Author: sgwealthbuilder

On 3 March 2016, Singapore bourse operator, SGX, included 41 listed companies into its infamous watch-list due to the implementation of the 20-cent Minimum Trading Price (MTP) rule. In all, there were 76 companies under the SGX watch-list, which was like the Hall of Shame.

To be part of this watch-list can be very embarrassing because it means that affected companies have to buck up and improve their financial performances. Otherwise, they may face the prospect of being delisted from the stock exchange.

The expansion of the watch-list to include companies failing to comply with the MTP rule had riled market players because this move essentially blurs the distinction between market quality and business fundamentals.

To be fair, even though a company’s share price is trading below 20 cents, it does not mean that the company has shaky business fundamentals. So to put those failing to meet the MTP with those companies with financial problems is deemed by many to be onerous.

To put things into perspective, the MTP rule was introduced in the aftermath of the penny stock crash in 2013. Many retail investors lost their pants after dabbling in Blumont, LionGold and Asiasons Capital. The three penny stocks surged to incredible levels within a short period of time and then dived spectacularly, prompting rumours of market manipulations by the Big Boys.

In a month in which SGX-listed Haw Par Corp announced the closing of the Underwater World Singapore, Temasek Holdings tendered all their shares and paved the way for French giant, CMA CGM to take Neptune Orient Lines (NOL) private. This marked the end of another Singapore icon and highlighted how fragile the economy is right now.

The take-over offer for NOL is $1.30 and it is unconditional. According to the listing rule, NOL can be delisted once it obtains more than 90% of the shares. The offer is deemed by many to be fair given that NOL has been bleeding for several years due to the collapse of the Baltic Dry Index (BDI). Temasek Holdings had been looking for a white knight for NOL for quite some time and CMA CGM came to the rescue.

The downturn in the shipping industry took many players by surprise. After all, the BDI stormed to 11,000 level in 2007 and subsequent crashed to near 700 level with the arrival of the Great Financial Crisis. Nevertheless, the downturn turned out to be much longer than expected and its seems that Temasek Holdings, which is the parent company of NOL, decided to throw in the towel.

In the world of aviation, one of the most dreadful radio distress signals is “Mayday!”. When the pilot-in-command made this signal, he would be facing some emergency situations that might be potentially life threatening. On 4 June 2016, it certainly was Mayday for Noble Group when the company’ share price tumbled to its lowest since 2003 after the announcements of a rights issue to raise $500 million and the shock resignation of founder, Richard Elman. This latest episode marks another embarrassing chapter for Noble Group after it was kicked out of the benchmark Straits Times Index in March 2016.

Today, Noble Group’s share price tanked further when the commodity trader announced that the proceeds for the rights issue will be used for working capital instead of paying down its massive debt. Obviously, investors are not happy with the management’s move given that only 20% of the proceeds from rights issue will be used to pay for the net debt of $3.7 billion. Furthermore, the price of the rights issue is at a huge discount of 63% to its price of $0.30 at the date of announcement. As a result, many traders punished the share price and sent it tumbling by 13%.

One of the victims of the global oil crisis, EZRA Holdings announced a set of terrible 2^nd quarter financial results on 14 April 2016. Losses after tax came in at USD282.6 million for 2^nd quarter and USD336.4 million for the first half of the financial year. This is a massive financial loss and there are not many companies in Singapore which can withstand this sort of impact. If EZRA investors are thinking of dollar-cost averaging and buying EZRA shares on the cheap, they need to be careful of catching a falling knife.

The company is actually biting the bullet for 2QFY2016 and realized the impairment losses from all front – loss-making joint ventures, losses on fixed assets and bad-debts. Given the depressing market conditions for the oil and gas industry, it is still unknown whether there is any more impairment to be made for EZRA Holdings further down the road.

Many investors thought that dollar-cost averaging is a good strategy to buy more shares at a lower price. But many of them don’t understand the difference between price and value. This technique, if applied wrongly, can cause massive wealth destruction to an investor’s portfolio, especially if the business fundamentals of the company are shaky.

Almost a year ago, the Straits Times Index tanked from almost 3500 points to the current 2760 points. The fall in the Singapore stock market benchmark index reflects the challenging economic conditions and those who invested in SGX-listed stocks would have suffered from a certain level of wealth destruction. Incidentally, the market correction started since the previous SGX CEO, Magnus Bocker, was replaced by the current Loh Boon Chye. But the rot probably started during Bocker’s time and it would not be fair to blame the current CEO for this mess.

One thing for sure is that Bocker was highly unpopular during his helm as SGX’s chief because of his slew of projects that did not yield much improvements to Singapore market. The biggest flop definitely had to be the introduction of a new $250 million trading engine that promised to propel Singapore into Asia’s top trading centre. Instead, a massive technical fault in 2014 caused SGX to stop trading for at least 3 hours and left SGX red-faced. To make things worse, this embarrassing incident came after SGX tried to restore confidence following the penny stock crashes involving Blumont, LionGold and Asiasons.

The penny stock crashes in 2013 probably summed up the lack of quality in SGX-listed stocks.

Sheng Siong Group announced its 1Q2016 results on 27 April 2016. Revenue increased 5.1% year-on-year to $208.5 million while net profit increased 16.8% year-on year to $16.4 million. Given that many SGX stocks had been heavily sold down since the start of the year, Sheng Siong’ share price remains rock solid in the face of poor market sentiments.

Under the current challenging business climate and government’s restriction on foreign labor employment, Sheng Siong’s latest results are impressive as they reflect management’s ability to control cost and improve margins.

I continue to like Sheng Siong for its debt free status and strong cash position. The group currently has cash pile of $113.9 million and operating cash flow remains healthy at positive $5.23 million, which is significantly lower than previous year of $12.8 million. This is because of the acquisition of property, plant and machinery.

In terms of growth expansion, the group is opening 4 new stores in 2Q2016. In addition, Sheng Siong had exercised the option to purchase premises at Block 209 New Upper Changi Road, for consideration of $53 million. I am pretty excited about this project because the traffic at Bedok interchange is very high, thus this store is very likely to increase revenue substantially for Sheng Siong.

If you are one of those retail investors who had bought LionGold shares at the dizzying height of $1.70 per share and still holding on to them, you might as well write off the investments. After all, the shares are worth nothing and is now trading at $0.003. The epic fall of LionGold shares from $1.70 to $0.003 represented one of the most dramatic penny stock crashes in Singapore stock market.

LionGold, together with Asiasons and Blumont, were penny stocks but rose spectacularly to new highs from 2012 to 2013. The trio of stocks then went into a free fall at the same time, causing many retail investors to lose huge amount of monies. The huge swings of these stocks had led to speculations of foul plays. SGX, which takes on the role of both regulator and operator, was also blasted for late intervention and lax enforcement.

LionGold is a gold mining company with primary concessions in Australia and Ghana. Investors need to understand that investing in gold mining stocks is different to buying physical gold because the risks involved are inherently very different. Investors who bought LionGold shares and subsequently lost a fortune must have learnt this lesson a painful way.

While parent company Keppel Corp suffered from another week of attacks by short-sellers, its subsidiary K1 Ventures announced yet another blockbuster dividend of $0.09 per share to be paid out on 18 May 2016. In total, K1 Ventures has given out $0.30 per share dividends this year.

K1 Ventures is one of my favorite SGX stocks which I have been tracking for more than 10 years. It is the investment arm of Keppel Corp and its business objective is to invest in US companies with potential and hidden values. Over the years, it had made many notable exits like Helm Holding, MMR and China Auto Grand. From these divestment, K1 Ventures had rewarded shareholders with hundred of millions of dividend payouts. In fact, based on its dividend track records, K1 Ventures should be the best dividend stock in SGX.

I had made thousands of profits from investing in K1 Ventures but had recently sold off all my shares to purchase my new matrimonial home. Nonetheless, I hope readers can benefit from reading my blog and thus, is sharing my analysis on K1 Ventures (again).

Following an unsuccessful management buy-out in 2013, K1 Ventures has committed to managing its existing investments for eventual exits and returning the excess cash back to shareholders.

On 22 April 2016, Singapore central bank and white-collar police raided 4 local brokerages for possible breaches of securities law. It was reported that one remisier each from OCBC Securities and DBS Vickers were taken for questioning by the authorities. When this news broke, it took the market by storm and left investors wondering which stock counters had been involved.

This latest episode reveals another dark chapter in Singapore stock market following the epic penny stock crashes of Asiasons, Blumont and Liongold in 2013. Back then, the authorities investigated the three companies for possible insider trading or market manipulations after $8 billion dollars were wiped out in two days of trading. The scandal in 2013 led SGX to implement a number of market reforms to safeguard investors’ interests.

Among the new measures implemented were minimum trading price of $0.20, daily short-selling reporting and new reporting requirement of shares transactions by major shareholders. It was also proposed that by mid-2016, contra trading will be phased out. I personally feel that the removal of contra trading is too draconian because fundamentally, there is nothing wrong with contra trading. This activity, although speculative in nature, allows flexibility and market liquidity. Of course, like all things in life, there will always be black sheep who attempt to abuse the system.

On 7 April 2016, local bank OCBC announced the acquisition of Barclays Asia wealth management business in Singapore and Hong Kong through its private banking arm, Bank of Singapore for $430 million. The transaction is still subject to approval by Singapore’s High Court but is expected to be completed by end of this year. Nevertheless, investors have given their nod of approvals and pushed OCBC share price up by $0.60 within the past week.

Since last year, OCBC share price performance had not been doing well partly because of its loan exposure to the oil and gas industry. The non-performing loan (NPL) has increased to $1.97 billion in FY15 from $1.28 billion the previous year, due to the “classification of a few large corporate accounts associated with the oil and gas services sector”. As a result, the share price had tumbled from $10.89 in 2015 to a low of $7.46 in February 2016. So the recent share performance must have given OCBC investors something to cheer about.

Smart traders who bought OCBC shares at $7.46 this year would be sitting on massive paper gains by now. Personally, I knew a wealth builder who invested $70,000 at that price range. I guess he must be laughing all the way to the bank now, if he decided to cash in.