Recent Thoughts and Updates on Portfolio (Returns Slip to 4.52%)

 

(Portfolio was at 4.52% Returns YTD at 5 August)

Recently I have not been updating much, there is just too much firefighting to be done first before i could post.

Before i begin, the September 'How I would Invest' SG Portfolio Update will be slightly delayed as i will only be available to update it a few days after the start of October.

From the chart above, you can see that the returns have dropped sharply to 4.52% from a peak of above 25% before recovering back to around 20% currently.

What led to 25% returns before June?

Dream International recording good FY 2023 Results. Share Price was at $5 around that period

Huationg Global held steady at $0.16 on the back of decent FY 2023 Results

Saint Miguel HK Share Price was at $0.90. A YTD Gain of around 14%

What happened after that? (June to August)

Dream International Plunged to close to $4 after results showed profit and revenue fall but gross margins improved slightly and dividend is maintained. It was around 50% of my portfolio so the returns attribution was close to 10%

Huationg Global decided to issue a profit guidance to inform investors they did not manage to renew their contract for the management of the dormitory. Share Price went from $0.16 to $0.124 in the next few days. It was around 30-40% of my portfolio so naturally i took a 6-8% loss in returns attribution.

San Miguel went up to around 1.10, 20% gains before correcting back to $0.85 levels after poor results.

Although Centurion went up to $0.6 and subsequently $0.7 levels, it did not really helped much because it was only 4% of my portfolio on initial purchase. It is now about 7% of the portfolio.

IGG continued to tank and tank and tank. I made 4 tranches of purchase during this period and the share price has actually reached a low of around 2.5 levels before its results release in August. A

To give a rough estimation, each purchase was around the same value in total. Therefore, the first 2 tranches at 3.09 and 3.14 already suffered a 20% loss in just less than 3 months.

The above factors lead to a record low of 4.54% at 5 August.

The first thing i thought about was .....is this a repeat of 2018. That trauma has always been in my mind whenever i get a good start to the year as i will always remember how i went from 25% to -8%.

The process has always been largely similar / consistent this year.....very different from how i would have done things in 2018.

The probable thing i done more as the returns went down was to do more research and also think about some other stocks that i would be keen to allocate to.

Fortunately, things went well after that

Huationg recovered around 10% after a solid 1H 2024 Results

Dream showed some recovery but many headwinds still persist (will talk about this later)

New Initiated Position Wee Hur showed some quick gains.

IGG Bounced over 40% from its Low on the back of Solid Financial Results and Desirable July Figures.

All of the above steered the return up again.

Thoughts and Likely Actions

Looking forward, the earnings season is coming again for stocks that are going to report September financial year end results. Something that i would have to look at again 

1 ) IGG was meant for a quick burger flip but the excellent July figures means i would likely track its games on a monthly basis and make a decision again. There has been addition by management as well.

2) Dream is a tough one. July and August Export Figures from Vietnam is really decent and China Disneyland seems to have been resilient.

But the typhoon hitting Vietnam in September seems to have derailed some export momentum and Shanghai is also hit by the typhoon recently which would likely affect theme park demand. At Japan, a recent bloomberg article mentioned about the heat resulting in lower numbers. Something that i have observed as well as it seems like figures might be 10-25% lower in August.

As such, October to December will be crucial and also to see if the US Toy Companies have good results or indicate that de-stocking is over.

After a lot of hype about Pop Mart, it still plays too small of a part to influence anything really. Funko and Spinmaster will be more crucial

Operations at the company seems to have improved with margin improvement and business operations improvement like robotic arms and automation etc . This is a good sight as wages have went up around May/June Period (10-20%) so this would likely be seen in 2H 2024. Fortunately wages make up around 25.5% of revenue in 1H 2024 compared to 23.9% in 1H 2023.

The in theory right investor would probably find something that is worth more in the meantime in terms of risk reward ratio and opportunity cost.

The better ones in theory will be able to be right in the short term. As for myself, i would have to start having a list of alternatives while continuing to monitor the situation in 2H 2024. As the revenue usually is much higher in 2H, there is more pressure on 2H to perform than 1H.

3) Continued Trimming down of Huationg and sourcing for possible additions. Continued monitoring of Wee Hur.

This is purely a favourable view towards workers dormitory and student housing while Huationg will transit back to a construction and related play.

As at current moment, any cash will likely be from selling of Huationg(continued trimming) or selling of Dream(due to really bad data seen from its related peers). Unless any other positions have takeover or bad things happening, it is unlikely it will be sold as of now......

On a deeper level that i have to think about as well, Dream is around half of the portfolio. Is the risk return worthwhile for this positioning? Although on the dividend end, it has maintained and it has paid a good yield last year such that the current yield is around 13% while balance sheet is heavy and payout ratio is around 45%.