Friday 30 September 2022

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


September 2022 Returns: -6.75%
Year to Date Returns: -15.46%

Since Inception (9 Sept 2020) Returns: 44.10%


Slight surprises there as the portfolio has plunged more than the STI (Around 2.72% in September) 

I would attribute it to the 2 factors below

1) Uncertainty over the new housing cooling measures. In short, this is likely to affect people who want to downgrade from private to public and are above 65. It is also likely to affect people who woke up and decided to take a loan to buy their house as the loan to value for HDB is reduced and the increase in medium term interest rate floor used to compute Total Debt Servicing Ratio (TDSR) and Mortgage Servicing Ratio (MSR).

This has certainly created knee jerk reaction in developers (Tuan Sing) and Agents (Propnex).

Personally i am not an expert but i believe if someone wants to buy houses because they believe the annual appreciation will be higher than the current interest rates despite the increase in rates used to compute the ratios, they will still want to buy it. Also, on the developer side, this might mean more focus on quality projects and whether the room sizes and layouts are suitable for the owners as they are more wary in switching houses. 

Nevertheless, if someone wants to buy a resale HDB for a bigger space, they would still have to do it and while the path to repay might be longer, they might be able to refinance again when rates are lower down the road (not sure when but i believe it should go down by 2026? lol)

2) Global Environment Gloomy

With interest rates on the rise and we are likely to raise rates even if recession occurs as inflation is the issue, there seems to be a lack of any reason to be optimistic for now. Therefore, in line with broad markets, the STI would have been said to be already more resilient compared to other country counterparts.

In terms of changes to the portfolio, there will be no changes made even though there could be a case to be made to switch propnex out due to the recent measures but i feel it is jumping the gun too soon.

Company in Attention in September SATS

A company that has caught the eyes of many in the public is SATS. In fact some folks are starting to ask if there is any basis to make an entry into this company that most are familar with the brand name.

I will try to sum up what i think of the acquisition from what i have glanced through.

The acquisition will cost 1.75 billion SGD (though it might fluctuate depending on the exchange rate of euro to sgd). SATS currently has a market cap of around 3.45B. Hence this is definitely a huge purchase as it is >50% of its market cap.

My worries about the acquisition are as follows

1) SATS is in a relatively healthy financial position with net cash of $252 million. This deal would likely turn it into a relatively net debt company as it has to take over the debts of the acquired company. An estimate Net Debt / Ebitda of 3.4x will occur based on SATS estimations against its current 0.5x.

2) The recent drop in share price even before the equity raising price is announced would mean that current shareholders are not benefitting as there will be more shares raised if price keeps falling. Even if the drop is covered by debt, it is not encouraging in such environment

3) The acquisition of a 'Market Leader' seems to sound good. However, when we consider that Cerebus bought the company in 2018 for €1.2bn and SATS is buying it in 2022 at €1.187bn, it does ring some alarm bells.

4) The main business of SATS is still unprofitable. Clocking in a negative EBIT of 34.3 million and profit after tax of -22.5 million for 1Q FY23. The main focus should be turning the boat in its current business instead.

5) It is already in October 2022 but only EBTDA and Revenue of up to March 2022 is shown in its slides for its acquisition

6) A competitor in the field, Menzies was acquired earlier for a PE of around 18 and EV/EBITDA of 4. Compared to the SATS acquisition of PE 18 and EV/EBITDA of 9, I would say SATS probably overpaid as the PE did not factor in taxes as the net income after tax was not given.

In conclusion, the fall in share price is probably justified as folks do not want to be badly priced out in forking money for the acquisition. Whether the business acquired will create the effects SATS wants will remain to be seen but the overhanging effect on the stock is likely to last to mid 2023 where the acquisition should be completed by then or at least until the exact equity financing details are announced      

Thursday 29 September 2022

(Sour Grapes Post) Why i do envy people who buy T-bills and Savings Bond

As per title, this is a post that is meant to be offensive and sarcastic to various extents

I do envy whenever i see people saying they have subscribed into the Singapore Savings Bond or the T-bills.

They have effectively secured guaranteed returns of around 3% (3.32% for the latest t-bill)

(1.66% Returns Secured)

I think they can pat themselves on the back and say they are the privileged ones.

The privileged group include the following

  • Smart People who decided to beat the Investment / Job / Forex / Custom officer scams by getting guaranteed returns.
  • Educated People who figured out that fixed deposit is a long queue and you can do everything online conveniently
  • Highly Skilled Folks who do not need the money to be doing any risky investments to generate any higher returns or the capital to inject their business.
  • Old people that cannot risk waiting five year ten years for markets to recover(for why this is so, please check with LBS from Investingnote)
  • Folks who figured out that the money conditions will be still bad 6 months / 12 months later
  • Folks who cannot be bothered with the market nor with any form of compounding at above 3% per annum for the next 10 years
  • Folks who also figured out that Sing Dollar would be a very strong asset class for at least 6-12 months.
  • Rich Folks who can focus on capital conservation.
Unfortunately I do not really fit in any of the groups above which is why i would consider such products to be last on the buying list or not even on the list at all actually.

Every day you see the stock market going down and you start laughing for no reason since you are going to make that guaranteed gains anyway.

(It makes me jelly at how some people can just compound wealth at 2.64% across 5 years)

To make things more funny, sometimes we might hear things like 'Wait for the next month SSB or next month T-bill cause rates will be higher.'

Isn't that same as saying waiting for crash to occur or it will go lower because more risk are ahead?

I mean a t-bill of 6 months / 12 months ....what's the point of waiting an extra month when the opportunity cost of that month is getting higher? 

To quote an example,

6 Months T-bill Month

Cut off Rate (Per Annum)

Implied 6 Months Rate

Worth Waiting Additional Month?

March 2022




April 2022




May 2022




June 2022




July 2022




Aug 2022




Sept 2022




In terms of asset allocation perspective, to lock in a % of your money in something that generates 3% a year sounds pretty good. That is until you see that the core inflation is 5.1% year on year in August.

To make things more realistic, the food index is 105.2 in January 2022 but it is 107.5 in August.
If a basic necessity like food has rose by around 2%, then this risk free rate does not sound so attractive in real terms.

Of course there is also no leverage of sorts, e.g borrowing money to buy SSB or T-bill etc.

Which is why i envy anyone who can afford to make their asset allocation into cash even if we know that the stock market is bad, the economy is filled with uncertainty from inflation and a recession etc.

As someone who is reaching the end of my 20s, i do feel that my life is kinda f-ed up from problems happening from both inside and outside (which might apply for some similar age folks).

Inside will be mainly because of my inability to perform in the equity markets when i have shown glimpses of my performance in the past and being unable to replicate them in the recent times. I have an expectation of what i should be able to achieve by i am very far from it.

Outside will be the current environment (Too many various investments that might tempt a normal person e.g Crypto, Tech Stocks, NFT to Staking etc, cost of living likely to increase quicker than salary, having to pay off loans or incur loans related to houses/ studies etc, not really a conducive environment for investors)

End of the day, its a choice everyone makes after considering their own situation, there is no right or wrong choice, for what we know SGD might come out as strongest currency in the next 12 months or interest rates might face a sudden dip and those who locked in 10 years Savings Bond become the major winners. Also, markets might crash even more and result in T-bill and Savings Bond users benefitting.

But being able to put money into such instruments is still worth a lot of envy to my own personal view.

Friday 16 September 2022

Thoughts on Mainland Holdings (Hkex 1100) Results

If this post gets released, it means that i had a favorable week and is in Korea having passed my pcr test. Which means that i will be sharing something 

(Image from its Interim Report of its Interior in the Factory)

(Image from the outside)
(Bird's Eye view of the Factory)

Mainland Holdings released its results back in August. In what was a very favorable result. I was expecting the revenue to be decent but it definitely has outperformed what i expected.

What is impressive on the initial look of the results will be the revenue growth that has managed to contribute to the bottom line as margins were stable and the cost increase were not as significant compared to the gross profit increase.

Dividends have been maintained at 3 cents per share. However, for a shareholder that held the shares previously, there has been a bonus issue of 1 share for every 20 shares held hence total dividend amount actually increased by 5%.

What has been particularly impressive is actually the manufacturing segment.

Management has attributed this jump in segment profit (89 million in 1H 2021 to 141 million in 1H 2022) as it manage to fufill quick turn around orders and had better customer relations (will talk more about this later).

In comparison, 2H 2022 had a segment profit of 85 million. Therefore, the jump is actually over 50%.

As for the trading arm, while it has continued to disappoint, i believe that it might have in roads with regards to securing partners or customers as well as providing a more integrated service.

It is worth noting that although management does put manufacturing in the segment, they are also able to customize and come up with designs for the customer as well.

Prospects Moving Forward

Management has talked in a podcast(in Cantonese) about orders still being full and what the customer wants is beyond what they can produce. 

Also, they have mentioned about how they were able to strengthen relationship with their customers (for e.g during covid times where they did not receive orders, they actually allowed major customers to order and owe them for up to 180 days with 0% interest charged.). Such actions allowed the major customers to put mainland headwear as priority supplier when demand resumed subsequently.

In another youtube video that was published in Jan 2022, i only came across that video last month and was a bit too slow and laid back in keeping up with the research in the company.

From the video, we got to learn of the experiences of the Managing Director of the Company. She took the lead herself to head to Bangladesh to set up a factory via acquisition of a company there, continued her charity deeds there and help transform a rural place to a bustling village thanks to the 7000+ jobs that her factory has given. 

(A by-product of the factory, a village becoming bustling)

This foray overseas is also part of the One Belt One Road plan by China. An opportunity that she came across when she was chosen as a Hong Kong Deputy to the 12th National People’s Congress in 2013.

A key thing that i noted is that she believes that when one expands out of China(走出去), how much one can succeed is based on own abilities but the chances of failure will not be high. Her expansion in Bangladesh method is actually learned from China Gov as well. Which featured three 2-year plans.

1st 2 years: Build up capacity, hiring and setting up fondations

2nd 2 years: Technology Transfer, cultivate local talents from the ground

3rd 2 years: Digitalized Management, making productions more advanced.

Also, we get to learn of some of her charitable actions which has not been in the public media and how her deeds in Bangladesh managed to spread words among the people and to a wealthy person which managed to know of her problems of not being able to get reliable electricity. In turn, helped set up a grid that connected to her factory in 45 days and allowed her to get reliable electricity and operate the factory 24/7. This in turn resulted in more people being hired and allowed to work (earn more and support their families).

The plans will be to improve the Bangladesh Factory productivity by setting up a new factory and improve production volume by 20%. Then they would attempt to implement a more digitalized and upgraded manufacturing system. If such implementation is a success, they would look to replicate such model in Mexico as it is closer to their customers in USA.

Worth noting points is that the lady boss did spend time in Bangladesh in 2022 as well, which means that she is on the ground and spent some time managing onsite and overseeing progress.

(Lady boss spotted in the factory )

Will i be adding it now?

This is a tough question because i do not feel that there is any hurry to add as i do not have a huge amount of cash lying around and my cash to stocks proportion has always been in the similar range that it has been for years. 

Perhaps something that i would want to monitor will be its announcement with regards to supply of products to a substantial shareholder (major customer) and its proposed caps. As the announcement to deliver the final circular has been delayed twice, i would want to wait to see if there is any updates as this would form up a huge chunk of their revenue (36% in 2021).

If the announcement turns out to be the same as previous or better, i would be somewhat inclined to add.

A small cap company that seems to have most of the boxes ticked (Respecting Govt Policies, Training the ground up and increasing productivity, Future Expansion plans in place, ability to improve segment profit by 59% while increasing revenue by 40%, Doing Good Corporate Social Responsibility via its Social Goodwill Deeds, Ability to strengthen relationship with key customers).

Valuations wise, it is trading at around 5 PE and its BV of 0.83 and there is no known listed hat peers to compare to. To add on, there are a lot of possible values that is not reflected in the book value such as the good deeds and reputation of the company as well as the potential value of its china factory's plot of land which it has held since IPO (which its china factory staff has been decreasing year on year).

Of course there are some black swans to be aware of as there might be unforeseen events in Bangladesh e.g. political unrest or invasion while it is important to note that on the demand side events that relate to its customers might occur as well. E.g loss of exclusive rights, demand in caps fall as customers are not interested in wearing caps or purchasing caps related to the sporting events etc.

But do beware that such black swans can be copied and pasted into different companies as well.

I hope the post has allowed one to gain some insights into the Company. 

Personally i think this post is one of my top 100 post.