Sunday, March 31, 2024

Portfolio Summary for March 2024

As of 31 March 2024


Security # shares Price S$ %
DBS 400 36.03 4.20
UOB 400 29.31 3.42
OCBC Bank 700 13.49 2.75
SGX 3,200 9.21 8.58
ST Engineering 6,900 4.02 8.08
Powermatic Data 8,500 3.00 7.43
Micro-Mechanics 18,400 1.37 7.34
Sheng Siong 19,100 1.53 8.51
TheHourGlass 19,600 1.60 9.13
VICOM Ltd 21,500 1.39 8.71
Credit Bureau Asia 14,300 0.915 3.81
HRnetGroup 21,900 0.725 4.63
Nanofilm 36,100 0.715 7.52
China Sunsine 41,800 0.395 4.81
TalkMed Group 34,500 0.36 3.62
Kimly 27,000 0.305 2.40
HC Surgical 35,500 0.26 2.69
Silverlake Axis 37,100 0.22 2.38
Portfolio Value = S$343,297
YTD Dividends Received = S$1,249
YTD SBL Fees Received = S$27

- Bought 20,000 shares of TalkMed Group.


Security # shares Price S$ %
UOB 200 29.31 5.39
SGX 1,300 9.21 11.00
Micro-Mechanics 5,400 1.37 6.80
Sheng Siong 8,700 1.53 12.23
TheHourGlass 5,000 1.60 7.35
VICOM Ltd 5,500 1.39 7.03
Credit Bureau Asia 5,700 0.915 4.79
HRnetGroup 7,500 0.725 5.00
Nanofilm 12,500 0.715 8.21
China Sunsine 10,800 0.395 3.92
TalkMed Group 5,800 0.36 1.92
Kimly 5,800 0.305 1.63
HC Surgical 19,500 0.26 4.66
Silverlake Axis 6,000 0.22 1.21
NetLink NBN Trust 24,000 0.855 18.86
Portfolio Value = S$108,813

- Sold 100 shares of DBS.
- Sold 3,000 shares of ST Engineering.

Singapore Savings Bonds

Security Amount (S$) Avg Yld %
GX22120S 14,000 3.47
GX23010Z 15,000 3.26
GX23110V 20,000 3.32
GX23120Z 20,000 3.40
Portfolio Value = S$69,000

Speculative Play

Security # shares Price US$
Kep Pacific Oak REIT 70,000 0.152
Portfolio Value = US$10,640


Time flies.  We have come to the end of the first calendar quarter.  The local bank stocks resumed the momentum and hit higher highs without taking a breather.  I could only sit on my hands and wait patiently for retracement, which I am pretty sure will come once the U.S. Fed cuts rates.

I took another nibble of TalkMed Group.  I am also monitoring Micro-Mechanics Holdings as investors continued to be bearish on the company's near-term prospects.

As planned, I whittled down positions in my SRS portfolio, selling DBS and ST Engineering as they hit yearly highs.  My eventual goal is to hold only one (or two) tickers in my SRS portfolio.

During March, I topped up my SRS account with the full cash amount eligible ($15.3k).  The main reason is to earn relief on my income tax.  Another reason is that my employer does a 50% matching contribution up to $5.7k.  The contribution goes separately into my company pension account, which is currently vested in an OCBC money-market fund.  The money is eligible for withdrawal only when I resign or retire.

Speaking of income tax, I recently checked my YA2024 filing on the IRAS portal.  On seeing the amount payable, my first thought was, "Sigh. There goes my performance bonus."  Well, it is actually a good thing to be able to pay income tax.  It means you are earning a comfortable amount of money for a living.  Nonetheless, I'd recommend one to be conversant with all of the tax reliefs available.  Not paying more tax than necessary is a prudent measure.

The average yield on May 2024 issuance of Singapore Savings Bond is estimated to be 3.06%.  Again, this is lower than my requirement, so I won't be parking any money there.

Earnings release season is coming up.  With sticky inflation and the central banks not in a hurry to ease interest rates, financing cost is likely to remain high for leveraged entities.  That said, the economy seems to be going strong, so companies continue to do brisk business and bring in revenue.  The stock market rally still has legs.  But one can never know.  Keeping my powder dry to pounce on opportunities as they arise.

I had just watched ChannelNewsAsia's latest documentary, "Regardless of Grades".  (You can find it [here].)  It talks about the Primary School Leaving Examination (PSLE) and the impact it has on our children.  It is no surprise that a field experiment found parental expectations to contribute the most stress in the P5/P6 kids.  I can relate to the experience.  My older boy is taking his PSLE this year.  My wife and I are concerned about his studies, particularly his Higher Chinese.  We have been sitting down with him every night to go through his assessment practices, getting him to understand the Chinese words and meaning behind each sentence in the passage.  I hope our labour will bear fruit, at least to push up his Chinese Achievement Level score.

On a separate note, my wife and I recently observed a thinning patch in the forehead of my younger boy.  At first, we thought it was a medical infection and we brought our 10-year-old to consult the family physician.  Later, my boy confessed that he had been pulling out his hair.  The reason was attributed to psychological stress in school brought on by the heavy workload.  I was stunned and was at a temporary loss on what to do.  All this while, my wife and I have been focused on our older boy because of his PSLE, and haven't been too strict with the younger child.  Ironically, the younger kid is the one exhibiting abnormal behaviour.  We sat down with him and explained how his habit of pulling hair will only make him look uglier.  If he is stressed by the heavy workload in school, he should inform his teacher.  We can brainstorm ways to cope with it.

By the way, a Straits Times reporter wrote about the story of how I met my wife.  The article appeared recently on the Sunday Times.  I hope it will inspire many to believe that love at first sight is indeed possible.  Hee.

Signing off for now.  Take care!

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Sunday, March 3, 2024

China Sunsine Chemical Holdings FY2023 Earning Result

China Sunsine Chemical Holdings ("CSSC") reported their FY2023 earning result on Thursday [here].  Here is a quick dive into the numbers:

Numbers in million RMB unless stated otherwise.
Twelve Months Ending 31 Dec 2023 31 Dec 2022 % Change
Revenue 3,490.4 3,825.0 (8.7)
Profit before tax 453.2 733.7 (38.2)
Net Profit 372.4 642.4 (42.0)
EPS (RMB cents) 38.67 66.29 (41.7)
DPS (SGD cents) 2.5 2.5 -

CSSC is primarily involved in the manufacturing and selling rubber chemicals, of which the bulk is in China (58%) and rest of Asia (30%).  CSSC also provides heating power and waste treatment in China, but revenue is inconsequential.  2H2023 revenue declined 2% y/y, due to 13% y/y decrease in average selling price (ASP), offset by higher 12% y/y sales volume.  The decrease in ASP was mainly due to (i) decrease in the price of raw materials; and (ii) a more flexible pricing strategy in response to the intensified competition.  Sales volume increased as a result of higher demand and the flexible pricing.

FY2023 gross profit margin declined from 30.4% to 22.9%.  Management will continue to adopt more flexible pricing with its "sales production equilibrium" strategy, so as to strengthen its market leadership position.  At the same time, they will look to tighten costs control.  Management remains confident of being profitable in FY2024.

The Board has declared a 1.5 SGD cents ordinary dividend per share, as well as a 1.0 SGD cent special dividend per share, Ex Date: 9 May 2023.  This is the same as previous year.

My Thoughts
CSSC operates in a competitive industry, whereby there is no differentiation between getting rubber chemicals from one supplier versus another.  CSSC has adopted the strategy of bulk sales amid flexible pricing.  Luckily, CSSC can still maintain profit margin above 20 percent, while enjoying a market leading position.  According to the company, it continues to hold the title of the "world's largest producer of accelerators, China's foremost producer of insoluble sulphur, and a significant player in the antioxidants market."

My worry is CSSC being caught a death spiral to zero profit with its adversaries.  So far, my nightmare hasn't materialized, but I continue to be watchful of the company's performance through the fiscal year.  A 6 percent dividend yield is the icing on a wobbly cake.

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Saturday, March 2, 2024

Singapore Technologies Engineering FY2023 Earning Result

Singapore Technologies Engineering Limited ("STE") reported their FY2023 earning result on Thursday [here].  Here is a quick dive into the numbers:

Numbers in S$ million unless stated otherwise.
Twelve Months Ending 31 Dec 2023 31 Dec 2022 % Change
Revenue 10,101.02 9,035.10 11.8
Gross Profit 1,972.75 1,698.66 16.1
Net Profit 586.47 535.01 9.6
EPS (in cents) 18.82 17.18 9.6
DPS (in cents) 16.0 16.0 -

FY2023 revenue was S$10.1B (FY22: S$9.0B), up 11.8% y/y, contributed mainly by the Commercial Aerospace unit of S$3.9B (FY22: S$3.0B), up 30.5% y/y and the Urban Solutions & Satcom unit of S$1.9B (FY22: S$1.7B), up 9.7% y/y.  The Defence & Public Security unit saw a slight 0.5% y/y revenue decline to S$4.2B.

FY2023 EBIT was S$914.7M (FY22: S$735.1M), up 24.4% y/y, contributed mainly by the Defence & Public Security unit of S$567.4M (FY22: S$405.0M), up 40.1% y/y.  Urban Solutions & Satcom unit saw a massive 65.7% EBIT decline to S$10.0M (FY22: S$29.2M), attributed to Satcom weakness, including severance costs and SatixFy divestment loss totalling S$32M, partially offset by higher EBIT from TransCore.

Management highlighted its TransCore investment became earnings accretive in FY2023, ahead of plan.  As at 31 Dec 2023, STE's order book remains robust at S$27.4B, inclusive of about S$3.1B new contract win in 4Q2023.  STE expects to deliver about S$7.9B from the order book in 2024.

The Board has proposed a final quarterly dividend of 4 cents per share (4Q2022: 4 cents), Ex Date: 30 Apr 2024.  This brings FY2023 total dividend to 16 cents per share, no change from previous year.

My Thoughts
Of all the local conglomerates I have researched, STE is one of the more capital-efficient entities.  STE's ROE is about 23.8%, comparable to post-restructured SembCorp Industries (23.8%), but far better than Keppel (8.1%, pre-restructured) and Haw Par (6.2%).  However, as with typical industrials, STE has a lot of debt on its books (S$6.1B).  Nonetheless, STE's healthy order book gives visibility to its revenue in the coming years.  Barring any extraordinary downturn in the global economy, STE should continue to remain profitable over the long term.

While its 16 cents DPS (85% payout of earnings) is nothing to shout about, I like the consistency of receiving cash quarterly without the unncessary shareholder capital change (spinoff, bonus stock issue etc).

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Friday, March 1, 2024

Portfolio Summary for February 2024

As of 29 February 2024


Security # shares Price S$ %
DBS 400 33.33 3.91
UOB 400 27.95 3.28
OCBC Bank 700 12.98 2.66
SGX 3,200 9.45 8.86
ST Engineering 6,900 3.98 8.04
Powermatic Data 8,500 2.95 7.35
Micro-Mechanics 18,400 1.68 9.06
Sheng Siong 19,100 1.55 8.67
TheHourGlass 19,600 1.55 8.90
VICOM Ltd 21,500 1.43 9.01
Credit Bureau Asia 14,300 0.915 3.83
HRnetGroup 21,900 0.725 4.65
Nanofilm 36,100 0.705 7.46
China Sunsine 41,800 0.39 4.78
TalkMed Group 14,500 0.375 1.59
Kimly 27,000 0.31 2.45
HC Surgical 35,500 0.29 3.02
Silverlake Axis 37,100 0.23 2.50
Portfolio Value = S$341,367
YTD Dividends Received = S$1,000
YTD SBL Fees Received = S$20

- Bought 500 shares of SGX.
- Bought 4,200 shares of Micro-Mechanics.
- Bought 22,100 shares of Silverlake Axis Limited.


Security # shares Price S$ %
DBS 100 33.33 2.64
UOB 200 27.95 4.43
SGX 1,300 9.45 9.74
ST Engineering 3,000 3.98 9.46
Micro-Mechanics 5,400 1.68 7.19
Sheng Siong 8,700 1.55 10.69
TheHourGlass 5,000 1.55 6.14
VICOM Ltd 5,500 1.43 6.23
Credit Bureau Asia 5,700 0.915 4.13
HRnetGroup 7,500 0.725 4.31
Nanofilm 12,500 0.705 6.98
China Sunsine 10,800 0.39 3.34
TalkMed Group 5,800 0.375 1.72
Kimly 5,800 0.31 1.43
HC Surgical 19,500 0.29 4.48
Silverlake Axis 6,000 0.23 1.09
NetLink NBN Trust 24,000 0.84 15.98
Portfolio Value = S$126,166

- Sold 900 shares of OCBC Bank.
- Bought 24,000 units of NetLink NBN Trust.

Singapore Savings Bonds

Security Amount (S$) Avg Yld %
GX22120S 14,000 3.47
GX23010Z 15,000 3.26
GX23110V 20,000 3.32
GX23120Z 20,000 3.40
Portfolio Value = S$69,000

Speculative Play

Security # shares Price US$
Kep Pacific Oak REIT 70,000 0.125
Portfolio Value = US$8,750

- Bought 70,000 units of Keppel Pacific Oak REIT.

The Lunar New Year came and went in a flash.  My family did not do many visits, as my older son fell sick on the second day.  It pains my heart to see him coughing away through the night and had to miss school for one whole week.  While staying home, I had spare time to spring clean (yes, on CNY Day 1-3) and do some reading.

The Singapore bank stocks found a second wind at the start of the month.  DBS, UOB and OCBC soared in price before retreating in mid-February.  All three banks announced record earnings and a higher final dividend.  DBS also announced a 1-for-10 bonus stock issue, Ex Date: 22 Apr 2024.  I did not manage to buy any bank share at my intended price.  Will continue to monitor for suitable opportunities.

Meanwhile, I accumulated shares in SGX, Micro-Mechanics Holdings ("MMH") and Silverlake Axis Limited ("SAL").  SGX fell out of favour with institutional investors, which caused its price to decline significantly.  MMH and SAL had reported less than stellar results, which saw their prices retrace accordingly.  Nonetheless, these companies remain profitable and I believe they will be able to grow their business over the long run.

I also executed an unscheduled trade in February.

Keppel Pacific Oak REIT ("KORE") suffered a massive 40% price plunge when the Manager announced that it will suspend distribution to unitholders till 2H2025 (see company filiing [here]).  The aim is to retain the income for recapitalization of KORE's balance sheet.  As of 31 Dec 2023, KORE has aggregate leverage of 43.2%, primarily due to lower portfolio valuation.  This is a whisker away from the 45% limit, which may make lenders unwilling to provide further financing.  The Manager has evaluated various options, including equity fund raising, divestment of properties and reduced distribution to unitholders.  All were found to be unfeasible.  Continued capex is also required to keep the properties attractive to current and prospective tenants.

I have reviewed KORE's FY2023 earning result.  Gross revenue was US$150.8M (FY22: US$148.0M), +1.9% y/y.  NPI was US$86.1M (FY22: US$84.3M), +2.2% y/y.  As of 31 Dec 2023, net assets was US$723.2M (31 Dec 2022: US$846.1M), -14.5% y/y.  NAV was US$0.69 (31 Dec 2022: US$0.81), -14.8% y/y.  KORE's current liabilities exceeded its current assets by US$67.0M, compared to US$24.3M a year before.  KORE has an uncommitted unutilised facility of US$50.0M and a committed unutilised facility of US$18.1M.  KORE should have no problem rolling over the debt with its retained income and unused facilities.

I believe the pendulum has swung too far to the downside.  KORE is still in a healthy operating mode, albeit it needs liquidity to tide over the present challenging situation facing U.S. commercial real estate.  S-Reits are not my forte, but KORE's dramatic fall in price caught my eye.

Securities Investors Association Singapore (SIAS) organized a Zoom session with KORE management.  (You can access the Powerpoint deck [here].)  The deck showed KORE has US$25M debt due 4Q2024 and US$50M due 2025.

If KORE survives through these two years and its refinancing goes through successfully, its price should recover to close the 80% gap to its NAV.  This is a rare mispricing event.  Thus, I bought 70,000 units of KORE for my account.

My analysis may well be wrong.  Just how bad is the U.S. commercial real estate situation?  The short answer is: real bad.  Bloomberg did a short video documentary about it.  You can watch it [here].  In the worst-case scenario, KORE finds itself unable to refinance its debt, and declares bankruptcy.  Should this happen, I will lose my entire investment.  However, this is only a small sum relative to my net worth.  The loss will not have any material impact to my wellbeing.  I am comfortable taking this speculative bet, in which the potential reward outweighs the risk.  (Please DYODD.)

As mentioned in my previous month's summary [here], I am revamping my SRS portfolio.  I have started selling down my existing holdings.  At the same time, I have started to accumulate NetLink NBN Trust ("NetLink").  For someone who previously avoided S-Reits, why the sudden interest now in NetLink?  Well, I find NetLink has many attractive points: a stable unitholder base; recurring earnings visibility; consistent and healthy margins; as well as a low gearing ratio of 24.3%.  With the development of new HDB residential towns like Tengah, and the government's plan to upgrade the National Broadband Network (NBN) infrastructure so as to provide faster connection speeds for families, the revenue outlook is bright for NetLink, as it is the sole entity providing the connection service and maintenance of the NBN.  It is like owning a utility company, albeit one with a 6% yield.  The vision for my SRS portfolio is to be a money stash that compounds at a moderate clip.  Investing in NetLink can help in this aspect.

April issuance of Singapore Savings Bond (SSB) is estimated to have an average yield of 3.04%.  The coupon rate is trending up again, but this is still below my requirement, hence I will not subscribe for the SSB.

At the workplace, I have just completed my annual performance evaluation with my team leader and manager.  My coworkers had told me their 2024 increment ranged between 1 and 3+ percent.  Hence, I wasn't expecting any better.  So I was pleasantly surprised when I was given a 5 percent increment in total compensation.  My actual bonus was also 15 percent higher than the target amount.  I'm glad that my contribution was given due recognition by my boss, and I'm grateful for the above average adjustment.  But it also means they have higher expectations for me this year.  I hope not to disappoint them.

My kids have just completed their Term One weighted assessments.  We can finally take a breather from the intensive revision (imagine: the parents are more worried than the kids!)  My older boy is taking his PSLE this year, hence we are concerned about his progress.  That said, as I grow older, I have realized the importance of taking care of our own mental health.  Being under constant stress can be harmful.  I try not to pack my kids' schedule, though I want my kids to take personal responsibility for their own success in life.  On various occasions, I have emphasized to my kids that I am not asking for perfect scores in their exams.  All I want them to do is to learn from their mistakes, pick themselves up when they fall, keep moving forward and "be better than yesterday".  Tenacity coupled with a growth mindset and incremental improvement can go a long way.

Until next time.  Cheers!

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