Saturday, October 1, 2022

Portfolio Summary for September 2022

As of 30 September 2022

CDP

Security# sharesPrice S$%
DBS30033.392.95
UOB30026.162.31
OCBC Bank70011.832.44
SGX1,2009.463.34
iFast5,7003.956.63
SATS3,9003.013.46
ST Engineering6,9003.587.28
CapitaLand Investment3,5003.473.58
Micro-Mechanics8,4003.007.42
Powermatic Data8,5002.616.53
Nanofilm10,4002.106.43
TheHourGlass5,0002.103.09
Vicom11,8002.006.95
Sheng Siong13,0001.586.05
ComfortDelGro11,2001.324.35
Credit Bureau Asia14,3000.9854.15
Genting Singapore11,7000.7852.71
HRnetGroup21,9000.744.77
HC Surgical35,5000.414.29
China Sunsine41,8000.455.54
TalkMed Group14,5000.3851.64
Kimly27,0000.3352.66
Silverlake Axis15,0000.321.41
Portfolio Market Value = $339,517

Trade Actions
- Bought 3,500 shares of CapitaLand Investment.
- Bought 2,800 shares of ST Engineering.

SRS

Security# sharesPrice S$%
OCBC Bank90011.837.54
SGX1,3009.468.71
iFast2,1003.955.87
SATS2,2003.014.69
ST Engineering3,0003.587.60
CapitaLand Investment2,6003.476.41
Micro-Mechanics3,1003.006.59
Powermatic Data3,4002.616.28
Nanofilm4,1002.106.10
Vicom4,7002.006.66
Sheng Siong8,7001.589.73
ComfortDelGro6,9001.326.45
Credit Bureau Asia5,7000.9853.98
HC Surgical19,5000.415.66
China Sunsine10,8000.453.44
TalkMed Group5,8000.3851.58
Kimly5,8000.3351.38
Silverlake Axis6,0000.321.36
Portfolio Market Value = $141,228

Trade Actions
- Bought 2,600 shares of CapitaLand Investment.
- Bought 5,800 shares of Kimly.

Commentary:
Time flies.  We have come to the end of the third calendar quarter.  Earnings reporting season will soon be upon us.  I'm expecting a grim verdict, with stubbornly high inflation eroding companies' profit margins.  (There is only so much cost you can pass on to customers before you lose their business.)

Central bank governors around the world are all marching to the same drumbeat - higher is better.  (Interest rates, that is.)  Even the BOJ had to intervene in the market to shore up the weak Japanese yen, the first time since 1998 [news].

As markets retreated, I nibbled on CapitaLand Investment (CLI) again.  Gone is the exuberance that shot CLI share past $4 in April this year.  Pragmatism and patience trump FOMO everytime.

I accumulated shares of ST Engineering in my CDP portfolio as it hit my target price level.  I also added Kimly shares to my SRS portfolio for the first time.

All of these companies have resilient business models which I'm totally fine to hold over the long term.  I'm particularly pleased that Kimly's management decided to diversify its Rive Gauche patisserie business [announcement].  I cannot see how the coffeeshop chain operator can derive much synergy from owning this confectionery brand.

SATS has officially announced the acquisition of Paris-based air cargo handler Worldwide Flight Services for a cash consideration of EUR 1.187B (SGD 1.639B). [announcement].  The enterprise value is assessed to be EUR 2.25B, smaller than the rumoured EUR 3B.  In terms of how SATS will cough up the cash, per the announcement, SATS has "committed funding in place through an acquisition bridge facility and will continue to evaluate its options with regards to the final funding structure.  The base funding plan entails use of internal cash and an equity fundraising from existing shareholders and new strategic investors (which could include a placement of new shares or other hybrid securities or convertible instruments)".

SATS' indicative financing plan (Source: SGX filing)

The SGD 1.7B equity fundraising is hardly a surprise, given SATS has only SGD 786M cash as of Q1 2022.  But raising money will be expensive in this environment, when central banks are committed to hiking interest rates in order to combat inflation.  SATS will probably need to offer a significant discount to the last traded price in order to entice investors.

The announcement did not sit well with the market.  SATS' stock price tanked more than 20% after the trading halt was lifted.  It must be highlighted that SATS' existing shareholders have yet to enjoy the fruit of the post-COVID19 travel boom, as the company ramped up costs significantly in the last two quarters.  I'm not sure how many existing shareholders are willing to pump more money into the company, even though Temasek has given its blessing for the acquisition.  I myself would like to see the funding proposal first before deciding whether to vote for/against the acquisition.

Well, not that my vote as a minority shareholder will make any difference. (LOL)  Any form of right offering will likely be subscribed by Temasek, inching the company more firmly into government hands.  If I am against the deal, I will sell off my holding in the market.  Broker analysts do not seem bullish on the deal either.  Credit Suisse had cut their recommendation from Outperform to Neutral.  UOB Kay Hian had cut their recommendation from Buy to Hold.

Heading into the final three months of 2022, my cash has dwindled to 21% of total portfolio value.  My household expenditure is rising because of the inflation.  I will minimize any non-essential spending like restaurant meals, and opt for alternatives like hawker food instead.  I don't drive and I hardly take cabs, so my transportaton expense is already at a minimum.  On weekends, I'm busy with my kids' tuition classes and swimming lesson, so we don't go out and socialise a lot.  Short of the cruise trip in November, I have only planned a hopover to Johor Bahru for shopping and massage.  Not going to fly overseas this year.  (I heard airfares now are sky high.)

On a different note, the recent market selloff has presented opportunities to load on quality stocks at favourable prices.  I know it is gut-wrenching to see your portfolio value goes down day by day.  If you have a sound investment plan in place, my advice is to be disciplined and stick to it.  Be aware of how much financial risk you can bear.  Set aside an emergency fund and allocate your remaining money into growing your portfolio wisely.

Until next time!




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