Thoughts on 5 years of investing

November 2019 actually marks my 5 years into investing. 5 years of trying different methods of investing. 5 years of doing the same thing....is definitely not easy.

Happy 5th Anniversary!

(What a 5th anniversary could look like)

(What these 5 years actually looked like to me)

(Credits to lovelinuscom)

Will be sharing some thoughts to what I have seen, felt and observed in these 5 years. Do note that these thoughts are definitely biased and might be wrong as well.

1) It's possible to be investing for 5 years and still be unable to encounter a take-over offer or a rights issue.

The former is probably due to luck and the latter would be picking companies with high levels of cash and low debt. Avoiding reits would also help in avoiding a rights issue

2) People who are awaiting a 'crash' like 2009 are probably still huge in cash since I have started investing.

Unfortunately, the STI has not reached the 1500 levels (1594 in 2009) from 2014 to 2019, the lowest it ever went while I was investing was about 2629 in 2016. Hence people who thought that in 2016 the oil price crash and the china penny stock crash was actually gonna send the STI to 2009 levels would probably be still logging in to their bank accounts on a regular basis thinking how much of it should go into SSB and telling themselves the crash is definitely coming as its long 'overdue'

3) Power of compounding > Waiting at the right time

This point has been illustrated many times online on a numbers basis. However the psychology of losing money is too strong for some people. For others, it's about whether they can compound well. Index funds have decent past results but naysayers would always say 'Past performance does not guarantee future results keke'. Ironically it's also some of the naysayers that say the 10 year once crash is due and mocking those that say 'this time it's different'

Year	5%  Compounding	10% Compounding	15% Compounding	20% Compounding	25% Compounding	2% Bank Interest Compounding
1	1	1	1	1	1	1
2	1.05	1.1	1.15	1.2	1.25	1.02
3	1.1025	1.21	1.3225	1.44	1.5625	1.0404
4	1.157625	1.331	1.520875	1.728	1.953125	1.061208
5	1.215506	1.4641	1.749006	2.0736	2.441406	1.082432
6	1.276282	1.61051	2.011357	2.48832	3.051758	1.104081
7	1.340096	1.771561	2.313061	2.985984	3.814697	1.126162
8	1.4071	1.948717	2.66002	3.583181	4.768372	1.148686
	18%	41%	57%	68%	76%

The last % is the amount u would have to lose in a market crash to lose to 2% Bank Interest Compounding which we all know is just a layman assumption as interest rate falls, it's difficult to find a pure play deposit and obtain 2% interest in each month.

4) For stock-picking, idea generation is important.

I have probably came across roughly 40 stocks in just 5 years that I have bought and sold some. So it's safe to say each year I probably need to have about 8 stock ideas that I would execute. The number of ideas would definitely fall when one is being more concentrated. I would say 5-6 ideas a year is pretty good already.

Another thing would be that you cannot expect all ideas to do well, it will not. There will be some hits, some misses and many more refining and going back to the drawing board to redo the process again.

5) Attending Company Agms are important even if not all Agms are particularly useful.

That is one way I seek some confidence in holding stocks that are relatively less known and those that I have quite some losses in. In particular to those that are in deep red, attending agms would allow me to gather some thoughts to if I should average down and when I should.

My thoughts would be that

If one would buy insurance to cover the risk of yourself falling ill or be unable to work, why would you not seek some form of insurance to your own investments even if it's not fool-proof.

Short thoughts on Lendlease Global Commercial Reit

Lendlease Global Commercial Reit will be listing on SGX on 2 October 2019. The application for its IPO will be open to public from 25 September 2019 (Wednesday) to 30 September 2019 (Monday). 

Prospectus can be found here

Will keep this article short as the reit has already been covered by many prominent bloggers such as Investment Moats

Key Information

1)Listing Price of $0.88 per unit is 1.08 of its book value of $0.81

2)Currently the portfolio consist of only 2 properties. The first being 313 Somerset and the second being 3 freehold offices in Italy.

313 Somerset currently has 86 years left on its lease.

3) The gearing ratio upon IPO is expected to be 36.4%

4) The forecasted dividend yield is expected to be 5.8% and 6.01% for 2020 and 2021 respectively based on the IPO price of $0.88 per unit.

5) 1,167,946,000 units will be issued, of which Lendlease Trust would hold roughly 27.2% of it, Roughly 33.1% would be available to the public and private placements. Roughly 38.85% would be placed to cornerstone investors which include Blackrock , Fullerton Fund Management and Nikko Asset Management.

What I like about the reit

1) Institutional Investors are onboard, as such there should be a higher corresponding trading liquidity to the company and allow the company to be better priced.

2)313 Somerset sits just on top of the mrt station and it still has 86 years left of lease which means valuations are unlikely to be adjusted too far downwards in the near future should a recession occur. To add on, there has been little sales of retail mall in the Orchard area. The most recent news would be Starhill Global Reit willing to offer above market price for Isetan's share of Wisma Atria, another retail mall which is just up the road.

3) Effective Interest rate is only 1% currently.

What I dislike about the reit

1) With only 2 properties, it is widely estimated that more properties will be injected into the portfolio and this will likely result in more offering of shares.

2) Projected forecast seems too good to be true on first glance. The forecasted financials seems to indicate that revenue would increase 36.7% from 2020 to 2021 and this would result in a corresponding increase in DPU of 38.4% after distribution adjustments. The revenue increase constitutes a 34.3% revenue increase in its Italy property and 37.7% in 313 Somerset. 

Valuations

	313 Somerset	Wisma Atria	Plaza Singapura	Paragon
Net Property Income Yield	3.1%(2020)/4.32% (2021)	4.85%	5.36%	5%
Occupancy Rate	99.6%	99.6%	99.3%	Not shown
Latest Rental Revisions	Not Shown	Not Shown	+1%	+8.6%

-If anything, the current valuations of the net property income yield for 313 Somerset remains to be below the current market levels even after a 30% increase to be projected in 2021. With higher yield shopping malls having a positive rental revision, I remain fairly optimistic that the income should be able to deliver as forecasted.

According to the S-Reit data provided by fifth person,

CapitaMall Trust trades at 4.41% dividend yield with a gearing of 34.2% and book value of 1.29

SPH Reit trades at 5.08% dividend yield with a gearing of 26.3% and book value of 1.15

Starhill Global Reit trades at 5.97% dividend yield with a gearing of 36.1% and book value of 0.85

My personal thoughts would be that for Landlease Global Commercial Reit to trade at 5.8% dividend yield with a gearing of 36.4% and book value of 1.08 is actually quite attractive.

However we have to be aware that the property's yield is actually currently below its competitors.

Final Thoughts

-Personally I do not think the IPO would stay underwater for the short run as there would most likely be injection of properties into the reit and it would be problematic if they have to issue shares at a cheaper price. Furthermore, this would make the yield trend towards 6% or even higher which would make the reit even more appealing.

-In the long run, many factors such as interest rate environment as well as the yield of property on its future acquisitions and the reit's ability to increase the property income yield would be important as well. Generally if I were to purchase a reit, i would be betting on inflation, economic growth being positive and interest rates to be stable or low .

-I would be applying for the IPO for the reit though i have not decided the amount i would want to put in yet as i would have to assess my expenses going forward and the equity to cash level before making a decision.

As usual, I would end off the post with a k-pop picture.

Thoughts on Uni-Asia Group 1H 2019 Results- Expecting a good full year

Uni-Asia Group (SGX: CHJ) actually released results back in August but then i decided to take some time off and gather some of my thoughts first.
-Results can be found here 

Quick Summary
-Interim Dividend of 2 Cents
-Profit of USD 2.9 million or 3.78 usd cents in Q2
-1H 2019 Profit came in at 8.66 usd cents
-Results mainly driven by recognition of certificate of completion by its 3rd Hong Kong Office Project K83. This was previously guided in the Q1 analyst briefing hence its not a surprise.
Previously i wrote about hopefully a 2 cent dividend being announced and it did happen. So I am pretty please with it.
-Overall i would say i am not surprised with the results. It's probably the first or second time i actually think this way for this company as in the previous year there has been too many fair value losses.

Uni-Asia Shipping


Q2 charter income came in roughly the same as Q1.  Having previously estimated a drop of at most 10% in charter income from Q1 to Q2, i am not too surprised with the results. The only concern would be the expenses which shot up from Q1 to Q2 as well as much higher than previous year.

Moving forward(at time of writing its 3 September), the baltic handysize index has jumped from 516 on 31 July to 665 on 3 September. With some ships due for renewal and some with rates pegged to the handysize index, i should see better shipping numbers in Q3 compared to Q2 and Q1. This is because the highest the index reached in Q2 was 516 while in Q1 its 588 but it sharply declined to 294 before recovering to 464 at the end of Q1.

Properties Investment Ex-Japan





With regards to both the projects, more gains should likely be recognized in Q3 and Q4 2019.
The main dilemma facing the company is whether should take continue to invest in Hong Kong should another proposal to invest comes to their table. As they have mentioned its tough to find a good partner in Hong Kong and the returns from its investments have been very good but the current Hong Kong conditions might pose a threat. That is something that the company would have to assess should an opportunity arises.

Irregardless,  i remain positive that these 2 projects would drive the bottom-line for the 2H 2019.

Properties Investment in Japan





With only 1 Alero project sold in 2Q, results came in at close to 0.
Looking at the list of projects, it is unlikely there would be a huge contribution in Q3 2019.


Japan Vista Hotel Management


As a result of lease accounting, it was estimated that the segment would be unprofitable and it did not surprise. 
The encouraging signs would be
1)The segment would be profitable had lease accounting been not accounted for.
2) Higher occupancy rate in Q2 than Q1 and as well as higher than previous year despite having more hotels opened
3) Occupancy rate of 83.8% is highest ever, with Q4 2018 being 83.7% while Q3 2018 was 82.8%

However it is worth noting there will be 1 hotel opening in December 2019(Q4) which means there would be some pre opening expenses recorded again.

Conclusion

-Business Segments showing improvements and with the gain yet to be recognized, i remain largely positive on a very good result in 2H 2019 and subsequently a very good dividend.
-The possible pitfalls that might affect the company's operations will be another sudden downturn in the dry bulk industry or Japan Tourism affected by global economic sentiments.
-Another key area for concern would be the lack of substantial HK Project Drivers in 2020 should the situation in Hong Kong deepens.


With that i would end off my article when a k-pop photo as usual

Thoughts on Tat Seng Packaging 2Q Results- A decent 2nd quarter

Back from holiday in Korea and the earnings season arrives for my portfolio once again.

Tat Seng Packaging released its results on 8 August 2019

Personally i would say i am pretty pleased with the results as i had anticipated much worse results.
Interim dividend of 1 cent is maintained and from the cash flow statements, they can well afford the 1 cent.

My Key takeaways

1) Margins Improvement
- Gross profit margins and net profit margins improved quarter on quarter despite falling corrugated prices.

	1Q 2019	2Q 2019
Gross Profit Margin	15.79%	16.81%
Net Profit Before Tax Margin	4.29%	5.38%
Net Profit Margin	3.36%	3.66%

2) Cash Flow Improvement
- Compared to previous year where its operating cash flow is negative, the cash flow this quarter is surprisingly high at 14.2 million ( roughly 9 sgd cents)
- Compared to previous quarter, 2Q's cash flow was higher by 1.5 million before change in working capital and roughly 5.6 million if net cash in operating activities is calculated.
- The impressive ability to pare down its inventory as well as trade receivables led to the above.

3) New production line at Nantong Tat Seng did not lead to Tat Seng being unprofitable
- One worry i had was that the depreciation might be too high and erode profitability especially when margins are very lean. However from the cash flow statements, it seems like the incremental depreciation could be around 500k per quarter or 2 million per year.
-Despite the increase in depreciation cost, the company is able to be more profitable than in the 1st quarter.

4) Sales Volumes increased
-Despite falling corrugated prices and tougher market conditions, Tat Seng recorded a 2.6% growth in sales volume for its China operations in the 2nd quarter.

5) Broad Corrugated Trend still intact but quarter on quarter trend differs


Quarter on Quarter, corrugated prices fell but Tat Seng ended up earning more, breaking the 'trend' that a lower corrugated price leads to lower profit each quarter. But when compared to previous year where corrugated prices are clearly higher by about 26%, the much lower profits in this quarter are reflected by the way lower corrugated prices.


Final Thoughts

-With the 2nd half of the year usually being the peak period of the company, i still remain confident that they have a shot at achieving 10 cents earnings per share this year. If anything, last year's 1H profits were a high watermark to beat and given the economic conditions it was very unlikely for them to better it this year anyway.

- A key concern i would probably have would be that RMB depreciation would once again eat into the earnings and book value of the company. In the 2nd quarter, SGD to RMB increased from
1 SGD = 4.96 RMB at end of Q1 to 1 SGD = 5.08 RMB at end of Q2. A rough 2.4% increase was enough to eat up close to all its profits. With talks about China using RMB depreciation as a measure, the macroeconomics side of things definitely does not look as rosy.

-Having said that, i remain pleased at how the company controls the decrease and increase in % of general and administrative expenses compared to its decrease and increase in % of revenue when compared to previous year's quarter.

Currently trading at a potential 6.18% yield, 0.6 price to book and possibly 6.2 PE with reducing debt levels. It looks tasty to me actually.


As usual, ending the post with a k-pop picture

Powermatic Data (SGX:BCY) - Stellar 2H and Key Observations

Powermatic Data released its annual report on 9 July 2019, its full year results was released some time ago back in May 2019.

A very stellar 2nd half of the year was the main contributor to its 46% jump in Profit before tax. A final dividend totaling 8 cents was declared. At its closing price of $1.80 on 12 July 2019, this translates to a dividend yield of 4.44% and a PE of 9.

The following are my key observations from the results and annual report.

1) Gross Profit Margins fall well offset-ted by revenue growth.

Even though gross profit margins lowered, the company achieved $12.2 million revenue in the 2nd half of the year, roughly 48% growth compared to 2H 2018. Furthermore, Powermatic Data has shown growth across each half of the year, which is definitely pleasing to the eyes.

2) Inventory growth in tandem with revenue growth.


-As inventory is only sold after the reporting period, the right way of looking at the table will be comparing inventory of prior half year to the next half year's revenue growth.
As such, a 3.43% growth in inventory in 2H 2018 lead to a 5.42% growth in revenue in 1H 2019, similarly a 38.47% growth in inventory lead to a 40.6% growth in revenue.
While i am not gonna plug any numbers from the sky, but a 39.8% increase in inventory this year will result in what kind of revenue growth in the upcoming half will be interesting point to take note of.

-Do note that there will always be a risk that higher inventory values might lead to higher write-offs.

-The counter argument will be that Powermatic Data has kept is inventory at a range of 17-19% of its next half's revenue.

3) Growth in fixed deposit and interest- earning balance



-Both fixed deposit and interest earning balances have seen a close to 50% increase this year.

-This would contribute to its bottom-line under 'Interest Income' which has already seen a 75% increase from 2018 to 2019.

4) Dividend Income would likely be lower this upcoming year.

-Powermatic has sold some shares of the Thai companies it has held for quite some time. While it is not disclosed that which company it has dumped, its not really a top secret that it has held shares in Synnex (Thailand) Public Company Limited  as well as Thai British Security Printing.

-Thai British Security Printing in particular has performed badly in its recent financial year and has omitted payment of dividend. Therefore it is very likely dividend income will fall.


5) Property Valuations improved

Its freehold property, a key point of attraction for many value investors, stood at $17.1 million on its balance sheet while its fair value was $31.5 million. The fair value improved from $30.2 million to $31.5 million on the back of higher transaction prices around the area.

Conclusion
-The company has 78 cents of cash after deducting all its liabilities coupled with an investment property that is worth 90 cents on its balance sheet as well as Thailand equity worth 18 cents, the company is trading virtually business free at current price of $1.80.

-Perhaps if the company continues to record a 30-40% revenue growth in this coming financial results, this company might attract investors to start believing that the current valuations are way too low.

-However, even if it does not record such growth, a investor in for the long run should be quite pleased that they are getting good value even at such prices.

The upcoming agm should be quite an interesting one in my view as the company did remarkably well in the 2nd half of the year coupled with a new factory in Malaysia, it would be interesting to hear from the management.

This would be my last / 2nd last post for the month as i would be taking a break and would likely return in August.


Signing off with a k-pop picture as usual

A midnight write-up on ST Group Food Industries Holdings Limited

This will be a midnight write-up on ST Group Food Industries Holdings. I apologize for any mistakes in the following post. Its one of my first time or few times writing an IPO as well. 

Issue Price: $0.26 per share

Issue method: Only private placement

Total Issued Shares after placement: 246 million shares

Net Profit for 1H2019: 1.912 million (In Aussie dollars)

Implied PE should results stay the same would be 17.3  (without counting in IPO Cost)

No dividend policy is stated.

What I like from the company

1) Shareholding after the IPO

Nobody seems to be cashing out from pre to post ipo, which is a good indicator. The 2 cornerstone investors are the master franchiser of Nene Chicken as well as the IPPUDO brand.

2) Tri-core business segments. IDarts not being a core is not included.

The company has 3 segments, food and beverage retail, supply chain and franchise.

	F&B Retail	Supply Chain	Franchise
2016 Segment Margin	-0.6%	13.99%	17.6%
2017 Segment Margin	4.84%	12.26%	24.63%
2018 Segment Margin	4.46%	13.39%	26.81%

With the increase in stores and increase in margins over the years, it is expected that the company should do well in both F&B segment and Franchise revenue.

As the company obtains royalty based on a % of the gross sale of its sub-franchised and sub-licensed outlets, the company is able to participate in the growth of these brands as well (at the same time putting themselves at a slight risk of the brands not doing well)

At the same time by being able to provide the food via its central kitchen, the company is able to ensure its food quality via its supply chain segment and yet at the same time earn a profit. This is pretty good integration to me.

What I dislike from the company

1) Papparich

-One would wonder why is Papparich not a cornerstone investor and instead we have Nene chicken and IPPUDO master franchisers as one when IPPUDO only has 2 outlets so far.

-On a closer look, the company only owns 50% of Papparich. As such it would record roughly half of its profits Papparich makes under Non Controlling Interest(NCI).

I think it's good that over the years, the profit to the shareholders have increased and the company has been moving away from reliance on Papparich as the sole brand . 

However, it also shows that Papparich's profits have stagnated from 2016 to 2018. Although in HY2019, NCI came in at A$856 000, it remains to be seen what's the strategy with Papparich from here on.

I won't say this is a terrible point to dislike about the company its probably picking bones out of an egg to be honest.

2) The need to raise fund is not justified

The company will be receiving net proceeds of S$6.2 million after the placement. The company earned A$2.7mil (not including NCI share).

Judging from its fabulous results in HY 2019 whereby it earned A$2.768 million in half a year whereas in the whole of 2018 it earned A$3.763 million, it's fair to say the profits this year and last year should be very close to the net proceeds. Hence it makes no sense for me why they would consider such a placement.

Though under trade payables, the company has roughly A$3.1 million amount due to shareholders and related parties. It remains to be seen how long this will remain on the balance sheet.

Conclusion

I feel that this is a pretty decent company which has very good integrated business model featuring franchise, retail outlets as well as supply chain. Though I would still be puzzled by why would they want to conduct such a private placement and be listed on the sgx.

Ratings:

Financial results: 5/5

Balance sheet: 4/5

Self-feel: 0/5

Total: 9/15

Like any other companies doing a listing on the market, this company will still likely record a lower profit as it has to account for listing expenses. Being the first restaurant company to list but not have any operations in Singapore, it will be unfair to use listed Singapore peers to compare to this company.

If I am honest, this company looks damn good, just too good to be true for me to buy into it.

As usual attaching a k-pop photo at the end of the post.

Uni-Asia 1Q results post-briefing review- Look forward to the dividend after 2Q 2019

Uni- Asia posted its 1Q results on 15 May 2019 and held its briefing on 30 May.

Will jot down the key takeaways as well as my thoughts about the results.

Shipping Sector



-As per weakening sentiments in the dry bulk rates, the revenue came in lower and 2 of the spot rate ships were originally part of a pool of ships that were under the management of others for charters. That arrangement did not yielded results that were expected by the management and were changed to a model index linked charter to the BHSI. As most of the ships were under long term charter, the results remained decent.

-Looking at the dry bulk rates up till end of May,  i think the charter income should come in at worst case of -10% to 1Q 2019 results. That should still mean that the segment is profitable. Though the key factor affecting revenue would be how much improvement the change in ship arrangements would bring.

Maritime Asset Management Sector



-Following repeated fair valuation adjustment downwards in 2018, there were no adjustments in 1Q 2019 which is a plesant sight. Furthermore, the total investment on the books has been reduced to 5 million USD from 5.8 million USD at end of 2018. This is due to a return of investment of 1 million and recording roughly 200 000 as seen in investment returns. All in all, the risk exposure has reduced which is good to hear.

-Though a key concern would be still how expenses are above the charter income even though it has come down a lot.

-This part of the business is hard to estimate but i do hope that they continue similar results throughout the year.

Property Investments (Ex Japan)



-The 2nd project (CSW 650 also know as China Shipbuilding Tower), an office building in Hong Kong still has 2 floors of 'profit' not recorded yet. They have been sold and would likely be recorded in the 2H 2019. The estimates of the amount to be obtained is probably 5-6 million before fees involved in the partnership.




The estimates of proceed do not fall short of my own layman estimates as well.
Given a ballpark conservative estimate of 4 million in the 2H, this would equate to roughly 6.8 cents sgd.



-The 3rd project (K83), another office building in Hong Kong is slated to complete by 2019. According to management, it seems likely that some gains would be recorded this year. Having made a convenient trip down to proof read my eyes that the building does exist and match to the photos seen in the presentation slides, i would say that it is more than likely this building would be completed this year.

Both projects would likely be a key driver in the dividend for 2H 2019 should there be no recognition in the 2nd quarter.


Property Investment in Japan



-Results mainly boosted by a one-off sale in Feb 2019 of Hotel Vista Nagoya Nishiki, which is not a surprise as it has been mentioned in the annual report of Uni- Asia as well in previous posts following takeaways of the AGM. Following which there are no hotels that are owned by the group, which means that such one-offs will not happen.

-Notwithstanding that, 3 Alero projects were sold in 1Q 2019 and had contributed to the bottom-line. Though 2Q would likely see only 1 project being sold and should have a lower contribution from this segment.

Vista Hotel Management



-Having gone thru the new lease accounting, it is estimated that roughly 2.4 million USD would be added to the expense this year due to the new accounting rules.

-The figure would likely come down only from 2021 onwards, which means 2019 and 2020 would likely stay high due to more new opening of hotels in 2020 as well.

-Profitability of the hotels business would be a loss of 100k-300k if the accounting rules been not counted.

- A pleasant sight would be an improve in occupancy rates despite a higher hotels operated and it has been guided previously that 1Q is usually the worst quarter for its hotel business.

-With the golden week in Japan, 2Q would usually be stronger and it remains to be seen how the results come in.

Personally i would still estimate the hotel management side to record a loss this year as a result of the leases expense.

Conclusion

-2H 2019 should be better than 1H 2019, on the pure basis that the recognition of profits from 2nd and 3rd project in Hong Kong

-Cyclical nature of shipping sector affecting bulk rates is a factor not in the control of the company.

-Hotel Management occupancy rates improving.

-I would look forward to the mid year dividend. If asked to estimate i guess it would be 2 cents sgd hopefully. As they target to pay a dividend equivalent to the minimum of 35% of profit for FY 2019.


As usual, at the end of my post there would be K-Pop pictures.

TMI: My K-Pop addiction has risen multiple fold this year, but its probably the most crucial thing that is driving me in continuing investing to fund my hobby(which is spending on concerts and K-Pop related).

Don't be surprised if the pictures are reused, for pictures are limited just like how one's capital/war chest is.