Wolf Money(portfolio update end August 2022)early release!
Portfolio as at end of August
1.) Cash
Commentary
The US China tension is causing fiction in world trade. It had been described in an African Proverb “when elephants fight, it’s the grass that suffers”. With competition in play, Pacific, Africa and South East Asia countries used to be “secondary friends” of certain country had been “upgraded” to friends of equal. I can’t speak about my view on Africa and the Pacific Islanders as I knew nothing about them. I am pretty sure when competitions are keen, ASEAN countries will get the extra attention(good and the bad) as World Powers try to win ASEAN over to their side. It is like two groups of primary school kids involved in an argument where both side are equally matched, both sides will want to rope in the less popular kids to join their “gang” to strengthen their point of view. Suddenly the plump and the skinny become the most valuable recruitment. I am pretty bullish on the prospects of ASEAN countries if South East Asian nations play their card right. ASEAN has a sizable market of 600m population. ASEAN is widely known to be the stomach of the world with abundance of food and corps produced in the region. ASEAN is also the fastest growing region economically. ASEAN is likely to house the second largest factory of the world after China with more MNC and Chinese companies setting up manufacturing facilities across ASEAN to avoid US tariff on Chinese made goods. Vietnam, Indonesian and Thailand are key beneficiaries of companies moving southwards from China. The cost advantages of operating in those countries are attractive as cheaper labour are more readily available. Singapore been the centre of ASEAN geographically play a role of a financier. Need to build a factory in Vietnam? Call the banker in Singapore. Need a credit line for a rice shipment from Thailand to China? Singapore banks can provide the necessary credit. I envisaged the next decade to be the decade for ASEAN provided there are no war. I will be looking to invest in companies which are beneficiaries from the flow of trades into ASEAN. I am particularly sanguine about Vietnam growth prospects. In less than 10 years, Vietnam economy will be larger than Singapore. Potentially Vietnamese can be top 5 holiday maker coming into Singapore due to growing affluence. For my real estate friends, be prepared to learn a language of Vietnamese, rich Vietnamese will be looking to buy properties in Singapore!
S&P 500 had rebounded 50%(green circle) from the lows(red circle) set a couple of months ago. 3667 was the recent low on S&P 500. One should exercise caution in the month of Sept and October. Historically the biggest points reduction in the market happens in those two months. Holding more cash and taking some profit off the table at this juncture is commonsensical. Chair Powell is not helping the cause. The hawkish tone didn’t help the market. The market might have to adjust the neutral rate. I estimated it to be at 3 percent previously, base on what I see the neutral rate might be closer to 3.5-4 percent. Balance sheet soundness is important for individual and likewise for company.
Cash
I continue to subscribe SSB which is offering a decent risk free yield. Subscribe a minimum of 6 months of SSB continuously, one can look forward to a recurring income every month for the next 10 years as SSB pay a semi annually interest, not bad to have some risk free income for the next 10 years without lifting a finger.
Singapore Medical Group(SMG)
In Aug, just after the result announcement, I have decide to part way with Singapore Medical Group with a small loss, the selling was not because the lack of trying on my part. What irk me is the lack of communication by its IR. Email went unanswered. If a company is not willing to engage shareholders on issue concerning the company, I would suggest the company to stay in private hands, shareholders don’t have to anticipate result announcements late into the nite. As you would expected, the result is poor. Given Raffles Medical excellent result, my expectations for SMG was high, revenue did went up due to pent up demand from medical tourists but profit took a tumble due to rising cost in engaging medical professionals. They warned of cost to be persistently high in the 2H. I have decided to sell the shares in the company. The second time suffering a small loss. It is what it is. You win some and you lose some. Life goes on. LWF holds no share in SMG.
Comfortdelgro(CDG)
ComfortDelgro share was firmer in August. I sold CDG due to the price hitting my trail stop. The profit from the sale help to balance up the book for losses made in SMG. It is important for me to clear the stale and keep the portfolio fresh. LWF was up 1% for August with ytd gain reaching year high at 11% thank to the nice dividend from CDG. In Aug, CDG reported 1H result, it was a big improvement from last year but it failed to light up my imagination. I was expecting net profit to be at the 100m(88m actual) mark excluding extraordinary gain or a run rate of 50m per quarter. The result is likely to improve further over the next couple of quarters due to low base. Most countries which they operate in are experiencing a rebound in traffic with the exception of China.
I have expected ridership to be back at pre covid level by end of 4th quarter previously but I made an amateur mistake, failing to account for the permanent loss of ridership due to permanent WFH arrangement. My estimate the permanent loss of ridership to be at the range of 10%. A 90% pre covid ridership might represent full ridership. All is not loss for CDG, Public Transport Council is scheduled to have a review of the fare calculation formula next year to account for the new trend. I presume WFH arrangement might be one to consideration when new fare formula are formulated. SBS Transit, 75% subsidiary of CDG recently renewed 5 bus packages for another 3 more years with LTA at lower tender price. It was reported, profit from the new bus packages will lower profit by 34m. The renewal was part of the deal with LTA for DTL(Downtown line) transition into the new rail financing framework Ver.2. I wouldn’t bore you with detail. In summary, SBS transit will be saving a minimum of 20m for moving DTL to the new framework. DTL had been loss making to a tune of 125m from 2017-2019, average losses of 43m per year. The new framework allow SBS Transit to co share losses with LTA. All in all both developments are profit neutral or only slightly negative for SBS Transit. I might revisit the share after the dust has settled once STI rebalancing exercise for component stock is done and calmer oil price prevailed.
As we head into the “scary” month of September and October. Letting the storm cloud passed is a good position to consider. Getting out of the area where elephants fight might also be wise and prudent. LWF is back to having full cash at disposal after SMG and CDG sale. Yield on cash is gaining strength which is not necessary a bad thing for saver. Till we meet again. God Bless.
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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.
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