(July 2024 Results) How i would invest in the singapore stock market if i had 100k of spare money

 

July 2024 Returns: -3.44%

Year to Date Returns: 7.44%

Since Inception (9 Sept 2020) Returns: 87.30%

Nowhere to hide as July proves to be a poor month for the portfolio and for my health as well. Had a bad fall and my right hand is currently unable to even hold my phone for 2 minutes.

GKE did really badly, i am surprised with the logistics margins especially considering there is increase in dangerous goods storage in 2H.

Haw Par surprised as there is a research report on it. Centurion continues to be appreciated by some investors(i guess) which led to its share price to appreciate close to 9%.

Huationg Global did badly, i talked about it in my previous post titled 'Biggest Loss in A Day' as such i will still continue to hold at least 1 more month and reassess the results.

So......the question will be..........is there any changes to be made to the portfolio again? Especially with the earnings season on the horizon.

Yup, lets make a change......after all with -3.44% in July......i doubt it will get worst.

I think the change will be to remove GKE and add a familar name back. Tat Seng Packaging will be added to the list as the china listed peers have done well for 1Q 2024 and currency remained stable within 1% in the past 6 months.

Dividend have been increasing in past years and finance income has went above finance cost in 2023.

In 2024, Corrugated Paper Prices remain low but stable 2600-2900 levels. Compared to pre-covid where it was 3000-4500 and during 2020/2021 prices were from 3200-4700.

With that, hoping for a better august.

Previewing Dream International HY 2024 (Revenue Growth likely but Predicting is Not Easy This Time Around)

Folks who have seen the previous post on Previewing 1H 2023 and FY 2023 would not be stranger to such a post. Dream International 1126.HK has been on my portfolio for some time.

In my mind i was thinking about when would be a good time to publish this post. I feel that i will have a better idea in early August(will explain why as well), but i decided to publish it now so it would be good to get it off my head.

Writing the Conclusion First: No intention to dispose any shares and will not do so. Will reassess when results information are out.

I still 💗 the stock

As per the title stated, i think that Dream International will likely show Revenue Growth but my predictions is not easy this time around due to various indicators showing mixed results which i will talk more about in the following post.

I will start with the negatives

1) Funko Depression

Funko guided its 2024 Revenue to be lower than its 2023 Revenue in its FY 2023 Results Briefing. In some sense it is already a known card that it is going to be bad. Therefore, there is no surprises as this segment continues to depress. With revenue coming in around 15% lower. Coupled with another 7 million lower inventory, this adds up to around 18% lower demand estimated from Funko to Dream.

Given that Revenue already fell from 2.1b to 1.1b in 2023, this 18% is likely translated to around 198m and since it is in the 1Q which is 20% of full year revenue forecast of Funko, the impact is likely around 40m i think. Considering 1H Revenue is usually <2H, i would say 80m impact for the 1H 2024 is around there. 

The negative impact is likely small but it is still there nevertheless.

2) Uninspiring Macro Numbers

The Vietnam Index of Industrial Production for Games and Toys is one of the macro indicator for the Toy Industry.

In years where it has produced negative growth YOY, Dream's YOY Revenue has also shown negative growth

(YOY refers to Year on Year)

However, i do acknowledge that the decrease this time around is relatively small. But this macro indicator cannot be ignored.

Exports Figures has been lackluster as well, Export of Toys and Sports requisites have seen a huge decrease from Jan to April. But have recovered well in May and June. Overall a small decrease of 4% and 7% to Japan and US. 2 Key Geographical Regions where Dream Exports to.

3) Margins

One concern shown by ppl on twitter as well as many folks across different platforms will be that its margins are too high and unlikely to be sustained. 

In a smartkarma report i read, management says that they are not confident that it can be maintained as well.

However it is worth nothing that i was told that in 2023 there were pricing pressures as well. 

With regards to this aspect, i can only say it is a business risk and we can only assesss as it goes or see if any clues come up with regards to raw materials / workers salary / cost savings from customers.

Raw Materials - PVC Price = Flat, ABS Price = Slight increase around 5%.

Workers Salary = 10-15% Increase from my understanding.

Overall this remains a risk but it is a business risk.

Positives / Opportunities

1) Increase of Salary is linked to Massive Employment. 

Around Jan-Feb, a few factories have started mass hiring around 200 to 300 staff. In April / May , they offered to rehire workers back in the first time ever (I Believe) on previous or better benefits as well as hiring even more staff of up to 1000.

Increase in Pay and Mass Hiring. 

This is of significance because Dream International has always been a relatively conservative company when it comes to staff strength. There is a decrease of staff from 28,924  in 2022 to 26,210 in 2023 when revenue is down as well. As such, this scale of hiring to me is a positive sign.

2) Sustained Theme Park Demand

Tokyo Disney Theme Park Merchandise Revenue is forecasted to be flat with gains of around 2-3%. However, from Jan to March 2024, it is around 17.9% higher than Jan to March 2023.

Merchandise Cost of Sales to its Revenue has increased as well from 42.30% to 43.50% . Therefore, another somewhat encouraging factor if we link it to margins.

With regards to visitorship, my estimate is that there should be at least 10% increase in numbers from April to June 2023 compared to April to June 2024. 

A more key indicator will be when Oriental Land Reports results at End July (a reason why a clearer picture will appear in about 2 weeks time).

With regards to Shanghai Disneyland / HK Disneyland, it is seen in Disney Theme Park Results. 

There is increase in revenue of 25% YOY.

My estimate for April to June will be Shanghai Disneyland being strong while HK Disneyland is not as strong compared to 1Q 2024.

3) Start to take in orders from Pop Mart

This is with regards to plastic figures. According to a research website's AGM report of pop mart, it seems like Pop Mart will continue to order from factories in Vietnam although it is currently 10% of its orders only.

With Pop Mart's 1Q 2024 Revenue up 40-45%, this could be a surprise engine for growth or to replace the Funko Revenue Shortfall.

4) Potential Surprise in Die Cast Sector

Monster Jam has been identified as a reason for growth in this sector in 2023.

This margin improvement for this segment is incredible with just a relatively lower % of revenue gain. 

127% improve in segment ebitda while external revenue increased by around 20%. Management attributed it to Monster Jam (which is a product from Spin Master)

In 1Q 2024, although the revenue of the Wheels and Action Segment is down, POS Sale for Monster Jam remains positive and strong at +32% and Monster Jam Revenue is positive.

Conclusion

Although macro environment indicators tend to point to a negative growth with some doubts on its margins being sustained, i would want to take a more micro approach this time around as Theme Park remains strong and there could be a positive surprise from new customers revenue as well as Die Cast Segment

Furthermore, Toys Export has been strong in May and June, if this positive momentum is sustained then i believe it should not be a problem as the hiring translates into volume exported.

With that i end off with a couple of K-Pop / Travel Related Photos .

(Random Photo of Strawberry Mochi)

(Melon Bingsu)

If you manage to scroll all the way down here, then why not read the next few paras as well?

The tough question is.......will a positive profit alert or negative alert be issued?

If it is positive, it is likely due to the revenue increase and margins improved via productivity .

If it is negative, it is likely due to the cost increase such as labor / raw materials as well as margins erosion due pricing pressures .

Without seeing the spinmaster and oriental land figures for april to june, it is too hard to make any estimations but i am leaning more towards what i wrote in the title which is revenue growth and positive profit (35% chance) more likely than negative (15% chance) for now.

If spinmaster monster jam shows growth, we could see die cast really become a dark horse.

As for oriental land, maintaining some growth of high single digit when Jan 24 - June 24 vs Jan 23 - June 23 will be good enough.

I lean towards a more positive stance currently as from the estimates of the Oriental Land, i do not see any significant profit gain from merchandise savings and as such margins should be ok for plush.

(The increase in operating profit from merchandise / f&b cost ratio is 1.5 billion.)

(In the FY that past, it was 1 billion.)

Given that Revenue for Merchandise is 165,419 million yen or 165 billion yen while cost is 71,948 million or 71 billion yen.)

As such, a 1.5 billion yen in cost savings is unlikely to swing margins much. Even if all 1.5 billion is in merchandise and particularly plush, it would be likely around 1% margins erosion i think.

In fact, cost of sales has been increasing for merchandise and decreasing for F&B since 2021.

Biggest Loss in a Day

8 July 2024 turns out to be a day where the portfolio sees its biggest loss (both % and absolute figures)

Day Returns: -5.71%

YTD Returns: 12.19%

My own personal thoughts / emotions

Mentally, i feel fine actually. Perhaps it is because i knew the chances of this happening was pretty high since Friday and had the weekend to prepare for it following the announcement on Friday.

Also, in terms of motivation, it has not been high all along and I was not expecting the year to be great. Having said that, i will still say the same thing that i have been talking about. I can only do to the best of my abilities and there are many things that i cannot control such as corporate business decisions and all. While i can do my best to do research, there will always be things that cannot be found. 

I will do my best and leave it to God to decide if i should continue investing. If somehow i can clock in a negative return for this year(bearing in mind that the current returns as above), i think it is a sign for me to initiate the plan to 'rectify' the problem in the following 6 months and if i fail to do it then i would definitely take a long hiatus from investing afterwards.

After all, to take half of whatever money i have left and spend the subsequent 1-3 years travelling and doing whatever i want without a job and without having to think about investing on a daily / weekly / monthly basis is something i have pondered about doing. So if God decides to show me this way despite my best efforts, then i will gladly accept it.

Thoughts on the Main Culprit of Negative Returns (Huationg Global)

Clocking in a -16.875% loss today, it has eroded 4.78 million in market cap following the news of the Dormitories Failed Tender to extend.

Personally, i thought about selling some shares if the loss was within 5% but at 16%, it is too over-reactive. After all, i had mentioned in my previous post that there is 80% of revenue being lower in 2H.

Lets think of possible reasons for this sell-off

1) Dormitory Concept not lasting. While i agree with this as some folks might sell out as it is not a 'dormitory' stock anymore, it means that not enough research has been done.

A quick search on google revealed that on 7 March a document was published to invite companies to tender for the dormitory. As such, one could have tell by reading the document that the tender was ending soon.

2) Gambling on the Contract Win. 

I would agree with this reason, whereby folks are selling off as the contract win has failed.

3) Allocation of Cost makes valuing the company difficult.

Unfortunately, this portion has been mentioned in the AGM and it is tough for me to assess as well. As such i can understand this but unlikely it is the reason 

I think that folks just bought into it for the dormitory concept and were shocked that the dormitory is not being continued would likely have affected this sell down. Though i have to emphasis again the volume traded today is around 1+ million so it is not exactly 'high' as seen in the EGM Votes (8M) where shareholders were present and the management could not vote.

Breaking down the company is actually difficult due to point 3 mentioned. But if we were to take it literally and remove the whole segment.

19597 in Segment Result . 8070 from Dormitory. Taxes is 19%

As such, without dormitory, the value will be 7694 = (17569-8070)*0.81

This equates to around 4.3 cents EPS. Or around 3.1 PE. To me this feels reasonable as a construction company. Although i think this figure is not accurate as the projects should increase and as such have to reassess the margins of the latest projects. 

A better feel of the margins of the Civil Engineering Works and Inland Logistics Segment should be seen in the 1H 2024 results. 2H 2024 will probably reflect the damage of the cost allocations better.

But I would not fault anyone to think that without dormitory, the company might not be profitable. 

An argument is that the company is profitable in 2018 and 2019.....but times have changed and prices such as dormitory prices have went up as well.

I would have been more negatively surprised if 1H 2024 is loss making compared to the company not getting the tender. But we never know, because the results are still being tabulated. Although i still don't think it will happen.

The company made 2.95 cents in 1H 2023 and 5.10 cent in 2H 2023. We still have to factor in that a similar half could happen in 1H 2024 and also for 2 months in 2H 2024.

For myself, any decision to sell the shares should be based on the below factors

1) If a loss making profit guidance is announced for 1H 2024

2) 1H 2024 Construction and Inland Margins / Revenue Fail to Impress

3) Bad Balance Sheet or Below Par Corporate Actions such as No/Cut in dividends despite a solid cash flow and balance sheet. 

Life would never be smooth and invesments are never all sunny days. 

Things can come at you suddenly but all i can say is to stay positive and analyze each situation individually and come to a logical conclusion. 

And for myself, probably looking at more kpop stuffs to keep my mentality and mood positive so i can objectively analyze each situation better without much emotional in play.