Wolf Money(portfolio update for end Feb 2023) Long post!
Portfolio as at end of Feb
1.) Cash
2.) Bank of China(3988.HKG)
3.) Boustead Singapore(BSL) / Boustead Projects(BPL)
4.) Lendlease Global Commercial Trust
Disruption Galore
My thoughts and prayers to the people affected by the deadly earthquake in Turkiye and Syria. Wishing the victims a speedy recovery from the ordeal.
In 2000s, It was probably one of the worst possible timing to start my career as a stock broker, beside the market was still licking the wound bought on by the 2000 tech bubble crash, 9/11 and sars crisis. The stock brokering industry was one of earliest industry that got disrupted by the boom of internet. The age of internet ushered in the era of low cost online trading. With the birth of online trading, commissions were slashed to a quarter of what its used to be. Some senior remisiers were reminiscing the good old days where commission were at a non negotiable 1%. A ticket size of 100k purchase of UOB shares will racked in 1k commission before co sharing with the brokering firm and if the clients decide to contra their UOB shares by end of the day due the share price going up $3, that will be another 1k to the remisiers and brokerage firm. Mind you that is only one customer doing one contra trade, now multiply 20 trades done in a day. 🤑🤑. Some remisiers would have 2 bungalows under their name before the liberalisation took hold if they had survived a series of crashes in the stock market. I was in the wrong commission era when I joined the industry but I gradually found my footing through value investing. Currently new trading platforms don’t even charge a commission for trading through them. How do you make money as a broker? After the liberalisation, some brokers called it a day and some brokers in our industry started their transformation early by having dual licenses to sell insurance to make up the loss of income due to falling brokering commission. It is always true when God closes a door, he opens another window for you.
Covid had a way to expedite disruption to business(not only in business, property market near ACS primary got disrupted by school relocation recently). Office to WFH, retail to online, cinema to Netflix were some examples. Every industry is likely to face some form of disruption now and in the future due to advancement in technology. Can one imagine Google, the disruptor of traditional media potentially disrupted by Chatgpt? It was unthinkable just 6 months ago. Technology has a way of making things faster and cheaper. Like taxi operators who got disrupted by ride hailing app. Blockbuster, a video and games rental company got disrupted by cable tv and online streaming services. Newspaper losing it advertising toll gate business to internet advertising. I can give plenty of example, the list goes on. One should see disruptions as a common occurrence, part of everyday life. Now who moved my Cheese?
How do one future proof yourself in the era of disruption. Job today gone tomorrow. Always have an open mind. If one is good with your hands, plumbing and electrical can be an option for self employment. I wouldn’t be surprised an electrician or a plumber making more money in the future due to lack of blue collar skills in Singapore. Be always ready to try out a new industry, enter into a side hustle, diversified your primary source of income and learn a new skill and be financially savvy. Having good knowledge in making your money work better for you is disruption proof. The journey is tough but well worth the maximum effort. Change is the only constant thing in life. In order not to fall off from the bicycle, one needs to keep pedalling to find your balance. I wish everyone all the best in undertaking your own little transformation. Seize your day!
Market is experiencing some weakness in the month of Feb which is perfectly normal after the big run up in Jan. All stocks except Boustead Projects in Lone Wolf Fund experienced some sort of correction. LWF would have suffered a terrible month if not for my lucky saviour Boustead Projects surprising privatisation offer. Gains from BPL overwhelmingly covered the weakness in Lendlease and Sarine, diversifications works for this instant. LWF was up 3.5% this month, bring YTD gain to 7.5%(unleveraged excluding dividend and cash yield). Sarine Tech share had a big fall this month after raising over 20% last month, share fall faster than I could read out “kaching ”. I sold the share off with minimum profit, a disappointment given I was sitting on some nice gain just a month ago. In this instant, the sell off in the share was a tell tale sign of a weak 4Q, margins were indeed weaker and profit fell off the cliff in 4Q from recently reported full year numbers.
Boustead Projects(BPL)/Boustead Singapore(BSL)
One should be happy with the 14% jump in the BPL share price this month due largely by the privatisation offer but unfortunately I came away heartbroken by the extremely low offer. The lack of a share option in-exchange for Boustead Singapore(BSL) shares made the offer less palatable to BPL shareholders who may wish to continue their investment journey with Mr. Wong FF. The market seem to be in agreement with me that the offer is extremely low and opportunistic.
I am baffle by the privatisation offer. BPL was listed just 7 years ago, having been in market for only a short history, one can’t comprehend the thought process behind the decision of listing and subsequent privatisation offer. Given the high return yardstick of BSL, BPL shareholders’ return over the past 7 year had been subpar except for 2021 which they gave out 14.5c upon divestment of their properties. The low dividend in most years were largely neglectable . In total, shareholders received around 23.2c in dividend over the past 7 years. If one would to have bought the shares on opening trading day in 2015, paying $1.04, after subtracting the dividend received over 7 years, the pioneering shareholders of BPL would have gain a mere 14c over 7 years for putting their faith in the company. That is 2% return annually for their 7 years of unwavering support, an unusually low return given Boustead high standard of creating high shareholders’ value. In comparison, the parent company, BSL achieved better return for its shareholders over the past 7 years. Just as the poor shareholders of BPL is seeing the light at the end of tunnel for a substantial turnaround in profit after the tumultuous covid period, BSL choose to privatise the company at such an appalling offer. Given the high regards I had for both companies, I urge both BODs to treat your shareholders fairly as part of good ESG practice. I continue to have faith in the company and that something good can come out from this exercise given my enormous respect for the people at BSL and BPL. I was hopeful of an amicable outcome without putting any set of shareholders at a substantial disadvantage, Boustead Projects after all was an offspring of Boustead Singapore, just like mother and son, the offer should reflected that special relationship. Boustead Projects has a NAV worth $1.265 with close to 49c in net cash per share. Cash per share is more than half of the offer price, literally the offeror is getting all of BPL business and undervalue properties at just 46c !! Unfortunately the revised offer of 95c doesn’t move the needle. All been said, I have decided to sell out my position in open market with proceeds rolling over to Boustead Singapore. In my personal opinion the liquidity in Boustead Projects share will be a concern for me going forward with parties acting in concert holding 82% in BPL at time of writing thus the less ideal switch to BSL. All is not loss as the switch raises the dividend by 4 times and I continue to participate in BPL growth through BSL although at lesser intensity. Among BSL business, I like the Geospatial business but not the healthcare and heaters business. A review of the Boustead Heaters business is long overdue as earning were lumpy with Boustead unlikely to dominate the industry couple with the perpetual weakness in British Pound and Euro making it a very difficult business to run. Healthcare business also failed to gain any traction 6 years into Boustead ownership. As a group Boustead Projects is seen as having the highest growth potential. The whole exercise of me buying and selling equates to trading BPL value for more regular dividend from BSL. I soldier on under the umbrella of BSL.
*All view expressed here are mine alone which doesn’t amount to any financial advice. Shareholders of both companies should seek professional advice. Kindly dyodd.
Lendlease Reit
The performance of Lendlease is stable. Lone Wolf Fund received 2.45c in dividend per share for the month of Feb. The malls under Lendlease is performing at an optimal level with occupancy rate at 99.5%. The management sounded optimistic during their half year result announcements. I continue to hold a small position in the reit. Shares were weaker due to the combine of rising 10 years yield and the Singapore government imposing higher stamp duty on non residential properties during the recently concluded Budget 2023.
Bank of China(3988.HKG)
Share price is slightly weaker in Feb. The Chinese central bank(PBOC) is introducing some remodelling to how the banks calculate their tier 1 capital which will allow banks to free up more capital for lending. The ability to lend more will ultimately increase profit for the banks in general, of course the ability to keep a close eye on loan book quality will be equally critical. BOC will be reporting full year 2022 result at the end of March.
Cash
I continue my application for SSBs amid a smaller application due to lower average yield. Cash in the portfolio has increased after the sale of Sarine and Boustead Projects with partial deployment into Boustead Singapore. I continue to look for opportunities in our market and overseas.
Summary
In my last portfolio update, I mention about the current Japanese central governor, Haruhiko Kuroda will be stepping down in March, his replacement Kazuo Ueda, University Professor is an unproven choice. The chances of BOJ misstep on yield curve control policy had increased in my view. Any incident can cause great volatility to the global market given Yen carry trade had been on going for a very long time. One should be watching the event in Japan closely for direction of the global market. The market had been kind to me for the past two months which gave me a greater opportunity to explore more option for capital deployment. Till we meet again, have a profitable March. 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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