Saturday, May 14, 2016

Shortlist for replacement of CMPH

Seriously, I have not found the replacement. They are just options which I find interesting enough to go deeper. This is preliminary findings and I welcome comments (even if u disagree)

First of all, I consider UOB kayhian, Kingsmen and SPH before, but decided to put all these in the back burner. Most of their most recent quarter report show continuous deterioration of earnings as compared to YOY. While I expect SPH earnings to improve next quarter due to the increase in print price, the net increase is not significant enough to put to rest the sustainability of its reduced dividends. I think 15 cents is more sustainable without growth drivers. Of course, SPH could inject Seletar mall and experince a short term jump, but that need some luck in timing. 

Option1: M1
In terms of yield, it is closest to replacing CMPH. Before u start throwing shoes at me and remind me of the 4th Telco, and that M1 will be most impacted due to its solely Singapore market and its high dependency on mobile and broadband market, let me say all investment is worth a look at some price. 

M1 has fallen the most, as compared to starhub and Singtel. I however, think bundling strategy has evolved from cost savings and win-win situation to one that fleece the consumer. I am sure consumers are aware. Look at the trend now, sim data only plan, without lock in period for subdized phone etc. 

While the will to bring in the 4th telecom by IDA is not in doubt, the feasibility of it is not a foregone conclusion. The 4th telecom will disrupt the 3 companies profits, but by how much? Assume M1 dividends go to 2013 levels, and assume M1 pays out almost all of it profits, it is a almost 15% drop we are talking about and we still have 6% yield. And that bad situation will mostly materialize in 2018 the earliest. (Build up of infrastructure takes time) Did not seem too bad now, isn't it?

Will read up more on M1 defintely. 

Option 2: Waste business operators; Colex or 800 Super

When u read quarter reports, these 2 companies have the most stable or growing business YOY. 800 super has a good growth story but Colex has better balance sheet. 800 super is gaining market shares in waste disposal business from NEA and is giving decent dividends but has its shares price run up due to a analyst report. Colex has a track record of paying pittance as dividends. Just look at their cash on hand, payout ratio and u know they are misers when dividends is concerned. It is rather surprising to me though, since its directors are paid reasonably and cleanly (no options) and the parent company owns 78% of company. Wouldn't Bonvest want money to flow up to the parent?? This is not the situation with Comfort and Vicom for example: 

Option 3: Yangzijiang
I am still a fan of YZJ, and I view Ren Yuan Lin as "buffet of the East" it's my own infatuation, and u need not agree with me. It's HTM never exploded like others say it would. It refrain from building Rigs/ jack ups and it's a very profitable company in the global fraternity of ship builders. Even Korean yards are in trouble now. 

The best part is, he is very candid. The order books is still strong but he admits they are won at the expense of margins. What do u expect right? Market did not seem to factor the depression of margins in yet though. I expect margin to fall and profits to go down. I am waiting for better valuation and hope to buy this as a cyclical recovery stock. I believe 4.5 cents dividends might not be sustainable in the short term. 

Option 4: accumulate ST engineering 

STE Q1 report is actually not as bad as the headline suggests. Expenses for Airshow is one-off. In fact, the recovery for aviation has finally arrived, but we will
Not know if the capex cycle has restarted 
Or it is just a one-time fluke. 

It is a net cash company with yield of 5%, not many blue chips company with this yield and balance sheet strength.

Option 5: Accumulate LMIR

A wonderful company and performance under Alvin Cheng. Waiting for rights issue news LOL or higher MOS.

However, option 5 is least likely because it is a trust and I have no wish to increase my exposure to reit/ trust unless the offer is irresistible.

Hopefully, will have more time during the June holidays to do some more number drilling and peer comparisons before I take the plunge.

If the market recovers in the meantime, I dun really mind. 

16 comments:

  1. well, i think STE is good.

    if 3 telecoms for me to choose, i prefer singtel. as we know, singapore market share is just too small. looks at those have better fund and big enough to expand oversea:)

    well, dunno why, i still thinking good to add some ahlibaba and bank of america. haha

    ReplyDelete
    Replies
    1. Hi Yeh,

      Thanks. I will keep to Singapore market for the time being. HK market is one place I have wanting to venture to, but never pick up the courage ...

      Delete
  2. if you HAVE to buy stocks, I like utilities and govt linkeds in this current climate.

    I don't like SingTel but I think yeh has a point with STE. you can look at others too.
    take your time, no need to rush.

    ReplyDelete
    Replies
    1. Hi SMK,

      I get your "have to" loud and clear. In fact, why all
      These are options instead of me waiting to buy then blog is because I hardly think they have give me the price I want in the short term. But I do know where to do intensive research if the price fall another 10%. Some like STE need no further research if it goes 10%. Just buy lol

      Delete
    2. btw none of my utilities likes will include singapore telcos.
      I find the consumer long term trend is getting stronger.

      Delete
    3. Utilities? Beside sembcorp? What other listed play are there??

      Delete
  3. what about Ascendas REIT, MIT, PLIFE,

    ReplyDelete
    Replies
    1. Hi Kyith,
      I do not want anymore REIT/ trust. I already had 3 of them in my small portfolio

      Delete
    2. Actually I have 4 lol. Including accordia golf trust ...

      If one more, then it is 5. A bit the scary if u ask me...

      Delete
  4. Actually, I was thinking about ST engineering as well.
    The dividend payout ratio is really low and balance sheet is ok. ROE, ROIC and Free Cash Flow are still ok, but trending downwards over the years...
    Stock price has been on a downward trend.

    ReplyDelete
    Replies
    1. Huh, payout ratio low, u mean high right ? That pay almost 100% of their earnings. But cash flow is higher than earning

      Delete
  5. How about Hock Lian Seng ? It is trading below NAV now with good dividend payout.

    ReplyDelete
    Replies
    1. Betta man,

      Sorry for my tardy response! And late response. Stoning ...

      Hock Lian seng? Construction companies? I will take a look!

      Delete
  6. I have entered position in Dairy Farm earlier this year, when the shares was battered down to 6 USD and below.

    It is a still a dividend paying stock.

    Using adjusted operating cash flow (operating cash flow before Working capital - Tax paid) to do an estimate valuation. It's not too far off when compared to valuation last seen in 08/09.

    ReplyDelete
  7. Solace,

    Indeed I was looking at DF, think I will just hold my fire ....

    I have enough skin in the game to be happy with a rising market. Some money to spare in a falling market ...

    If fact, we dun know what market will throw at us. Ascendas just went to 2.27 a few days ago and I am like huh ??

    So... Waiting

    ReplyDelete
  8. Hi Mike,

    I find it hard to tell if 800Super has been awarded contacts from NEA.
    The last update in sgx announcement was in 2014 though. That's one of main factor stopping me from adding positions in 800Super. currently only own 10k shares of it.

    ReplyDelete