Friday, February 28, 2020

Portfolio Summary for February 2020

As of 28 February 2020

Cash Equity

Security# SharesPricePortfolio %
OCBC Bank900$10.6012.07%
ST Engineering2,500$4.1713.19%
Genting Sing11,700$0.81512.07%
Old Chang Kee5,000$0.724.56%
HC Surgical19,100$0.50512.21%
Nam Lee Metal28,200$0.3412.14%
Portfolio Market Value = $79,008

SRS Equity

Security# SharesPricePortfolio %
OCBC Bank900$10.6014.59%
CapitaCommercial Trust5,000$1.8614.22%
Sheng Siong8,700$1.2416.50%
HC Surgical19,500$0.50515.06%
Portfolio Market Value = $65,379

The Wuhan coronavirus has a new name, Covid-19.  What started out as a China crisis is a global epidemic spanning 57 countries, afflicting more than 83,000 worldwide.  The death toll has hit above 2,800 and sees no sign of abating.  In Singapore, we have 96 infected, but with zero fatality so far.  Perhaps a consolation is that without any medical complication, the afflicted have a significant chance of recovery.  Kudos to our healthcare workers who are braving the risk to take care of our sick.  (They certainly deserve every bit of the one-month bonus [news].)  On the economic front, Prime Minister Lee had warned that Singapore faces severe impact in the coming quarters and a recession may be likely [news].

The travel and hospitality sectors are badly affected, as tourists stay away from our shores.  Major cruise lines are skipping Singapore as a port of call [news].  As more Singaporeans opt to stay indoors and eat at home, the transport, retail and F&B industries are facing tough times.  The big landlords are stepping up to offer rental rebates and support to their tenants [news].  As a show of solidarity, the Ministers, political office holders, senior management of Temasek Corp and some of its subsidiary companies are embarking on wage freeze and pay cuts [news].  Overall, it is a grim period ahead.

Trade Actions

As the prices spiralled down in February, I decided to add on two new positions.

Genting Singapore
I bought 11,700 shares of Genting Singapore ("GS") for my cash equity portfolio.  This is a company that needs no introduction.  (Surely, you have been to Resorts World Sentosa, which is owned by GS.)  The stock started getting pounded when the Singapore government widened the restriction to bar all overseas visitors who recently travelled to mainland China [news].  (A significant percentage of GS gambling clientele comes from China.)  In its recent FY2019 earnings release, GS management had warned that "it is generally pessimistic for the first half of 2020" [link].  Nonetheless, the management intends to make use of this down period to accelerate the depreciation of existing assets and speed up the plan to rejuvenate its attractions.  A positive surprise is that the board had declared a final dividend of 2.5 cents per share, up from 2.0 cents previously.  Together with the interim dividend of 1.5 cents, this forms 70 per cent of FY2019 EPS.  It is largely known that GS is gunning for a casino license in Japan.  As early as October last year, GS was reported to be one of three bidders shortlisted for an integrated resort in Osaka [news].  However, during mid February, it was publicized that a MGM-Orix consortium appeared to be the sole qualified applicant for the Osaka casino project [news].  Word on the street is that GS management had evaluated its chance of winning the Osaka license, and it is slim.  Hence, the management had chosen to focus on the Yokohama casino license instead.  It will be interesting to see how the result turns out.  (Stay tuned, folks.)

Nam Lee Pressed Metals Industries
I added 28,200 shares of Nam Lee Pressed Metals Industries ("NLPM") to my cash equity portfolio.  NLPM is a Singapore-based company, focusing on the design, fabrication, supply and installation of steel and aluminium products for the building and infrastructure industries.  (Think gates, door frames, staircase nosing, hand-railings, laundry racks, sliding windows, etc.)  This is one of those small caps on my watchlist that has a 'boring' business model, but with sound fundamentals.  One key risk of investing in small caps is illiquidity.  This was evident after I had bought the stock, when the share price hardly budged, even as the market gyrated between fear and euphoria through the month.  Another key risk is the lack of analyst coverage, which means you are on your own to detect anything amiss in the company's financial situation.  I intend to keep this stock for a long time, unless there is any significant change in its business.  In the meantime, to borrow wise words from a seasoned blogger, a 4.35 per cent dividend yield is good Panadol for turbulent times.

Looking Ahead

Global markets witnessed bloody carnage during end February, as the rest of the world saw a spike in Covid-19 infections.  Of particular worry is the rocketing number of cases in South Korea, Iran and Italy.  Stock prices are falling across the board, with SIA, SATS and ComfortDelgro bearing the brunt of the onslaught.  For some well prepared investors, it was a bonanza and the plunging prices represented buying opportunities.  Sadly, I have limited firepower in my cache, so I will need to be selective.  Self note to be patient and wait for stability first before dipping in.

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