Updates to my Portfolio

During the past few weeks, I have made some updates to my portfolio:

On 10/4/17, I purchased shares of AP Oil at a price of $0.27. AP Oil is a value play to me. Its PE is 12.7, PB is 0.8 and is currently giving me a yield of ~4.6% based on my purchase price. It is net cash, and cash in fact makes up ~86% of its market cap. AP Oil has been looking around to deploy its cash hoard. The CEO frankly mentioned that the company is in a business that has low growth prospects. He also said, “We have grown organically for the past 10 years, and now we are at a stage where we can take risks and not die.” Recently, it invested RMB25 million ($5.1 million) in a joint venture that provides financial leasing services in Chongqing, China. This deal is interesting in that it gives AP Oil downside protection + upside participation. Two key clauses were included in the JV agreement: 1) Put Option: After 1 Jan 2018, AP Oil will have the right to sell-back its stake to Zongshen at an agreed market valuation (determined by an approved valuer) at not less than the initial capital contribution of RMB25m. This creates a sort of capital guarantee for AP Oil. 2) Tag-along rights: That ensures AP Oil is able to participate in the same kind of upside as Zongshen should they decide to sell their stake in the JV to a third party. These are deals which tell us that management is savvy at the negotiation table. Revenues and margins might drop in the coming years due to low growth and volatility in selling prices while management tries to diversify the business. Nevertheless, its huge cash hoard is reassuring.

On the same day, I purchased shares in Alliance Mineral at $0.35. As the company was not profit-making yet, I bought a small amount purely as a speculation play – it is and remains the smallest constituent in my portfolio. To me, the rewards of seeing the company successfully hitting its targets one by one was worth the high risk involved. However, my risk averse nature prevented myself from investing more. Enough has been mentioned about the company online so I will not go into the details. Let’s see how this works out in time to come.

On 19/4/17, I bought more into Spackman Entertainment at a price of $0.152 as I felt that the stock was being unfairly penalised for its CEO’s lawsuit. The tension in the Korean Peninsula did not make things any better. Spackman has issued a positive profit guidance for the upcoming quarter and I believe that the company is slowly making progress forward with its acquisitions. Will its upcoming movie – Golden Slumber be a hit? Only time will tell. What I do know, is that Zip Cinema has a very good track record in its producer – Eugene lee.

Lastly, on 25/4/17, I purchased shares in Bund Center Investment at a price of $0.82. Bund Center Investment is a value-yield play, similar to that of AP Oil. It owns the Bund Center office tower and the Westin Bund Center Shanghai hotel in Shanghai; as well as the Golden Center Shopping Mall in Ningbo. As the company adopts a conservative accounting policy of valuing its properties at cost less accumulated depreciation, the current assets are carried in its books at SGD407m, while the carrying value is around SGD1946m according to an analyst report. This makes my purchase price of $0.82 around 31% of its RNAV of $2.58. It is currently in a net cash of $61 million, and is debt free. It also generates strong cashflows of around $70million a year of which an average of $51million goes to dividends. This is $0.067 a share, representing a yield of ~8.17% at my purchase price.

As my recent purchases have shown, I have been looking more at value stocks, especially now when markets and optimism have climbed. I am currently more averse to investing in growth plays, as I feel my portfolio has enough growth stocks in it. As markets continue to rise, we need to be more careful and cognizant of the risks that lie ahead, one of which I feel is overconfidence – the pride before the fall.

 

 

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 Spackman Entertainment, Jumbo Group & GLP

spackman-entertainment-groupOn 5/12/16, I bought into Spackman Entertainment at $0.143. For me, Spackman Entertainment is a catalyst play for the short term. There are a number of catalysts that I felt presented an attractive risk to reward ratio. The most important one would be that it had divested its loss-making asset Optus Pictures Limited, which should drive costs much lower. I have always viewed divestments of continuously loss-making businesses in a positive light – it shows management’s willingness to adapt and focus on its more profitable assets, a strategy I believe will reward investors in time. Keeping and focusing on the more profitable Zip Cinemas which boasts a stronger track record of hits is a good call. The company has also a 27.2% share ownership in Spackman Media group, South Korea’s largest entertainment agency, which analysts believe to be worth around US$45 million, approximately around its current market capitalization. However, my take is still to view analysts opinions conservatively so I am not banking on this valuation alone. Nevertheless, any move to create value for shareholders is always welcomed. The last catalyst would be the release of the highly anticipated movie “The Masters”, premiering this month. There has been alot of hype and buzz around this movie due to its list of A-listers starring in the show. I am however, more interested and attracted to the former two catalysts as the movie business is volatile in nature and it is hard to know whether the movie will actually do well. Nevertheless, I have caught one of the movies made by Zip Cinemas – “My Brilliant Life” and was quite impressed by it. Let’s see how this catalyst play works out in time to come.

 

jumbo-group-facebookOn the same day, I also bought into Jumbo Group at $0.64. I have always wanted to own shares in Jumbo since its IPO, but the price never went to a level which was attractive enough for me. At the current price, I still feel it is not undervalued but rather more towards being fairly valued. The reason why I chose to invest at its current high is because I am a firm believer of its scalable business model, and its opportunity for growth in the future. Its brands sell high quality food and its business is able to produce respectable margins and ROEs in a very very competitive industry. The bad part about waiting to purchase a solid stock at an attractive price is when the business continues chugging along and demanding higher valuations. I rather accumulate now slowly and continue to buy more when opportunities present itself along the way, than to miss the boat altogether. I view this investment as a long term holding.

global_logistics_propertiesMy final purchase of the day was into GLP at $2.20. Over the past 3 weeks, I have been tracking GLP and was contemplating buying it when it was around $2.00. Nevertheless, due to my indecision, I missed the mini rally of its shares. My reason for buying GLP is simple – it is a market leader in its business, the logistics industry is growing, its asset management arm seems promising and its price is fair. Recently, GLP is undertaking a strategic review of its business to enhance shareholder value after prompting by GIC. I am not sure what will result from this review but I remain confident that GLP will continue to grow in the future. Its asset management arm is something that I am rather optimistic of, as it reminds me of the strong business model that ARA possessed. Being a property developer and asset manager allows it to recycle its funds and earn recurring fees at the same time. Although I am not a big fan of property developers, its asset management arm gives me some comfort in knowing that there is an element of recurring revenues and growth as its AUM grows. I will continue to track the ongoings of this company going forward.

Finally, on 8/12/16, I increased my stake in ISOTeam at a purchase price of $0.385. I remain optimistic about the company’s growth and my thesis remains the same. With my recent purchases, my portfolio is around 40% invested in the stock market. I am still tracking a few more stocks but currently am contented just waiting.

 

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.