Wolf Money(portfolio update end Jan 2025)early release
Chinese New Year
Happy Lunar New Year to all my readers. I wish you the best of luck and happiness in the year of the snake. May you profit greatly from your investment.
I remember as a kid, Chinese New Year was a big thing. Preparation started a month before the actual day. From spring-cleaning to giving the house a fresh coat of paint. From making enough Wu Xiang to last for the first 15 days of the new year to decking out the whole house with CNY decor. It had always been a mad rush to the big day. My mum will be cooking all sorts of food, from curry to braised meat. It was a joyous occasion. Everyone in my household was looking forward to having a good celebration.
Over the years, as we ditched our adolescences. Chinese New Year celebrations have become a mellower affair. Besides the exchange of new year pleasantries and the customary reunion dinners. We will be doing our own things afterward. It is my observations, Chinese New Years celebrations in Singapore has been relegated to be another holiday for some. Gone are the multiple visitation to relatives and some have chosen to avoid the inconvenience questioning altogether with planned overseas trips during CNY.
The changing demographics have changed our perception of family bonding. Maybe we are too westernised in our thinking where individualism trumps over collective memory. Our neighbouring countries like Malaysia and Vietnam stand in stark contrast where family bonding still play an important role in their society. Friends from those countries shared wonderful memories of them having a reunion meal with 30 immediate and extended family. Strong family bond is the cornerstone of a strong Singapore.
As we approach an aging society, people around the reunion table are going to get less with each passing year. Treasure your loved ones while they are still around. Reunion dinner should be taken at home, not at some old folks home. I would like our school to prioritise grooming students for the society over students for the economy. Learning how to be a proper citizen and a person of good character should be the top priority of all educators. 十年树木，百年树人 .
As we approach budget 2025. The declining birth rate must be addressed with more forceful measures. One off incentives to encourage procreation will have little effect. I like our government to think out of the box. Ditch the one-off incentive mentality. Bring in the big guns for long term financial support. To encourage more couples to have more kids, it is paramount to lower down the cost of raising a child. Some suggestions I can think of to solve the pain points of raising a child include free rental of a 5 room flat for family with 3 children and above. Half price coe for family with 3 or more children. Free school/tuition fees for kids going to our local primary school to university. We are a rich country if the government is willing to throw money at the problem. The problem will get solved, eventually. I am optimistic with the right policies, in 100 years from now, there will continue to be a tribe called Singaporeans.
Lone Wolf Fund(LWF)
Portfolio as at end of Jan 2025
1.) Cash
Commentary
The couple of STI forgotten blue chips, mainly Genting Singapore and Wilmar International in LWF continue their lacklustre performances into the first month of 2025. I am still cautiously optimistic of their businesses turning around in 2025. I am willing to tolerate short-term weakness for more steady returns. The high yield makes holding them more palatable. The good run of LWF starting the year with a gain over the past few years has come to an end. I would have preferred to start the year with some green for some good omen. Lone Wolf Fund was down 2% for the month.(28th Jan 2025) excluding dividends and cash yield.
Seek deeper
In the US, the correction in tech stocks, especially Nvidia was brutal. Deepseek, a Chinese AI company started by some university students have developed a breakthrough AI model without the need for advanced semiconductors. It was reportedly mentioned some employees of the company doesn’t even have coding and programming skills. It costs only a fraction of what was spent developing ChatGPT and other AI model. The breakthrough sent an earthquake to Wallstreet. As the market reassessed how Nvidia and other AI companies will be affected by the new development. I can’t comment on how this will affect the current AI players, but one thing for sure, money will always find the most cost-effective way out. Will the demand for higher end chips be affected? Most likely. Will Deepseek increase the adoption for AI thus increase the demand for lower end chips? Most likely.
I gave Deepseek Chatbot a go. My initial impression of Deepseek, it does give a fuller answer to my questions and the R1 function(deepthink) gives a wider and in-depth view of the subject. All these services are free at the moment. One of the limitation, it is currently on a trial version with informations up to July 2024. It is an exciting time in the world of AI, but make sure one is betting on the correct “AI horse”.
Wilmar International
Wilmar bought an additional stake in JV Adani Wilmar. I had a look at the financial of Adani Wilmar. The numbers look very strong. Revenue and profit were experiencing double-digit growth. The 1.48b paid for the additional stake might be a potential masterstroke by Wilmar. I expect the India market to be larger than the Chinese market within the next decade given the high consumption of edible oil, rice, and sugar in India. The purchase is Wilmar’s largest acquisition since the purchase of Goodman Fielder. The acquisition comes with a lower risk of execution since it is a JV they had jointly set up with Adani since 1999. The financial of Adani Wilmar is strong, with a AA credit rating and net cash position and close to 720,000 retail distribution points in the country. The SGD $1.48b might be money well spent. The company has a ROCE of 22%, which means AWL is making excellent decisions with shareholders’ fund.
I can see the benefits for Wilmar’s management doing the deal. First, it cut ties with a JV company struggling with its own problems and, secondly, the India market for food FMCG is an untapped gold mine. Adani Wilmar’s large distribution networks could start pushing more Wilmar branded products to their Indian customers. The recent results show strong growth in Adani Wilmar. It speaks of the same trend which I have described earlier. Adani Wilmar’s revenue 3q FY25 grew a strong 31% and profit went up 105%. The company is on track to achieve record profit for 2025.
The company is in a good position to capture the opportunity. With India’s economy growing at 7% annually. The country will be one of the fastest growing economies in Asia, surpassing China. As economic growth improves, consumers will want to switch over to better quality food products. Adani Wilmar’s is the brand owner of Fortune. Fortune is a leading player in edible oil and rice. As an investigative investor, I did a taste test on Fortune Basmati Rice. I got it for 2 bucks after discount on Shopee. The rice is fluffy and has a nice aroma. It is obvious why Fortune is the top brand in the food FMCG space in India.
The expansion into India is not without risks. Currency and local politics are two main risks. In the short term, the deal pushes up Wilmar’s debt profile, closer to 0.9x if the acquisition is fully funded by debt, but in the longer run, it will transformed Wilmar into a unique Chindia growth stock. Wilmar is in the sweet spots in some of the biggest market in Asia, India, China and Indonesia(ICI). Wilmar is the leader in many FMCG food categories in ICI.
The Adani Wilmar deal wouldn’t be effective till 31st Dec of this year. The total purchase price might be lower than $1.9b as Adani had sold more than 13.5% via OFS. It gives Wilmar plenty of time to bring in an equity partner with external capital for Adani Wilmar, thus putting less stress on the balance sheet. The company will be reporting full year results on the 20th of Feb.
Genting Singapore
The company will be opening a couple of new attractions from Feb onwards with Minion land the first of many RWS 2.0 initiatives. It will likely draw more visitors to the island. The Singapore Oceanium will be the next. The growth for RWS like Wilmar will come from India given their country’s strong GDP growth. As Indians get wealthier, more will be travelling. Singapore is within 6 hours’ flight time from major cities in India. Our country welcomed more than 1.5m visitors from India last year.
This year I expect more Chinese tourists to come to Singapore, given the negative media coverage on scam centre kidnapping in Thailand. The usual Sin-Mas-Thai route which is very popular with the Mainland tourists, might be switched to Indo-Sin-Mas. I am expecting more tourists from China to tour other ASEAN countries. Chinese tourists coming to Singapore have reached pre-COVID numbers by the end Nov 2024.
Genting will enjoy the tailwind from RTS opening as Malaysians make up 30% of people going to RWS. Genting will be the one to watch end 2026. I have increased my position in Genting Singapore with the sales proceeds from Boustead Singapore.
Boustead Singapore(sold)
The winter in the business environment in Singapore, especially in the build environment, is likely to continue for a long time given the oversupply of industrial buildings and business parks in Singapore. As more MNCs relocating to cheaper countries. More have decided to put their vacant buildings for sale. With the impact of JB-SG SEZ yet to be felt, our local industrial building sector mimics those experienced in HK in the early 2000s. Manufacturers in HK shifted production to Shenzhen causing a glut in industrial buildings in HK. Are we doing the right thing by shifting all our manufacturing facilities to JB? I don’t know. The shifting of manufacturing to a lower cost location is against the current trend. Many countries like America wanted manufacturing to be done within their country to lower geopolitical risk and supply shock. One example of Singapore caught off guard during COVID where we couldn’t produce our own masks due to lack of basic manufacturing capacity in our country. It is basically the same reason why we don’t shift our ammo manufacturing to other countries. We need those critical items when we need them.
The high interest rate environment is sticky. So far the market hasn’t factored in a reflation of the interest rate. I rate it 1/3 chances of interest rate going up again. A high interest rate environment makes an asset sale more difficult to achieve at the desired price. Boustead’s challenge is also to win enough contracts from overseas to replace the weakness in Singapore.
Cash
There is an uptick in cash level from the sales of Boustead Singapore. I would be interested to do a roll-over of my SSBs if the average yield goes above 3.2%.
Summary
LWF started the year with a negative return. I will have a clearer view of where my portfolio will be heading after 20th of Feb. Coincidentally, both Wilmar and Genting are set to report their full year results on the same day after the market closed. I will be looking closely at their income statements and their outlook. As for the US market, the clarity is limited due to Trump’s unknown trade policies. I will be taking a 2 weeks break to celebrate my Chinese New Year. Once again, Happy Lunar New Year to my readers celebrating the joyous occasion. God Bless.
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