Wolf Money(portfolio update for end May 2023)part 2
Portfolio as at end of May
1.) Cash
2.) Bank of China(3988.HKG)
Commentary
The general mood of our local market was one of weakness in May due to on going uncertainty about US Congress ability to pass the bill for debt ceiling hike. A default on debt obligation by the US government is akin to an economic Maguire scoring an own goal coined by a Ghanaian MP. On local front, a few companies caught my attention for various reasons. SingPost warning about the lack of profitability for its domestic mail business. I hope it is not a prelude in asking the tax payers to carry the unprofitable baby. I hope not to see another “SPHing” happening in SingPost. It will be troubling if unprofitable business are nationalised under the cover of public good. Private profit, public loss again? I don’t know.
Sembcorp is contemplating of divesting SembWaste to a third party with BlackRock and KKR cited as potential buyers. Although I am not a shareholder of Sembcorp but the implications of essential service like waste collection been sold to a third party is a concern given SembWaste is the largest waste collection company in Singapore. The potential new buyer would want to earn a good rate of return on their investment. A substantial rise in refuse collection fees can’t be rule out which will ultimately affect many Singaporean households. It will be another stab in the pocket given the host of price increases due to high inflation this year. The best or the middle option in my opinion is a direct divestment through a SGX IPO. The listing will help to inject much needed life to our faltering stock market which are facing a wave of privatisations. Locals could invest in the company to hedge against any increase in their refuse collection fee.
Keppel Corp after many years of underperforming had decided to “deconglomerate”. Is it too late to split up the company? I don’t know. The action would had been greatly welcome by shareholders if it was done 5 years ago. I was advocating as recent as 2 years ago for “deconglormerate”. The merit of doing the corporate action is less clear now after the Ukraine War as conglomerate in my view is starting to make sense again due to trade wars, supply disruption and geopolitical issue. The business diversification of a conglomerate can help guard against sector and market risk. The recent purchase of 5 major trading houses in Japan by Berkshire Hathaway might signal the attractiveness of conglomerates. Anyway it is for the shareholders of Keppel Corp to decide.
Boustead Singapore
CapitaLand Ascendas Reit had recently signed a S&P to acquire The Shugart, Seagate International HQ at One North. The purchase price stood at $218m, coincidentally the property was built by Boustead Projects 8 years ago. The property is a stone throw away from Alice@mediapolis, another property own by BPL. The size of both properties are quite similar with The Shugart just slightly bigger. Coincidentally again the sale price represents the same exact valuation given to Alice@mediapolis by the property valuer in the IFA report during the privatisation offer which was published a couple of months back. 50% owned Alice@mediapolis will be reaching its 5 years non sale clause in a less than 6 months, divestment might be on the card after the non transferable period. Finger crossed!! Boustead Singapore reported better than expected result due to Boustead Project reported a 62% improvement in result. There were quite a number of one off in the result which improves BPL and BSL profit. Contribution from joint venture was negative due mainly to the gestation loss for Bideford property and higher interest cost with nett off by gain in Vietnam subsidiary disposal into a JV. Take nothing away from BSL effort, the company increase profit by 34% in the second half of FY2023 excluding all one off. BSL should be able to increase current operating earning in FY2024 given the good momentum in the second half of FY2023. Contribution from associate and JV will improve with the welcoming of Como group into Bideford property in FY2024. Oil and Gas arm had a surprising robust order book going into FY2024. Geospatial had a stable year. The healthcare arm managed to reduce losses. Overall Boustead FY2023 set a foundation for better performance in FY2024. 2.5c dividend was declared with payment in August. Total dividend at 4c unchanged from last year. The company has a net cash of 67c per share representing 82% of the current share price. I am quite excited by the prospect of their business in FY2024 if they could quickly sort out the small nagging issue on the privatisation of BPL, even if they paid full value, it wouldn’t cost the company much money.
Haw Par Corp(HPC)
LWF received dividend from HPC in May. Like all dividend received from past investment, they are not account as part of LWF return till end of the year. The weakness in price was due partly to company going XD and weakness in UOB and UOL shares which account for a big chunk of HPC valuation. Share continue to trade at historical low in term of price to book. Next result will determine the strength of HPC recovery.
Bank of China(BOC 3988.HKG)
The Chinese economy continue to strengthen. Economic data had shown retail sale to be on the uptrend but corrections can be seen in Chinese stock market. The market was expecting an even better economic numbers thus the market taking a breather after a strong run up since Oct last year. Share of BOC after a big run up early part of the month succumbed to profit taking towards the end of the month. Stock is almost unchanged.
Cash
I didn’t apply for any SSBs this month due to the unattractive yield. The rest of SSBs is giving me a return of above 3%.
Summary
LWF was even Steven for the month, ytd gain stand at 3.5% (non leveraged, cash and dividend yield excluded). Monthly portfolio would have been up if HPC dividend was included. The market conditions had been extremely difficult to make any headway. We went past May with a smaller correction vs my expectation. Singapore market was down over 2.5% in May. To be honest, I was expecting a lot worst given the problems facing the US market financially and politically. June is historically an uneventful month. I would be glad if the market goes past June without any hiccup. A couple of stocks under my watch list are trading more attractively after the May correction. US Congress scheduled vote on debt ceiling and FOMC meeting in June will likely dominate the headline next month. I don’t have optics on the market beyond 2024. My 2c guess market might be trading at current level or higher during the period leading up the US President election in 2024. I am not afraid of the known unknown, I am afraid of the unknown unknown which can derail the usual cycle uptrend leading up to the election. Lone Wolf will be taking a break from the middle to end of the month for a short holiday. God Bless! Amen 🙏
Please consider follow us on telegram for the latest update on Lone Wolf investor by clicking on the link below. No form filling, no payment required, no collection of data, no data mining, no hard selling, no obligation.
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 education only. Buyer beware,do you own due diligence.
Comments
Post a Comment