A review of my company prospecting process: More hits than misses

Less than a year ago, after a screening process, I highlight 4 companies

https://sillyinvestor.blogspot.com/2020/05/company-prospecting-process-maxi-cash.html

Of the 4 companies, Maxi-cash, Muti-chem, Hotung, and Overseas Family education,

I only invested in Hotung. 

Maxi-cash and Muti-Chem gives capital gain of 50% and 70% had in invested in them, and Hotung, just 15%, excluding dividends. 

What went wrong? I think I have current yield bias, and aversion to company with high loan to equity ratio. Could I have done better? I am not sure. I guess missing out on gains is better than holding on to losses.

I predicted improving dividends for 3 counters in blogpost here

https://sillyinvestor.blogspot.com/2020/12/merry-chiristmas-here-are-3-companies.html

Of the three, YZJ kept is earnings intact, Kayhian did increase it, and Verdict is not out yet on CSCP. Companies that pay out dividends as a ratio of earnings could see higher volatility of dividends but it might made timing the turnaround more rewarding. BAE system also guided on 50% payout, and with improving earnings (Projected), I hope to repeat the success of it. 

Third, using Free cash flow yield

https://sillyinvestor.blogspot.com/2020/12/merry-chiristmas-here-are-3-companies.html

1) Lung Kee (HK 0255) (15%)

2)Yangzijiang (13%)

3) Lonking (HK3339) (13%)

4) *Diary Farm International (13%)

Closely followed by Silverlake Axis and Singpost in the 8-9 % range.

In terms of capital gains, with exception of lonking, all are in the range of 10%, DFI and Silverlake are loss making and I have exited SIlverlake after they suspended dividends in 1H.

I recently also found another company 0819 TianNeng Power with FCF in excess of 10%, PE in the range of 10, in the sector of making batteries for EV and etc. An growing company in a growing industry should deserve better valuation and due to the min lot size of 2000 shares, it is my biggest HK purchase. However, I am already 10% underwater. 

FCF yield need longer runway before they can appreciated by market? 

The better counters, such as SATS(>50% gain), has nothing fundemental improving, although the outlook is defintely better. 

The concluding thought I have, is hence:

I really hope to count on luck, and hence diversification is important. After I sold off Silverlake, non of my counters hold more than 5% in my portfolio. In fact, most of then are in the 2-3% range. 

Hence, although i do have some counters than are gaining 70% or 50%, as a portfolio, it is just 6% gain based on COST. 

Hope I continue to be lucky. 

 

Random thoughts: Pence wise and Pound foolish, literally

Recently, I bought BAE systems from London exchanges (LSE) 

When I check my balance i saw this my purchase price is 4.735

I ask why 4.735, when the message alert I received is 473.5 

I thought it is a error from kayhian side. I even joked with my broker and fellow bloggers that I got a 100 baggers.

My broker tried to explain to me it is in Pence. He send me the conversion rate, I say I am aware it it is pound. 

I ask why divide by 100. He exasperatedly said it is pence, like cents ... 

And I go oops. 

And I ask, and they allow trading of 1 share?? 

End up I paid double the commission to get the quantity I wanted. 

LOL. Had a good laugh. Sillyinvestor indeed.

Sold Silverlake Axis for UOB kayhian

Just a quick update. 

SLA suspension of dividend in 1H is the straw the broke my back. I threw in the towel. Suspension of dividends when profits is still decent, and cash hoard high is a red flag to me. 

They have already suspended Q1 dividend, with 1H reporting as an excuse. I was prepared to give  them the benefit of doubt since during Covid Period, everyone might err  to the side of catious. I would prefer that they give a lower dividend then scrapping it during Q1. So when 1H came and go without dividends, I was aghast. 

Just during the AGM, they told shareholders dividend payout is not something they take lightly and they assured shareholders that there is no imminent acquisition. Hence the suspension of dividends bring back memories of S-chip. SLA is SaaS company that is supposed to less affected by Covid, and the results bored out this fact, while earnings dropped, it is nowhere as drastic as those in transport, hotels or avivation. Yet CDG, proposed an "token" dividend, while SLA scrapped it totally. 

Without taking into consideration Dividends or trading gains from this counter, the loss is about 40%, but I am prepared to move on. 

I made bids for Singtel and Uobkayhian to rotate the fund free up by SLA. They might turnaround later and declare good year end dividends, but I  think I had enough. Is goodbye for now. 

随心笔：我也很想他

 看着那桌子，

你不在那拼命地改书了。

空空的桌子，彷佛看到你教导学生。

回过神，就是空空的一张桌子。

课室外的走廊，也没有你和学生的身影。

----------------------------------------------------

你的朋友问我，

你可以来我的补习班吗，

笑着说很想念我的课。

其实，我也很想念你们。

---------------------------------------------------

踏进课室，没有玩捉迷藏的学生，

没有你们嘻嘻哈哈，

装神弄鬼地想吓我。

你们毕业了，有些音讯全无，

有的，还和我聊天。

听着我们一起用来教课的歌，

我也常回忆起你们。

或许，过去了，就不要想了。

新的形象吧。

疯疯癫癫的我，和你们有缘。

今年，可能需要的是斯文类的？

-------------------------------------------------

梦里偶尔还会看到父亲。

那个世界再重逢时，

是看到年轻的你，

还是老弱的你？

来接我的时候，我是老了，还是一个小孩？

我也很想他。

Dealing with losers, First Reit and Silverlake

First REIT

I used to owned FR and during October when it plunge to 50 cents, I actually bought more of it. I calculate the worst scenario of 4 maturing 2021 hospitals' fees being halved and felt 50 Cents will be a steal. My Average price is about 72 cents. 

When Lippo announce unilaterally that they are doing restructing of all the hospitals, and price plunging, I do not have the luxury of time to re-calculate everything although I do remember DPU could well be Halved if all hospitals are reviewed and using a 10% yield as an estimate of fair value, I thought it can go to 40 cents, so I simply sold off all my holdings then for a small profit. 

After the Restructing exercise is announced, I bought back at 44 cents, believing it offer good "value". Given I intent to do it in 3 tranches and 44 cents is my first shot, I am not overly concerned with the daily price movements, there and then.

The bomb dropped when they announced the rights issue. Rights issue is not a surprise, anyone investing in reits should be ready for it. What is "bad" about this Rights issue is that it is done with a hefty discount and will be used to paydown loans and not for expansion. 

Yet, for all the negative surprises, what will I do?

Keep calm and subscribe for rights, including excesses. 

Why? 

I ask myself 3 questions. 

First, is First reit at risk of permanent loss? Well, they may if they default, so I am not buying more from the market, but will subscribe to the rights. Also, since the major shareholders will take up excessess not taken up by minority, I know the probability I will be hanging dry will be low. 

Second, will the operating matrix keep going down. To answer this question, I believe the healthcare (private) sector in Indonesia is still primed for growth. They have the right demography, and public healthcare is hardly a competitor, reasons being very obvious. 

Revenue and GP are improving. The one-off loss is due to a non-cash item

"Through the assets review, it made a one-off non-cash adjustment totaling Rp 426 billion that eroded its profit. The reviews resulted in an adjustment in the firm’s accounts receivable balance, cancellation of projects and improved policies for the firm's registration of fixed assets.

This article was published in thejakartapost.com with the title "Siloam Hospitals books loss in 2019". Click to read: https://www.thejakartapost.com/news/2020/06/02/siloam-hospitals-books-loss-in-2019.html."


In fact, not too long ago, FR is one of the most loved counter. 

Third, at 20 cents, is it value for money? If Rupiah do not depreciated by more than 5% against SGD annually, and you believe Soliam hospitals operating moat. At 20 cents, Yield is 13%. I Do not trust proforma numbers totally. If you missed it by 30%, 9% yield is not too shabby. 

So, I keep calm and carry on. I might not be able to do this, if I have already expended my 2 Average down attempts rule. But since, I have only fire one shot, and a small one, I think it is still tolerant in my whole portfolio scheme of things to continue.

Silverlake Axis

I have already reduced my stake of SAL sometimes back, booking a loss. It is the only company that is close to 10% of my portfolio, so I reduced it to less than 5% now. 

The loss is not crippling if taken together with the dividends I received, and also a short term trading gain when it went from 40 cents to 55 cents. (I sold partially then)

While the loss is insignificant in the overall scheme of things. What is frustrating is the Thesis did not hold.

1) Growth only happens in 2019, given 2020 is a Covid year, I could understand that all companies will be affected. However,

2) They further reduced their dividends payout ration by much more than the loss of profits. This is self-inflicted wound

3) The accuisitions of Goh companies are either bad timings, or really a bad deal. Since it makes no difference to both top and bottom lines. Well, at least there is no worry of top up of payments. FAT HOPES!

4) FInTech are all the rage now. Yet as a Saas company, it is not winning any major contacts. I wonder if the new digital banks will approach SAL?

Given that I have already reduced it weigtage to a rather comfortable level, I will continue to monitor it. Given its proftability, I hardly believe I have a permanent loss risk, unless it is a outright fraud. Yet, i believe the risk is low, given the high profile customers. 

 

From Recovery to Growth, Pan United and Koufu

It is rather difficult to project earnings beyond 1 year, which is what I learned from Lee metals and silverlake axis, Yet, because of the "unqiue" or "unfortunate" circumstances of Covid-19, it is quite possible that we can project 2 consecutive years of growth. 

2020, is a recovery year from a low base, with 2021 being a "growth" year, just by the virtue of execution of shelved plans. 

Lets start:

Koufu:

1) In their updates, H2 is already better than H1 due to Phase 2. Yet, we know the F&B retailing segment will still be mostly constrained by the WFH affecting stalls' business at those near office and tourist attraction and also by the maximum of 5 people capacity

2) 2021 is a recovery year, due to a low base effect, it is a no brainer that earnings will be better. 

3) Assume vacination rollout is successful and most countries have significant of their population vacinnated in 2021, 2022 could see more "normalisation" of business conditions. 

4) Growth in2021, should come from the successful cost reduction when Asia Deli, and their existing factories are sold when the integrated facility becomes fully operational and their reduncies in P&E get disposed. Depreciation is the largest expense for Koufu. 2021, numbers will be drag down by their higher numbers in depreciation before their dispose of their existing factories.

5) The 2 growth areas of "R&B" tea is the area where the strategy is getting clearer. Instead of owning the brand and going it alone, they are going for partnership and reduce on cost by selling the products on existing stalls of partners. 

6) Product diversification and snergy with deliAsia group companies. In 2018, they made 2 mio profits. I believed they maybe loss making in 2020, but I do notice the presence of dough culture and heritage shops. They intend to increase the shops 4 folds over 5 years.  

RISK: Sudden dearth of successful bidding of food courts.

Pan United

You can see that demand has spiked after August, when dormitory workers are allowed to return to work slowly. 

The site Market Price of RMC is also higher than Begining of 2019. Why 2019? Is the Recovery of Pan United Earnings from the slump of constructions. 

2020 is obviously gone, demand is almost halved. I hardly believe 2021 will be able to fulfilled all pent up demand, especially with labour an issue. Genting and MBS expansion plans could possibly only materialised in 2021 (Not in BCA forecast)

Pan United is a market leader in RMC, and poster boy in terms of innovation of products and etc.

Noted: Vested with both companies (Why would you think I would want to write so much? MUHAHAHAHAHAHAH)

Random thought: Excited about creating an escape room

I learnt how to create an online escape room using Harry Potter Theme. 

Took hours, but glad I manage to follow the instructions and create a prototype to help me son. 

Try it here, and keep me feedback 

Hahahaha excited 🤣

https://docs.google.com/presentation/d/1aXxettMSuZsO-qWYyWAlM44Y5UKGHoeEAz29fWnyh-I/preview?usp=drivesdk