2013 Review - My Trade Records

Its coming to the end of 2013, looking back I realise my trading style is different compared to 2012.

In 2012, I have a few large speculative trades in penny stocks like GemsTV, SingXpress Land, New Wave when they were trading under 10cent, some under 1cent. While there were some big profits $1K-2K within few days, there were also similar large losses too.

I spent 4+ hours of digging out my SGX Contract Statements, and keying into the Excel Template (template adapted from Alexander Elder's Spike Trade blog, do visit their website, template & free guide is available for registered users, Free-of-charge).

Feeling a sense of pride, as I finally managed to get myself to be serious enough to compile my trade records.

After reviewing my trades for 2013, I realise the following:

1. Lesser penny (less under 10cent, more above 10cents) & Warrant trades
   I finally convinced myself the danger of trading the volatility of such speculative counters, after all like what Warren Buffett often says (& I often ignore) somewhere along the line "no ones can predict the price of the days, weeks & months to come; one simply attempt to pay a good price for the value in the company".
2. My Dividends save my losses, maybe buying on the premise of ex-dividend rebounds work for certain markets & counters...
3. Less play on "market mass psychology", more on value plays
   In 2012, some of my bets were on market behaviours such as a company announce large dividend (above 33%) or trading a penny counter's narrow range of say 0.8-0.9cent..
   In 2013, notably GP Hotel, Popular and Suntec REIT, were more mostly due to their value & dividend payouts. While some maintain their corporate performances, luck still plays a part, after all no one can confidently says a business could maintain its growth in earnings (eg. Popular which seem to face some challenges in its properties & bookstores businesses).
4. If you believe in the "appraisals", then ignore the price & hold on to watch the business play out...
   I still have a few counters, they are still under my cost price, but I decided to hold on, believing they will play out fine, if not, hopefully there's still dividends that I could rely on for my returns.

Reviews on my holdings:
1. Medi-Flex, 30 Dec 13 is the AGM & EGM to vote to approve the buyout by its mother company "Top Glove Sdn. Bhd." at $0.15, since its takeover party already owns 79.91%, I hope there wont be any stupid resistance to block the delisting. An additional bonus is the dividend 0.12cent, which will yield me $324.27, a 2.49 % (or about 7.47% annualised) return on my capital of $12,981.33 (better than fixed deposits).
















2. GP Hotels, bought since 4 Jun 13, the stock languish at $0.245 until recently along with the "Santa Claus rally" rise back to $0.26 on 27/12/13's closing, hopefully it will continue to rise during the "January effect".
Otherwise, I am hoping for a dividend at the end of its fiscal year.
This counter is 58.62% owned by its Chairman & Billionaire Koh Wee Meng, and he continued to spend millions almost monthly to buy its stock. If the owner is spending millions buying, whats the worries with my thousands following?
Another foreseeable boost is its new hotel development at 165 & 167 Tyrwhitt Road currently under construction is targeted to open for business in 1H 2014. Upon completion, the new hotel will boost the Group’s hotel portfolio by another 270 mid-tier hotel rooms, a 15% boost to its current 1,738 budget-tier rooms.
Rolling PE: 14.78
NAV: $0.39
P/NAV: 0.65 (35% discount to its NAV)

3. SuntecREIT, with the opening of its phase 1 of Suntec City and first overseas acquisition of 31 storey office building in North Sydney CBD, build & rent by Leighton Group; this REIT is one of the best value among the REITs in the SGX. While there are concerns over rising interest rates, I doubt interest rates will rise beyond the US 30years interest rate of 3.94% in 2014, as FEB's official interest is still near zero, and its roll back of monthly purchase ($85bil. to $75bil.) will take a year at least to full roll back the QE3.
Back to its business, the structuring of North Sydney acquisition also means that the REIT has tied in a constant DPU growth over the next few years and fully funded by loan, there is little need of cash call in the near future.
Lastly with its quarterly distribution of about 6.1% DPU, one should be able to comfortably hold on to it for foreseeable future.
Rolling PE: 8.71
NAV: $2.05
Price/NAV: 0.75 (25% discount to its NAV)

*All ratios above are extracted from Shareinvestor.com.

SMRT's "imminent" fare increase, how a 10% revenue increase could equates to 150% profit increase

Its out, the hints are there, the bitter medicine is unavoidable...
Public Transports Providers (aka SMRT & SBS Transit) are stand to stem the fall of its price for the past 3 years. With limited sneak peaks into the recommendations by Fare Review Mechanism Committee (FRMC), a number of "shock cushions" have been announced such as concessions, monthly travel pass and more importantly "A More Responsive Fare Formula Compared to the previous fare adjustment formula, the proposed new formula will have a new Energy Index (EI) component - See more at: http://ride.asiaone.com/news/general/story/public-transport-fare-review-committee-wants-more-concessions-commuters?page=0%2C2#sthash.mVAJZZVF.dpuf"

I did a base scenario of 10% increase using SMRT's Q1 Financial Highlights released on 1 Nov 13:

I realised a 10% revenue increase could easily leads to 150% increase in operating profit; the following is how I derive:

($m)	Revenue (2QFY14)	Increased Figures	Change in $m	Changes in %
Revenue	S$296.3	S$326.3	+ S$30	+10%
Operating Expenses	S$285.8	S$285.8	same	NA
Operating Profit	S$20.0	S$50	+ S$30	+150%
Basic EPS (cents)	0.9	3.28	NA	+364%

Assume all else remains the same, with 10% revenue increase as a result of say 10%-15% fare increase and / or funding from government; I took S$50m divided by 1,523,410,000 shares (extracted from Q2FY14 result, 1(b)).

With a EPS per Quarter of roughly 3cents, the EPS of Full Year will go back to 12cents of its "glory days", this will makes its current share price of $1.29 looks like a value to buy (PE 10.75).

As for Technical view, a second convergence of 50D MA with the shorter MAs (7d & 20d) marks a congestion area which may imply potential reversal. A rejection of new low on 1 Nov 13, and 5 Nov 13's green parabolic dot may mark the start of a new uptrend. MACD lines have been on a slow uptrend below 0, bars are above 0; but not much to imply since it has been on downtrend for past 2years.

All in all, the imminent fare increase announcement should provides a up spike, reversal or not, depend on the actual amount of fare increase announced.

My view is, the companies have been "forced reduced to non-profits" over the past years that any increase in revenue will provide a multiplier effect to its EPS and thus may boost the counter share price to adjust accordingly.

STI Index - the "pivot" point

Hi there,

Today I received a friend's enquiry on my view on STI index's direction, to be frank, I don't have an answer as the STI is currently in a pivot point, so all I can say is if it goes above e "pivot" it should continue its uptrend, if it goes below, it may only be a consolidation stage or if it breaks below 50days MA, then it will go downtrend.

So what is this "pivot" point I am referring to? It is the Fibonacci 78.6% line which I've drawn, based on the estimated "high" & "low" of STI's extreme in the most recent 2 years.
If you see the chart below, you can see that 0% Fibonacci line basically is the point when STI was 2521 on 5 Oct 2011, and 100% Fibonacci line is when STI was 3464 on 22 May 2013.

Let's "zoom" into our next chart below, to see the 6months view of our current STI.

As one can see, we are at that dotted Fibonacci 78.6% line, just a tiny bit below, this line is a important resistance that I called "pivot" point. If you look at 12 Jul, 24 Jul & 2 Aug this year, when the STI "flirts" around the pivot, but its candle never fully above or below the pivot. Now we are back at the same point, thus I would prefer to sit at the sideline to watch for clearer signals on the direction of STI before I consider my next trade.

 

1 signal to note below, the Force Index technical indicator, the bullish force seem a little stronger than the previous Force "peak" where my arrow source is, at 2 May 13. This tends to imply a higher potential for more upside to come.

 

In terms of RSI, which measures only potential peak & bottom for a "consolidation" price movement, such as the past 5 months, we maybe due for a peak. To note, this apply on for consolidation movement (where price move up & down, without a major trend), a major upward movement such as STI between Nov - Dec end 2012, the RSI will fail, as RSI slowly move down to 70% but price shoot up from 2950 to 3190 at end of 2012.

 

Last few things to consider, fundamentally STI current Price Earning Ration (PE Ratio) is at 13.34, this is around the median point of STI's PE ratio. STI's past PE has fluctuate to under 10 to around 25, during dot-com bubble it went even higher. So 13 suggests a reasonable, value PE to enter.

Still this is a lagging measure, as earnings are only reported a quarter later, so even if price remains, earning drops, PE ratio will still rise.

 

And lastly, October 13 is the "showdown" between Obama Democrat government vs Republican controlled Congress, when the government has to ask for increase of debt ceiling again, to fund its Fiscal 2014 budget. Expect a roller coaster, not sure if it will be similar to how 2012 was...

 

Locally in Singapore, housing markets seemed to be "choking" with the leverage been tightened by SG government, lesser people can borrow enough to buy the new launches, resales are worse with low volume and Cash Over Value (COV) reduced to manageable under $20-30k range. We may soon see discounts by developers soon, to clear their launches, and should there be any economy hipcup, prices may finally start to drop a little. Right now, it is hard to go higher, without the support of leverage.

 

That's all for this post, good luck trading!

 

Regards,

Tony

 

Sound Global make Offer!

Singapore Blue Chips Bargain? My views on JMH & DBS

To my dearest investment club readers!

Its some times since I last wrote about my thoughts, recently I read a article by a local SG Online Investment Forum Editor's article about blue chip bargains (http://www.fool.sg/2013/08/22/singapore-blue-chip-bargains/), these blue chips are all above $4 at least. In case you wonder, Motley Fools is a popular investment forum website in United States, and they launched a Singapore "startup" version with selected articles contributors. These articles writers frequently dispense nuggets wisdoms on shares investments along with REITs, Trusts and so on.

Now back to the blue chips, I found as (described in the above article) several blue chips have fallen to quite attractive price, I've attached some charts (a pic speaks thousands words).

The line I've drawn, basically connects all the major bottoms in the past 1-2years, and hint at current price of Jardine Matheson Holdings Limited, JMH 400US$ (J36) & DBS near their potential bottoms. Of course, this assume we are not entering into recession cycle, and thus the price should bounce off around the "support line" and continue its long term uptrend. In the long term, the inflation would mean that the stock prices will continue to rise, as long as the companies maintain its growth (at the same rate will do!).

If you are wondering, how rich I must be, to afford 1 lot (1000shares) of JMH whose closing price on 22 Aug 13 was US$54.89 & cost US$54,890 per 1000share... The answer is no, I cant afford that,but  if you ask around, there is an option to trade "unit share" which is basically mini-lots at 100share per mini-lot. This allows investors to trade even the dearest blue chips in Singapore & be a shareholder in the company.

Sound Global - Potential Stock Arbitrage Case Offer $0.70

On 5 July 13, after-trading hours, Sound Global issued an update, pardon me if I interpreted wrongly, basically it converted its bonds and warrants into shares, about 22.3% (bonds) and 0.7% (warrants), thus with reference to page 3 of 28 June's notice (attached), Wen Yibo and his concerted party's 56.20%, they have control of est. 79.2% of entire Sound Global's shareholding.

Sound Global dual listed in SGX & HK, Chairman Wen Yibo proposed his interest to delist from SGX & offer cash consideration no less than $0.70.

2 things matter to tender offer; 1) the chance of the tender offer to succeed & 2) the time taken to succeed.

1) The chance Chairman Wen Yibo getting regulatory approval of SGX, HK & financing (est.$300 mil.needed) to complete the deal?
Networth of Wen Yibo & family: http://www.forbes.com/profile/yibo-wen/ $1.3 billion
Background:
Wen Yibo is China's first and, for now, only entrepreneur to break into the billionaire ranks thanks to an expertise in treating waste water. His Hong Kong- and Singapore-listed company Sound Global provides water treatment services to several major Chinese cities and manufacturing zones. His Shenzhen-listed Sound Environmental Resources also builds waste processing facilities. Increases in business last year lifted the shares of both, and with it, Wen's wealth. Sound Environmental's sales in first nine months of 2012 rose by 26% to $208 million; it's net profit jumped 42% to $44 million. Sound Global's revenue increased by 12% in the six months ending in June to $191 million. Wen holds a degree in environmental engineering from Langzhou Jiaotong University, where he is a part-time professor. He shares his fortune with his wife.

Unlikely he will fail in getting the financing and regulatory needed, as the deal does not concerns any sensitive interests.

2) time taken to succeed?
I estimated 1-2 months time to confirm the deal & announce a public offer, & another 1 -3 months to get the stakes needed to delist Sound Global from SGX.
If I am not wrong, a 90% tender is needed, since Wen Yibo owns 56% and the deal is only delisting from SGX but remains listed in HK I don't expect any resistance from its other shareholders like Norges Bank 5.9%, Mitsubishi UFJ Financial Group, Inc. 7.19%.

Projected rate of return:
If $0.635, Projected Profit ($0.065) divide by Investment ($0.70) =  9.28%
If assigned 70% chance succeed, our Adjusted Projected Rate of Return (APRR) is 0.7 x $0.065 = $0.0455.

If deal fail, price will drop back to pre-offer traded price of $0.57 (or drop of $0.065), thus loss becomes $0.57/$0.635=89% or aka loss of 11%.
If assigned 30% chance fail, our Adjusted Projected Rate of Loss (APRL) is 0.3 x $0.065 = $0.0195.

Risk-adjusted projected profit (RAPP) = APRR $0.0455 - RAPP $0.0195 = $0.026.
Risk-adjusted projected rate of return (RAPRR) = RAPP $0.026 / Investment $0.635 = 4%.

Assume a desired closing of deal in 3 months, RAPRR annualised becomes 16%
Assume a likely closing of deal in 6 months, RAPRR annualised becomes 8%.

STI - Downside Resume - Double Down!!

On 16 June 13 (Sun) I posted a trend change, and announce STI uptrend, I was right for only 3 days.

Due to Fed's affirmation that QE3 will be scale down beginning end of this year, market has switched to "cash-in" mode, to sell away holdings and convert to cash / bonds or whatever "safe assets" investors could find.

The STI has shown a failure to breakthrough the downtrend, failing to even touch 20d MA, its price & 7d EMA have taken another dive. This is only beginning of the resumption of "double down"!


















Its time to review your holdings, sell if you are unsure or afraid to hold your investments (stimulate dropping another 25% or so), if you can stomach that kind of fall, then hold & add on later.

If you are in losing position, inflation will make everything price higher in mid-term, so if you are confident and wish to hold, go ahead. Otherwise, you can always convert to cash & short later. This apply to majority of stocks, but still some will go against the down trend, eg. medical supplies, mask manufacturers etc. (trust me, this quarter's earning will jump, no thanks to Sumatra's forest fire).

For those bold, and can monitor your trade, try shorting the market with Warrants for SG, options & reverse ETI. All the Best to your trading, may the Force (Trend) be with you ( * - * )")

STI Market Rout - Is the bottom in sight?

They say it is foolish to predict market directions, and its been sometimes since I last posted my trades...
The past 3weeks have been a painful down market, and it started all by a change of perception "the fear of QE withdrawal".
I thought it is funny, that people are so fearful that market will collapse, because Fed felt the economy is strong enough to exit ICU (aka reduce QE, monthly bond purchase).

In any cases, the fear is valid for certain sectors (such as REITs, high debt companies), why?
Because the removal of QE or reducing of monthly purchase of bonds will eventually allow bond yields > Treasury yields > bank interest lending rate to rise, possibly breaking the 4% and back to 5%? Observer should note that the current money supply in the economy are several times larger than it was in 2007, and this huge money base in the economy is still set to grow bigger (but at a slower pace, with lower bond purchase).

In any cases, companies such as those "Buffett stocks" with strong brands, EPS, yield etc. is great for load up now. But companies that are already heavily financed with debt, especially bank loans, should be avoided and trade with caution, as these companies will be dragged by increasing interest and cost of interest servicing.

So, after so much talk about QE, economy, the big question is "is the bottom in sight"?
Should we enter market now?
My short answer, yes!
Why? Good to ask.

From a fundamental point of view, the current PE ratio of STI index is only 12.98, this is lower than the average of 15, not to say the typical market peak's PE ratio of 22-25.

Furthermore, most companies are still predicting similar level of forward earnings, hardly a market peak.

 

From Technical point of view, see the chart below:

STI just form a "kangaroo tail" where the valley "V" is formed, with a bullish white candle following on Fri, 14/6/13. So, even if S&P500, Dow were to continue to fall tonight, it is likely to bottom in the next few days, and begin a slow and steady uptrend.

 

The Force Index has formed a shallow bottom, implying the "V" is losing strength, the MACD line has "flatten" and soon to turn up, the RSI has already turn up. In short, multiple bullish indicators signal that the bottom is over, and reversing to uptrend soon.

 

How high the uptrend will be? This I cannot tell, but I can say is the market has bottomed.

If you have escaped the "crash", now is the time to open your savings wallet and go "Great Singapore Sale" of best Singapore companies! Load up on those companies, with positive operating cash flow, low debt, and best high discount to NAV, and some dividend yield of 4-6%.

 

This should fatten your money, by the time this year's Christmas for you to buy those latest gadgets for the kids' Christmas gifts!

 

One point to note, unless tonight's US indices fall by 3%+, & STI dropped 3% too on Mon, resulting in a gap down or long dark candlestick, lower than the "V"; the bottom is safe & you should shop now. But if the markets drop by 3% more, which I feel unlikely, unless there's some material news which are not announced, then the bottom is intact.