Tuesday 31 January 2023

(January 2023 Results) How i would invest in the singapore stock market if i had 100k of spare money


January 2023 Returns: 5.82%

Year to Date Returns: 5.82%

Since Inception (9 Sept 2020) Returns: 50.50%

Good start to the year with most stocks seeing some recovery in share price. On the news front, apart from anticipated profit guidance from TC Auto, there is not much to look at. Feb and March will likely be more busier periods where more results comes out.

On the general front, dry bulk and container shipping related sgx counters like uni-asia and samudera remain strong year to date. Though i am a bit doubtful about them as they are likely to have a weaker Q4 but still strong 2022. However the rates are really very bad in January.

With regards to recession, there has been many views by different bloggers and youtubers. I do not have any particular views and thoughts towards it currently. Perhaps with more information and demographics related down the line, a clearer picture might finally be formed.

Monday 23 January 2023

Predicting and Previewing HG Metal Results

 HG Metal has been a position that i have added in 2022 and so far my gains and losses are +/- 3%.

It has presented a decent result in 1H 2022 with eps of 5.12 cents. Should it continue its trend, it will mean that earnings come in at around 10 cents and trading at a PE of less than 4 as its trading price is 39 cents.

Furthermore, the net asset value of the company stands at 89 cents.

Ever since 2019, the company has shifted its focus from trading to manufacturing. This can be seen in its manufacturing segment profit growing since 2019 while its trading segment has had mixed results.

Manufacturing Profit growing while Trading Segment has mixed results.

In thinking about how the earnings might go in the second half, i decided to take a look at 3 things.

1) Steel Rebar Prices

2) Steel Rebar Demand

3) Competitor

1) Steel Rebar Prices

The average price of steel in 2022 2H is 1060, which is higher than 2021 1H where it started recording decent earnings of 4 cent EPS. However, it is lower than 2021 2H and 2022 1H. Which means that the trading segment might face some losses due to the volatile steel price movements.

However it is all too difficult to predict as the trading segment faced losses in 2018 despite a flat steel price environment and prices was higher than 2017 while in 2019 it managed to have profits despite 2018 2H > 2019 1H > 2019 2H for steel prices.

All things considered, i consider the retracement of steel prices to be rather healthy and it is good for construction demand. A thing worth noting is that steel prices have rise again in 2023 and is up around 10+% in China (A country which SG Imports steel from)

2) Steel Rebar Demand

According to the BCA Free Info, demand for Rebar Steel in 2022 (Up till November) has already exceeded 2020 and 2021. Making it the strongest year since Covid Struck.

Of course it is unlikely to surpass 2018 and 2019 levels but HG Metal's 2021 manufacturing revenue has increased beyond 2019 levels which shows that it has managed to grow despite the macro environment not recovering to those highs.

As such, i expect the manufacturing segment to show some growth or at least maintain stable.

3) Competitor

BRC Asia is its competitor and the market leader in the industry.

Despite some reversal in contracts, it has recorded a relatively strong gross profit and net profit from July to Sept 2022.

This means that business is stable although it has highlighted the BCA Heightened Safety Requirement which might play a part moving forward.

Wild Card Consideration (Resignation of the CEO)

Interestingly, the CEO does not hold any shares in the company and he has resigned while the major shareholder will take up the position of the CEO.

I have to applaud the efforts of the leaving CEO as since joining in Jan 2019, he has turned the ship well and recorded profits in 2019, 2020 and 2021. 

He is also paid well in 2021 (1.5 to 1.749m) when the company recorded 12.1 million profit.

In 2020, he is paid (0.25 to 0.499m) when the company recorded 1m profit.

In 2019, he is paid (0.5 to 0.75m) when the company recorded 0.8m profit.


I feel that 2022 results will be stable. Following which then there is probably 3 scripts that the company might follow 

Script A - A company that does well when steel prices are up and a lot depends on the increase of steel prices moving foward. In this case, 2022 2H will likely be weak due to lower moving steel prices and the volatility is far lesser.

Script B - The company continues to benefit from its manufacturing segment and is able to offer the value preposition while the tailwinds of 2023 demands being stable and 2022 demands being good offer a re-rating of share price.

Scrip C - A change in CEO results in the company moving backwards instead. Might mean there are some setbacks in the manufacturing business. This means that 2022 might be its last good year for some time.

Of course none of the scripts might happen as well. That is the nature of some sgx small caps where info is very difficult to find and even with info the estimation might be off. As such, it explains why its sizing in the portfolio is around 8+%.

Just hoping that the company will pay a good dividend and be able to produce decent results moving forward after their company trip in July 2022 to Langkawi.

Thursday 12 January 2023

Justin Allen Holdings (A Company i have shortlisted recently)

 To continue the previous trend, if this post goes off, it means i have took a plane and travelled somewhere. This time its Taiwan.

As such, considering the flight price as compared to previous trips is lower, the quality of this post is expected to be not as high.

A company i have added to my shortlist/ waitlist recently is Justin Allen Holdings Ltd (Hkex: 1425). It is a company that is listed in 2019 November and its business entails OEM garment manufacturing of sleepwear and loungewear products. Its major customer is Target and Walmart although the former is 85% of its revenue.

(Company Logo)

Following my trend of looking at the balance sheet first, the company's balance sheet and financials have caught my eye straight away as they look too wonderful to be true.

(Total Equity rising since 2018, Cash has also covered liabilities in 2021 which means i can take a close look at the other parts of the company)
(Revenue and Net income rising in tandem. Looks good as well but is all so good?)

What i like about the company

1) Really Good Numbers

There is no sugar coating, the numbers are good and that is that.

The half year numbers pale in comparison to full year number as usually business picks up in 2H of the year. Nevertheless, the past few years have seen an increase in price per product. Yet at the same time, the number of staff at Cambodia has decreased. With its China Plant being unprofitable in 2022, relatively cool to say a huge chunk of profit comes from Cambodia.

(Seasonal Impacts do Occur, 2H usually is better than 1H)

Perhaps a better way to sell koyok will be to present the 1H numbers in comparison but i am slightly lazy so i will just leave it like that.

2) Close to full hiring and expansion plans. Constructing a plant near the delivery location has became a trend recently i have noticed and with 3 factories in the pipeline as well as customers possibly approving new wear products will allow for better revenue in future. In fact, i would say this might mean that it is close to full capacity currently.

From my possibly unreliable sources of the internet, it seems like the Cambodia Factory is close to full capacity as well.

(Company's Expansion Plans)

3) Major Customer increasing demand over time.

(1H and 2H both increased year on year.)

What i dislike about this company

1) Balance Sheet can better. Company holds quite a huge sum of financial assets and have seen them being written down in 1H 2022.

For folks who are highly into looking at inventory, trade receivables and various asset ratios, this balance sheet will likely be a mixed bag of results as while receivables has not increased despite an increase of revenue by 30%, payables has increased largely while inventory has also increased by around 40%. 
 A good gauge will be to refer to the 2021 balance sheet to assess the inventory levels.

Fortunately, the 2021 June levels of inventory look similar to 2022 June. Which means it is not much of a worry. Also with most revenue coming from target, i am not sure how much importance should be place on the receivables. 

2) Highly Volatile Orderbook. As orders are not on a long term contract basis and also subjected to economic demands in US, these are factors that can affect any garment factories in general. There is also a heavy reliance on Target to have not much financial difficulties as well as being able to grow their market share and demand in US.

This is also highlighted in its IPO.

3) Difficulty in finding more information. While some information on its China Subsidiary which is unprofitable is available, the Cambodia Subsidiary's information is much harder to find and it its not a surprise given that there is probably around 1000 staff there about and the language Cambodia uses (Khmer) is difficult to type / translate around as well. 

On the management front, they have been rather low profile or did not win any awards or anything where they would give an interview. The most recent article was about wages in 2022.

Another article was in 2020 which mentioned a change in strategy helping the company.


Is this stock a buy currently? Not for myself as i have mentioned a lot of times i do not have excess cash. 

How about if i had cash? I would consider because this company has shown good profitability in the past, a potential expansion plans as well as unit price has increased each year while margins have climbed steadily as well. Also, the management themselves hold 67% of the company. I believe that a billion or 2 billion HKD is considered small as Target's apparel sales in 2021 itself is around 140 billion HKD.

Of course there is some concerns over what sizing i should put in(if i had the cash) as a part of me would have liked for the management to explain a bit more on their plans and how they have done well these years while maintaining a lower Cambodia Headcount etc. 

In other words, the PR portion can be better communicated. Sometimes even accepting a media/radio interview to share about the company's business and its developments would be decent as well

Although something interesting is that they have paid a 5.9 cents dividend for FY 2021 and there is some reasoning given. 'For the year ended 31 December 2021, the Board proposed a final dividend of HK$0.059 per share, representing a dividend ratio of approximately 46.6% out of the profit attributable to the owners of the Company. Given the Group continued to record good results in a challenging environment, the Board decided to declare dividend at a relatively high dividend ratio to shareholders of the Company for sharing fruitful returns to them and as an appreciation for their support.'

I would not be surprised if  FY2022 results continue to impress.

                                                      (Thanks for reading)

For folks who want to view the half year comparison can refer to the table below.

Anyway if my valuations (which are 99.99% inaccurate) would indicate, i would estimate that 2H 2022 could break 23 million . However, this is depending on what is the maximum capacity they can achieve which is something that they have not said or indicated. From my reading, they do outsource their orders as well so i believe any increase in production should be largely possible.

 If productions do hit 23 million in 2H 2022, the profit estimate could look like this.

This means that it is trading at less than 4 PE at the current price of 0.63 (As Full Year EPS will be 0.17)

However at the current price of 0.63, it is trading at book value of 1.64 (above book value) which is a rarity among garment small caps.