(January 2021 Results) How i would invest in the singapore stock market if i had 100k of spare money

 

January 2021 Returns: 10.97%

Total Returns since 9 Sept 2020: 22.49%

No changes to any holdings since its inception in September 2020

Main driver of returns : UMS, Propnex, Ifast, Powermatic Data

With earnings season coming up, there will be some review of results and re-adjustment

Are things cheap at the moment?

January 2021 has proved to be a volatile month, in fact i feel that it is probably one of the most volatile months in the past 6 months. As any what goes up quickly comes down and goes down even further for some.

I would look at 3 stocks listed in the SGX and give my own opinion.

1) UMS

(UMS Share Price Chart)

At a 5 years high, surpassing 2018 price. In terms of profit, 35 million in 9 months of 2020 isn't bad at all. However unless it can post another 18 million, it will not beat 2017 results which coincidentally led to the rise of it in 2018. The key question will be will demand for semi-conductor continue to be robust? As we know that it is a cyclical industry but has the trend changed? 

(AMAC Q4 2020 Earnings Presentation)

With a decent forecast of 10% growth over previous quarter and around 25% over Q1 2020 for applied material's Semiconductor Systems Segment, things bode well currently. With the addition of TSMC's forecast of a 15% growth in 2021, it seems like growth will continue and this will probably justify its valuations.

2) SBS Transit

(SBS Share Price Chart)

A good gauge of the economic activity is this resilient transport operator that has run into bottom-line trouble thanks to the circuit breaker and covid 19 outbreak. From a peak of 4.2 to about 2.95 now, it has retraced roughly 30%.

Looking at its ridership, 2020 2H is 60% of 2019 2H, which does not bode well even though economic activities have resumed. Furthermore with all of its profits coming from Covid 19 Support, i am not sure what the dividend policy will be. At this price, its reasonable for a normal market condition but given that earnings release(probably bad) is coming right up and an unknown dividend policy.....it would be good to hold back for now and await till results are out.

3) DBS

(DBS Share Price Chart)

Leaving the hardest for the last, we have one of Singapore's top bank DBS Bank.

 Share price currently is not anywhere near its 5 year highs of around $30. 

However its current share price is back to pre-covid levels. Which is puzzling because it seems to show that business is back to normal. However is that so? Lets take a look

(DBS 3Q 2020 Results)

(DBS 3Q 2020 CEO Observations)

As such, it is almost certain that the outlook for 2021 is more rosy than 2020. As such the current price is probably pricing that in as well.

 I feel that current price is getting reasonable for the following reasons.

1) Low interest rate environment to boost wealth management. When crediting ur salary and not using it becomes a pain for ordinary folks due to the ever lowering of interest rates, whether you choose to invest it (Wealth Management) or take a loan to purchase a house (Bank Loan) or spend more of the money to enjoy life due to covid stress (Credit Card). You seem to have trap yourself.

2) Indication of a reduced allowance will improve bottom-line

3) With better results, surely a better dividend is on the horizon?

Potential Pit falls

1) Extension of MAS rules on dividend for banks

2) Covid Infection again, affecting business to a greater extent

3) Implicatiosn from Lakshmi Vilas Bank

To conclude in short

1) UMS- Not Cheap but because growth is factored in

2) SBS Transit- Cheap but uncertainty lies

3) DBS- Reasonable if based on current conditions

Friendtimes Inc (6820 Hkex): From Zero to Hero and back to almost a zero again.

 

As someone who was keeping an eye on the mobile game stocks listed in HKEX, Friendtimes Inc definitely caught my eyes in 2020 as it was one of the fastest moving stocks across 2020.

From the starting price of around $1 at January 2020 to the peak of $3.89 before closing at $1.85 on 15 January 2021, it has been very volatile times for a shareholder. 

Anyone who was vested at the peak would have lost around 50% of their initial invested amount.

What led to the rise in its share price initially?

1) Covid 19

Covid 19 has brought about a shift in consumers preference in entertainment and resulted in higher amount of people turning to games on various platforms. This has resulted in more hype in gaming stocks such as FriendTimes Inc as there were more people expecting good results coming out from these companies.

2) Flagship game delivering

浮生为卿歌, a game launched on 31 December 2019, quickly captured the female market and make waves in China.

It made the 4th place as one of the top 10 growth in China iOS game market in 2020

At its peak, it propelled Friendtimes to the 15th position for May 2020 in the Top 30 China Game Developers Revenue ranking.

With the above, I was expecting quite a good result of at least 1 billion RMB revenue as well. However i felt that optimism might have been too rosy and well reflected in the share price for me to participate.

For point of note, the share price on 28 August 2020 was $3.84

What went Wrong?

1) 1H 2020 Results subpar

Despite making numerous headlines and achieving good results in game rankings, revenue only came in at an increase of 34.5% and profit after tax only improved by 8.7%.

This was largely due to an increase in Sales and Marketing expenses. The increase in its Sales and Marketing Expenses was more than its Profit Before Taxation. In short, the company was overly aggressive in achieving more traffic for its games by advertising and resulted in a sub par result.

This is also not helped by the fact that its new game 浮生为卿歌 created an attrition and eroded the revenue of its other games. Which resulted in a lesser increase in overall revenue.

Despite numerous buybacks (19 times ever since its results was released), the decline in share price continued and resulted in the position today. 

Previewing Full Year Results (Is it time to buy?)

The short answer will be No. 

The ranking of FriendTimes in the Top 30 China Game Developers Revenue ranking are as follows

After looking at this ranking, i am less than optimistic that the 2nd half will outgrow the first half. Which means that assuming results maintains, an eps of 0.14 rmb would be expected. 

Although if the selling and marketing expenses comes down, an eps of up to 0.21 is possible. 

However, given by how lacklustre the growth in 2H is likely to be, i would be unlikely be buying it at current price. The possible catalyst though is that a new explosive game is released. Also, that game will have to do well and not affect the revenue of other games for Friendtimes Inc to be successful.

To sum it up, it is a story of a game company where its growth has not worked out. It has to show its game can grow again, before its valuations will grow.

 

2020 Review. Moving into 2021 (Long Post)

 3157 being the HK Small Caps Tracker

6th Year of Investing. 

Given what has happened throughout the year to the world, to the people around me and to myself.....I would say this is a good year. Entered the year being <50% cash as well which definitely means firing has to be more cautious.

Of course the 18.21% is inflated as my largest holding stock went ex-dividend and there was no drop in price (due to lack of volume) despite a dividend yield of around 9%. Hence i would say the more accurate figure would be around 14-15%.

I am a net spender this year as well as i bought more than i sold. Unfortunately despite a record spending this year, returns have not been as high as what i see from others lol. Most of my losses came from large caps, probably a sign i should have more holding conviction/ avoid large caps for myself.

On the XIRR front, it is largely similar to the time weighted returns.

Most of the returns came in December. Without December returns would be at about 8%. Interestingly enough, i was contemplating adding some of my positions up till the last day as i believe that they are still undervalued. However for easier accounting, i decided to push back a little longer.

Made a tiny donation to show some gratitude....its just a real tiny amount.

Remember these 2 tables?

Its from the post dated 5 July 2020. 

I have to apologize as i was not as accurate in expecting what would happen in the 2H 2020. Though more than half performed positively, the returns are not as high as i thought it would be.

The conclusion I get from this experience is that small caps in general have more potential then large caps. Although they are also the ones responsible for the largest negative returns.

What i learnt this year

1) A different kind of crash elicits different responses. 

Being through the previous kind of down market scenarios like the oil price crash, china penny stock market crash and the trade war fears. This is the first time a down market scenario is due to people's lifestyle has been affected. As such different opportunities start arising compared to the previous scenarios which did not affect a person who is not invested as much. As such, those who adapt to the scenarios will be rewarded in the short-run. In the long-run it remains to be seen although folks could have just clocked out their returns as it is largely rewarding to adapters.

2) Sentiments can change very quickly

I would tell the story via a stock i held. 

For background information purpose, Tat Seng Packaging is a company that does corrugated packaging in Singapore and China. 

Most of its revenue comes from China. 

It is also part of the top 50 packaging companies in China. It is a counter that i have held since November 2017.

In February, Covid Cases starting popping up across the world while China is in a lockdown. However, Tat Seng Packaging's stock price did not decline much. It released its result at (1) and as expected it was bad as corrugated prices were way higher in 2019 and declined sharply in 2020. However, the stock price did not immediately drop by a lot even though dividend was cut by 50%.

In March, along with the global stock market decline, Tat Seng hit bottom at 25 cents. This was where all the doom and gloom was around and people are saying things like Covid 19 will take away all the lifes and investing probably does not matter as much and sort of stuff like that. 

But China eventually recovered and it was until June when the agm questions was answered then people knew that the operations of Tat Seng were ongoing all along. Then, it presented a really good set of half year results in August. Recording an increase in profit even if other income was not being counted. This propelled the company to close at a price that was higher than it was at the start of the year when covid was not as known to large number of the population.

Hence, business doing well is key as this is what would drive recovery. Fear is real, its normal to feel fearful as its part of human nature. I felt fearful as well. More research would have helped instead. On the company front, the lack of disclosure probably did not help much as well.

3) Returns do not say the full story (Obviously a Rant)

Many could have been saying things like returns being in 2 digit or 3 digit this year and so on. However there are more things that needs to be considered together.

a. What was the person's cash amount compared to his investment amounts? Obviously if you had 50k in investments and 500k in cash then your returns would have done well if you had bought in this year.

b. Was your salary affected this year? Well this plays a part in affecting your lifestyle and therefore would have affected your investing mindset if your daily lifestyle is affected.

c. How has your returns been before this year? A longer track record would be much better in predicting returns. Rather than a flash out of the pan.

Moving into 2021

I would probably just add into some of my positions i currently am holding as I believe they would perform well and are still undervalued. Of course cash level is a consideration as it is currently lower than the start of 2020. Also I have to factor in sudden IPO participations, possibility of a large ticket purchase, possible travelling opportunities should they arise as well as averaging down conviction picks that can get sold down.

A non-investing takeaway i find more important would be that when presented an opportunity to do something, telling yourself 'Its too expensive' is probably the most lousiest excuse to detract yourself from doing it. This is because the opportunity might never come again. I probably regretting not doing more in 2019 after whatever happened in 2020. I am not sure if i have the chances of doing it again anymore. Which is more depressing since the point of earning money from stocks is to be able to enjoy life more without worries.

Yup and you guessed right, i used that excuse way too many times in 2019.......