Wolf Money(portfolio update for end August 2021)long post
Lone Wolf Fund(LWF)
Portfolio as at end of August
4.) Cash
Commentary
The STI is down by just under 2 percent in the month of August. Some volatility can be seen in some small cap stocks. Some outperforming small cap companies fell from heaven with correction of up to 30 percent. Lone Wolf Fund was lucky to be higher in the month due to exposure to quality big cap stocks with improving business fundamentals.
I sold Pico Far East early August due the stock price hitting my trailing stop. I farm it out at the money. I am gutted for not taking my profit previously. I was aiming for the sky then. Greedy me. Lesson learn. One of the reason for the sale was due to rising covid cases in China. 60 percent of Pico business come from China and greater China. A rise in covid 19 case might disrupt the ability to host events. A departmental store at Bugis had 160 caseload. A country of 1.5b population had a similar case numbers to a Singapore departmental store? Possible? I let you draw your own conclusion.
Thai Beverage share recovered from 9 months lows. The share in my observation has an inverse relationship to covid caseload in Thailand. The drop in caseload in Thailand has a positive impact on the share price. I had estimated the peak caseload for Thailand to be around 21-22k per day base on the number coming out of India as a reference. The covid cases reached a high of 23k in the middle of this month. It has since fallen steadily to around 16k per day. I believe Thailand delta variant infection had peaked. I do see the caseload coming down to around 2-4K per day in two months time. The plan to reopened the economy in Thailand is on track. That will give Thai Beverage business a shot in the arm which derives 75 percent of its profit from Thailand. The beer co IPO which had been at the back burner for over a year may be resurrected if conditions in Thailand improved.
(Rising covid case in Thailand, lower share price)
I have decided to sell my Comfortdelgro in my situational play bowl. It was a tough call selling given news flow out of CDC is actually improving. I have decided to redeploy capital to Keppel Corporation which I think may represent a better risk reward amid the ongoing restructuring of the company. Comfortdelgro had a reasonable good month given the weakness in STI. It reported better first half result, follow by announcement of a potential listing of their Australia subsidiary in ASX. The company also announced a contract win with its jv partner to run Auckland rail network in New Zealand. The contract is worth 1.13b for an initial 8 years. This contract is a landmark win for Comfortdelgro as it is the first major contract in a new market and it also strengthened the valuation of the CDC Australia listing. The reopening in Singapore is on track. There are visibly more people taking public transportation from my observation. I will be receiving 2c dividend from the company. Comfortdelgro nevertheless delivered a small but positive return for LWF.
The latest addition to LWF is Keppel Corporation. Some of my friends had known me for going cold on TLC. I did reasonably ok by general omission of TLC stock from my portfolio over the last 10 years except for the odd profitable short stay in ST Engineering last year during the height of covid 19 stock market panic. Why Keppel Corporation now? In short, “All roads lead to Rome”. Although there is no Rome at the end of Keppel Road but there is Temasek Avenue at the far end of the road.
From recent corporate actions by Temasek Holdings in regards to Sembmarine merger with Kep O&M and in process of taking out as much as 700m worth of debt from Keppel Corp to the merged company and on top Sembmarine to pay Keppel up to 500m for the loss making O&M business, to Temasek setting up a separate company(asset co)for the purpose of helping Keppel O&M find investors to procured its legacy rigs and receivable worth up to 3.8b, to Keppel almost done deal purchasing of undervalued SPH (control of management shares predominantly pro government entities and individuals which have 200x more voting rights than ordinary SPH shareholders(16.361m x 200 = 3.272b of management voting rights vs 1.59b ordinary share holders), guess which way the pro gov forces are going to vote on the takeover?). There is a break up fee of 34m if the deal is not consume by SPH due to other higher offer obtained. The break up fee can act as a deterrent against a new bidder for coming forward. The intention is clear from all the corporate actions. It is akin to someone betting the whole house on the chosen “horse” to come in first in the race. Coincidentally the vehicle set up by Keppel for the purpose of taking over SPH was named Keppel Pegasus, the greek mythological flying horse. Herculean effort had been made to make it a one horse race. If horse doesn’t run, it can fly to the finished line. Previously Temasek was prepared to pay $7.35 for control of Keppel until they pulled the plug due to unfulfilled conditions. Road side market story by the way of Punter’s talk, please don’t take it as gospel truth. Do your own due diligence. Please refer to Punters’ Way for assessment of the winning horse. 😁
I don’t have enough time to calculate the fair value of Keppel Corp after the restructuring. A little voice in my head tells me it is undervalued. My best guess, the stock is probably trading closer to that lower range of its fair value. Who knows what is next to keep the horse in its winning position. A telco merger call M&S maybe?
There are plenty of bankable assets in the combine entity. For e.g M1, Keppel Capital(similar to ARA asset management), Keppel Logistics, a host of properties assets and Investments in Ifast, coupang etc. Keppel is likely to become a different animal a few months down the road. Keppel Corp is a mystical creature formed out Keppel Land which was privatised at $4.38 with the combination of Keppel t&t which was privatised at $1.91 and potentially adding sph at $2.099(combine of cash and shares in K reit) and other business units. I estimated Keppel Corp as a whole are capable of generating operational earnings somewhere between 45c-55c eps a year on a steady state after the conclusion of O&M and SPH deals. There is also the element of divestment to look forward for shareholders which Keppel Corp had repeatedly mentioned. Keppel is trading at 0.85x price to book which is -1sd off its average price to book valuation of 1.9x over the past 10 years. Keppel Corp remind me of that profitable trade I made in K1 Venture a decade ago. I hope for similar outcome. I hope not to be umbrage by it. I may do a more detail write up on Keppel Corp if time permits. It might take me a while due to the size and complexity of Keppel business dealing.
Singapore market has limited downside Imho given the cheap valuation vs historical comparison but the number one concern I had is the over valuation of US. There is always that sense of trepidation with the market doing a major correction affecting STI concurrently. Keeping an eye on the rest of world is key to the health of the Singapore market. Wishing all a sunny September which might be in short supply due to Met Service forecasting Indian Ocean Dipole. Mighty Zeus, father of Hercules is coming. Do keep the feedbacks and questions coming too. God Bless.
Please follow us on telegram for the latest update on Lone Wolf investor by clicking on the link below
https://t.me/joinchat/oCgkD3sQFRMzMWM1
Disclaimers
All investments is highly speculative in nature and involves substantial risk of loss. We encourage our reader to invest very carefully. We also encourage reader to get personal advice from your professional investment advisor and to make independent investigations before acting on information that we publish. Much of our information is derived directly from information published by companies or submitted to governmental agencies on which we believe are reliable but are without our independent verification. Therefore, we cannot assure you that the information is accurate or complete. We do not in any way whatsoever warrant or guarantee the success of any action you take in reliance on our statements. All information provided are for information only. Buyer beware,do you own due diligence.
Comments
Post a Comment