SG Wealth Builder

One of the most over-looked value stocks in Singapore’s stock market, K1 Ventures is giving out a huge Chinese New Year Hong Bao to its investors. Amid the bearish stock market sentiments, K1 Ventures is rewarding shareholders $0.21 dividend per share, even though it recorded a loss of $8.47 million for 2Q 2016. Notwithstanding this, I am sold on the company’s performance and bought the stock at $0.965 based on the management investment track record. In this article, I will share how to derive my entry and exit level for K1 Ventures.

K1 Ventures’ proven record

Since the Greenstreet Partners assumed management responsibilities within K1 Ventures, they have distributed $0.35 per share or $742 million, a “frightening record” that is extremely difficult to match in Singapore market, given the fact that K1 Ventures used to trade at $0.20 to $0.30 range. The company choose to be low profile all the while and thus, has been overlooked by many SGX investors. Recently, the company underwent a 5-in-1 share consolidation to meet SGX’s minimum trading price requirements, resulting in the share price to be adjusted to $0.90 to $1.00 range.

Ever since the failed management takeover in 2013, the company has been in divestment mode.

Last week, the big boys, the so-called “whales” are in action again. Keppel Corporation was the subject target and was relentlessly shorted in huge volumes. The short sell orders executed were:

• 25 January 2016: Short sale volume: 4,918,000 worth SGD 24,158,094
• 26 January 2016: Short sale volume: 5,875,800 worth SGD 27,831,381
• 27 January 2016: Short sale volume: 3,895,600 worth SGD 18,456,686

It seems like the whales are hell-bent on lowering the value of Keppel Corporation as oil prices crash to a 14-year low. Due to the oil crisis, Keppel Corp latest Q4 profit fell 44% and its 2015 profit dropped to a 5-year low. Incidentally, Keppel Corp is also a conglomerate with stakes in the property sector, which is also facing a slowdown. The double-whammy gave the whales the perfect opportunity to “wallop” Keppel Corporation and short the counter like nobody’s business.

Of course there were other blue chips which suffered from the recent whales’ attacks but the data from SGX’s Marking of Selling Orders revealed that Keppel Corporation was consistently being shorted for practically the whole of last month. If you are holding on to Keppel Corp shares, you have to be careful because this is abnormal. If the whales consistently targeted and whacked your stocks ferociously, it could mean something big is looming.

In perhaps one of the most disturbing scenes ever shown on TV, Adam Cheng’s character in TVB’s block-buster drama threw his four sons from the top of the stock exchange building after losing his fortunes in the stock market. That was in 1992 and the controversial scene was aired during the first episode of the epic drama. If the Hong Kong producers wanted to deliver a devastating impact on viewers, they succeeded because until today, this drama set the gold standard for a stock market drama series.

I was only 12 when The Greed of Man was shown and obviously I knew nothing about the stock market back then. Nonetheless, the drama has delivered a shocking message and that is to always respect the market. You can make a fortune from the stock market and conversely, you can also lose everything to the stock market if you cannot manage your emotions. At the end of the day, you must remember that nobody can beat the market.

In the real life, many Singapore investors and bloggers were taught a sobering lesson on how cruel the market can be. Within a year, the mighty Keppel Corporation’s stock price plummeted from $9.00 to $5.00.

Benjamin Graham invented the Net Current Asset Value per Share – NCAVPS, which he used to determine the value of the company he invested in. Based on his formula, Raffles Medical Group (RMG)’s stock price is worth only $0.10, way below the $4.00+ currently traded at the Singapore stock exchange. Being one of my favourite stocks, let’s look into whether the company is undervalued or overpriced.

Market Trend

First of all, from a macro viewpoint, the healthcare sector is an evergreen industry because of Singapore rapidly ageing population. In the coming years, as Singaporeans grow older, the demand for quality healthcare will grow as well. In fact, in the past few years, the Singapore government has been implementing measures to address the bed crunch situation faced by many public and private hospitals. New hospitals will be built and collaborations between the public agencies and private hospital will be developed to alleviate the pressing issue.

An example is the Emergency Care Collaboration between Ministry of Health and Raffles Hospital. Under the collaboration, first announced in December 2014, SCDF ambulances will send patients assessed with non-life threatening conditions to Raffles Hospital’s Emergency Department for treatment if it is the nearest available and appropriate hospital.

One of the largest local banks in Singapore, OCBC stock price closed at $7.77, a six-year low. The last time OCBC shares traded below $5.00 was during the Great Financial Recession, recording a low of $4.14 on 6 March 2009.

OCBC will be releasing its full year financial results on 17 February 2016. However, based on its 3Q results in October last year, the Net Asset Value for each OCBC stock price was $7.78, slightly above today’s closing price. It is still premature to assess whether OCBC stock price is undervalued because the latest data has not been released. But given the current weak market sentiments, OCBC stock price is expected to slide further.

The non-performing assets (NPAs) were S$1.93 billion as at 30 September 2015, up 41% from S$1.37 billion a year ago. The year-on-year increase in NPAs was largely attributed 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.]

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

Many investment bloggers can quote Warren Buffett’s famous saying “Price is what you pay, value is what you get”. But how many of them can actually truly understand what he means?

One of the greatest cardinal sins made by investors is to fall in love with the stocks they have invested in. In doing so, they suffer from investment blind spots and subsequently sustain heavy losses when market turns sour. It is as though they go to sit in for an examination without studying for the subject and then expecting to obtain an ace for it.

Many investors don’t determine the value of the stocks and don’t set entry/exit levels. Most of them buy stocks based on prices. The key reason for this folly is because most investors cannot differentiate between price and value.

A classic example would be Singapore Exchange Limited (SGX), Singapore’s stock market operator. The counter surged to a high of $15.90 in 2007 and then dropped to today’s $6.82. Die-hard fans who bought the counter in 2007 at such price would be staring at massive losses now.

Even though the company has been consistently paying good dividends, the amount of losses would have wiped off the dividend gains accumulated throughout the years.

The current stock market mayhem may represent a perfect opportunity for investors to enter the market but then again, it is important to refrain from timing the market. You never know whether the correction is the start of a long term bear trend or just a short term flip. In this regard, Osim is riding the storm finely.

Regardless the situation, it is important to set an entry or exit point in your stock investments. Apart from this, wealth builders must understand the importance of allocating wealth across different asset classes like gold bullion.

One of my favourite stocks that I have been monitoring is Osim, a Singapore-based company with substantial overseas market reach, especially in China. The current China’s slowdown is expected to have significant impact on Osim but under the leadership of its founder, the company is likely to ride the storm.

Osim was founded by local entrepreneur, Ron Sim Chye Hock. The company is well known for its luxury massage armchair and over the years, Ron Sim has transformed Osim to a powerhouse lifestyle company with more than 1,100 outlets in over 360 cities across 28 countries. What is more impressive is that Ron has single-handedly established a strong Singapore brand name, similar to successes enjoyed by global companies like Starbucks and Apple.

According to a report, the Strait Times Index (STI) fared the worst in South East Asia last year, declining 14.3% of its value. As a result, many Singapore investors and investment bloggers suffered heavy losses in their stock investments. Although not technically a bear market, investors should be aware of the risks in stock investing and equip themselves the knowledge on how to value a stock before surrendering their hard-earned money to the market. Fundamentally at the point of buying the stock, the investor must not be making losses. Easier said than done, but it can be achieved. In this article, lets delve into how to avoid making losses in SGX stocks.

Generally there are two ways to measure the value of a stock. The first is using the Price/Earning (P/E) method, which actually divides the price per stock by the earning of the company in that year. Essentially, this simple metric uses the earning performance of a stock to determine if a stock is over or under value. So if the earning, which is a denominator, decreases, the P/E will increase. Personally I find this method highly inaccurate as past performances would not guarantee future performances and furthermore, prices can be very subjective to everyone.

One of the largest Warren Buffett’s investments to date is Coca-Cola, which is one of the world’s largest F&B companies. Buffett’s affinity to Coca-Cola dated way back to his childhood when he started his entrepreneurship journey selling cokes. Years later, he would become a major shareholder of Coca-Cola. It is a well-known fact that what attracted Warren Buffett to Coca-Cola was its simple and understandable business model – selling soft drinks to consumers, supermarkets and restaurants. This trait of Coca-Cola turned out to be one of its investment moats.

Even though Warren Buffett has built his fortune from his investments in Coca-Cola, does it means that the Food & Beverage (F&B) industry should be in your investment menu? Let’s delve into some of the common myths and check out whether it’s worthwhile to invest in Singapore F&B stocks.

Myth 1: F&B stocks are simple and easy to understand

While Warren Buffett may have struck gold with Coca-Cola, it would be a sweeping statement to say that investing in an F&B stock is straightforward and simple. This is because no two F&B companies are created alike.

For example, an F&B brand that does well in Singapore may not be palatable at the global stage.

During this festive season, I have thought deeply on my investment style and track records so far in 2015. While I did not make any major investment moves for the past three years, my personal finance is certainly in a better shape now as compared to 2010, the year I started this blog. Along the way, there were several intriguing investment ideas, new philosophies and key lessons that I have picked up from the various people that I have met. In view of this, I thought it is important to pen down my thoughts for more clarity.

Have you wondered why some people just keep winning in their stock investments while others lost huge sum of monies in stocks or fallen prey to silly gold scams which they never should have in the first place? Is it true that “the rich will become richer and the poor will become poorer”? I have come to realize that those who keep making money from the stock market are those who know how to read the game. In other words, they have the available tools and data that enable them to make informed decisions, thus allowing them to get ahead from the rest of the people.

In November 2015, Singapore Airlines (SIA) made an offer to acquire the remaining 44.23% stake in Tiger Airways for SGD450 million. The takeover, if materialized, would mark a sorry end to the listed company, which has seen its stock price plummeted from $1.50 at initial public offering (IPO) in 2010 to a low of $0.245. SIA is offering to buy out the remaining shares at $0.41.

Investors who remain faithful with Tiger Airways since its initial listing must have lost a lot of money. Suffice to say, the offer by SIA is definitely not attractive enough but then again, the offer of $0.41 represents a premium to the price range it was trading ($0.29 to $0.40) prior to SIA’s offer. So investors who bought during the IPO high of $1.50 need to ask themselves whether is it realistic for Tiger Airways to turn around its fortune and increase its stock price.

Being a budget airline, Tiger Airways has been battling stiff competition within the region against formidable rivals like Jetstar Asia and Air Asia. In 2008-09, the company lost almost $50 million but things got better after it got listed in SGX, with the company clocking in profits of $28 million in 2010 and $40 million in 2011.

Perhaps one of the most overlooked dividend stocks by wealth builders in Singapore, K1 Ventures announced capital distribution of 1.5 cents per share in October 2015 to reward shareholders. The objective of the proposed capital reduction is the maximisation of value, through the distribution of surplus cash to shareholders because the company will not be making any new investments and instead will focus on managing current portfolio. This is the second capital reduction for K1 Ventures since Dec 2007 and for each of the past 10 years, the company had announced dividends. 

In announcing the capital distribution, K1 Ventures also released a fantastic 1Q 2016, which saw a net profit of $87 million. Revenue was $89.3 million for the first quarter ended 30 September 2015 compared to $2.9 million in the prior year period driven by an increase in investment income from KUH, attributable to the receipt of a cash distribution of approximately $85.6 million. The balance sheet is also in great shape because net current assets is $144 million and there is no outstanding borrowing. After the disposal of Helm, K1 Ventures had finally become more “asset-lite” and not burden by the heavy borrowings. Cash-flow is also good, with the operating activities at $84 million and cash and equivalents at $135 million.