(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.......

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

A minor retracement in December as IFast and Top Glove tumbled. However, Propnex continues to deliver. 

Returns since its inception in September this year amounts to 10.61%.

Nevertheless, despite some thoughts on changing out Top Glove, I have decided to continue holding it in the portfolio as I do not think that the demand of gloves is likely to go off any soon.

Meanwhile, I remain moderately positive on Hanwell delivering in Late February/ Early March. 

G.H.Y CULTURE & MEDIA – Time to 一路向北？ IPO Review

The conclusion in a picture

 

This will be a more light-hearted and less serious analysis of the upcoming IPO. Hence the timing of this post.

The 3^rd IPO on the mainboard this year. 

Public Application is from 11 December 9pm to 16 December 12pm.

Introduction

G.H.Y Culture & Media ‘s business can be broken down into 4 Segments

1) Television Program and Flim Production

2) Concert Production and Management

3) Talent Management Services

4) Costume, Props and Make-up Services

At an IPO Price of $0.66 per share, this results in a market cap of 708.7 million as there will be 1,073,792,000 shares outstanding post IPO.

Financials

As the company is newly formed, with a short history tracking back to only 2018. It has earned 12.4 million in FY 2019 and 13.0 million in Half Year of 2020. This translates to a PE of 57 based of 2019 numbers.

Based off a 26 million earning in FY 2020 (13*2), this translates to a PE of 27. Which is a reasonable valuation based off good growth numbers seen in its short track record.

However, this analysis is too unrealistic as 超人不会飞. The business segments of this company are largely project based and not a stable business volume throughout the year.

Business Segment	% of 2019 Revenue	% of 2019 Segment Results	% of 6M 2020 Revenue	% of 6M 2020 Segment Results
Television Program and Flim Production	92.22%	89.33%	58.90%	57.12%
Concert Production and Management	1.55%	2.5%	39.78%	41.03%
Talent management service income	2.20%	12% (with costume segment )	0.376%	1.83% (with costume segment )
Costume, make-up and props services	4.03%	12% (with talent management segment )	0.937%	1.83% (with talent management segment )

 

Concert Segment has done very well this year. Much thanks to 周杰伦 嘉年华 世界巡回演唱会 新加坡站 in January 2020 which was pre-covid. Following the Covid-19 that occurred after that, it would be safe to say that this segment would not be contributing in 2H 2020.

 

In terms of television program productions, the company undergoes productions based on 3 revenue models

1)       Customer like TV Company engages them to produce a drama/flim. In this case they charge a production fee.

2)       Develop their own drama/flim then selling it to customer for a fixed fee. In this method, the cost and risk are more on the company.

3)       Develop their own drama/flim then selling it to customer for a variable fee. Based on user clicks or viewership for each episode.

Based off 2019 and 2020 trends. (2) is the most common method used by the group. Although in 2020 it has ventured to (3).

In terms of balance sheet, it looks stable and fine. Although I am quite surprised by the bank borrowings of 4.35% to 5.01%. Even though its not a huge amount, the short-term bank loans at such a rate might signify that pre-ipo the company appears to be a huge risk to the banks.

What I like about the company

1)     Strong Know-how in the Business – The CEO himself is a director of flims and produces his own flims. Has been in the industry for over 20 years and therefore should not be remote to producing flims and budgeting it. Being in the China industry means that he does not need to break into the China industry and understand the red tapes.

2)     Strong Board Members- Non-Executive Director and Substantial Shareholder Mr Yang Jun Rong is well respected in the music industry. Known as 荣哥, he is Jay Chou’s manager and is possibly 1 reason why the rights of Jay Chou’s Concerts would be given to GHY Culture Media. As the saying goes, 做生不如做熟.  He also owns 45% of JVR Music. Fans of Jay Chou will not be unfamiliar to that name as it is the company that releases music by Jay Chou.

3)    Strong Flim and Drama Pipeline upcoming. With 4 projects released in 2H 2020 as well as 6 productions in 2H 2020. Coupled with 1 release and 7 productions in 2021, it is safe to say that the pipeline not spectacular growth is already strong. With more funds following the IPO, the company is likely able to undertake more project and grow their profitability.

What I Dislike about the company

1)       Unfortunately results for this year is unlikely to be as good even though it might show growth from last year. This is due to Covid 19 making concerts obsolete in the 2H of 2020. This means that the IPO is priced at a very steep PE. Assuming a more realistic full year earnings of 20 million. It’s a PE of roughly 35. Which is acceptable assuming concerts do return in 2021.

2)       Need for listing? Well I guess this company is doing quite well on its own and with strong connections in the industry, the need for listing might not be needed in fact.

3)       Concert Management Revenue for Non Jay Chou Concerts are not as spectacular. With only 1 concert in 2019, the revenue came in at 1.2m and segment result being 0.469m. This means that the company will have to undertake more concert managements should there be no 周董效率(Jay Chou Effect)

 

Some Mojito thoughts

2 Jay Chou Concerts in Singapore netted 14m in Revenue and 8m in Segment Results. Should Jay Chou tour China, 1 would wonder how much he can earn based on touring each city. This should be bombastic.

2 upcoming concerts in Malaysia and Australia in 2021. Should they both happen, it would help in contributing to the bottom-line a lot.

 

Some 发如雪 thoughts

People would like to take unusual productions and mm2 productions to compare towards GHY Culture and Media. However, although both are media and concert production companies, it is safe to say they are vastly different.

Unusual Productions is by far a larger player in Singapore. MM2 focuses more on South East Asia, Taiwan and Hong Kong flim productions. MM2 has also embarked on a more comprehensive value chain model by integrating VR content production and Cinemas in its business. Although the flip side is that this had made MM2 more asset heavy and it has also took on more debt at a larger cost.

At this current moment, GHY Culture and Media is not looking like MM2 nor Unusual Productions.

Conclusion

I believe this IPO is a hit and run IPO. There seems to be strong demand and a small public tranche. With Half Year 2020 already beating 2019 Results, it might induce people to apply.

At current valuations, it must show that it is able to undertake more projects and allow them to be at a profitable scale as current before I would be convinced that it is worth such valuations.

Of course, opportunities such as a Jay Chou China Tour could happen and form the tailwinds to this company.

But it will be good to see the company getting involved in more concert productions in China and Singapore apart from Jay Chou Concerts. I believe that will be where the growth will come from. But until I see something more concrete, I would have to refrain 千里之外 and 安静的听妈妈的话. 等待说好的幸福. 希望驚嘆號会在给我一首歌的时间后出现.

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

With news of a vaccine coming out in November, most stocks have rallied in the portfolio as a return to value is seen in the month. Among all, Propnex, Centurion and UMS have performed very well. 

Total Return since the start of the portfolio on 9 Sept is 11.45%

Stocks that have seen retracement include Top Glove and iFast.

Top Glove being a victim of the vaccine news and it has encountered some company problems as it workers have caught covid and it has spreaded within its factories affecting its productions.

IFast being a stock that has done well during the Covid Period has seen a small sell-down.

In terms of results release,  Powermatic, UMS and Propnex all released their results in November

Powermatic- Stable results. Increase in inventory might signal something good in 2H

UMS- Continues the trend of good results. Dividend announcement a slight surprise but full year should remain good with semiconductor demand strong.

Propnex- Stable Results despite recent news of HDBs possible measures and it remains to be seen how Q4 will be affected by tightening controls on the re-issuance of options-to-purchase. 

Despite the influx of cash and the above occuring, there will be no changes to the portfolio at end of November.

At December, Top Glove will report its results, that will probably be a deciding point of whether Top Glove will be rotated out.

Credit Bureau Asia Limited IPO . To Apply or Not?

Some Basic Info(Apologies if they are not as accurate)

Listing Date: 3 December 2020

Offer Price: 0.93 SGD (93 cents)

Enlarged Share Capital: 230,390,000 Shares

Implied Market Cap : $214,262,700

Offer Size: Around 58 million Shares

Public Offer : 1,500,000 Shares

Dividends: At least 90% of net profit after tax for FY 2021 and FY 2022

Prospectus can be found here

Financial Info

Historic PE: 30.6

Half Year Implied PE: 28.9

Company Info

A company that speciliazes in credit reports. Providing to financial institutions and non financial institutions. Some of its customers include local banks as well as Singapore Commercial Credit Bureau.

These credit reports are needed for loan approvals as well as assessing an individual/ entity for their ability to undertake a loan.

The company has Singapore, Malaysia , Cambodia and Myanmar exposure. However, it has disposed off its Malaysia Unit as it was loss-making.

Perhaps unsurprising as well, Singapore contributes the most revenue and profit to the company. This is due to its market leadership in Singapore and Singapore being the most developed market among the 2.

What I Like about this Company

1) Relatively Resilient Line of Business

-Rain or Shine, loans will be needed and there will be a need to assess if loans are needed. As such there will always be a good demand for credit reports and related services. This can be seen in its Half Year Revenue which was largely stable despite Covid 19 and circuit breaker.

2) Dominant Market Leader in FI Data Business

-Company has 99.9% of market share in the FI Data Business. Being the market leader, it is likely that the revenue stream will be stable as the rival in this case is too far behind.

The company has also won the tender of operating the Moneylenders Credit Bureau from Ministry of Law. This will allow the company to further expand its reach in the FI Data Business as the current bureau is operated by its rival Experian. The tender victory would allow for a higher information sharing as more members are added.

3) Exposure to Myanmar and Cambodia 

-Both are developing countries, with economy picking up in the future, the need for such credit reports would likely increase as well. This would bode well for Credit Bureau Asia as it is able to take advantage of the rise in affluence. On top of that Cambodia has been profitable since 2017

4) Organic Growth Seen

From 35.6 million in 2017 to 40.6 million in 2019. Its a decent 14% growth across 2 years. Despite Singapore being a relatively developed market already. As such, in a normal year, attaching a growth of 5-7% seems to be fair.

To add on, it has only about 43% market share of the Non FI Data Business(54 million estimated in 2019), which means should it gain market share and maintain margins, the growth can be higher than 7%

What I Dislike about the company

1) Structure of the company

-With 51% ownerships and joint venture structures, it has resulted in the company's non controlling interest earning bulk of the company's profits.

A deeper dig will reveal its other owners sharing the profits are large data companies like Dun & Bradstreet(2017 Revenue 1.74 billion USD) as well as Equifax (2019 Revenue 3.5 billion USD)

As such, one would wonder if these big companies decide to work with someone else, where would Credit Bureau Asia be? Since Credit Bureau Asia is unlikely to be a big fry to these companies.

2) The need for listing

-Looking at the balance sheet, the company does not seem to have a purpose for listing. It does not seem to have any financial difficulties. It has also not used any debt so far.

-It even paid out at least 10m each year. Which does not seem to indicate that they have any plans for a big expansion or acquiring a big rival or upwards/downwards intergration. Since if they would it is likely they would store cash instead

3) Malaysia Losses

-Malaysia has been unprofitable in 2017, 2018 and 2019. Although the company cited reason was competition from multiple players in the credit and risk information solutions industry in Malaysia, it is a good reminder that the company is not always successful to breaking into another country and the Non FI Data Business is still competitive even in Singapore as well.

Conclusion

-I feel that its worth applying, though its not for a long term hold. Probably just flipping on hype and craze as well as the markets recovering well in recent times.

-The small public offer will make placement shares look attractive and some folks might want to get into the market as it offers a dividend yield(around 3% likely) that is resilient

-In terms of long term prospects, i don't expect high growth of 30-40% in revenue year on year. However I think 5 to 10% each year will likely be possible. The growth will have to come from Cambodia and Myanmar in due course if things go the right way.

-As it is one of a kind IPO in SGX, there is no comparative PE to attach to. It would be unwise to compare it to the companies it is partnering as those companies have the scale and know-how.

-If i have to force fit a comparison, probably Vicom would be a company i would compare to due to its defensive nature. Hence a PE of about 20 would be ideal.