Wolf Money(portfolio update for end April 2024)part 2

 

(Image Credit: FT; Saudi Aramco)

Lone Wolf Fund(LWF)

Portfolio as at end of April 2024

1.) Cash

2..) Boustead Singapore(BSL)

3.) Great Eastern Holdings(GEH)

*Stocks are not rank in accordance to capital invested. 

*Just for sharing. Not an inducement to buy or sell.

Commentary 

Lone Wolf Fund was down 0.5% in April. Ytd gain stands at 7%(excluding dividends and cash yield) with Great Eastern going xd in April. STI was up 2% for the month. There is nothing much to talk about this month when it comes to portfolio, given there are only two stocks in my portfolio. April is the first month in many months with no new names for the in and out departments. Even after the weakness in Wall Street. I had trouble finding undervalued stocks for my LWF. The S&P 500  end the month down 4%. I did a slight round down of my holdings in Boustead, to give it a nice round number. Capital was reinvested to GEH. Now both stocks have equal weightage in my portfolio. As mentioned in my previous blog, I am working within the capital I had put in the market. No new money will be invested. I am concerned about the rise in geopolitical tension in the Middle East and the stubbornly high inflation in the US. As tension rises, same goes for oil prices. It is very difficult for interest rates to come down if inflation stays elevated. Oil is the mother of all commodities. When oil is on a strong uptrend, it pushes up the cost of everything.

(Image credit: One of the first few measures by SGX to enhance corporate governance and shareholder value)

On the local front, SGX has put in a consultation paper to make submission of resolutions easier during the annual general meeting. Listed companies and board of directors need to facilitate the process, to make it a less costly and lengthy affair. There is increasing minority activism happening in local listed companies. SGX is proposing changes to the listing rule to allow resolutions to be tabled and voted on more easily, avoiding posturing, over legalistic and gatekeeping practices. The exchange is in the process of rolling out other initiatives that will required listco to address the undervaluation of their shares. That is great news for everyone. For once, SGX is on the same side with many suffering minority shareholders. I give credit to SGX for stepping onto the plate. I hope this will open up an era where good listed companies could experience better valuation through such initiatives. With encouragement to price discovery, a better valuation among the well run companies could be obtained. Ultimately, with better valuation, good companies will be keen to list. I hope SGX will be able to sustain the good momentum, as a vibrant equity market is critical to Singapore’s leading financial hub status. I read a report by an external party(can’t confirm the legitimacy). Small and middle cap companies listed on Singapore market have lost one third of its liquidity over the past 10 years, causing weakness to their share prices.

SGX should also double down efforts to promote Singapore stocks to young investors, sending a couple executives on a mission to engage local universities students. It will be a low cost experimentation that could payback big time in the future. There is a growing trend of younger Singaporean showing a disproportionate interest in HK and US market than our own, condemning Singapore as a niche market. My fear is that eventually we wouldn’t have enough young people keen on Singapore stocks.

In part 1 of my monthly review, I mentioned a potential hollowing out of Singapore by JB. It was rumoured in the media that Johor is considering building a casino in the state which the Malaysian side had denied. This potential development real or fake should be keenly watched. Singapore’s own casino might be affected by local and foreign tourists going to Johor for their gaming needs instead of heading to our IR. The free-flowing border of JB-SG RTS-MRT can aid the movement of tourists towards Malaysia too if the IR really took off.

(Image credit: The Straits Times; Johor casino may get the flow of gamblers which will otherwise be heading to our IR)

Boustead Singapore 

Chairman Wong, did an interview with BT recently, explaining his position on the privatisation of Boustead Project. I find the reading quite interesting. It felt like his interview was his answers to my views on Boustead. I am looking forward to Boustead Singapore FY 2024 results at the end of the month. Given the better than expected performance of the first half, I can’t help being optimistic about the coming result. I hope the company can improve the dividend payout to at least 50% of earnings. There was a slight reduction in shares for the purpose of raising capital for GEH purchases.

Great Eastern Holdings

I hope the B.O.D and management of GEH will walk the talk on what was communicated at the AGM. Just to recap, the board has agreed to proactively seek ways to enhance shareholders’ value and increase shareholders’ communication. Failure to achieve any objectives might result in another shareholders’ revolt next year. I hope common sense will prevail. Improvement to GEH valuation is a win-win for all parties including OCBC. 

(Share price had tanked 30% over the last 5 years and 40% over the past 6 years(dividends not inclusive)

The ability to win over GEH’S shareholders and do the right thing for its shareholders is so critical for the company as failure to improve TSR(total shareholder return)will result in a fractured relationship between the board, management and minority shareholders. I want the board to think in place of minorities. Imagine the board members experiencing a 30% drop in directors’ fees and the CEO of the company, suffering a 30% pay cut, hypothetically again, if OCBC suffered a 30% drop in contribution from GEH over the last 5 years. Will it be acceptable to OCBC and those management of Great Eastern? For the past 5 years, that is what GEH shareholders went through, suffering a 30% capital loss. If you go back by another year. The decline in share price was a sharper 40% over the last 6 years. As you, the directors and CEO count your millions in your bank account, kindly do have some thoughts for the minorities shareholders who are not as wealthy as you. Returns that are deprived to the minorities will mean less money for elderly shareholders undergoing critical medical treatment, less money mean retirees unable to fulfil their bucket list and less return mean parents which may otherwise be spending those money on a good education for their kids, had to forgo the idea. Is asking for a reasonable rate of return for our investment too demanding? I hope the directors don’t take offence in my commentary. Although I am not speaking on behalf of anyone but my opinion may represent the feeling of most minorities and their expectation of the board. I have confidence of the board, doing the right thing for all shareholders. I will leave the directors to do their Godly work of improving shareholders’ returns, in the process improving the lives of many retail shareholders. Thank you and God bless.

(Image Credit: MediaCorp; Mad respect the man for what he stands for and what he did for Singapore)

In the worst and unlikely scenario, shareholders’ activism spreading to OCBC due to unresolved grievances at GEH. Given the bank has the highest tier 1 and poorest ROE among the local banks. There will be growing calls by the minority shareholders and fund managers to improve its own valuation by undertaking its own value unlocking initiatives, to improve shareholders’ returns, on par with other local banks. Readers can read my field report on the AGM. I had increased my holdings in GEH this month.

Great Eastern’s first agenda of the new trading week was to report their Q1 result. I am more at ease when companies report their results early in the week. I mentioned the TGIF, the weekend escaper in my previous blog. You can read about the “weekend escaper” here. Thank God, the result did not disappoint. GEH produced a 26% increase in 1Q profit, attributed to the good investment climate and increasing revenue. Based on the current profit run rate, a billion dollar net profit in 2024 is a real possibility baring any unforeseen. Finger crossed 🤞 

Cash 

There is no movement in this department too. I might be interested in next month SSBs. I suspect the yield of June SSBs will be higher due to the yield mimicking the higher yield on the 10 year SGS.

Summary 

The second half of the year will usher in more volatility. With investors casting an eye on the US presidential election in November. The US market is on an extended bull run, and will likely face its litmus test right after the election. It doesn’t matter which President won the election. One will have to handle the big budget deficit. There are only two ways to solve it. Austerity which involved cutting entitlements and raising taxes or print more money, in hope with passage of time and inflation, the debt will get smaller. Both ways have their pros and cons. 

I am unlikely to be buyer of stocks in the foreseeable future unless there is one on fire sale. The weak seasonality of May and June warrants some caution. Given the high interest rate and high inflation rate, something has to break, I just don’t know what and when. Sometime giving up, a chance of a moonshot, brings a good night’s rest. With good rest, mind will be sharper. Happy Labour Day! God Bless.

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