product or service, or there is a different customer footprint, with the same product or service.” Nordic has taught me once again that quality management is the foremost driver of a company’s prospects in the long run. One may buy low, but if the management is not apt, the company may go to the doldrums still. Good management will help to compound the earnings over the years, in which case the stock only gets better with time to come. Value stocks on the other hand, require one to consistently deploy one’s capital into another value stock after a successful sale of an undervalued company. As the valuation is a tad high for my liking at a PE of ~14.5, I only nibbled and will be waiting for an opportunity to further add onto my position.

I also made the decision to cut my losses in QAF Ltd at $1.24 on 6/9/17. Total losses from this trade stands at -9.49%. My original thesis did not pan out as the company has mentioned that it is looking at listing its agricultural business instead of selling it. I still feel the agricultural business is a drag on the company’s returns, and the company would be better without it. Returns from investing its capital into the bakery business seem much brighter. I will still be watching this space in time to come.

In addition, I took advantage of the weakness in the share prices and increased my positions in InnoTek on 28/9/17 at a price of $0.28, ISEC on 2/10/17 at $0.305, Jumbo on 5/10/17 at a price of $0.555. My annual portfolio review is due at the end of this month, let’s see how my performance matches up against the STI index then.

 

Disclaimer: The author owns shares in the abovementioned company. The ideas expressed in this blog should not be construed as an enticement to buy or sell the securities, commodities or assets mentioned. The accuracy or completeness of the information provided cannot be guaranteed. Readers should carry out independent verification of information provided. No warranty whatsoever is given and no liability whatsoever is accepted for any loss howsoever arising whether directly or indirectly as a result of actions taken based on ideas and information found in this blog.