Astrea Retail Bond – It’s a Press!

 

3 Reasons to press for the bond

1)      Current Astrea Bonds Trading at a Yield to Maturity less than 3%

As such, the 3% bond should be traded at a premium and should open above $1. Which means anyone who wishes to punt should not be underwater on day 1.

 

2)      Current Retail Bonds are also trading below 3% yield to maturity

The best comparison would be to compare with the SIA Retail bonds. Surprisingly for a company that continues to be unprofitable, it is trading at a yield to maturity that is below the ASTLC 3.85%. Although one can argue that its maturity its in 2024 and therefore have a shorter timeframe, the ASTLC 3.85% also has a Scheduled Call Date of 20 June 2024. As such should it be called in 2024 when it meets the conditions. The XIRR of 2.89% without counting any fees looks attractive as well.

 

3)       PE Funds perform well under simulation and from March 2020 to November 2020

A previous doubt I have in the private equity would be the performance and whether they would do well to generate profits for redemption. From the simulation by an independent research consultant, it seems to have done well by maturity date. Which means that the bonds are safe (not risk free but relatively lesser risk)

From the results, we can conclude that the covid 19 crisis did not affect profits of the PE Funds a lot as they manage to bounce back and regain the losses by turning in a profit that is way higher than the loss in the 6 months from March 2020. As such, passing such the hurdle of Covid-19 with flying colors is a big plus.

 

             However, what are the risk?

 

1)      Interest Rate Risk - If interest rate continue to increase, bonds would have a fall in price in general and would encourage funds to invest in other newer issues with higher rates.

2)      Stonks Risk – Well in the environment where a day’s fluctuations can be very wild, one would never know what happens in these few days. Assuming someone took the money to punt the Astrea Bonds instead of deploying them in Tesla or other more in-demand and in-focus stocks which they might have wanted. They might miss out on those gains instead.

3)      Freak Events – There can be many freak events that might happen out of the blue. For example, PE Funds found to be fraudulent etc. Should such shock freak events occur, this would likely drive down valuations of the PE funds and the bond as well.

 

Conclusion: It is a press! At least for the short run its worth the try. For the long run, the prediction of interest rates is anyone’s guess. A fair value opening price i guess should be 1.014.

Pictures obtained from Bondsupermarket and Bond Prospectus

Disclaimer: This is a post written in a short time span and of the blog owner’s view. As such it should not be a surprise should any mistakes arise in the post. It is also a post sponsored solely by the owner's own time.

Results Release Short Few Lines Layman Analysis (Tat Seng, A-Sonic, QAF, Yanlord , Challenger)

Tat Seng Packaging (SGX: T12)

-Profits greatly improved thanks to a more stable paper pricing in 2H 2020 compared to the downtrend in 2H 2019

-Company has also done well during the Covid Crisis, a trend not seen in its competitors.

-Gross profit margin for 2H 2020 improved year-on-year

-Improvement in profit margins despite higher depreciation cost

-Operationally good, dividends though were a disappointment. Could be due to spin-off and capex requirements.

-Spin off should imply a fair pe of at least 15 as long as it’s not at sgx but rather hk or china. Which is massive considering that it is currently trading at 5-6 pe in sgx.

However, what are the risk?

Paper Price fluctuations resulting in huge swing of earnings as seen in past few years

Industry is highly fragmented and lacks pricing power. While generally one could do its best to improve its business processes, it still conforms to the trend of the industry.

A Sonic Aerospace (SGX:BTJ)

-Results decent thanks to ‘Other Income’

-Normalized Earnings based on Q4 is roughly 800k each Quarter

-Based on Annualized and Profit to Parent ratio of 58%, Estimate roughly 1.8 million in profit

-Company Market Cap 24.854m, (Trade and Other Receivables + Cash – Total Liabilities) = 26.529m

-Effectively it is trading at 0 earnings valuation. With recent adding of shares by management as well.

However, what are the risk?

-Revenue Increasing at a % lower than Freight Charges. This could imply that it does not have much value in its value chain in passing cost or setting cost. Which would start to hurt its profitability, as seen in 2020 its ‘Revenue – Freight Charges’ is lower than 2019.

- Record Profits thanks to disposal but a dividend cut. Implying business conditions might be tough?

QAF (SGX:Q01)

-Results fundamentally solid however the re-valuation was a surprise. Will have to see the valuations of the spin-off eventually should it happens. EBITDA came in pretty close to estimation for the Primary Production Business.

-Spin-off would also reduce the gearing of the company as the Primary Production has higher liabilities to assets compared to the group as a whole.

-Based of its Bakery Operations of 7.3 cents, trading at around 14 PE for a Bakery Company looks rather appealing.

After removing primary productions from its market cap, the adjusted PE is about 10.

However, what are the risk?

Earnings Normalizing post covid, spin-off not occurring again due to lack of demand.

Yanlord Land (SGX:Z25)

-Profits come in around the same after normalizing earnings. Definitely unlike Sincere Property.

-Higher Sales throughout 2020, margins going down as per industry trend

-3 Red Lines. Yanlord Land seems to have passed all 3 requirements, meaning that it would be able to grow its debt further. To add on its investment properties (around 20% of its assets) should provide some breathing space in the future as it can be sold off if needed to meet the requirements.

- With roughly 4 years of 2020 Revenue’s sales yet to be realized, the next few years seem fine.

-Pockets of possible opportunities (Spin-off of project management, property management, investment properties to reits)

However, what are the risk?

Write down of Investment properties (After all increase in 2019 and 2020 seem rather unbelievable)

Curbs to China Housing Market (Especially recent reiteration of how housing is not for investing but for living emphasis in China)

Does not seem to follow trend of other China Property Stocks that are listed in China or Hong Kong. 

For example, on 25 February, most property stocks trended higher by 6% to 20% following news of 3 batches of land sale per year by multiple cities.

Unfortunately, this sentiment is not seen in Yanlord Land which could imply a different investor base and perception towards China Property Market. As such, any positive sentiments from China/HK is unlikely to be replicated in SG.

Challenger Technologies (SGX:573)

2H 2020 beat 1H 2020 (13.7m vs 9.6m). This is impressive considering that other income for 1H is higher than 2H. Recovery from Circuit Breaker effect and going into phrase 2 and 3 very well.

Excellent Inventory Control. Revenue and Purchase of Goods and Consumables have a very similar magnitude in change. Which is ideal as you would not want purchase going up 50% but revenue going down 10% or going up only 10%.

Market Cap of 193.32 million, Cash – Liabilities amounting to 30 million, full year earnings of 17 million without other income. Valuation does not look steep.

However, what are the risk?

Failed acquisition offer might result in being less shareholder friendly. As seen in its dividend despite a record year. The dividend is lower than 2018 despite profits being higher than 2018.

Fall in Employee Expenses, in any other year in normal business circumstances, that would be good productivity showing. However, this year, the employee benefits fell by 3.1 million which meant that either someone was fired, or the overall pay package has been reduced. 

To make things more puzzling, as of 2019 annual result they reported they had 41 stores in Singapore while in 2020 annual results they reported they have 42 stores in Singapore. 

From a shareholder standpoint, its good to see good results. But from an employee point of view, knowing that your company made 5.6m more before tax by cutting employee cost by 3.1m and receiving 4.8m more of other income. I don’t know how to view it.

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

 

Positive Returns in February despite a really volatile month in the markets

Results Release for UMS, Propnex, IFast, Hanwell, Centurion 

Results Short Commentary

UMS - Shocking 4th Quarter creates a drop in share price on the last trading day of the month. However I remain positive on the long term trend, as such it would still remain in the portfolio.

Propnex - On paper looks like the better company compared to APAC Reality, a comparison article i would consider penning my thoughts when i have the time. In short, results are excellent and with travel not resuming any time soon as it seems, housing would be a good investment tool with low interest rates to stay for a little longer.

IFast - Good Results but it seems like its very volatile as investors seem to regard it as a tech stock. Will have to see how well it grows its AUM and more details on the E-MPF and how much stake they have in it.

Hanwell- Originally was going to exit and take profits in this stock after a remarkable increase the past few months. However, was totally caught off guard with the potential spin-off of Tat Seng Packaging. As such, holding this stock and see how things turn out will be the choice. On the results front, 2H out performed 1H as it was widely expected. Hence there was no surprises on that. However the dividend was a bit disappointing as it could have been higher.

Centurion - Operationally did ok and fair value losses due to sluggish demand of its student hostiles (due to lock down and lack of flying to study abroad) were expected as well. The demand should remain stable for workers dormitories. The lack of dividend is understandable given it has been in the headlines for a big part of the year.

Overall i am fairly satisfied with the portfolio performance and the results of the various counters in the portfolio so far.

Ka Shui International Holdings Limited - A Perfect FA Coy set to fly?

 

Stock Ticker: HKEX: 822

Stock Info: A die casting of alloy and plastic injection business

Stock Price as of 8 February 2021: 0.6 HKD

Implied Market Cap: 536.26 million HKD

                                                      Financials:

A company that has recorded profitability in all but 1 year from 2008 to 2019. I would consider it impressive as it has recorded a profit even in 2008 where the global financial crisis happened.

Perhaps a red flag will be fluctuating earnings across years and 2015’s unprofitability that has to looked into deeper on why so the case.

In 2015, the company has recorded unrealized loss for foreign exchange contracts of 71m and 22m of impairment. Which when after accounting both one-offs, resulted in a loss.

However, this worry can be chalked off as in its 2019 Annual Results, it has done away with the forward contracts.

Balance Sheet:

From the snapshot, current ratio has always been above 1, equity has always increased apart from 2015 where it was unprofitable.

Looks ok to me.

Dividend Record

Solid Dividend Record with a Knack of rewarding shareholders every year. Apart from 2016 which it was unprofitable for the year ended 31 December 2015 which is understandable.

 

Recent Results

Recent results have been a blast and a huge boon. With the company tripling its profits on the back of margins improvement. Its something good to see as it highlights that the company’s manufacturing processes has improved and could be a sign of potential earnings value.

Even if not counting the other income, the company is on track for a better year as it tends to have more orders in the 2^nd half of the year.

Assuming Covid did affect demand in 1H 2020 and it outperformed a non covid 1H 2019, its imaginable that 2H 2020 will likely be better than 1H 2020. Especially in 2019, 1H 2019 had 14m of profit while 2H 2019 had 74m of profit.

As such if we assume similar allocations and 1H 2020 margins, we could be looking at 2H 2020 profits of 195 million in 2H 2020.

 

Is it time to buy buy buy then?

Unfortunately, there is potential red flags to consider before we jump into such a counter.

1)      Controlling Shareholder dumping shares

Unfortunately, in what is supposedly looking like a record year, the controlling shareholder has decided to exit the shares at a price of 0.7358 to 0.8546. Although reasons are unknown as it could be for personal reasons, it looks kinda shady and profit taking. It is the main reason why the price has crashed and is trading at 60 cents today.

2) Appointment of a CEO capable of crashing share prices. 

Share Price fell from above 1.25 in 2017 to 0.94 today

Sounds a bit misleading but a new CEO was named and will be taking over from 1 February 2021. Chu Weiman who is previously the CEO from the trading division of Leeport (Holdings) from September 2016 to December 2020. With engineering background, surely it is relevant to the industry they are operating in.

Unfortunately, the track record of the trading division is as follows

Year	2017	2018	2019	1H 2020
Operating Profit	15,962,000	10,242,000	- 37,016,000	-5,498,000

Although 2017 and 2018 was profitable, 2019 lost all its profits and the loss trend did not reverse in 2020. Hiring such a person to lead the company moving forward, I have my doubts. The sole bright side would be that the controlling shareholder (Lee Yuen Fat) will remain as the chairman of the board.

1)      3) Questionable Sale of Subsidiary to Controlling Shareholder

In October 2016, an announcement was made whereby the company will sell a subsidiary along with the land and building to its controlling shareholder. In the very complex deal, it has been mentioned that it gives shareholders the opportunity to consolidate its production lines and realise the fair value of the group’s investment in the land and property with a gain.

However, a question would be if so why would the land be sold back to the owner instead of the open market then? Well your guess would be as good as anyone’s.

Conclusion

The company is cheap based on current valuations and should the 2H 2020 thesis occurs. On its website it has also been collaborating with a few parties such as XPeng which opens up its exposure to the electric vehicle industry, a new up and rising trend in China.

However, a few structural issues remained even though on paper it has rewarded shareholders almost every year since 2008.

Looking at its long term stock chart, 

The highest stock price came in 2013 and 2014 whereby dividends were at their highest. Whether such high amount of dividends would occur again would be anyone's guess but at least the trend is that the dividends go with tandem with good results and there is a decent chance there will be good results.

Unless a guidance is given, and some explanation is given in some briefing with regards to the major shareholder selling the shares. If ever i would take up a position, it would a small portion for punting. A large position would be unlikely due to the lack of info available. 

(January 2021 Results) How i would invest in the singapore stock market if i had 100k of spare money

 

January 2021 Returns: 10.97%

Total Returns since 9 Sept 2020: 22.49%

No changes to any holdings since its inception in September 2020

Main driver of returns : UMS, Propnex, Ifast, Powermatic Data

With earnings season coming up, there will be some review of results and re-adjustment

Are things cheap at the moment?

January 2021 has proved to be a volatile month, in fact i feel that it is probably one of the most volatile months in the past 6 months. As any what goes up quickly comes down and goes down even further for some.

I would look at 3 stocks listed in the SGX and give my own opinion.

1) UMS

(UMS Share Price Chart)

At a 5 years high, surpassing 2018 price. In terms of profit, 35 million in 9 months of 2020 isn't bad at all. However unless it can post another 18 million, it will not beat 2017 results which coincidentally led to the rise of it in 2018. The key question will be will demand for semi-conductor continue to be robust? As we know that it is a cyclical industry but has the trend changed? 

(AMAC Q4 2020 Earnings Presentation)

With a decent forecast of 10% growth over previous quarter and around 25% over Q1 2020 for applied material's Semiconductor Systems Segment, things bode well currently. With the addition of TSMC's forecast of a 15% growth in 2021, it seems like growth will continue and this will probably justify its valuations.

2) SBS Transit

(SBS Share Price Chart)

A good gauge of the economic activity is this resilient transport operator that has run into bottom-line trouble thanks to the circuit breaker and covid 19 outbreak. From a peak of 4.2 to about 2.95 now, it has retraced roughly 30%.

Looking at its ridership, 2020 2H is 60% of 2019 2H, which does not bode well even though economic activities have resumed. Furthermore with all of its profits coming from Covid 19 Support, i am not sure what the dividend policy will be. At this price, its reasonable for a normal market condition but given that earnings release(probably bad) is coming right up and an unknown dividend policy.....it would be good to hold back for now and await till results are out.

3) DBS

(DBS Share Price Chart)

Leaving the hardest for the last, we have one of Singapore's top bank DBS Bank.

 Share price currently is not anywhere near its 5 year highs of around $30. 

However its current share price is back to pre-covid levels. Which is puzzling because it seems to show that business is back to normal. However is that so? Lets take a look

(DBS 3Q 2020 Results)

(DBS 3Q 2020 CEO Observations)

As such, it is almost certain that the outlook for 2021 is more rosy than 2020. As such the current price is probably pricing that in as well.

 I feel that current price is getting reasonable for the following reasons.

1) Low interest rate environment to boost wealth management. When crediting ur salary and not using it becomes a pain for ordinary folks due to the ever lowering of interest rates, whether you choose to invest it (Wealth Management) or take a loan to purchase a house (Bank Loan) or spend more of the money to enjoy life due to covid stress (Credit Card). You seem to have trap yourself.

2) Indication of a reduced allowance will improve bottom-line

3) With better results, surely a better dividend is on the horizon?

Potential Pit falls

1) Extension of MAS rules on dividend for banks

2) Covid Infection again, affecting business to a greater extent

3) Implicatiosn from Lakshmi Vilas Bank

To conclude in short

1) UMS- Not Cheap but because growth is factored in

2) SBS Transit- Cheap but uncertainty lies

3) DBS- Reasonable if based on current conditions

Friendtimes Inc (6820 Hkex): From Zero to Hero and back to almost a zero again.

 

As someone who was keeping an eye on the mobile game stocks listed in HKEX, Friendtimes Inc definitely caught my eyes in 2020 as it was one of the fastest moving stocks across 2020.

From the starting price of around $1 at January 2020 to the peak of $3.89 before closing at $1.85 on 15 January 2021, it has been very volatile times for a shareholder. 

Anyone who was vested at the peak would have lost around 50% of their initial invested amount.

What led to the rise in its share price initially?

1) Covid 19

Covid 19 has brought about a shift in consumers preference in entertainment and resulted in higher amount of people turning to games on various platforms. This has resulted in more hype in gaming stocks such as FriendTimes Inc as there were more people expecting good results coming out from these companies.

2) Flagship game delivering

浮生为卿歌, a game launched on 31 December 2019, quickly captured the female market and make waves in China.

It made the 4th place as one of the top 10 growth in China iOS game market in 2020

At its peak, it propelled Friendtimes to the 15th position for May 2020 in the Top 30 China Game Developers Revenue ranking.

With the above, I was expecting quite a good result of at least 1 billion RMB revenue as well. However i felt that optimism might have been too rosy and well reflected in the share price for me to participate.

For point of note, the share price on 28 August 2020 was $3.84

What went Wrong?

1) 1H 2020 Results subpar

Despite making numerous headlines and achieving good results in game rankings, revenue only came in at an increase of 34.5% and profit after tax only improved by 8.7%.

This was largely due to an increase in Sales and Marketing expenses. The increase in its Sales and Marketing Expenses was more than its Profit Before Taxation. In short, the company was overly aggressive in achieving more traffic for its games by advertising and resulted in a sub par result.

This is also not helped by the fact that its new game 浮生为卿歌 created an attrition and eroded the revenue of its other games. Which resulted in a lesser increase in overall revenue.

Despite numerous buybacks (19 times ever since its results was released), the decline in share price continued and resulted in the position today. 

Previewing Full Year Results (Is it time to buy?)

The short answer will be No. 

The ranking of FriendTimes in the Top 30 China Game Developers Revenue ranking are as follows

After looking at this ranking, i am less than optimistic that the 2nd half will outgrow the first half. Which means that assuming results maintains, an eps of 0.14 rmb would be expected. 

Although if the selling and marketing expenses comes down, an eps of up to 0.21 is possible. 

However, given by how lacklustre the growth in 2H is likely to be, i would be unlikely be buying it at current price. The possible catalyst though is that a new explosive game is released. Also, that game will have to do well and not affect the revenue of other games for Friendtimes Inc to be successful.

To sum it up, it is a story of a game company where its growth has not worked out. It has to show its game can grow again, before its valuations will grow.

 

2020 Review. Moving into 2021 (Long Post)

 3157 being the HK Small Caps Tracker

6th Year of Investing. 

Given what has happened throughout the year to the world, to the people around me and to myself.....I would say this is a good year. Entered the year being <50% cash as well which definitely means firing has to be more cautious.

Of course the 18.21% is inflated as my largest holding stock went ex-dividend and there was no drop in price (due to lack of volume) despite a dividend yield of around 9%. Hence i would say the more accurate figure would be around 14-15%.

I am a net spender this year as well as i bought more than i sold. Unfortunately despite a record spending this year, returns have not been as high as what i see from others lol. Most of my losses came from large caps, probably a sign i should have more holding conviction/ avoid large caps for myself.

On the XIRR front, it is largely similar to the time weighted returns.

Most of the returns came in December. Without December returns would be at about 8%. Interestingly enough, i was contemplating adding some of my positions up till the last day as i believe that they are still undervalued. However for easier accounting, i decided to push back a little longer.

Made a tiny donation to show some gratitude....its just a real tiny amount.

Remember these 2 tables?

Its from the post dated 5 July 2020. 

I have to apologize as i was not as accurate in expecting what would happen in the 2H 2020. Though more than half performed positively, the returns are not as high as i thought it would be.

The conclusion I get from this experience is that small caps in general have more potential then large caps. Although they are also the ones responsible for the largest negative returns.

What i learnt this year

1) A different kind of crash elicits different responses. 

Being through the previous kind of down market scenarios like the oil price crash, china penny stock market crash and the trade war fears. This is the first time a down market scenario is due to people's lifestyle has been affected. As such different opportunities start arising compared to the previous scenarios which did not affect a person who is not invested as much. As such, those who adapt to the scenarios will be rewarded in the short-run. In the long-run it remains to be seen although folks could have just clocked out their returns as it is largely rewarding to adapters.

2) Sentiments can change very quickly

I would tell the story via a stock i held. 

For background information purpose, Tat Seng Packaging is a company that does corrugated packaging in Singapore and China. 

Most of its revenue comes from China. 

It is also part of the top 50 packaging companies in China. It is a counter that i have held since November 2017.

In February, Covid Cases starting popping up across the world while China is in a lockdown. However, Tat Seng Packaging's stock price did not decline much. It released its result at (1) and as expected it was bad as corrugated prices were way higher in 2019 and declined sharply in 2020. However, the stock price did not immediately drop by a lot even though dividend was cut by 50%.

In March, along with the global stock market decline, Tat Seng hit bottom at 25 cents. This was where all the doom and gloom was around and people are saying things like Covid 19 will take away all the lifes and investing probably does not matter as much and sort of stuff like that. 

But China eventually recovered and it was until June when the agm questions was answered then people knew that the operations of Tat Seng were ongoing all along. Then, it presented a really good set of half year results in August. Recording an increase in profit even if other income was not being counted. This propelled the company to close at a price that was higher than it was at the start of the year when covid was not as known to large number of the population.

Hence, business doing well is key as this is what would drive recovery. Fear is real, its normal to feel fearful as its part of human nature. I felt fearful as well. More research would have helped instead. On the company front, the lack of disclosure probably did not help much as well.

3) Returns do not say the full story (Obviously a Rant)

Many could have been saying things like returns being in 2 digit or 3 digit this year and so on. However there are more things that needs to be considered together.

a. What was the person's cash amount compared to his investment amounts? Obviously if you had 50k in investments and 500k in cash then your returns would have done well if you had bought in this year.

b. Was your salary affected this year? Well this plays a part in affecting your lifestyle and therefore would have affected your investing mindset if your daily lifestyle is affected.

c. How has your returns been before this year? A longer track record would be much better in predicting returns. Rather than a flash out of the pan.

Moving into 2021

I would probably just add into some of my positions i currently am holding as I believe they would perform well and are still undervalued. Of course cash level is a consideration as it is currently lower than the start of 2020. Also I have to factor in sudden IPO participations, possibility of a large ticket purchase, possible travelling opportunities should they arise as well as averaging down conviction picks that can get sold down.

A non-investing takeaway i find more important would be that when presented an opportunity to do something, telling yourself 'Its too expensive' is probably the most lousiest excuse to detract yourself from doing it. This is because the opportunity might never come again. I probably regretting not doing more in 2019 after whatever happened in 2020. I am not sure if i have the chances of doing it again anymore. Which is more depressing since the point of earning money from stocks is to be able to enjoy life more without worries.

Yup and you guessed right, i used that excuse way too many times in 2019.......