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.

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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.

Sale of GLP & Purchase of Addvalue Tech

As news about GLP’s buyout continued to surface and finally seemed to have reached an agreement, I realised that I did not blog about the sale of my shares earlier. On 19/5/17, I sold off my shares at a price of $2.91, giving me a gain of ~31% based on my earlier purchase price of $2.20. I sold my shares as I felt there was still much uncertainty about the buyout price, and the risk-reward ratio was getting less attractive with the surge in its share price. Nevertheless, although I feel it is indeed a strong company to hold for the long term, this buyout offer did give me a good return and I am grateful for that. On hindsight, I should have waited (the final offer price was $3.38, not inclusive of dividends!), but we always have to make the best decision we can at that point of time. Just like in a game of poker. 😉 On 15/7/17, I continued to add to my investment in ISEC Healthcare at $0.33, as I feel it is still undervalued as compared to the industry. I had wanted to add more at $0.315 but was greedy and decided to queue at $0.31 instead. Unfortunately, my bid did not get through. At $0.33, its absolute PE is still high, but I am rather optimistic about this. Let’s visit this space again in time to come.

 

On 21/7/17, I bought into Addvalue Tech at a price of $0.049. I feel the risk reward ratio is attractive to me at the current price, and the recent entry into the Thai market for its iFleetONE products is good progress. Catalysts remain the sale of its subsidiary Addvalue Communications, contract wins for its iFleetONE product and commercialisation of its Inter-Satellite Data Relay System. Nevertheless, the firm has been loss making for the last few years, and it might take some time before the numbers are back in the black again. This is a speculative position, and I will consider selling if losses continue and their business divisions do not show signs of growth. As this is still not my typical kind of investment, my stake is very small. Position sizing is very important in portfolio management.

 

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.

Purchase of ISEC Healthcare & Valuetronics Holdings

On 2/6/17, I bought into ISEC Healthcare at a price of $0.34. International Specialist Eye Centre (ISEC) is a comprehensive medical eye care service provider based in Malaysia and Singapore, whose vision is to provide high quality, compassionate, world-class eye care at affordable level. It is a net cash company (~$21m) with no debts, and is currently trading at a PE of 26x FY16 earnings. This may seem high at first glance, but I like the management’s opportunistic acquisitions at pretty decent prices, eg. the acquisition of JLM GP and aesthetic clinics at a PE of 12 to complement its current operations. From my interactions with medical professionals, eye surgery is seen as a lucrative business, and this is reflected in ISEC’s strong net margins of ~20% compared to the estimated industry average of ~13%. The company has seen increasing revenues in the past 5 years, but this has not necessarily resulted in rising profits due to the firm’s loss-making Mount Elizabeth Novena Specialist Center. With the cessation of operations in 2015 along with contributions from new acquisitions like SSEC (Southern Specialist Eye Center Sdn Bhd) in Malaysia, profits in 2016 rebounded strongly from $2.8m in 2015 to $6.4m in 2016. ISEC intends to continue expanding in Malaysia and into the region. Countries like Vietnam, Myanmar, Indonesia, Taiwan, Philippines and China are targets. At an annual dividend of $0.011 per share, the company is trading at a 3.23% dividend yield at my purchase price of $0.34.

On the same day, I bought more of QAF at a price of $1.355 as I still felt it presented value, especially with the ongoing strategic review of its primary production business underway. With the purchase, QAF is one of the more significant holdings in my portfolio.

On 12/6/17, I purchased shares of Valuetronics at $0.765 after its shares were sold off sharply, possibly due to the drop in US tech shares the night before. I have been eyeing Valuetronics for some time, but its recent gains have made it hard for me to pull the trigger, especially from the valuation perspective. Valuetronics is an integrated electronics manufacturing services (EMS) provider with key businesses in consumer electronics (CE), and industrial and commercial electronics (ICE). Honestly, I still feel I lack the competence to understand the semi conductor and electronics industry, and these include my investments in Micro-Mechanics and InnoTek. However, I find comfort in their management, especially Micro-Mechanics’. As for Valuetronics, I am optimistic as I believe it is a beneficiary of two major trends in IOT and autonomous driving. In 2016, there was a steep fall in revenues and earnings due to the exit from the low margin CE LED business. This used to be a big business for the company. However, it was not long lasting, as management steered the company back to growth with the introduction of new products, like smart lighting with Internet-of-Things (IOT) features. I must admit that the comeback and return to growth was indeed quick. At my purchase price, the company is trading at a PE of ~12 and a yield of 5.2%, based on a FY17 dividend of HKD$0.20. The company is net cash, with around ~$130m in cash. Valuations are not exactly compelling for an OEM provider,  Let’s see how this company performs in the coming quarters.

With the recent purchases, I am around ~80% invested based on my investment portfolio, and around 60% invested based on my total portfolio, which includes my emergency savings. I am still building up my cash cushion, so I will need to save more in the coming months.

 

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.