Saturday, July 11, 2020

Interview of SillyInc CEO by Bi Sai Times

SillyInc is a small boutique investment two man show company. Recently the company has stepped out of Singapore markets and has been actively putting its cash to use. We are pleased to interview the CEO of SillyInc, Sillyinvestor in this maiden Issue of Bi Sai Times

First of all, to see the amount of actions taken, at the end of 2019, "Vested amount is 66K in cash account, SRS 9.3K and CPF 5.7K", but in 1H 2020, Vested amount in cash account is 117K, SRS 11.8 k  and CPF 20.4 K. There is a maiden venture into HK Ex of 5K


Q: Why the venture to Hong Kong Exchange, and why not US? 


A: We did look at US ETFs, but the reason why we went to HK at around Feb is because we find Strong free cash flow generating companies giving yield in excess of 7%, and after studying the companies, we find that there are certain growth drivers that might improve earnings, and the odds of big fall in earnings is very unlikely, and hence the safety of the yield. That assessment was in Feb, when Covid 19 has not infected the world. 


Q:I could see that your overall portfolio is still in the red (refer to appendix), for all your accounts, although the SIngapore Cash Equity seems to be relatively doing better than others. Given the V-shape recovery that has taken place, do you have anything to say about the poor performance of your investments


A: As the name of the company implied,we did make some silly mistakes. We start accumulating equity in late Febuary when the market start correcting and when the market has tanked more than 30% from the peak, we slowed down our purchases when the opposite should have happen. We should have accumulate a little less agressively when the correction started and continue to buy when the market tanks.


However, if we include dividends and trading gains, our total portfolio loss of 4% will be halved to 2%, given that STI is still about 20% off its peak, I think our portfolio did not do too badly


Q: What are some "Bi Sai" or "Dua Sai" investment that you regretted?


A: We are getting apprehensive about SAL, given it is about 15% of our Singapore portfolio. Although we still believed that it is too undervalued and growth should materialised when both Singapore and Malaysia start issuing digital bank liscenses, or as and when existing customers go for a overhual of their systems, which has been a few years overdue. SAL main market is in SEA, and it is one of the market leaders, and SEA is the place for digital growth in either e-commerce or Fintech. 

We are scratching our heads to why is the market undervaluing SAL by so much. So well, if this turn out badly, it will really cause our performance to "lao sa”

Q: Did you manage to dig out any "gold" then?


A:Nope. Our average is too high. SCI at one point of time rose 60% from its bottom, but even then it is just our average price of $2.1 -$2.2, but  it did allow us to sleep better at night. 


Q: I saw that you are divesting more than you are investing.


A: Indeed, we sold out First Reit, Pan United, pare down Areit, and CSE.


Q: What are some of your net buy then?

A: ST engineering, SIA engineering, Sembcorp Industries, Silverlake, DBS, SIngtel, Tai Sin, Hotung Investment, Diary Farm

Q: Many belived that the worst is behind us, and SIngapore Market is one of the laggards in the region, are you going to accumulate further. 


A: Nope, at least not as current level, Second Wave infections is already upon us, look at US, Brazil and Meixco. US in a day, has more COVID cases than WUHAN accumulated. 


Q: But many believed that even if cases increases, lock down is not going to happen again


A: That is true, but even the Republican States that initially refused to mandate the use of masks and is already back pedalling, I believe while a sync world-wide lockdown is very unlikely, the many restrictions that will be heightened will prolong the pain of restarting the economy and going forward, the earnings will get real ugly. 


Q: But many analysts are saying we should write off 2020 earnings, as that is priced in and we should look at the reovery that will come in 2021. 


A: Given that we are 70% vested, if really the markets goes into a bull run, I think we should be contented with the gains we should make with the tide rising. But the 30% insurance is necessary in view of the volality of the market with 2nd wave of infections. I believe COVID19, might not be the black swan anymore, it has already reared its ugly head. US and China enmity is more of a concern to me, as it could badly disrupted trade. That theme of "China-Plus" supply chain is one investment theme we are looking at, and we do want to have some ammunition to buy, when the time is right. So not, we do not plan to buy anymore if market just move sideways


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Appendix:




14 comments:

  1. >We are scratching our heads to why is the market undervaluing SAL by so much.

    Isn't fears about related parties transaction the reason?
    https://www.thestar.com.my/business/business-news/2015/08/24/gohs-silverlake-hit-by-short-selling

    Granted this news is 5 years old, but I remember that the stock price has yet to recover since the short report was released.

    ReplyDelete
    Replies
    1. I think the report effect is gone le. Not because of passage of time, but there is an independent audit that clear SAL of wrong doings, althought they make several recommendations, and most of them have been adopted le

      Delete
  2. Hi SI

    I believe the market has not taken in much appreciation for news surrounding the digital banking license awarding in both Singapore and Malaysia. When they do, I'm sure the project will start to ramp up and that's when the share price will be going to move. Having said that, I do worry that there will be 2 more subsidiary in Malaysia in the next 1 year that will have their tax incentive privilege expired, which means bottomline margins are going to be affected and this will dent their eps.

    https://techwireasia.com/2020/06/malaysia-is-gearing-up-for-a-digital-banking-revolution/

    ReplyDelete
    Replies
    1. Hi B,
      Thanks for your link. If the overhual projects dun come, the tax will be a big problem, but it the projects come, should not be an issue.

      Also, given that GOH own so much of this, and its dirt cheap now, I hope he dun do a low ball offer when the contracts are streaming in

      My average price is quite high

      Delete
  3. Hi SI, the redness is not good, but I see soreness more than infection. The redness will go away soon. :-)
    By the way, Sillyinc is nice. Bi Sai Times sounds awful.

    ReplyDelete
    Replies
    1. Hi Rolf,

      Ya... My eyes also red.see people portfolio I green with envy. Then see my sea of red, colours conflict.

      Hahahah.

      Bi sai nice ... Hahahahaha. Sorry for being crude.

      Delete
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