SingTel at a cross-road

The gloves are off as SingTel engages in a battle with Australian rival, TPG Telecom. In late last year, TPG Telecom won the rights to become Singapore’s fourth telco operator. In early April this year, TPG shocked the market by winning the rights to become Australia fourth mobile operator in Australia.

It is still early days to assess the impact of the heightened competition from TPG but SingTel is at a cross-road as it has to compete with TPG in both the Singapore and Australia market. While the impact of a fourth telco in Singapore would have minimal impact on SingTel, the same cannot be said for the entry of a new competitor in Australia. This is because the Australia market is very important to SingTel, which traditionally derived the bulk of its earnings from the regional businesses.

In the fourth quarter ending 31 March 2017, EBITDA from Optus, SingTel’s subsidiary in Australia, was A$741 million, more than half of the Group’s EBITDA of S$1.31 billion. This is not surprising given that the Australia market is so much bigger than Singapore. Net profit was up 1% to A$250 million while operating revenue rose 1.6% to A$2.11 billion.

Singtel

Against the backdrop of increased competition, Optus continued to enhance the competitiveness of its network – with A$1.5 billion in capital expenditure. At the end of March 2017, Optus’ 4G network reached 96.1% of Australians. Through the deployment of significant spectrum holdings and innovative technologies such as 4.5G and native Voice over WiFi, Optus is improving network coverage and download speeds for customers.

Despite the challenging outlook, SingTel reported strong core revenue and earnings. Year-on-year for 4QFY17, operating revenue grew 5% to $4.3 billion and EBITDA increased 4% to $1.31 billion. Among its overseas joint ventures,  Telkomsel’s pre-tax profit contribution rose 17% as …

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Is ISOTeam over-rated?

ISOTeam, a Catalist-listed company that specializes in eco-conscious Repairs and Redecoration (“R&R”), Addition and Alteration (“A&A”) and complementary niche services specialist in Singapore, announced a set of mixed financial results for 9MFY17. The group maintained its net attributable profit at S$5.1 million for the nine months ended 31 March 2017 despite a 5.2% dip in revenue to S$61.2 million.

One question that I have been asking myself is whether ISOTeam is over-rated. ISOTeam is Nippon Paint’s exclusive applicator of paint works for R&R projects and both companies had formed strategic partnership over the years with Nippon Paint taking up stakes of approximately 5.93% in ISOTeam through a shares placement in 2014.

Despite this, investors must realize that the R&R segment is an extremely low barrier industry and basically many companies can do the jobs that ISOTeam are doing. To put things into perspective, the exclusive applicator of Nippon Paint would not provide much competitive advantage for ISOTeam.

At the end of the day, when public organizations or companies tender R&R jobs, it is all about dollars and cents. The company which can do the jobs “cheaper, faster and better” will win the contracts.  This is apparently the case when ISOTeam’s topline in both 3Q2017 and 9M2017 was affected mainly by the decline in revenue generated by its core R&R business, which had faced intense price competition.

To differentiate itself from its competitors, ISOTeam has no choice but to [This is a premium article. The rest of the content is blocked and can be accessible by SG Wealth Builder Members only. To read the full content, please sign up as member.]

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Not a member yet? You may sign up to become a member of SG Wealth Builder. The full benefits and

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Collapse of Noble Group share price

It is a battle that Noble Group cannot afford to lose. Today, the company requested for trading halt after it’s share price plunged by 32% following news of credit rating cut by S&P Global. This latest setback came after yesterday’s report that potential white knight, Sinochem Group, was not interested to invest in the embattled commodity trader.

The latest blows sent the Noble share price into tailspin, causing its market value to shrink to USD 400 million, a massive decline from USD 6 billion in 2015. This dark chapter of Noble gripped the market in maximum fear. Many shareholders would not be able to sleep well, fearing the worst for their investments. Can the beleaguered company turn the tide and emerge from the battle victorious?

Stock investing

The unfolding events of Noble Group are nothing short of intriguing. Once the largest Asia’s commodity trader, it used to be among the elites and was part of the Straits Times Index (STI) as recent as last year. In 2010, it’s share price was even trading at a high of $3.43. Those days must be surreal to existing shareholders who watched in horror as the share price keep falling over the past two years.

Some investors blamed the founder, Richard Elman, for the current situation that Noble Group is facing and there were calls demanding for him to step down as Chairman. In 2015, the Group was mired in controversy as a little known financial blogger accused it of dubious accounting practice. This led Noble Group to engage PricewaterhouseCoopers (PwC) to review its accounting method. PwC subsequently confirmed that Noble Group followed international standard for its accounting.

Read my previous updates on Noble Group:

  1. Noble Group will swim or sink?
  2. Meltdown of Noble Group shares
  3. Is Noble Group doomed?
  4. Will Noble Group do an Osim
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Sheng Siong share price inflated?

Sheng Siong is a local supermarket chain with 43 outlets located across Singapore. Listed in the Singapore stock market, this counter is popular among investors. When it got listed in the SGX mainboard on 17 August 2011, the IPO price was $0.33. Fast forward six years later, the share price has surged past the $1.00 milestone recently but investors must be wondering if Sheng Siong share price is inflated.

With a population of 5.3 million, the market for supermarket chain is very small in local context. Furthermore, the market is also saturated with other players, not to mention the mom-and-pop stores. Sheng Siong’s closest rivals are NTUC Fairprice and Dairy Farm which operates the Cold Storage and Giant outlets. Among the trio, Sheng Siong is the smallest operator. To compete effectively against these big boys, Sheng Siong must have the economy of scale and operating margin.

For many years, Sheng Siong’s gross profit margin had been excellent, averaging at least double digits. For 1Q2017, the gross profit margin was 25%, a slight increase of 0.5%. However, operating margin was only 9.5% for 1Q2017. What is the difference between gross profit margin and operating margin? Why is it important for investors to understand this financial metric?

Investing

To put it simply, gross profit margin only reflects the difference between the gross revenue from sales and the cost of goods. It does not include other variables. On the other hand, operating margin includes the costs of taxes and interests, providing a more holistic financial picture than gross profit margin. In this regard, Sheng Siong should continue to improve the operating margin, which was less than ideal.

The main driver for growth for the supermarket industry is still brick and mortar. So, the mode of growth in Singapore is still through the expansion of …

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Exchange traded funds (ETFs)

If you are a busy professional who have no time for stock research but would like to build a diversified investment portfolio with global exposure, then exchange traded funds (ETFs) may be for you.

Generally, there is still a lack of awareness among retail investors on this class of investment probably because ETFs passively track indexes. Thus, it may take the thrill out of stock picking. Nonetheless, ETFs offer an alternative path to seek returns from the market.

Broadly speaking, ETFs is a type of collective investment scheme that pooled money from investors and invested according to the fund’s objective. In a way, it is similar to unit trust. However, the main difference between unit trust and exchange traded fund is that the former is actively managed by professionals while the latter passively track a specified index. Because of this, ETFs are open-ended investment funds and are traded on a stock exchange.

The interesting thing about ETF is that it replicates an index and do not try to outperform the underlying index.Take for example, if an ETF tracks the Straits Times Index (STI) which declines in value, the ETF would produce a return that reflects the drop in value.

Stock investing

There are several advantages in investing in exchange traded funds. Firstly, if you have limited capital but would like access to blue chips, then ETFs offer a low cost and simple way for you to own index stocks. For example Nikko AM Singapore STI ETF offers investors an opportunity to invest in the top 30 companies listed to SGX.

Secondly, retail investors do not [This is a premium article. The rest of the content is blocked and can be accessible by SG Wealth Builder Members only. To read the full content, please sign up as member.]

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Meltdown of Noble Group shares

Noble Group suffered another major setback when its shares experienced yet another bout of massive sell-offs, triggering the activation of SGX circuit breakers. Upon the commencement of trading on 12 May 2017, shareholders of Noble Group ran for their lives and dumped the shares like no tomorrow. The rout resulted in the activation of circuit breaker at 9:01 am.

However, the circuit breaker was futile in stopping the carnage. Share price continued to fall by as much as 22% compared to the day before. The sell-off came fast and furious, prompting another circuit breaker at 9:54am. At the rate of declining, Noble Group was set for an explosive free fall.

The crisis in confidence came about as the commodity trader issued a profit guidance of a loss of USD130 million loss for Q1FY17. This incurred the wrath of shareholders and ignited the meltdown of Noble Group shares.

Noble Group

The circuit breaker system was introduced by SGX only in 2014. Following the plunge in penny stocks of Blumont Group, Asiasons Capital and LionGold, SGX saw the need to introduce circuit breakers. According to SGX, “the circuit breaker is activated when an incoming order could potentially match an existing order in the order book at a price outside the circuit breaker price bands. The price bands comprise an upper and lower price limit based on a deviation of 10% from a reference price”.

When the circuit breaker is activated, a cooling off period of five minutes will take place. During the cooling off period, trading can still take place within the price bands of no more than 10% away from the reference price. With this system in place, the regulator hopes to reduce wild fluctuations in share price and safeguard investors’ interests.

The latest horror show of Noble Group occurred in a difficult …

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Noble Group will sink or swim?

Fresh from a 10-into-1 shares consolidation, Noble Group share price free fall by 33% at one point during the trading day of 11 May 2017. The sharp correction was due to the bombshell dropped by Noble Group announcing that it is likely to record a net loss of around USD 130 million for 1Q2017. Investors must be wondering if the embattled Noble Group will sink or swim after two years of roller coaster ride.

After reporting a profit of USD 8.6 million for FY16, the commodity trading company recently irked investors with the ill-timed shares consolidation. It was reported that massive number of investors stormed out of the special general meeting, even though the proposed consolidation move was eventually approved.

The shares consolidation raised a lot of controversies because it came in the midst of a respite from a horrendous USD 1.6 billion loss in 2015 and negative reports over its accounting practice. Amid the vicious short-selling attacks, the share price tumbled to record low of $0.12. Recent positive financial results and reports of major investor’s interest in Noble Group led to a brief recovery in share price. Nonetheless, Noble Group did itself no favor by announcing this shock shares consolidation exercise.

Stock market

I am not vested in this counter but I can empathise with existing shareholders of Noble Group. First of all, there is no guarantee that after the shares consolidation, the share price of Noble Group will remain north of $1.00. Many SGX listed companies fell below the $1.00 mark after shares consolidation. K1 Ventures is one good example. K1 Ventures’ share price used to trade around $0.18 to $0.25 level. After the five into one shares consolidation, the share price dropped from $1.00 to $0.70.

Some investors may have thought that the shares consolidation exercise of Noble Group …

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Short selling on SingTel shares

On 12 April 2017, SingTel shares experienced heavy shelling by short sellers. On that fateful day, the short sales volume was 21.7 million, with market value of $82.7 million. The heavy attack led to a decline in SingTel share price from $3.84 to the current $3.75. What could have caused the big boys to do massive short selling on SingTel shares?

The short selling of SingTel shares was disturbing because it has been on-going for several weeks. From 3 to 7 April, there was 16.7 million of short sales volume, with total value of $65.4 million. The week before it was 21.7 million short sales with total value of $85 million being shorted. Prior to that, another ferocious attack occurred in the week 13 to 17 March, with 20.4 million short sales volume of $81 million value.

Stock investing

It may sound far-fetched to investors but the reason for the SingTel shares attacks could be attributed to short-sellers plotting to pull back the Straits Times Index (STI), which closed 0.98 percent lower on 17 April 2017. Being the stock market bellwether in Singapore, it makes sense for the big boys to target SingTel in a bid to engineer a stock market correction in Singapore.

Previously, I have posted a series of research on this telco giant in this blog. Readers may refer to the following links:

  1. SingTel shares to rocket on NetLink Trust IPO?
  2. SingTel share price in supreme form
  3. SingTel increased investment moats aggressively

Most investors would view short-selling negatively but nonetheless, such activity is needed to prevent market prices from becoming out of whack.

According to Monetary Authority of Singapore, short selling refers to the sale of securities that the seller does not own at the time of the sale, short selling may either be: ‘covered’ or ‘uncovered’ (also referred …

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OCBC Bank to rock the market with multi-billion dollar hidden assets?

Following the news of OCBC Bank looking to sell its stake in United Engineers Limited last year, the share price of the famous local bank has been on a mighty hot streak. On current bullish form, breaching the $10 per share support level seems inevitable. Will OCBC Bank rock the market with more divestment news?

In my previous article, several readers expressed cynical at my valuation of OCBC shares. Based on the valuation of its equity stake in United Engineers, there is no way OCBC Bank shares would hit the $10 mark. On this, I did not dispute. But market sentiments always play a part in a stock performance. As Warren Buffett often said, price is what you pay but value is what you get. There is often a gap in the intrinsic value of a stock vis-à-vis its market price.

Previously, I have written a few analysis on OCBC Bank shares that I feel are must-read for investors of OCBC. Readers may want to check out and read the following blog posts:

  1. Will Ezra sink OCBC share price?
  2. OCBC considering the sale of United Engineers Ltd
  3. OCBC multi-billion worth of hidden assets

Singapore banks

For OCBC Bank, its hidden assets consist mainly of properties and securities worth $6.45 billion in terms of unrealized valuation surplus. This amount is largely unchanged from $6.42 billion from last year.

Investors must note that when we talk about “unrealized valuation surplus”, it is not the same as the prevailing market value of the assets. According to OCBC Bank’s financial report, the unrealized valuation surplus “represents the difference between the carrying values of its properties and investments in quoted subsidiaries and an associate, and the market values of those properties and quoted investments at the respective periods”.

What the above means is that OCBC Bank may …

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