Wolf Money(Portfolio update for end June 2024)long post

 

(Image credit: Nippon.com)

Falling local population

This topic is quite contradicting. On one hand, we have an increase in the overall population, but our local population is stagnating. It is no longer a secret, Singaporeans are no longer reproducing enough to replace ourselves. Although starting a family and having kids is a personal choice. A big part of the decision is financial considerations. With Singaporeans grappling with the high cost of living and high mortgage rates, pro-creation has become a back burner for some couples. Generous financial incentives should be increased to solve the national problem. 

1.) Free HDB flat for 3 kids or more

The main pain point is having a roof to house everyone. A five-room flat in a nice area costs $1m. Maybe the government can consider taking over the mortgages of those households with 3 or more children. With mortgages taken care of, money could be channelled towards paying for education and other expenses associated with raising a child.

2.) Free childcare for 3 or more kids.

It is common to find private childcare costs more than $1k each, even after subsidies. If a family with 3 or more school going kids, childcare and student care fees can take away a big chunk of a family’s earned income. Free childcare and student care can greatly reduce the financial pressures of the household.

3.) A half-priced COE to be given to households with 3 or more kids

Transportation will be a headache when you have many people in a household. Having a car to move people around is essential and a more cost-efficient option for large families with many kids. 

4.) No levy on domestic helpers

A big household needs all the extra help they can get to take care of the kids. A domestic helper is essential. Waving of the levy on domestic help offer tangible help to households with many kids. The concessionary rate is $60 a month. 

5.) Allow subsidies for ladies to freeze their eggs and encourage sperm donation

This policy works like the Svalbard Global Seeds Vault for use in the future. Only married women are allowed this procedure for procreation currently. More encouragement should be given to male tertiary students to donate their sperm.

Citizenship for non traditional sources of migration 

Those foreigners living in Singapore for more than 10 years and have committed their working life in Singapore can be considered for PR that leads to an eventual path towards citizenship. One group of people which I think will have no problem integrating into our society are the Nepalese. Most Nepalese kids studying in our public school come to our shore because their Dad has a posting as a Gurkhas working for the Singapore Police Force. All Gurkhas will have to retire at the age of 45. Their spouse and kids must returned to Nepal when their dad tour of duty ends. Most Nepalese children would have done at least 10 years of education in Singapore. They speak like Singaporeans, and they only know Singaporean friends all their lives. It is quite cruel in my opinion to ask them to return to Nepal which has a total different way of lifestyle which they had been accustomed. I do think they make a good neutralised citizens. Maybe a special pass for them to continue their studies with a path to eventual citizenship can be considered. Given the Gurkhas’ contribution to Singapore’s security. Some special arrangement can be considered for their kids. I have spoken to a few Nepaleses here, they are quite humble and well mannered people. Other possibilities included opening up a small pool of citizenship from non-traditional source of migration from Eastern Europe, Middle East and, Africa that can bring diversity to our country. The diversity is also for security considerations. We can give citizenship to outstanding foreign nurses or personnel that contribute to critical sectors like healthcare and transportation.

Our birth rate has fallen below Japan. We are one of the fastest ageing societies in the world. Without strong intervention by our government, the birth rate will continue to decline. It takes a village to raise a child. Any child-friendly policies will be helpful in improving our population. Japan offers a case study for Singapore. By 2100, if the Japanese don’t tackle the declining population, their population is estimated to be down by half from 123 million to 63 million in 75 years. Any sensible pro-creation and immigration policy can help address the shortage. If we do nothing, will there be a country called Singapore or a tribe called Singaporeans in 100 years time? Maybe AI can predict.

Lone Wolf Fund(LWF)

Portfolio as at end of June 2024

1.) Cash

2.) Wilmar International 

*Stocks are not rank in accordance to capital invested. 

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

Commentary 

The Singapore market continues to struggle for direction, with our market trading sluggishly over the course of June. I guess market participants are focusing on the latest edition of the UEFA European Football Championship. It has always been the trend, when there is a major football tournament, the market suffered from poor interest. Lone Wolf Fund had a slight decline due to Great Eastern shares trading back towards the final offer price of $25.60. This month Lone Wolf Fund’s return was down 1.5%. Ytd gain stands at 29%(excluding dividend and cash yield). I managed to wipe my face on Wilmar. 

Great Eastern Holdings(sold)

Today we are here to attend the funeral of the Singapore stock market. Besides the low valuation suffered by our market participants, investors of our market have to navigate the complexity of low ball offers from majority shareholders. One would expect a local banking giant to lead as a beacon for good corporate governance. Unfortunately, they have decided to turn a blind eye and join the dark side of the forces, blatantly ignoring the IFA report to pay a fair price for GEH. I could have walked away quietly by accepting the offer for a gain in excess of 40% in 3.5 months, but I can’t walk away without my conscience pushing me to express my thoughts on this whole takeover saga. I started the journey by supporting Chin Woo. His leadership is top-notch. I think most minority shareholders will agreed, without Chin Woo’s effort, the minority would have been in a much inferior position. My heartfelt thank you to Chin Woo and his team. It is amazing how the group of minority came together to take the fight to OCBC. We are under no illusion that it is going to be a David vs Goliath match up, but we never gave up till this moment. Unfortunately, given the uneven playing field, it is almost an impossible task. Regulations are there to protect minority investors, it should not aid any majority shareholder’s quest to privatise companies cheaply. 

All those grand statements of upholding fairness in ESG report is just paper that can be flushed down the toilet bowl when a takeover of an undervalued subsidiary is involved. The final low ball offer will permanently damage the integrity of our market. Without proper oversight on investor protection, The Singapore market is fast becoming a non-investable market. I strongly urge the authorities to put the wrong thing right. SGX, MAS and SIC need to force OCBC to come out with a fair offer within this current offer period. If nothing is done, copy cats will be emboldened. OCBC’s strong-arm treatment of GEH minority is totally out of character and unacceptable. I urge those who care about our stock market to respond. This is one battle the GEH minority can not lose. Those neutral who think OCBC GEH saga is none of their business. Think again. The signal sent out by this takeover will have serious repercussions to your investment in our market. It can be Great Eastern now, it can be other companies which you have an interest next. The negative message sent “The weak should bow to the powerful and rich”. I hope the authorities can take a stand on this case. I suggest the suspension of the 6 months rule for OCBC to cure the IFA opinion since OCBC had no intention of making good the minimum float for GEH shares. It will take away the uncertainty for the minorities from the 6 months suspension. 

This takeover episode touches the raw nerve of fairness in our society. Sorry for my rant due to me having the distinction of not one but twice the “victim” of two “clever” vgo schemes within the course of a year. Boustead Projects and now Great Eastern Holdings. There will be no peace in our market from now on after the GEH saga. It will be free for all going forward. Is there anyone from the authorities brave enough to take a stand? This madness has to stop. Enough is enough. Is there any decency left in our market? As I cried the death of our stock market. 

I have eliminated my holdings in Great Eastern by doing an open market sale. I am more than happy for the person who bought the share to have a go on achieving fair value. At least, I didn’t accept OCBC’s offer. I find it quite bothersome to be dealing with OCBC, quibbling over a few dollars. I will be willing those fighting for higher price. Lone Wolf Fund achieved a return of 41% with dividend included over the course of 3.5 months holding period. A portion of my gains will go to some charity organisations which I support, thanking them for doing God’s work. God Bless. 

*Not an inducement to buy or sell. Kindly do your own due diligence

Wilmar International 

Wilmar is the only addition to the Lone Wolf Fund in June. I accumulated shares over the course of June. The weakness in Wilmar, in large part, is due to ongoing weakness in the Chinese economy. Hog prices have recently rebounded from their lows due to flooding in China. A big part of their business is in soybean crushing that goes into production of soybean meal feed. The deflationary cycle is still continuing in China, in process affecting Wilmar’s margin and profitability. Wilmar International has a worldwide business. It is probably the only listed company in Singapore that has a sizeable operation in India and China. I think the company did a good job of managing the complexity in world trade given the shipping disruption, trade wars and the weakness in key markets. Chairman Kuok has been buying shares in the open market recently with greater frequency. Key strengths of Wilmar include having a world-class board of directors. With two China experts, Mr. Yeo and Mr. Kishore, and the pioneer of Singapore shopping malls, Mr. Peck sitting on the board. Wilmar has one of the most talented and over-qualified b.o.d in Singapore. The current valuation does look cheap at 9x p/e and 0.71x price to book. As for their earnings, I can’t put a thumb down on where their FY24 numbers will be. So far they have been able to clock in earnings per share around SGD 32c-40c for the past 4 years if we strike out the abnormality in FY 2022 where there was a big recovery after the pandemic lock down. One comfortable fact, the company has some big guns shareholders that include PPB Group owns by Robert Kuok and Archer-Daniels Midlands. It is comforting to be swimming with the protection of the big whales. Chairman Kuok owns 14% of Wilmar. 

(Some of the heavy hitters in Wilmar shareholders list)

Cash

I did a roll-over of the lower yield SSBs to the current issue. There was an increase in deployable capital due to the sale of Great Eastern shares. Outgoing includes a new position in Wilmar. Cash holdings have increased to 3/4 of LWF’s portfolio. I hope the next best stock can serenade me to part with my cash soon. In the meantime, home will be a high yielding savings account. 

(Hog prices recovering in China)

Summary

Most of my stock purchases are guided by randomness. I don’t have a predetermination or prerequisite on the type of companies I will invest in. It will be easier if the company comes with a simple business for me to understand. I find keeping an open mind to be helpful with buying good stock. Given the falling numbers of quality stocks listed on our exchange, I am running out of creditable candidates for LWF. It doesn’t help with five more companies in process of getting themselves delisted. I have decided to change my strategy by only investing in institutional stocks. 

As readers of my blog know, I am potentially left with no holding in Lone Wolf Fund given my sale of GEH and the disposal of my Boustead Singapore share last month. In came Wilmar, which is one of my random buy. I have decided to steer clear of the small cap space until the authorities come out with a concrete action plan to revive the stock market. No more knobbly knick-knack! Beware! Undervalued companies, especially small cap stocks, can stay undervalued and trade lower over time if nothing is done. I wish no participation in those value trap given the liquidity, corporate governance issues and a serious lack of investors’ protection that is plaguing our market. I am suspending my purchase of any company below the market capitalisation of $250m unless there is a very strong reason for me to do otherwise. Those trading below the $250m market capitalisation can be a cold and hard place to be in, given there are minimum retail and institutional interests. I might even consider lifting the threshold to a minimum market cap of $500m or higher if the market situation turns more Draconian for small cap stocks. Cheap can go cheaper. Juxtaposing to our growing wealth hub status, the sad state of our market is hard to comprehend. Like anything else, life goes on until someone’s job depend on easing the pain of the market, decided to do something to improve the situation.  In the meantime, I am force to take measures of my own, to find alternatives. HK, US, UK and TSE are some of the overseas markets, I will be looking for value. There is no promise of success.

One day, will I ever give up on the Singapore market? I don’t know is my answer. It is getting harder after getting a left and right lowballing punch from majority shareholders of Boustead Projects and Great Eastern. I am a big believer and supporter of Singapore companies. I still harbour hope for our market to return to its former glory but my patience has been chipping away after decade of underperformance by our market. Analysing companies is the simple task but trying to predict the unkind intention of the majority shareholders is difficult. More listed companies, in my observation, instead of spending more time to improve their businesses, are looking for money inwards with “innovative” schemes and unwarranted cash calls, taking liberties with minority shareholders as the tough economic environment bites. These are disturbing development. Those are the companies to avoid. I want to reinforce my view, fairness is the cornerstone of a progressive society and more so for a stock exchange. Without fairness, no market can exist for long. The strong and powerful will be feasting on the weak and vulnerable. Our local investors deserve better treatment from our listed companies and protection from the regulators. I want to be championing for Singapore stocks for many years to come but my Singapore focus view is getting more difficult to stand on its own. I was told “huh, you still buy Singapore stocks?”. I just laughed it off but deep down I was bothered by that jape. I always thought it is quite natural for Singaporeans to buy Singapore stocks. Singapore equity is where I made my money and to have someone looking at our market with disdain is disheartening. Am I the last generation of Singapore market investors? I hope not. SGX, MAS, Temasek, GIC and MOF over to you. God bless.

(Can someone just stop the train from falling off the cliff?)

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