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

 

October 2022 Returns: -9.27%

Year to Date Returns: -23.29%

Since Inception (9 Sept 2020) Returns: 30.74%

Main shock is in the chips company falling due to the recession fears as well as intel cutting capex which triggered a downturn in sg semi-con stocks.

STI remained resilient with financials still doing decent. Of course the question will be if they will be resilient next year when the 'recession' everyone seems to think of it is coming will come.

I anticipate the portfolio to be lower than current position come end of the year, but i will maintain as it is and act according to results. 

After all, investing is not about predicting whether it will be lower or not but rather the business, whether it is resilient and riding through cycles to build value. Its just a joke. I am lazy to document a sell out all lol. Who really cares about fundamentals at such point right lol we just celebrating every ssb and t-bill increase in rates.

(Long Post) AAG 3Q 2022 Results Thoughts

 

(530-Pipeline Accident. 

Fortunately, no one died but this has resulted in one of the routes that allow the company to transport gas to Henan being cut off)

AAG Energy released its results on 27 September 2022. Along with the poor market conditions, the share price declined as well.

Taking a look at the surface, profits for the first 3 quarters are up 91% year on year.

3Q 2022 turns out to be the best quarter this year and possibly in the history of AAG Energy as well.

This is a shock as revenue of 559 million in Q3 is much lower than 1Q of 733 million Q1 and 596 million of Q2. This revenue fall probably explains the affected volume production

With profits coming in at 410 million RMB in 3Q 2022 alone, which has beat the profit levels of 375 million in Q1 2022 and 363 million in Q2 2022.

However, on a closer look after breaking it down, the cost was very weird as Q3 cost was abnormally low (As seen in the image below).

 

After contacting the IR of the company, they were kind enough to reveal that the reason was due to foreign exchange gains being accounted as deduction of operating cost in China Accounting Standards. Also, they said that the reduction in operating cost is mainly due to the foreign exchange gains.

Whereas in Hong Kong Accounting Standards, this would appear as foreign exchange gain.

Therefore, the company’s 1Q and 3Q results are in China Accounting Standards while 1H and Full Year are in Hong Kong Accounting Standards.

This got me to look back at the annual report to find out if foreign exchange had played a part and which part of the company’s accounts. After all, in 2021 the exchange gains were negligible and in 2022 1H it was only 47 million against a Profit of 739 million (around 6-7% of profit).

This got me to realize that this exchange gains are a result of receivables and payables being denominated in USA and translated to functional currency as RMB.

As a result of a 5.34% appreciation of USD against RMB in 1H 2022, the exchange gains resulted in 47 million. In 3Q 2022 alone, the appreciation of USD against RMB was 6.26%.

This alone has made calculating whether the company has recovered from the 530-pipeline accident difficult as the exact costing structure is now unknown.

This appreciation and depreciation of USD and RMB is not exactly ideal either. Since the company trades in HKD Currency which is pegged to USD while its balance sheet is in RMB, a devaluation of RMB against USD will lead to lower equity value and earnings when translated back to HKD but in turn this will allow for exchange gains on balance sheet. The vice versa applies.

Nevertheless, I anticipated a 30% production loss in its gas field that was affected by the pipeline accident and after running my figures, my estimation was that the revenue fall was probably around 18-20% in Q3 instead of the 30% revenue fall that I calculated.

Secondly, I had anticipated 300 million profits based on what I have read , felt and inferred on the half year results. I believe that this amount was somewhat close to the real profit (not accounting the exchange gain)

When the full year results come out, I will be able to tell the impact of the pipeline accident more clearly. Higher Exchange Gains means that the margins were lower and the impact of the accident is more severe. Personally i hope that the exchange gains is on the lower side.

After running my own simple extrapolation predictions, I believe the exchange gain is around 52 to 102 million. I will come back to review this to see if its true when the full year results come out. But I am still learning and trying to get things right.

Short Term – Price is likely to fall slightly as Covid 19 would dampen LNG prices. A more serious Covid 19 outbreak and lockdown would likely affect business activities. Having said that, the sale price of the gas to their partners are far below the market price of LNG. It is estimated to be around 50-60% of the market price.

Mid Term – How well does the Panzhuang Well Preservation goes, Mabi Well Target for 2023, General Gas Price Trend in terms of renewing the prices that are set periodically

Lingering Issues -  Top Shareholder's intention for the company is unknown. Currently the top shareholder (Xinjiang Xintai Natural Gas Co Ltd)  holds 57.04% of the company while the second shareholder (An Individual) holds 17.83%. Therefore privatization is rather difficult unless the second shareholder agrees.

The last time the major shareholder added was in June 2021 at a price of 1.25 HKD while the second shareholder acquired the 17.83% of shares at 1.07 HKD in 2020. 

Counting in Dividends, both are sitting at some gain.

(Long Post) Added more Medialink Group (HKEX: 2230)

 

Disclaimer: This stock pick has an estimated 99% chance of losing money. Do read further if you are interested in the long post ahead and in losing money when you can put your money in the ssb/ t-bill instead.

Although if you have interest in seeing how i lose money, you can also continue to read further.

High Chance of losing money but here we go again trying again at another attempt to build wealth. It might have been easier to just stay cash but I have promised myself that I will keep going till the end of the year at least.

About the Company

Medialink Group is a company that does distribution of media content and brand licensing.

To be more precise, it distributes anime to various tv companies for them to broadcast and it does sell content and merchandise related to the brands that it distributes.

Some examples will be the company being the licensing agent for Sesame Street in Greater China Region and the sale of anime merchandise related to animes such as Jujutsu Kaisen: Zero. A popular anime that has grossed over 100 million in Japan.

In more recent times, the company has expanded its portfolio of brands and has ventured into various fields such as co-investments in flims.

About the CEO

As this is a people business, the person behind the company is definitely of utmost importance. Lovinia Chiu (趙小燕) is the founder of the company and has over 30 years of experience in the industry as she started in 1988 as a person in charge of sourcing overseas variety and drama shows.

The company is also not a new company as it has been started since 1994 by her after.

She has also been awarded the Outstanding Female Entrepreneur in Great Bay Area in 2020.

She has been in the Japan Market in 1990s, a crediting factor for her breakthrough at that time of point is her ability to consolidate the market information for the clients (Japan companies who have the flim rights). For example, she was able to let them know what are the time slots and how many companies are in various countries that the clients are able to market to.

About the Stock

Priced at $0.45, the company ipo-ed in 2019. The current share price is $0.134 as of October 2022. It has distributed a total of $0.0308. Therefore, the realised loss since IPO is around 64%. For a company that has maintained profitability and is debtless, this fall in share price is rather impressive that warrants a look at the company.

      

On a 5-year scale, the revenue of media content distribution has decreased slightly from its 2018 levels. Nevertheless, it has bounced back from 2020 lows.

In terms of its brand licensing business, this is where things get interesting. The amount of revenue has increased by 436% since 2018.

From 2021 to 2022, it has increased by 80%.

 

In terms of segment profit, it is encouraging to see an increasing trend in its brand licensing business as it shows that there has been increased gross profit along with its revenue.

In terms of its ratios:

Current Ratio: 2.36

Quick Ratio: 1.41

Liabilities to Equity Ratio: 0.63

Liabilities to Asset Ratio: 0.39

Bank Borrowings: 0

PE Ratio: 6.05

PB Ratio: 0.48

Annual Report Message

Interestingly enough, for the past 3 years, the management has always started the chairman’s statement with a Chinese Phrase.

Annual Report Year Message

2022 機遇在手 盡展所長

2021 乘風破浪 勵志前行

2020 毋忘初衷，方得始終

If my level of understanding of Chinese is correct, 2022 sounds the most positive. Which is another reason for optimism

Decision to Buy and Probably Lose Money

-Management knows what they are doing, the founder is experienced in the field and has good business connections in this aspect

-Brand Licensing Business expanding in profit and revenue. With a record high licensed assets under the company, I anticipate the segment to either do well or go bust with a high amount of write-offs

 

-Walking out of Covid effect, with comic fairs being held in various places such as Taiwan and Hong Kong, there are more increased opportunities for spending in the merchandise of various areas.

 

(HK Comic Fest 2022)

(Taiwan Comic Fest 2022)

-Management has guided previously that there will be double digit growth. Adding to the experience and honesty of the management in some interviews, the price remains cheap for an unique distributor of film and anime IP rights.

Key Risk

-Bad economy leading to a lack of demand for movie and anime films

-Overinvestment in the wrong IPs leading to huge write offs

-Sudden Japan Anime Prata Flipping. For example, Japan firing off a missile at another country and leading to worldwide boycott of Japan products or films.

-No reasons needed, markets are in a decline due to higher risk free rates and stocks will fall if they do not perform against the rising tide of interest rates