Wolf Money(Portfolio review for year end 2022)
Portfolio as at end of Dec
1.) Cash
2.) Bank of China(3988.HKG)
4.) Sarine Technology
Commentary
My thoughts and prayers to those families affected by the Genting Highlands landslide in Malaysia and the sinking of a warship in Thailand. An unfortunate situation no one should ever go through. I wish the survivors a speedy recovery.
Merry X’mas and a Happy New Year. 2022 had been a challenging year for many investments, stock is down, bond is down, oil is down and Bitcoin is down, just about everything is down except for interest rate and USD, even USD is showing some sign of weakness recently. Lone Wolf Fund managed a 8 percent gain without leverage if yield on cash is included a return of 10% is achieved (last year was slightly above 15%) The gain fell within the mid to high single digit target which I set out before the start of the 2022. The star performance which contributed to bulk of my gain is Keppel Corporation. The sleeping giant managed to punch above its weight for once. Lone wolf had a double winning trades on Comfortdelgro. The worst performance in term percentage loss is my test case investment in Grab. LWF suffered a 50% loss within 2 months. Lesson learned, all that glitter is not gold.
Next year I hope for a higher return since risk free rate is already at 4 percent but my gut feeling is telling me, market is going to be tough. We might be in for a flat market at best with the odd rally and sharp decline characterising the lacklustre sentiment. I am setting a mid to high single digit return target for 2023 again, unchanged from last year which might still represent a tall order but I will try without taking excessive risk. The market is likely to be a tale of two half. First half subpar with better 2nd half. 2c worth. With such a high interest rate environment, its basically impossible not affecting most businesses. Some businesses might not be interest rate sensitive but a high mortgage interest is likely to eat into discretionary spending. Going to supermarket buying one less chocolate bar, buying a 2 bedroom property instead a of 3 bedroom property or buying a car without the additional accessories. All those cut backs are going to have an impact on the economy and inflation. 2023 inflation will be under control but still high on historical norm. Solvency issue surrounding some companies with high debt will feature more regularly in 2023. I am expecting some high profile corporate failure in 2023. It is important to look at the financial ratio of company before investing. High debt, low inventories turnover, high outstanding trade receivable beyond 180 days, interest cover ratio, consistent negative operating cash flow etc are some red flags to watch out for.
(4.1% Risk free for 12 months by doing nothing)
Cash and Bank of China(3988.HKG)
Cash continue to be a safe harbour for capital in 2023 with 4% risk free simply by doing nothing. In my humble crystal ball view, North Asia Market is safer than the rest of the world. Chinese related reopening play listed on Hong Kong Stock Exchange is likely to outperform other market. I continue to lookout for China state own enterprises to invest. State own banks are likely to experience growth given the loosening monetary policy in China. I have so far taken an interest in Bank of China due to their attractive yield and low valuation. I hope to do more but I am not under pressure. The surge in covid cases in China may affect short term production and supply chain number in the next couple of months but the reopening of the economy is intact.
Boustead Projects
Boustead Projects is another company in my portfolio, I like their Vietnam industrial property business. The company is experiencing very strong demand for their factory in Vietnam. I wouldn’t be surprise Vietnam business to be larger than Singapore business in years to come. Although high interest is likely to affect all property company, BP is in a better position than 95% of the property companies listed on SGX given it has a net cash of 154m around 49.5c per share. One special mention is their asset quality, all their assets are marked at cost with yearly depreciation. It is unlikely to experience any big write down even with a rising cap rate environment due to their ultra conservative accounting policy. Most of their properties had reached stabilisation stage ripe for injection into Boustead Industrial Fund. Timing of the divestment is at best unknown. Boustead Singapore had recently made a purchase of 567,000 shares in open market at 80c. Mr. Wong FF and Boustead Singapore is a 74% owner of BP. 2023 might be a breakout year for Boustead Projects with all business units firing all cylinders. Order book had reached post covid high of 454m.
Sarine Technology
Sarine is a new addition to LWF, an Israeli tech company listed on SGX. Reader of my blog know I rarely buy tech. My money got “Grab” in my last outing in tech. Sarine Tech does diamond planning,grading and cutting machines. I will classified them as a niche tech company. They are involved in the mid stream of the diamond trade. What perk my interest was the recent change in dividend policy. The company will be paying 80% of net profit on a quarterly basis. The company shouldn’t have any problem paying usd 0.5c every quarter. A sign which I took as a vote of confidence by the management to meet their sale and cashflow target. Overall dividend can reached SGD 3c-3.5c which is around 8-9% before 10% tax. Price to earning ratio is a reasonable 9x. The company is in net cash position. Nav stands at 28c. The rationale of buying the company was to position myself for the upcoming revenge shopping by Chinese tourists in 2023. Just look at the demand for Panadol from the Chinese can have on supply in Singapore. Diamond sale was down 36% in China year on year due to covid related restriction and weak economy. Tiffany & Co is a corporate client of Sarine grading machine. As more people buy diamonds, demand for their machine will go up. 50% of their revenue is recurring which take out volatility in earning. Recent 3Q result had shown improvement as the new meteorite plus system is well received by diamond manufacturers. The liquidity of the stock is poor. I am taking a small position for the attractive dividend yield. Diamonds are women best friend and mine so now. I am so far attracted by the financial numbers of the company. I am quite impressed with the high ROE. I have no industry knowledge nor an expert in the field of Gemologist. The share did a 30 percent haircut over the course of the year.
(The different types of Sarine’s machine)
Opportunities
Reits is one of the worst performing sector in 2022. The correction has open up some interesting opportunities. I do find a couple of interesting candidates. 7-8% dividend yield will be a good starting point. I am only interested in local reit with sizeable assets in Singapore. I hope to make my maiden purchase in a reit after a 10 years break in 2023.
The Lone Wolf book recommendation award
by popular vote goes to “The most important things” by Howard Marks
https://lonewolfinvestor.blogspot.com/2022/09/wolf-moneybook-recommendation.html
The Lone Wolf bargain of the year
by popular vote goes to “Nlb e resources Newspaper”
https://lonewolfinvestor.blogspot.com/2022/07/wolf-bargainintellectual-freebie.html
Thank you for those who had voted. I will also like to take this opportunity to thank all the readers of my blog. You are my source of motivation. Thank you from the bottom of my heart. I hope to read and continue with better research. Lone Wolf investor will be taking a break for the month of January to enjoy my CNY. I wish everyone a wealthy and healthy 2023. 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 education only. Buyer beware,do you own due diligence.
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