Astrea 7 Bonds Press or No Press?

By now i guess everyone should be familiar with Astrea Bonds already. Basically it is a portfolio of Private Equity Funds and it is broken up into different tranche where the top tranche has the lowest interest rates but is the safest among the different tranche.

Interestingly, this time around, retailers have 2 choices to choose from. 

Class A-1: 4.125% (S$ 280 million)

Class B: 6% (US $ 100 million or around SGD 140 million)

(Pasting the Picture you will see on most blog and finance site post as a thumbnail)

Reasons to Press

1) Current Astrea Bonds trading at a premium. The Yield to Maturity of current Astrea bonds are trading at below 3.6%. What this mean is that there is a very good chance that the new issue will open above water and it will allow for retailers a chance to make a quick profit.

(3.41% to 3.56% Yield to Maturity)

(2.056% to 2.15% Yield to Maturty)

2) Previous Astrea Portfolios did decent

Astrea IV started with 1098 million in 31 March 2018 and at 30 November 2021 it has 718 million left having distributed 826 millions. Had there been no distributions, it is an increase of 40% in 3.5 years.

Annualized gain of around 10% is impressive. Also it has earned enough to cover the 27m of interest payments each year.

3) Astrea 7's old funds did well as well

1 thing about PE is that we are concerned with performances of funds that are coming to a tail end of their life span of 10 years. With 2 funds having started in 2014, it is important to know their performance.

1 such fund is Permira V and its record of 25.9% net IRR isn't bad at all.

Another fund is CVC Capital Partners VI and its record of 18.5% net IRR might not hit the 20% IRR but it is positive and would clear the hurdle rate needed for interest payments.

Reasons to not Press

1) Tech Valuations have fallen and Recession is looming? Amidst the cloudy circumstances that is circling, there is some concerns given that Information Technology is 33.9% of the portfolio. There might be some earnings concern.

If a market downturn continues till like 2027-2028, this will affect more than 50% of the funds which are looking to exit their investments and they might have to exit at below NAV due to depressed valuations due to down turn.

2) Much more attractive options? A question when we deploy cash is to ask if there are attractive things out there. The markets have fallen quite a bit this year. S&P 500 for instance is down close to 18.5% as of 19 May. Hang Seng Index has fell by close to 30% over 1 year period. As such, some markets might appear 'cheap' and the opportunity cost to invest in these markets might be more attractive.

3) Interest Rate Hikes. 2 ways to look at this. We know the rate hike is coming but the amount of increase and number of times is not certain yet. If rates keep increasing, we will demand a higher return and this might drive the astrea bond to below par value which will deter some who might want to divest it to address their own needs. 

Another way to look at it is that since 80% of the funds are Buyouts, they are very likely to be leveraged companies and the interest rate hike might affect them negatively. This is something once again that we can only see when the half year results comes out and the NAV is recording fair value losses.

Conclusion

Its a press for myself. Though i have not decided on the amount and whether i want to hold it for long term or short term.

Barring a sudden rate hike by the Feds this month again due to black swan events, I do not see the bond opening underwater.

Of course i am wary of recessions and all but i believe that there should be enough warning signs to get out should the signs show that the A1 tranche will be affected. The pros outweigh the cons.

Lastly, should we apply for the Class B Tranche? Taking a look at the chart, the BBB Corporate 10 years is 4.908%. As such, the 6% that is on offer seems to be an attractive choice as there are many different companies involved (982 invested as of Sept 2021). This should reduce the risk due to diversification.

(Raymond James Weekly Interest Rate Monitor 16 May 2022)

Key Comparisons for Thoughts

With the most Investee Companies, lowest weighted average age and most % of undrawn capital. In some ways this issue might be the 'safest' among the 4.

(Non Equities Related) My reflections on turning 28

As May approaches, i will be turning 28 this month. I did some reflection on various aspects of my life.

Lessons Learnt (Applicable to myself but does not mean it applies to all)

1) Its not about who is in front of you and who is behind you. But rather is the current speed and progress something you are satisfied with.

Many of times, we have heard of people sharing how highly paid / rich / well respected at work with high rank etc as well as stories of how people are lowly paid / poor/ suffering in some aspect of life / not having work life balance etc etc. 

The main thing for me is that everyone has their own 'game' to focus on. As such, you should know yourself best in what you can achieve and what you cannot. Hence you should set targets for yourself only and focus on it. Whether people are overtaking you in some aspects of life or you have overtaken others in some aspect of life does not matter at all.

2) Ability / Knowledge / Skills does not equate results. 

Perhaps a common understanding is that if you can do well then you will get good results.

Examples

A Singer sings very well = should be popular and do well

A person who does his job very well = should have good pay rise, bonus and promotion

A person who does his research for investing very well = Should be able to have better returns than those that does not

Unfortunately, such things are not given in real life and most of the time it does not happen. In some cases you can do the same thing 10 times and only find success 3-4 of times. Simply put, doing well improves your chance but does not mean anything else. 

A lot of other factors will affect the outcome simply and its important to adjust your mindset towards that. The most important thing is that each time you do the same thing again, you are either putting in consistent effort or you are improving in doing it.

3) Have a realistic expectation of the stakes and tradeoffs involved in whatever you do

Sometimes, we can have unrealistic expectations of outcomes in various processes. As such when the outcome is not to our expectations, we find ourselves being unmotivated quickly.

Examples

Setting unrealistic expectations for investing. Expecting DBS to go to $100 by June 2022 for instance.

Thinking that more hours put in at work will get recognized. While this might be true in some cases, sometimes the people who get recognized might not be you as others might have put in even more hours or others might be the head of the project. The reasons are aplenty.

What is more important is that you should ask yourself if its worth it? If it is then go do it . But if it is not then you should ask what are the alternatives that i can seek and work towards it.

Above are just some of my thoughts.  Does not to apply to all.

For myself i have some expectations and what i want to do this year. But since it applies to myself only and it probably sounds boring, i will not be talking about it here. 

But keen readers would know where my interest lies..........

(Choosing a nice picture for thumbnail)

If you have read towards the end, then do consider looking at the below. Once again, just my thoughts only.

(To view a clearer image do click on this link:)

(April 2022 Results) How i would invest in the singapore stock market if i had 100k of spare money

 

April 2022 Returns: -2.91%

Year to Date Returns: -6.29%

Since Inception (9 Sept 2020) Returns: 59.71%

Most counters on the list detracted. It has been a bad April as well for the index.

In my opinion the key development was that the covid situation in china has gotten worse and there might be a need to relook at positions held in the list.

In terms of results, iFast has reported its 1st quarter of results and it looks bad which might have been more than expected given the poor market conditions would have affected the AUM amount and AUM Mix. With the news of not securing a Malaysia License, it seems like there will be head winds further and the guidance for the HK business in 2023 seems to have been slightly revised lower. 

However with the low weightage of iFast in the portfolio (<4%), I am not really worried about it. Though a thought i have been curious is that despite all the attempt to promote the local fintech industry and encouraging them to take the big step, a company like iFast has failed in winning both the Singapore and Malaysia Digital Bank License.

Exited Position: Straco

Exit Rationale: Since Mid-March, the aquarium has been closed. Although the flyer has resumed operations, the aquarium is still the main income generator and it seems like golden week, a traditional 

Entered Position: YZJ Financial Holding

Enter Rationale: The sell off on 29 April makes no sense and i anticipate a rebound of price when the buyback mandate kicks in. To put the company it in some simple numbers.

Current Share Price: 0.545

Price to Book Value: 0.504

Price to Earnings: 6.8

Default Rate: <5%, Recovery Rate: >70%

(Coverage Ratio 3.9, 24% of loan in Real Estate and 37% in Manufacturing)

(Collateral type is 34% Land/Properties and 37% Shares)

Going by the coverage ratio, there seems to be some leeway in case the debts do fail. As such, the current price represents a good discount. Of course we would need to be wary of the downside risk as there is little information on the debts and the potential correlation in the debts should there be a debt crisis in China as we have seen in the property space already. In such cases, the collateral might suffer a huge depreciation.

Another thing to look out for will be its profitability after it has shifted its strategy from 100% Debt Investments to 50% Investment Management and 50% GP Funds Business. This would need some time to bear fruit as well and in 2023 we will be able to see how the company balances short and long term profitability.

As such after replacing Straco, the allocation looks like this.

My dining experience at CouCou

 

(Coucou at Suntec)

Company Introduction

CouCou is a up and rising brand from hkex listed Xiabuxiabu(HKEX:520)

(Spending outside of China is way higher. 

While revenue is around 5%, the potential to increase much more is there)

(Coucou rapidly expanding overseas branches)

From the annual results of XiabuXiabu, we can tell that this has been a fast growing segment and despite a 30% increase in outlets only, the revenue increase is more than 30%. 

As a person who has been tracking the company on and off, i was very curious to try out CouCou although i have heard of polarizing views and its very expensive price point.

Finally i managed to rope/scam a friend to join me in eating the very expensive hotpot food. 

*evil giggles*

Dining Experience

(Ordered Bovine Bone with Tomato Soup Base and Fresh Mushroom Soup Base as my friend does not take spicy and i am no where better myself)

(One of their signature is the Pu Er Milk Tea)

(The background image is the sides and sauce bar)

(Beef and Seafood Platter - $108)

(Their smoothie dessert that is refillable)

(Total bill 230, more than 10% of my take home salary just flew out on 1 meal)

The soup is good, my friend and I both enjoyed it a lot, it was the kind of soup that i would repeatedly drink. 

The platter is good as well, we both liked the beef and the seafood combo. With the drinking of soup and the free rice that can be given on request at the sauce corner, both of us are full at the end of the meal.

The price point is definitely scary for some as this is considered quite a luxury meal. However, as seen earlier, overseas spender usually spend much more at CouCou compared to people in China and they have expressed that they will review their price in May so lets see how it goes.

Service: I feel that the service is good, i know people will compare to Haidilao but i feel that its difficult to compare because both restaurants have a huge difference in terms of what the staff can do etc.

Overall: We left the place feeling satisfied by the meal and my friend mentions that he wants to be back again which i agreed.

After the meal i feel that Coucou has the materials to make their expansion in Singapore a success. However, they would have to work on their price point overseas if they would want to make their overseas expansion a success. With their first outlet opened in Singapore in 2022 and 2 more outlets in the pipeline in Singapore, it remains exciting to see how much revenue generation their overseas arm can bring in.

Meanwhile, I will have to be more proactive in investing and drive more returns so i can enjoy more Coucou.

Revisiting Zengame (Hkex: 2660)

 Zengame is one of the game companies that has very good results in 2021. It prompted me to relook at the stock and where it stands.

(Zengame's newest game in 2H 2021)

	1H 2020	2H 2020	1H 2021	2H 2021
Revenue	468,478,000	274,028,000	444,223,000	1,029,735,000
Net Profit	131,848,000	89,120,000	145,745,000	354,598,000
EPS	0.16	0.11	0.17	0.43
Div Per Share		0.06		0.15

Zengame's net profit surged on the back of an exceptional revenue in 2H 2021 thanks to their new mahjong game 'Fingertip Sichuan Mahjong(指尖四川麻将). 

The company has 2 flagship games. Fingertip Sichuan Mahjong and Zengame Fight the Landlord

As such, the company is trading at less than 4 PE and has a yield of 7.2% against its closing price of 2.06 HKD on 13 April 2022.

Company is currently trading at a book value of 1.38 and has 96 cents of net cash or 46% of its market cap.

How does the company's prospects look in 2022?

                                                                    Sichuan Mahjong Rankings

According to data, the mahjong game has performed decent in 2022. Although not as consistent as the levels of 2H 2021, the game has rebounded quickly from January.

                                                      Sichuan Mahjong Grossing Revenue Ranking

Looking at its top apps grossing rank, the company has recovered from a February low.

With the covid lockdown headwinds, the demand for such games is unlikely to die down so soon.

                                                     Zengame Fight The Landlord Rankings 

Its other game, zengame fight the landlord, has performed decent.

                                        Zengame Fight The Landlord Grossing Revenue Rankings

Its gross ranking has also showed a recovery after February.

It looks good for Zengame. However, careful monitoring of the company's pipeline of games and its 2 flagship games is needed.

Looking at its price chart, there seems to be some price manipulation going on as it did not go up immediately after the results was released despite higher volume. The increase in the latter stages to 2.56 was on smaller volume and a selldown has started 5 trading days ago.

As such, a good initial entry point based on my fail TA will still be at around 1.80. 

As for FA, the 1H 2022 will likely outperform 1H 2021, although currently it looks like it might not be as good as 2H 2022.

It was a company that i thought based on its Fight the landlord game, will do badly in 2021. It did so in 1H 2021 but totally turned the tables with mahjong in 2022.

(Mahjong Game Play)

(Mahjong Game Play)

(Mahjong Game Play)

Rating the Results Release of Stocks in My Portfolio

 It is April and earnings release has passed. Will provide a results rating and short review of the HKEX Stocks in my portfolio. 

To see what are those HKEX Stocks in the portfolio, pls click on the 'here' on the right side>>>>>>

(Which of the coys did the best?)

1) AAG Energy (Hkex: 2686)

- Results is in line. However the dividend cut surprised many as the company has decided to increase capital expenditure and largely expand its drilling operations in its Mabi field that has been a small contributor for the past few years.

Year	Capital Expenditure	Cash + Receivables - Liabilities	Property Plant Equipment
2019	536 million RMB	1944 million RMB	3721 million RMB
2020	526 million RMB	1784 million RMB	3994 million RMB
2021	859 million RMB	1392 million RMB	4478 million RMB
2022 (Projected)	1578 million RMB

- I think this sets up a relatively good platform if the company manages to achieve good drilling results in its Mabi fields and start driving cost down. However, if it does not then i can see the can being kicked for a few years more down the road yet again. Which is bad as this will result in higher depreciation and actually be negative for the results.

-Another reason for the dividend cut was that it had decided to set up a Joint Venture Company with regards to the technology advancement in drilling. While it is uncertain whether this joint venture will be successful, there is no doubt that AAG is currently one of the front runners in drilling effectively and profitably. 

-As such, it will be important to see its results and see what the company reports on the drilling progress in Mabi.

Key Opportunities

- Expansion of Mabi. General Uptrend of Regulated Natural Gas Prices in China (Leading to higher VAT refunds and better revenue) Potential Opportunities arising from JV as the govt is keen to expand the industry as it is an alternate source of natural gas.

Key Risks

-Mabi Drilling Results not desirable. Lockdown in China affecting gas demand.

Rating 7.5/10

2) WKK Intl (Hkex: 532)

-Results a big miss. I had bought into it as the taiwan trading associate has shown good results and sales while 2nd half is usually a good half for EMS businesses. 

-However, the EMS Business in 2021 2H was worst than 2H 2020 which is a surprise and full year 2021 it has showed poorer EMS Results compared to 2020 which had lockdown in China.

-As such, despite a good result from its Taiwan Trading Associate, i have made the decision to divest the position

Rating 3/10

3) Central China New Life (Hkex: 9983)

- Results in line with expectations as the company has delivered a bottom line growth of 48% despite increasing GFA by only 35%

-A key worry will be its receivables to its parent (Central China Real Estate). This makes up 22.5%.

-To make things worst, the receivables has increased by 70% when revenue increase is only 35%

-A key highlight is its Final 33.7 cents dividend, at current price of 4.41 is a yield of 7.6% and the company remains cash rich as it has not engaged in any major acquisitions yet. In a worst case scenario, its cash covers its liabilities and there is still excess cash of around 5% of market cap

In a best case scenario, the receivables can cover all the liabilities and the cash which is excess, is 51% of the market cap.

Rating 5/10

4) Central China Management (Hkex: 9982)

-Results in line with what was guided at Half Year. Company recorded some free cash flow as well.

-Dividend is generous as its final dividend of 9.9 HKD Cents is a yield of 8.1%. Adding to the interim dividend of 8.60 cents, this is a total yield of 15.2%

-A key highlight is that it has cash-liabilities of 54.5 HK Cents. This is 45% of its current market cap.

-A key worry would be that it operates under the 'Central China' Name which is its parent company. As such the business will be affected if Central China Property is under bad name due to debt issues etc. While being asset-light and cash rich, its model relies on helping 3rd party small developers who partner with Central China due to its reputation and name in the Henan Region. 

Rating: 7/10

5) Mainland Headwear Holdings (Hkex:1100)

-Results is a beat, exceeded its positive profit announcement. The share price is also at a 5 years high.

-In a January Positive Profit Announcement conference online, it has guided that its orders are packed for 1H 2021 such that it has stopped receiving orders for 1H 2021.

-It has said that it remains confident of revenue double digit growth and increase in productivity in 2022. Despite increase in raw materials and transportation prices, the company is positive on mitigating these increases e.g by inserting clauses in contracts to increase prices when cost exceeds a certain amount.

-In the form of dividends. Total Dividends for the year is 9 cents. Against the current price of 1.87. It has a yield of 4.8%. Also included is a bonus issue of 1 share for every 20 shares held.

-Revenue increased by 60% but receivables increased by only 8%.

-Key opportunities. Increase in productivity driving sales volume. China Factory in Shenzhen becomes valuable land as production slowly shifts towards Bangladesh and staff in China is reducing year by year.

-Key Risks. Covid outbreak in Bangladesh leading to work restrictions. Major developments in Covid leading to sporting events and demand for caps to reduce. Trading arm continues to deepen losses.

Rating: 9/10

(March 2022 Results) How i would invest in the singapore stock market if i had 100k of spare money

 Its the end of the month again. Which means its time for the tallying.

March 2022 Returns: 3.00%

Year to Date Returns: -3.48%

Since Inception (9 Sept 2020) Returns: 64.51%

The main performers for the month are Uni-Asia and Propnex. Meanwhile detractors include China Sunsine and Hanwell. All in all, a good month as the portfolio recorded a good performance

The biggest things to consider this month will be the relaxation policies introduced in Singapore. With group sizes increasing and travelling overseas made more convenient. There are a couple of considerations especially as this month reopening stocks have seen an increase in share price following the news.

As such, having given some thoughts, i have decided to make some amendments to increase the risk in the portfolio.

Exit Positions : Q&M Dental and Hanwell

Added Position: China Sunsine , TC Auto

Entry Positions: LHN Limited

Rationale for Addition: I believe that automobile consumption will increase in 2022, since 2021 has been a supply crunch and in 2022 the Covid-19 woes will likely result in more pent up demand once the covid situation has eased. 

As such, i believe both China Sunsine and TC Auto which have low PE and is largely related to the China Auto Industry will benefit.

LHN Limited is a bit of a wild card. Its core PE is around 10-13 and it has a spinoff happening.

The company's segments of co-living, industrial, commercial, facilities management have a decent positive effect from the reopening.

Co-Living is likely to benefit as country opens up and more expats/individuals travel from aboard to Singapore. 

Industrials should see more business activities and finally a higher rental lease.

Commercial should start to recover with higher footfall in public.

Facilities Management such as its car parks should see higher usage.

Of course the impact will always be hard to gauge and there are some downsides to the company such as more than half of its net income is from 'other income'

As well as the commercial and industrial portion has performed relatively poor in the most recent FY. 

Also it is an asset heavy company as it owns and manages its co-living sites.

As such, it can be labelled as taking a risk. 

Rationale for Exiting Positions: Q&M Dental and Hanwell are companies that i believe would perform better in a more 'closed' borders. The chances of not requiring a PCR Test pre-departure has increased in recent times and the chances of lockdown and snatching of food in Supermarket has greatly reduced. Along with my previously written post on the headwinds faced by Tat Seng Packaging, it all adds up as a good time to exit these positions.

As such the allocation will look like this after the changes.