Wolf Money(portfolio update end Nov 2024)
Bye Singapore, Hi Malaysia 2026 part 2
The attractiveness of operating out of a cheaper country has drawn one of the mnc to relocate their operations from Singapore to Malaysia. One of the main reasons cited was the opening of their car parts centre in JB. In Malaysia, one can buy a piece of industrial land at a very low price. JB, with its lower fixed cost and proximity to Singapore, is an attractive location for companies to operate that don't require to provide time critical service to Singapore customers. Warehouses and factories are often built at a fraction of Singapore’s cost. One may view it as an isolated example, but I believe we are at the crossroads of a big shift in trend. More businesses will be relocating to JB. Singaporeans working in those affected industries might need to relocate to Malaysia or face the prospect of being made redundant. JTC should prepare for the era of subpar demand for industrial land. Repurposing industrial land for other usage should be one of their priorities. We could reposition industrial land for use for agriculture or assisted living communities. One of other possibilities is to make our industrial land more affordable for industrialists with a longer term business plan by increasing the tenure of industrial land from the current maximum 30 years to 60 years. We might be facing oversupply of industrial land in a few years time if nothing is done. As mentioned in my blog in April, economic leakages will be more keenly felt with the opening of RTS by the end of 2026.
With daily flights to Malacca, the Malaysian state might be the next hotspot for Singaporeans seeking a cheaper retirement home. Malacca is known for its medical hub status. When a retiree looks for a retirement home, easy accessibility to a medical facility is one of the priorities. With flight time less than 1hr and the exceptionally good food, Malacca is an excellent choice for retirees who need to shuttle between both countries. I have known of a friend in the business of running hospitals in Malaysia. Her company offer medical services to Singaporeans in JB and Malacca. They provide a one-stop shop solution by arranging round trip for the patients doing surgery in their hospitals in Malacca and JB. Knee replacement surgery is one such common procedure which can be performed at half the price of Singapore. The patient can choose a doctor with dual license who can practice in both jurisdictions. With medical costs rising faster in Singapore. With the improvement in transportation options between the two countries, demand from Singaporeans for non-life threatening operations will increase. Medisave could be used for some procedures in their Malaysia hospitals. As for medical doctor, having a dual license may give one an advantage to catch hold the opportunity of Singaporean patients trading down their medical needs in Malaysia,
Lone Wolf Fund(LWF)
Portfolio as at end of Nov 2024
1.) Cash
Commentary
The news grabbing headlines of Trump’s victory dominate Nov market debate. With the newly elected president dead set on imposing higher tariffs on all Chinese goods. If a 60% tariff is imposed, it will cut China GDP growth by 2.5% which can have a catastrophic impact economically and socially. It will almost be certain to cause a big inflation spike in US. Chinese goods have to find alternative sources, it is most likely the rest of the world will be enjoying cheap Chinese made goods flooding the international market. A good opportunity for those countries struggling with high inflation to lower theirs. American made goods will become more expensive. Pro-Western alliances will be cosying to China to hedge their bets. I predict an improvement of relations between the EU and China.
From my observation, Singapore has turned more pro-China in recent years. It might be wise to keep a balanced view on big power contest, at least for the next 4 years. We definitely don’t want to be seen as part of China’s alliance. Our country strives because we know what to do and say the right things, our country can’t be use as a springboard by Chinese companies to bypass US trade sanctions or neither should we be use as pawn to undermine China’s interests. It is a tough balancing act. It is unwise to assume the current trade tension between US and the rest of the world will only last for 4 years or during Trump latest administration. Voters’ sentiment in US control politicians, not the other way round. There will be many Trump copycats in the future.
Wilmar International
My readers already known, I bought back half of my position in Wilmar which I had sold a couple of months ago. Strangely, I bought more after the US election. Wilmar’s share price has retreated back to its starting point before the last surge to a high of $3.47. Palm oil prices have surged to their highest level in a year. Indonesia, the largest palm oil producer with 57% world market share, is implementing the B40 biodiesel scheme in 2025. All motor fuels are required to have a 40% biodiesel blend. Indonesia’s policy to cut reliance on imported fuel will help to mop up excessive palm oil supply in the market. The Thai government has recently imposed an export ban on palm oil due to surging price. That may ultimately cause tighter supply in the international market. Oil palm continues to be the highest yielding vegetable oil for consumption and biodiesel. Wilmar International is the largest producer of biodiesel in Indonesia.
Chinese authorities have shown more willingness to support the economy. Although I did mention, stimulus will have little effect on consumption, because the Chinese save too much. Wilmar International operates in the consumer staples sector where demand is more or less inelastic. One can go without their branded bags or Starbucks coffee, but living without rice, oil and sugar is harder.
There were news about Adani Group Chairman being charged in US court for bribery to the Indian government for advancement of his business interest in solar. I have no idea how this is going to affect the sale of Adani Wilmar stakes to meet compliance with Indian stock exchange rules. The weakness was felt in Wilmar stock. There is no shortage of bad news at Adani Group. What I find it interesting, Adani Wilmar share price actually went up after the initial sell off. Why did it affect Wilmar share? 🤷 . Btw the JV of Adani Wilmar was established since 1999. If there is any corporate governance issue, would Wilmar be doing this JV for 25 years? 🤷. The weakness in Wilmar share is puzzling, given Yihai Kerry shares is recovering and palm oil hitting year high recently. Does that not have an improvement in sum of the parts valuations? If I may suggest an ASX listing for Wilmar Sugar Australia business to create value for Wilmar shareholders, in process reduced their debt further.
Chairman Kuok has been buying shares in open market. Close to 7.5 million shares had been bought in Nov. That was close to $23m spent in Nov alone. It is one of the main reasons for adding to my position. I like boss who show a strong interest in supporting their share.
Cash
After the deployment of capital in Wilmar. Cash level came off from 100%, but continues to be high in my portfolio. With the rising 10 years sgs yield. Returns on cash will improved, so are mortgage rates. Cash is on standby for potential bargain in any market selldown. I find cash to remain an attractive option.
APAC Realty(sold)
I bought a small position in the company and sold it later in the week due to the stock hitting my trail stop. I walked away with a small cup of coffee from the sale. There seems to be very little interest in the stock. The purchase was inspired by the strong take-up rates in recent property launches. Close to 2500 units were sold in Nov alone. It does look like the sector is heading towards a strong year-end closing. More launches will be coming in the first quarter of next year. If there are no major shocks, property sales look good for the next few months. All been said, I should have gotten PropNex instead which has outperformed APAC by a mile. I hope to do better next time.
Summary
Some words of caution, the Russia Ukraine situation is not improving. I am just wary of a nuclear war developing in Europe. As Lone Wolf Investor is getting older, getting in and out of the market in fast repetition might be too hectic for me. I am shifting my investment strategy by focusing more on income generating assets. I will be adding stocks that pays a dividend higher than 5% if I can find the right opportunity. My thinking is still at a primary stage where changes can occurred along with market condition.
Lone Wolf Fund YTD gain stands at a positive 33% unleveraged (excluding dividends and cash yield) unchanged from last month. The small gain from APAC more or less compensate the slight weakness in Wilmar stock in Nov.
I will be traveling and updating of the blog will be irregular. Next month I will be doing my year end review. It has been an interesting year. Never thought Singapore market can be so “exciting” owing to my undeservingly good fortune. Those travelling, stay safe and enjoy your holidays. God Bless.
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