Author: sgwealthbuilder

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.

ISOTeam is a Catalist listed stock which I have been wanting to cover for a long time but had not done so because I was under the impression that the company is in small player in the building and construction industry. However, I found out recently that I was wrong.

Company background

The company is actually an established player in the building maintenance and estate upgrading industry in Singapore. ISOTeam has over 15 years of Repairs & Redecoration (R&R) and Addition & Alteration (A&A) experience, and has successfully undertaken more than 300 public and private sector R&R and A&A projects involving close to 3,000 buildings. ISOTeam is also the exclusive applicator of paint works for both SKK and Nippon Paint in the public housing sector in Singapore.

I like ISOTeam for its competitive strengths in its strong track record of project completions, early mover in eco-conscious solutions and diversified capabilities in servicing residential, commercial, industrial and institutional segments. All these strengths enabled ISOTeam to repeatedly winning tenders for public sector projects even when they are not the lowest in price.

Share price performance

ISOTeam launched IPO in July 2013 with 32.2 million shares at 22 cents each. For the past three years, the share prices increased steadily from $0.22 to $0.30 based on the strength of increasing revenue and profits.

And so the saga continues. On 8 April 2016, OSIM increased the buy-out offer price from $1.39 to $1.41. The revised offer price is basically on a cum-dividend basis and will be the final offer price.

To be frank, the revised price is nothing to shout about and is unlikely to sway those dissent shareholders who refused to accept Ron Sim’s offers. Whether maverick entrepreneur Ron Sim can successfully de-list OSIM remains to be seen but it would be interesting to analyse what exactly prompted this shocking corporate move of the year.

Bad times ahead?

One possible reason for Ron Sim to de-list OSIM might be because of a possible global economic downturn. After all, China is slowing down now and OSIM had previously banked on rich Chinese’s spending power. A look at its global network of outlets revealed that the number of outlets in North Asia has been reduced from 365 to 360. Overall, the company is also reducing its GNC and TWG Tea outlets.

As OSIM’s core business is still in selling luxury massage armchair, a global economic crisis will definitely impact its share price negatively. Drawing from the Great Financial Crisis (GFC) in 2008, its share price tumbled to a record low of $0.04.

Founded in the 1970s in Singapore, Tat Hong is a listed company that provides crane rental services in the construction and offshore marine industry. It now operates 1,500 cranes across the region. By tonnage, it is the seventh largest crane rental company worldwide. Is it worth buying Tat Hong shares now? In this article, I will share my insights on Tat Hong’s investment value.

On 15 March 2016, the company announced in the SGX website that “it has been approached in connection with a potential transaction which may or may not lead to an acquisition of the issued share capital of the Company. Discussions are preliminary and there is no certainty or assurance whatsoever that these discussions will result in any transaction”. The announcement on potential takeover offer led to a massive surge in Tat Hong’s share price the next day. The stock rocketed from 41.5 cents to 63.5 cents.

Is this a value trap or value buy? Before jumping the gun, investors or traders must put things into perspective and evaluate whether Tat Hong’s shares are worth buying or trading. Since 2007, Tat Hong’s share price has tumbled from a high of $3.36 and is now languishing at a 6 year low of $0.58.

The Hour Glass is a listed luxury watch retail group in Asia with headquarter in Singapore. Founded in 1979 by the husband and wife team, Dr. Henry Tay and Dato’ Jannie Tay, the company started operation in Lucky Plaza through a partnership with Metro Holdings. In recent years, the company’s share price has surged from $0.30 in 2009 to almost $2.00 in 2014. Post stock-split of a one-into-three exercise in 2014, the current share price is now trading at $0.74.

What sets apart The Hour Glass from other luxury watch competitors is that it also has a substantial property portfolio. According to its 3Q2016 financial report, the group is holding on to $64 million worth of investment properties. In 2015, it acquired two Australian properties, namely an 11,000 square feet heritage listed retail and commercial property in Sydney and an 8,000 square feet retail property in Brisbane’s prime luxury retail precinct for $6.3 million. Such property investments reflect the listed company’s strategy for growth in the future.

Besides laying the groundwork for future growth, it is also making the effort to grow its core business. Amid the global economy uncertainties, The Hour Glass acquired the Watches of Switzerland in 2015 for $13.3 million.

Raffles Medical Group (RMG) recently announced share split of each company share into three ordinary shares. It is not a done deal yet and the proposed move is still subject to approval of shareholders at a general meeting and the approval of SGX.

The rationale given is that the proposed share split will make the company shares more accessible to retail investors because of the reduction of each board lot. In addition, the move will also expand the shareholder base from the current approximate 7,780 shareholders.

I am not invested in this counter but have been tracking the company’s performance. Given that SGX has reduced the board lot trading size from 1000 to 100, RMG’s rationale for the stock split is not exactly convincing. This is because most retail investors can afford investing in RMG at current price, albeit at lower board lot size. On the flipside, existing shareholders may face risks of a decline in their share value after the implementation of the proposed share split. There is no assurance that the subdivided shares will be $1.39 after the implementation of the stock split.

On its financial health, RMG is doing reasonably well. Profit after tax is $69.3 million in 2015, a growth of 2.4% increase from $67.6 million in 2014.