Wolf Money(portfolio update end March 2025)part 2 long post, early released
Lone Wolf Fund(LWF)
Portfolio as at end of March 2025
1.) Cash
2.) Grab
Commentary
The US market went through some wild swings this month. Tech stocks got murdered during March with Nvidia and Tesla heading the losers list. Trump’s uncertainty over tariffs is causing uneasiness in the market. It is not the actual tariffs that slow down the US economy. It is the imposing and subsequent withdrawal of policies that cause businesses to hold back on capital expenditures. The policy flip-flop is causing the real damage. We might get an ugly set of economic data for first quarter. With the world boycotting of US goods, profit warnings are almost a certainty. Nike and FedEx were the first few to warn of a slowdown in the coming quarter due to tariff. Many corporate America will be joining in with their profit warnings. The market may have to wait till Nov 2026 for some form of relief before the mid-term elections reining in on Trump’s behaviour. In the meantime, the stock market is the best bet to rein in on the President’s actions.
I do see lower demand for US debt, especially longer-term government debt, since those countries under trump tariffs will be doing fewer trades with the US. The treasury department will have to roll over using short term debt which is more expensive to finance. That will keep the short-term rate elevated.
The Chinese economy is still in danger, but Chinese equities did better over the last couple of months due to policy certainty.
The Singapore market was resilient in the face of Wall Street sell-off. Our market was mildly positive for the month. Lone Wolf Fund was up 3.5% for the month(as at end of 28th March), bringing the YTD performance back to positive territory. LWF was up 3% for the year(excluding dividend and cash yield, as at 28th March). Grab and Wilmar gave a good account of themselves. Both stocks were in positive territory, helping to lift the overall gain in LWF. Both REITs managed to tick higher in March. Overall, the LWF performance is better than my own expectations in March given the huge correction in the US market.
Grab Holdings
I bought back GRAB after their sharp drop recently. Shares were trading above USD $5.30 just a couple of months ago. Support can be seen at around USD $4, which took 2 years to break through. On the earnings front, they are profitable on a net operating basis in their recent 4q. It is an important milestone for the company. I hope it will usher in a period of sustainable profit after 13 years of losses.
The company continues to build their network effect, thus ring-fencing the business with a strong moat against their competitors. They are the undisputed number 1 ride-hailing app in South East Asia. I do see the app as an essential tool for tourists traveling in this part of the world. Tourists are less price-sensitive given they are likely to prioritise safety over price. I had a chat with the tech guys at Grab. They have made great strides to reduce cost. One way that they did was to use an open-source mapping system rather than the system provided by Google, which would have cost them USD $100m a year. With open-source mapping systems, they are able to map out addresses and roads not found on Google Maps. It gives customers and their delivery partners more accurate information. They are providing GrabMaps service internally and externally. The technology provides them a way to monetise their GrabMaps service through advertising. Other technology deployment includes GrabFood locker for popular area which improves efficiency and earning of partners. Instead of one order, delivery partners can do multiple orders at the same location with one trip. For people interested in the technology. You can visit the link to a video for more information.
The company do have a lot of cash sitting on their balance sheet. Cash per share is close to USD $1.30 which is close to 30% of the last closing price at the time of writing. Cash is good for some M&A. I find Klook a good fit for Grab. Klook sell tickets to places of interest and concerts. Tourists can buy entertainment packages with Grab premium MPV ride included. There is talk of a merger with GoTo. I find the rumour to be a non-starter. It will be tough and close to impossible to get regulatory clearance for the deal. Just imagine, a Gojek and Grab combine will give the entity a 90% dominance in Singapore ride hailing market. It is a monopoly far exceeding the Standard Oil monopoly in the US. I don’t think any regulators will want to see a combination on that scale. I find GoTo too big for Grab to acquire. The rumour price is set to cost in upwards of more than USD 7b.
The combination of the digital banks in both companies is worth exploring in Indonesia. It might face less resistance. Qoo10 is another option if they can buy it cheap out of liquidation. A shopping app is essential to strengthen the network effect. Bite size acquisitions which doesn’t put pressure on the balance sheet should be considered.
Grab is a controversial stock. Some might even associate it with modern slavery, but think again, they created jobs for millions of people in ASEAN which might not even exist. Lifting millions out of poverty. I hope the company can continue to strike a balance between driving costs down and paying their partners fairly as it set on the path to be a profitable company. With happy partners, the business will be more enduring. I have increased my holdings slightly over the course of the month due to weakness in the share price.
Starhill Global REIT
The REIT is trading at close to 7.3% dividend yield, which makes it the highest yielding shopping REIT for a majority Singapore-focused REITs. They have more than 70% of their investment in Singapore. More than 53% of their portfolio is master leased, which makes their property income predictable. There will be no renewal of master leases in the near term. They have 83% of their loan fixed, adding another layer of financial stability. Borrowing came down in their latest results. Most of their malls are located in touristy areas. A bad tourist numbers will likely affect them more than weak domestic spending. Shares are trading at 30% discount to NAV. There is probably limited growth in DPU, but given long WALE of 7.4 years, it does provide a stable flow of dpu to REIT holders.
Wilmar International
The stock had a strong performance in March. The positive sentiment in the Chinese equity market managed to rub off on Wilmar. The stock was up 4% for the month. The uplift in Wilmar also helped LWF put on gains in March. There are corporate acquisitions done by Adani Wilmar(AWL). The India subsidiary committed to paying close to $92m to buy over G.D Foods, which owns the TOPS brand of sauces. The acquisition is another bolt-on strategy to grow its branded FMCG business that commands a higher margin. Both India and China are trying to strengthen domestic consumption by introducing income tax deductions. It will be helpful to Wilmar business as essential priority will be spending on food for hard hit consumers.
Prime US REIT(sold)
I am on a REITs buying spree this month after steering clear of the sector for close to 2 years. I bought a test case in Prime US REIT. They seem to be on the path to recovery. The US office sector is improving as we speak. The lack of new builds over the last few years since COVID has dynamically swung in favour of the landlords. New building permits for offices are at 14 years low. The US- Canada trade war added another layer of costs to building of new offices. Canada is the largest supplier of building materials into the US. Potential investors might find it more attractive to buy the current office stocks than to build new. Prime US REIT owns only grade A offices. Most of their office buildings are relatively new, except for 171 17th Street, which is 22 years old. The REIT manager is keeping 90% of the DPU to be used for uplifting the facilities for older buildings. Prime US REIT remains a speculative test case. If they decide to increase the dpu percentage payout, it will have an outlandish impact on the share price. Shares is trading at a 75% discount to NAV. The downside and upside can be seen with Trump’s economic policy. Tariffs on imported goods will have an effect on job creation and companies on-shoring in the US mainland are negative and positive factors for investors to consider.
As for the REIT, it is a catch 22 where they are too small to be in the radar of most institutional investors. Based on their market cap(less than USD $200m) and high gearing, it makes any securitisation or acquisitions via debt or issuing shares given the discount to book value, close to impossible. The best way forward for the REIT, in my frank opinion, they should do an asset discovery exercise when the occupancy is above 90%. A wholesale of their properties to a larger REIT or a piecemeal sale to interest parties and return capital to REITs’ holders will be much welcome. They do have some attractive grade A properties. The trio of US office REITs trading in our exchange have a price to book value of between 0.26x and 0.42x with Prime Us REIT the cheapest among the group. They are probably still a few quarters before dividends are resumed at a higher level. Capital will be redeployed. Profit from Prime even out the losses at Genting Singapore.
Genting Singapore(Sold)
I sold Genting Singapore this month due to the stock hitting my technicals. Another reason was the puzzling decision for by the management of Genting Malaysia to throw their hat into the ring, to join the race for Thailand casino license.
I wish to give an imaginary scenario. In the most unlikely scenario of Genting Malaysia winning the license for a Thailand casino, will it cannibalise its Singapore’s business? If a big player wants to gamble in one of the casino operated by Genting, which one will the client management team refer the player to go? Thailand wishes to have an integrated casino similar to Singapore, potentially going after the same customers Singapore casino attracts. From what I read, Thailand wants to propose a gambling tax lower than Singapore. Will there be a conflict of interest given the Malaysia and Singapore arms shared similar substantial shareholders? A bid by Genting Malaysia may potentially drove up the bidding price for the Thai license. Will it be better to have one solid bid by the two companies than two lesser bids by two companies? I don’t know if that can work, there might be regulatory hurdles from the Singapore side for a joint bid. Anyway I will leave it here. Kindly don’t take my commentary as cardinal truth. It is just a personal concern. The sale resulted in a 6% loss in this position.
Summary
With the US pulling out of international relations to focus on its own domestic issues. Tougher times are ahead for Singapore and the rest of the world. We can’t assume the tariffs wouldn’t affect us directly. The key word is directly. I find it hard to agree with conventional wisdom, US has a trade surplus with Singapore, so we are on the good books of Trump. Unfortunately, Trump is no honourable man. He walks back his words as quickly as he could say them out. Just imagine, if Trump is in need of money, will he go to his poor friends to borrow money, or will he take aim at his richer friends? Now substitute friends with countries. Are we better friends to the Americans than the Canadians? Nope. The US can even force others to purchase US bonds or black mail countries to invest a minimum amount into the US for military protection etc. Anyway, we just need to prepare ourselves for any situation since we can’t control actions of others. A more enduring efforts towards a common market in ASEAN should be made a priority.
The first “TrumaHawk tariff missile” will be approaching Asian countries on 2nd April with Trump dead set on imposing reciprocal tariffs. India, South Korea and Vietnam are prime targets.
We are still very much an exports-driven economy even though we have pivot into financial services in the last decade. Local businesses relying on selling into the US market will need to diversify into other markets. God bless.🙏 . Selamat Hari Raya to all the Muslim celebrating the joyous occasion.
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