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

 

May 2022 Returns: -3.41%

Year to Date Returns: -9.49%

Since Inception (9 Sept 2020) Returns: 54.27%

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

But we have to go back to fundamentals on the list and assess them. Especially quite a number of counters have released results / updates in the past month.

Powermatic Data - Satisfactory Results

TC Auto - Sales down by around 15% but that is expected as the covid lockdown in China has occured. Does not look that bad based on 1st 3 months but i think april/may might be worse based on more lockdown news seen in areas such as Guangdong, Shenzhen. As mentioned previously, kicking the can down the road again before a recovery will occur but the PE is low for the company compared to peers in hkex.

KSH - I need some time to read in depth the result. But i have no particular concerns on a minor glance through

UMS - Looks ok

Propnex- Revenue Growth still strong with housing market prices still increasing. Some measures have been put in such as no escape from ABSD with 35% tax on residential property transfer into a living trust.

However, with inflation being the theme, i do not think a huge downturn in price is coming. Similarly, with the population being very cash rich (SSB was close to 3 times oversubscribed with each person getting only a maximum of 15k in the most recent issue.) Demand is unlikely to be weak as well.

LHN- Mixed results, most segments recorded decline in revenue and profits. This time around, a good chunk of profits coming from fair value gain in residential segment which is their co-living concept.

Have to monitor the core profits especially the residential segment.

Uni Asia - The 1Q updates gave little away but i believe the fundamentals are still intact. Perhaps some might not have been happy with their dividend policy etc but that is to each of their own.

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:)