Wolf Money(portfolio update end Sept 2021)

Lone Wolf Fund(LWF)

Portfolio as at end of September 

1.) Keppel Corporation 

2.) Cash

Commentary

Sometimes I wonder what would I be doing if I had no interest in the stock market. For sure I wouldn’t have joined the stock brokering industry and in process grinding out a decade long career. Numbers wouldn’t excite me anymore and of course less of that “money face” side of me. If only I am control by the left side of my brain which is associate to artistic creation. I would have become an artist or an auctioneer dealing with the great antiquity of the world.....1million going once, going twice and going for the final time, SOLD!. Btw my favourite programs on BBC are Fake or Fortune and Antique Road Trip. 

Our stock market had become an antique market of some sort. An eclectic mix of old companies can be found. Collecting antiques may lead to great appreciation in value but holding a portfolio of companies of great antiquity is not to be suggested, some said it can be hazardous to health too. After 14 years STI had failed to break its old high of 3900. The underperforming is glaring given most of other markets had broken their 2007 high years ago. A recent news article by Business Times had shown holding Singapore stocks had produce a poor return over the past decade even with dividend included.

Old economy stocks and property reits dominate our stock market. It is baffling to look at the current state of our market given how Singapore pride herself as a technologically advance economy. There is no local tech unicorn listed in our stock market. SGX is trying to chart a new course by introducing Special Purpose Acquisition Company(SPAC) to address the delisting wave and the lack of IPOs. The concept equal to a blank cheque company where the SPAC could be listed without any viable business. Laterally it is a listed cash company looking to acquire a private company. SPACs will have a time limit for deployment of that cash to make an acquisition. It is similar to a cash company doing a RTO(reverse takeover). The jury is still out if this is going to be a successful strategy to turn around the struggling Singapore Market. In my view, The problem is not with the lack of investment dollars, the struggle is getting the good companies with viable businesses to bite the SPACs baits. I am hopeful but the devil is always in the detail. I rarely see good companies going by the current route of RTO to get themselves listed. The best of the lot had to be Wilmar International via RTO of Ezyhealth. The rest made no impact. I always look at RTO wannabe with some trepidation and suspicion. I believe a proper company will do the proper thing by seeking an official IPO. Maybe it is just me. I can’t speak for all. I wish SGX all the best. I hope the new initiative can finally bring back the success which had eluded the long suffering Singapore investors.

STI was 1% higher for the month of Sept. A spirited fight back towards month end pull the index back above water. The news capturing company of the month had to be China Evergrande. Heavy borrowing and falling demand for properties in second and third tier cities in China and reckless investment out of their core business are the main reasons for the dire situation. The fallout is likely to be felt across the property sector in China. I personally don’t think it is going to be the Lehman moment for China as most of debts owned by Evergrande are borrowed from Chinese Banks which are mostly SOE(state own enterprises) which the government wouldn’t want to put them at risk, a no bailout scenario is akin to shooting their own foot. There is also the social destabilising aspect for the CCP to consider. All been said, borrowing cost is likely to go up and development profitability is likely to drop in the future. Keppel Corp through Keppel Land does have exposure in the Chinese real estate market. They are mostly in coastal cities in Shanghai, Wu Xi Jiangsu and Tianjin. Although prices of those coastal cities are holding well. I am expecting tougher operating environment in China property sector going forward. One thing which is going for Keppel Corp is their conservative balance sheet and historical low cost land bank. It was mention in their 2020 annual report Keppel Land’s RNAV is worth 10.3b in Keppel Corp’s book or $5.68 per Keppel Corp share in 2018. At current price Keppel Land is worth the whole of Keppel Corp and more. One will also be getting the infrastructure, M1, O&M, Logistics business for free.

(Source 2020 Annual Report)

I operate a very concentrated portfolio given there are only Keppel Corp shares and Cash. If Keppel does well, I will naturally do alright. LWF was down about 1 percent for the month of Sept. I sold Thai Beverage for some beer money due to the share hitting my trailing stop. I also roll over the capital I received for more Keppel Corp shares. Keppel share managed to hold its own in the month of Sept given the volatility in the financial market. The share price mostly traded within a tight band of between $5.20-$5.30 for good part of the month. My main reason for investing in Keppel is clear. It is a restructuring play with asset divestment bonanza to look forward. This time they seem to be more purposeful in going about its intention. Close to 2.3B worth of assets had been divested within the first year of their stated intention of 5b divestment by 2023. It is likely Keppel Corp is on track to meet their divestment target way before 2023 is up. I had also pinpoint certain corporate actions which might be beneficial to Keppel Corp. Please refer to my previous blog. Keppel share price performance over the last 10 years was underwhelming. It was trading close to $10 to $12 in 2012(red circle). One would have been licking the wound for holding Keppel all these years even with dividend return included. The current price of Keppel Corp is near the lower range of its 10 years trading band. There are only two periods in the past 10 years where the share had traded briefly below $5(blue line and green circle). In mid 2015 during oil price crashed and height of Covid 19 panic last year. I am comfortable with my entry price. I am hopeful for better share price performance in the coming months. 

As mention in my previous blog the easy money had been made over the course of last 12 months. Now the difficult money awaits as tapering of QE and the rise in interest rate in 2022 bring more uncertainty to the market. I am favouring those companies with special situation in the area of restructuring and divestment. At the moment, I am unlikely to make a big move on my portfolio as opportunities are few and far. In short, I give up the chance of a moonshot in return of avoiding the quick bloodbath. Have a great October ahead. God bless. 

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