Year: 2018

Once upon a time in Singapore, taxi drivers held commuters to ransom with their ridiculous surcharges, bad practices of taking longer routes to earn higher fares and going ‘MIA’ during peak hours. Suffice to say, in every industry, there will always be black sheep. But the emergence of Grab and Uber have changed the game and levelled the playing field. Among the biggest casualty from this fall-out had to be ComfortDelgro, the largest taxi operator in Singapore.

The irony about ComfortDelgro is that as a taxi operator, it derives the bulk of its revenue from bus and MRT businesses, instead of its taxi business. With the disruption in the taxi landscape, perhaps in no time, ComfortDelgro may consider switching its taxi drivers to bus or train drivers. This scenario may become a reality due to a frightening competitive advantage of Uber and Grab – they are both relatively asset-lite companies. Read on to find out why this spell big trouble for this Singapore blue chip.

Horror ride for Comfort

The evolving on-demand transport landscape is indeed sweet revenge for commuters as taxi operators had monopolised the market for the longest time due to lack of credible taxi alternatives. A lot of credit must be given to the Minister for Transport, Khaw Boon Wan for democratizing the private-hiring industry.  

Sometimes, life is stranger than fiction. In my years of investing in SGX stocks, I have come across many investors who persisted in buying more shares of companies whose business fundamentals turned sour. Perhaps they did not have the time to read the financial reports or maybe they just lack the competence to do a proper due diligence. So in M1 case, is it a case of catching a falling knife?

When investing in stock, never just study the trend of the share price. This is especially so if you consider yourself to be a long-term investor.

Recently, several financial bloggers purchased M1 shares on the basis that the shares had reached a “break-through” level. Whether they had made the correct decision is subjected to debate. After all, there is no right or wrong in the stock market. The only thing that matters is whether you have made money from the stock investments.

In my point of view, I would avoid investing in M1 shares at all cost. And the latest financial results vindicated that business fundamentals of M1 continued to slide.

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Being Singapore’s aerospace and defence group, one wonders whether ST Engineering has lost its investment fortress. Revenue has stagnated since FY2012 and net profit plunged from $576.2 million in FY2012 to $484.5 million in FY2016. Due to the declining financial performance, the stock price had also dropped from a high of $4.45 in FY2013 to the current $3.36 level.

Is ST Engineering a value trap or bargain buy now? This article will examine the merits and risks of investing in this government-linked company.

Land Systems

Firstly, as a defence group, ST Engineering enjoys a defensive fortress in Singapore as its Land Systems sector supports the Singapore Armed Forces (SAF) to modernize our fighting forces through major projects like the next-generation Armoured Fighting Vehicle. It also provides engineering solutions for various weapons and ammunition systems. For 3Q2017, commercial sales and defence sales constituted 63% or $1.0b, and 37% or $0.6b respectively of Group revenue.

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Keppel Corp’s massive fine of USD 422 million over corruption charges had cast a spotlight on rival Sembcorp Marine. The record fine had raised questions on whether Sembcorp Marine would be implicated and created much uncertainties for the company. This is because it is not known if Sembcorp is currently being investigated by the authorities over corruption charges. Nevertheless, it is timely to review whether it is opportune to invest in the parent company, Sembcorp Industries Ltd.

Being rated as the world no.2 oil rig builder, Sembcorp Marine had endured a challenging FY2017 like Keppel Corp. Revenue decreased for rig building and offshore platform projects as well as contracts termination and inventories written down arising from the contract signed in October 2017 to sell nine jack-up oil drilling rigs. Revenue for nine months shrank to $1.7 billion, a decrease of 36% year-on-year. But net profit remained stable, at $28 million, an increase of 3% year-on-year.

Notwithstanding the above, it should be noted that Sembcorp Industries Ltd (SCI) is more than just Sembcorp Marine, which is listed separately on the mainboard of the Singapore Exchange. SCI has three main businesses namely, Utilities, Marine and Urban Development.

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2017 had seen local banks like OCBC and DBS making strategic acquisitions to grow their wealth management portfolios. Yet UOB is surprisingly quiet on the merger and acquisition front. What is the venerable bank up to? Is merger king, Wee Cho Yaw, plotting something special in 2018?

Once upon a time in Singapore’s banking fraternity, there were four local “Heavenly Kings” – Development Bank of Singapore (DBS), United Overseas Bank (UOB), Overseas Union Bank (OUB) and Oversea-Chinese Banking Corporation. They are all household names and I believe most Singaporeans have experiences with their bank products or services.

On looking back, the devastating effect of the Asian Financial Crisis in the nineties and the industry liberalization brought forth by the new Monetary Authority of Singapore (MAS) regulations changed the banking landscape forever. Through the years, UOB has staved off these challenges and emerged as one of the most powerful forces among its peers.

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The recent upturn in Singapore economy led to a surge in local banks’ share price. Generally seen as the bellwether of the economy, bank stocks are extremely sensitive to economy conditions. South-East Asia largest bank, DBS, is no exception. The share price stormed to record high of $26.60, an impressive level not seen even during the boom years preceding the Great Financial Crisis.

The power surge of the share price had created much wealth for many wealth builders, including DBS CEO who bought 200,000 shares for $2.8 million in February 2016. For the man in the street, $2.8 million is lot of money. But for Piyush Gupta, his annual pay package in FY2016 was already $8.4 million. His purchase of DBS shares back then was driven by his conviction that the shares were grossly undervalued.

Indeed, his move was vindicated as the bank’s share price climbed by almost 100% within two years. If Gupta had held the shares from February 2016 till now, he would have made a profit of almost $2.8 million.

With the bullish form of the share price, it is indeed tempting to purchase DBS shares. However, it is important to review the financial performance and assess whether the price is worth the value.

The story of Perennial Real Estate Holdings is certainly intriguing. Having made its way into SGX stock market in 2014 after staging a massive $1.56 billion reverse takeover of St James Holdings (the famous nightclub operator), Perennial counts Wilmar International and Osim founder, Ron Sim as major shareholders (combined 35%). Recently, it announced a US$1.2 billion Joint Venture Vehicle with First Close of US$500 million to Invest in HSR Healthcare Integrated Mixed-use Developments in China.

The entry of Perennial Real Estate Holdings into China’s healthcare put it on a collision path against Raffles Medical, which announced that it is building two hospitals in China. Although the two healthcare players are from Singapore, their business models and backgrounds are fundamentally different. In this context, I will share my insights in this article.

Background of Perennial Real Estate

Although Perennial claims to be an integrated real estate and healthcare company, the business focus is predominantly in property development and management of mixed-use projects. In Singapore, Perennial has invested in and manages prime iconic properties located in the Civic District, Central Business District and Orchard Road precinct, such as CHIJMES, Capitol Singapore, AXA Tower, TripleOne Somerset, House of Tan Yeok Nee and Chinatown Point.

The recent corruption fine on Keppel Corporation amounting to $566.91 million by US, Brazil and Singapore authorities certainly rocked the market. The record fine came at a time when the oil market is perceived to be recovering from a devastating three-year slump. But more importantly, as a government-linked company, the episode left a taint on the reputation of Singapore, widely known to be one of the most corruption free cities in the world.

But beyond the corruption scandal, a far more sinister probably awaits Keppel Corp. In my opinion, it could be the dominance of US shale oil production that may change the game for the Singapore blue chip. Whilst the corruption fine may be staggering, Keppel Corp’s balance sheet is strong enough to withstand the impact without incurring significant damages to its growth prospects.

Diversified businesses

As an industrial conglomerate, Keppel Corporation has four major business divisions – Offshore and Marine, Property, Infrastructure and Investments. Keppel O&M (KOM) specializes in offshore rig design, construction and repair, ship repair and conversion, and specialised shipbuilding. It integrates and harnesses the experience and expertise of 20 yards and offices worldwide to be near customers and markets.

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From pork seller to CEO. Nope, this is not the plot of the latest Mediacorp drama nor the story of SG Wealth Builder. Instead, it is the real success story of Mr Lim Hock Chee, CEO of Sheng Siong. From a humble outlet at Ang Mo Kio, Mr Lim grew Sheng Siong to the third largest supermarket operator in Singapore and eventually got it listed in 2011.

Since its debut at IPO price of $0.33, the share price had been surging in recent years and even crossed the $1.00 in 2016. Given the bullish form, should investors enter this counter now or is it a value trap?

2017 proved to be another great year for Sheng Siong as the home-grown supermarket operator achieved revenue of $629 million and net profit of $52.8 million for nine months, an increase of 5% and 11.8% respectively year-on-year. The results were certainly impressive given the current weak retail sentiments. But as shared in my previous articles, I would not invest in this counter due to the following factors highlighted in this article.

Before reading this review, please check out the articles I have written on Sheng Siong. They would contain my research and insights on this counter.