Wolf Money(Portfolio update for end Nov 2023)part 2

 

(Merry X’mas and A Happy New Year everyone)

Lone Wolf Fund(LWF)

Portfolio as at end of November 

1.) Cash

2.) Valuetronics Holdings Limited 

3.) SBS Transit 

4.) Boustead Singapore(BSL)


*Stocks are not rank in accordance to capital invested
*Just for sharing. Not an inducement to buy or sell.

Commentary 

The Cashare portfolio of companies continue to offer stability to Lone Wolf Fund. Just to recap on my pivot into buying companies with huge cash or cash equivalents in their books. The huge cash pile adds to earnings growth of SBS Transit, Valuetronics and Boustead in the recently concluded earnings season due to tailwind from higher interest income. All companies in my portfolio had shown an improvement in earnings even though some companies’ revenues were lighter year on year. The high cash holdings will probably keep all the companies in portfolio out of trouble for the foreseeable future. There are possibility of those companies return excess cash to shareholders. The STI index after the initial two weeks surge early part of the month succumbed to profit taking towards the end of the month. The index ended less than 1% higher for the month. The Singapore market’s performance was underwhelming again given the strong rebound out of Wall Street. What could help our market? Divine intervention is needed.

Cash 

I continue to roll over the lower yield SSBs to the current higher yielding issue. The yield on SSBs had reached its highest in a year this month, however next month SSBs will see a drop in yield in-tedium with the lower 10 years SGS bonds yield.

Valuetronics

The company recently reported half year result showing a 42% increases in net profit. The first half result was saved by interest income. Interest income generated by the cash pile now contributes at least 30% of profit. The company had put on a creditable performance given most contract manufacturers reported poor results this month. The company did experienced a 15% drop in revenue due to weak demand from customers. The drop in revenue didn’t affect their profitability. Margin actually went up by 3 percentage points due to cost reduction associated to material and lower manpower cost. A low RMB also help increased margin. The company declared dividend amounting to 8c HKD, up from 4c HKD. I have decide to increase my holdings in the company due to its good yield. They shouldn’t have any problem paying up to 4c SGD this year as dividends. Cash in the company reaching 199m SGD as at 30th Sept, roughly 48c cash per share. The company continues to be cautious about the revenue growth as new customers take time to increase their orders.

SBS Transit

SBS Transit reported stable earning growth of 4.7% due largely to interest income. The drop in contract value for 5 negotiated bus packages had minimal impact on profitability. Cash has reached close to 370m or $1.18 cash per share, around 47% of the share price. I continue to be hopeful of a special dividend this year in celebration of their golden jubilee. I am also cautiously optimistic they might change their dividend policy to a 60-70% payout ratio in the future. There is simply no reason for the company to keep such a huge amount of cash as they transit into an asset light company.  

Boustead Singapore 

Boustead reported a strong 1H24 result. For guidance, in the words of management, “ was for a satisfactory result in the current year”. The result would have been more impressive if currency and one off were taken off for comparison. Profit was up 19% vs comparable period last year. 1.5c dividend was declared.

BSL has launched an exit offer for Boustead Projects’ minority shareholders. It is good to finally see the conclusion on this prolonged privatisation exercise, now both sets of shareholders can move forward. The $1.18 exit offer was a just reward for those dissenting BPL shareholders who had the gumption to hold out for a higher offer. Unfortunately, the new exit offer felt like a kick in the teeth for some former BPL shareholders who had accepted the offer or sold their share at 95c just six months ago. A fair offer should have been forthcoming without the need for the stock exchange to intervene. My hope going forward is to see all honourable directors in any listed company to conduct themselves with utmost care, guided by their own conscience when proposing scheme that may impact minority shareholders. They need to be mindful of their dealing with mum and pop retailers which are neither sophisticated nor armed with army of legal and financial advisors. For the retirees, to obtain fair value for their investment means better medical care or a long-awaited trip to fulfil their dream in the bucket list. To a young investor, getting a fair payout give confidence to our stock market, there is indeed fairness in our stock market. To young parents, a fair payout makes the difference of having the means to send their kid to an Ivy league school for a better education. To those multi millionaires directors and CEO who have everything, I would like to quote you the famous words from Warren Buffett “A life of a millionaire or billionaire with huge wealth at the start of the year, doesn’t change very much when he gets an extra million or two at the end of the year”. Ultimately, money stays behind when everyone passed on, everyone will be judged independently by the Great Lord on their conduct on earth. Have you treated everyone(shareholders included)fairly without contempt? Have you been a good person or at least try to be one in your lifetime? A resounding Yes should be the only answer. 

An egm will be held to vote on a resolution by independent shareholders of BSL whether to allow interested parties to accept the $1.18 exit offer. Personally I would have voted against the resolution on principle ground, however I will vote in favour on this resolution even though I am at the receiving end of that less than ideal 95c offer. I have immense respect for the Chairperson. Boustead Singapore wouldn’t be what it is today without the Chairman’s vision and his business acumen. He could have enriched himself and his family by paying themselves out of this world compensation or issued themselves large amount of stock options at a huge discount to market price but they didn’t. They stay true to themselves by treating their shareholders fairly. I would even go as far to vote in favour of any resolution that requires the company to make a one off $100m payout to the chairperson for his many contributions to Boustead Singapore if there is one proposed. I hope with the closure of this privatisation exercise, Boustead Singapore can achieves new height under the leadership of the Chairperson and his capable deputies. Let’s work towards a win-win outcome, with management and shareholders sharing the vision of a world class company with at least a billion dollars in market capitalisation by 2027 in time for the company’s bicentennial celebration. 

*Views above are mine alone , if there is anything you disagreed, I seek your understanding. Everyone should be able to decide on their own accord how they will vote for the resolution. Thank you. God Bless.

Summary 

Lone Wolf Fund received some nice dividend from Boustead Singapore and Valuetronics this month. LWF rebounded from last month drop, portfolio gained 2.5% for the month, YTD gains stand at positive 5%(excluded dividend and cash yield). Star performer of my portfolio this month was Valuetronics. The stock was up close to 10% even after going xd on a 1.35c dividend. SBS and Boustead contributed gains to LWF in November.

I will be doing a year end review next month to tabulate the final return for the 2023, barring any freak incident in market, LWF portfolio’s return is likely to end the year on a positive note. I will be setting my goal for 2024. I hope to see you soon. God bless. Happy Holidays everyone!

Part 1 continues here


(Charlie Munger 1924-2023)


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