SG Wealth Builder

Singapore “Big Three” local banks recently announced third quarter 2017 results. Although all three banks suffered from collateral damage arising from loan exposure to the oil and gas sector, the latest results were generally upbeat and data revealed resilient growth for OCBC, DBS and UOB.

Competition continued to be stiff among the banks but growth for all three banks is expected to be positive for the full-year as Singapore economic growth was predicted to exceed 3% for 2017.

OCBC took the lead

Net Performing Assets (NPAs) continued to weigh on the banks’ earning as the ailing oil and gas sector showed no signs of revival. DBS recorded a devastating 25% decline for 3Q17 profit as compared a year ago. Profit stood at $802 million, the worst among its close rivals. The dismal result for DBS was due to the massive allowances of $815 million made, largely for the loan exposure oil and gas sector. This was a huge provision and the amount indicated that the DBS CEO might have grossly underestimated the oil slump.

On the other hand, OCBC smashed in a solid profit of $1.06 billion for 3Q17, 12% above S$943 million a year ago. UOB came in second with profit of $883 million, 12% above a year ago.

In what is believed to be the world largest IPO ever, Saudi Arabia oil company Aramco is seeking to list 5 percent of the company, which is valued at USD2 trillion, in both domestic and international stock markets. The move is part of the plan by the Saudi kingdom to diversify its economy and reduce the reliance on the black gold. International stock exchanges from New York, London, Hong Kong and Singapore have been vying to win the prized trophy of winning the IPO. Can SGX win the game?

To put things in perspective, the chance of Singapore Exchange securing the prestigious secondary listing in SGX is remotely small. The rate of success is probably 5% and I would be extremely surprise if SGX could pull it off. This is because if the intention of Saudi Arabia is to seek an international listing to diversify income, then market size is significant. Logically speaking, the natural choice would be New York, London or Beijing.

In my opinion, the New York Stock Exchange is the most likely destination for the Aramco IPO. London offers the prospect of being the major investment gateway to European market but Brexit had totally changed the game. As for Beijing, the stock exchange is not accessible to foreign investors and for Saudi Arabia to list Aramco there would defeat the purpose of a secondary listing.

Embattled Noble Group firmly had investors on tenterhooks as media reports emerged of DBS bank cutting lending facility and the resignation of co-CEO. The double blows sent share price plunging to $0.198, below the $0.20 critical support level. Considering the fact that there was a 10 into 1 share consolidation done in May 2017, the adjusted share price is actually $0.0198.

Investors who had subscribed to the rights issue in last year would have lost their pants if they had held on to the shares until today.

A week before, the SGX-listed company reported a stunning USD1.17 billion losses for the third quarter. Losses for the nine months ending 30 September 2017 amounted to a scary USD3 billion. Prior to this, investors were already preempted about the gigantic loss on 23 October 2017. Nonetheless, the latest setback sent the shares into a tailspin. Is it really the end of Noble Group?

The frightening aspect of the latest results was the [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.]

Read my articles on Noble Group:

1. Nightmare of Noble Group continues
2. Noble Group’s horror show
3. Noble Group new white knight?

SATS is a SGX stock which I have always admired because of its historically strong business performance. The company is a leading provider of gateway services and food solutions, with the major bulk of business mainly in the aviation sector. Recently, the share price of SATS experienced a loss of form. What is the situation? Has the management lost the plot?

Since the announcement of the 1QFY2018 financial results in 21 July 2017, the share price experienced a major bout of decline. From $5.10 to $4.60, there was a drop of almost 10%. Technically, this represented a correction for SATS share price. It is only lately that this counter started to recover and climbed to $4.77 on 3 November 2017.

It appears to me that investors had decided to punish this counter for delivering quarterly profit of $57.3 million in Q1FY2018, a decline of 10.6% compared to prior year. But I think it is not justified because in the previous year, the profit was bolstered by the sale of the Senoko plant, which provided a non-operating gain of $9.3 million.

In fact, SATS performance should be considered resilient because current quarterly results excluded one-off items like disposal of assets. Revenue and operating profit remained flat, at $426.5 million and $53.5 million respectively.

2017 is a milestone year for Jumbo Group as the F&B outfit celebrates its 30^th anniversary. Listed in SGX Catalist only in 2015, Jumbo counts sovereign wealth fund, Temasek Holdings and Osim founder, Ron Sim, among its major shareholders. Temasek Holdings has a stake of 1.24% while Ron Sim holds 10%. With such strong support from institutional investors, is Jumbo Group a safe bet for retail investors and is it worth the effort to invest in this counter?

Share performance

In my last article in December 2016, I wrote that the share price was on bullish form. Indeed, there was a minor bull run which saw Jumbo share price surging to a peak of $0.78 in February 2017. Subsequently, the shares went on a correction mode and tumbled to a low of $0.54. It was only in recent weeks that the share price recovered to $0.60 level.

Despite its share performance, I like the growth story of Jumbo Group. The revenue had been growing consistently from $87.6 million in FY2012 to $136 million in FY2016, demonstrating management’s track record in growing the company. For the 9 months ending in FY2017, the revenue amounted to $106 million. Based on projection, it is likely that total revenue for FY2017 would surpass the previous years.

Festive season is only two months away but for many SPH staff, there is nothing to look forward to nor cheer about this year. Within a month of taking over as the new CEO, Ng Yat Chung announced the shocking decision to accelerate the culling of 10% of its workforce. Originally, the 2016 plan was to carry out the lay-offs over two years. Now, the decision is to bite the bullet and complete the SPH retrenchments by end of this year.

The SPH retrenchments come at a time when the media giant is struggling big time to adapt to the disruptions brought forth by technology. In the latest full year financial report, SPH reported net profit of $350.1 million, 32% higher than last year. But upon delving deeper into the financial results, the performance of the core business (the media segment) was not so rosy after all.

Operating revenue declined 8.2% year-on-year to $1.03 billion. But of more alarm was that the media segment clocked in the worst performance among the business divisions for the operating revenue – a drop of 13%. In terms of profit, the media segment also registered a decrease of a whopping 42% to $114 million due to lower income from the advertisements.

For the longest time, home-grown multinational group, Haw Par share price had been in laggard form. Although the business fundamentals had been consistently good over the years, the share price had been hovering way below its Net Asset Value (NAV) of $12.00. But in 2017, Haw Par share price suddenly came to life and roar ahead to reach a record high of $12.28 recently.

Founded by the Aw brothers in the early 19^th century, Haw Par is well-known for its Tiger Balm oilment products. However, the family business went through a tumultuous period in the 1970s when massive irregularities almost led to a spectacular collapse of the company. The government of Singapore had to intervene and pulled in the late Michael Fam to restore order.

Following the crisis, there was a three-way battle vying for the control of Haw Par between Hong Leong Group, Jack Chia Limited, and United Overseas Bank (UOB) headed by Wee Cho Yaw. In 1981, merger wizard Wee Cho Yaw emerged victory in the fight and the rest is history.

Under the brilliant leadership of Wee Cho Yaw, Haw Par grew from strength to strength and was transformed into a diversified conglomerate with operating business in healthcare, leisure, property and investments.

On 4 October, SIA Engineering Company shares tumbled to 6-year low following news of JP Morgan’ sale. Share price fell in the early morning of trading to $3.15 before recovering to $3.20 level. In my opinion, the correction is long overdue as the business outlook for the MRO giant has considerably dimmed in recent years with the entry-into-service of new aircraft requiring much less maintenance works.

Financial results for 1Q2017/18 revealed that profit declined 82% to $36.2 million. The huge decline was because of the absence of divestment gain in last year (SIA Engineering divested 10% stake in Hong Kong Aero Engine Services Ltd (“HAESL”) to Rolls-Royce Overseas Holdings Limited (“RROH”) and Hong Kong Aircraft Engineering Company Limited (“HAECO”)).

However, even after excluding the impact of the divestment in the quarter ended 30 June 2016, profit for the current quarter of $36.2 million was $1.8 million or 4.7% lower. Revenue also remained flat, at $272.8 million. Although the results were not exactly that disappointing, they seemed to suggest that SIA Engineering business fundamentals might have peaked.

To be fair to the management, SIA Engineering had tried to engineer growth in view of the challenging operating environment. Last year, SIA Engineering began to [This is a premium article.

The past two years had been of great chaos for SingPost as it endured a significant management upheaval, a special audit, massive impairment of an overseas acquisition and adjustment of a long-standing company dividend policy.  For a country that prides itself of being world-class efficient, the mess in Singapore’s national postman certainly raised a lot of eyebrows among concerned investors.

On looking back, the appointment of Dr Wolfgang Baier as CEO back in 2011 could be a knee-jerk attempt to re-invent the mailing company into an e-commerce company in light of consistently falling revenue from domestic mails. His appointment was itself surprising given his young age and the perceived lack of C-suite experience.

When Wolfgang was appointed as CEO, he was only 37 and was from a management consulting firm, McKinsey & Company. Given SingPost’s venerable standing in the industry, attracting a more experienced business leader should not be a challenge. To be frank, I have no objections to foreign talents taking on top positions in Singapore companies. However, Wolfgang lasted only four years and resigned abruptly in end 2015, leaving Mr Mervyn Lim to cover his CEO duties for one year.

During Wolfgang’s tenure, SingPost had mixed financial performance, with net profit falling from $160 million in 2011 to $141 million in 2013 and then rising to $161 million in 2015.

Suntec REIT share price is enjoying some sort of bullish form in recent months. The share price hit a 2-year high in July after the announcement of a 50% interest in Premium Grade office in Melbourne. However, a look at the recent financial results indicated things may not be so rosy after all for the venerable REIT. Total return for 2Q17 was actually a decrease of 23% compared to last year. So why did the share price rise and is Suntec REIT a value trap?

Suntec REIT portfolio

Being one of the first REITs to be established in Singapore, Suntec REIT was listed on the SGX mainboard on 9 December 2004. Besides having a respectable history, the real estate investment trust also boosts a unique portfolio of properties comprising office and retail spaces.

Suntec REIT owns Suntec City mall and certain office units in Suntec Towers One, Two and Three and the whole of Suntec Towers Four and Five, which form part of the integrated commercial development known as “Suntec City”. The property portfolio also comprises 60.8 per cent effective interest in Suntec Singapore Convention & Exhibition Centre (“Suntec Singapore”), a one-third interest in One Raffles Quay (“ORQ”) and a one-third interest in Marina Bay Financial Centre Towers 1 and 2, and the Marina Bay Link Mall (collectively known as “MBFC Properties”) and 30.0 per cent interest in 9 Penang Road (formerly known as Park Mall).

Since 2008, the shares of home-grown healthcare provider, Raffles Medical Group, went on a rampage bull run, rising from $0.56 to almost $5.00 in 2015. The mighty surge in share price had created much wealth for many of its long-time investors. Recently, the shares came under siege and experienced a serious loss of form.

Against the above backdrop, several readers wrote in to discuss about the outlook for this SGX stock. In this article, I will share some of my views and insights on Raffles Medical.

“I like RMG but, like you, have resisted at prices say 1-2 months ago. It would be really valuable if you could share what you feel a fair value or target price might be?” – Georgie

“Wonderful article! Agree with your point of view on the soundness of Raffles Medical. With reference to your article, I have 2 questions.

1. Is there any particular reason or calculation that led you to the specific target price of $0.80 (or $0.60 in your previous article)? Assuming a similar profit, the PE ratio would be around 20, which is quite low for a healthcare stock, especially for RMG considering its stable growth.
2. Given that the overall global markets seem inflated, and may undergo a correction, would you recommend keeping RMG during the recession (as a defensive stock) or to pull out your investments altogether to hold in cash and bonds?”