Wolf Money(portfolio update end June 2025)part 2 early released
Lone Wolf Fund(LWF)
Portfolio as at end of June 2025
1.) Cash
2.) Banyan Group
*Stocks are not rank in accordance to capital invested.
Commentary
The US strike on Iran’s nuclear facilities has pushed the war in the Middle East across the rubicon. Further involvement by the US is likely to meet with Russian and Chinese resistance. I suspect both countries will be providing undercover support for Iran, which is part of BRICS grouping. Oil prices rising above 100 bucks will push the fragile world economy into recession. If there is an expanded war in the Middle East. More wealthy Middle Eastern refugees will seek shelter in other parts of the world. The best solution for peace is for all the leaders who are in favour of wars to be gathered in a Vatican-style conclave under locks and keys until a solution is found. This is your silly war. Don’t drag your citizens in. Peace for all. I was more optimistic of a quick solution if it only involved Israel and Iran. Because both countries do not have enough ammunition to last for years. Given US involvement, the war might last a-bit longer until congress decides on taking away some of the executive power from the US President.
For this month’s portfolio update, I will focus more on the Banyan Group.
Banyan Group
The Great Mystery
The Banyan Group got off to a flying start in my portfolio. Shares are on a nice uptrend. I hope the latest uptrend is sustainable. The first quarter result of 86% owned Laguna sparked my optimism. Just to recap, Laguna produced THB 680m or SGD $27m in net profit for 1Q. On a year on year comparison, the first q result of Laguna alone is already more than 4 times that of Banyan’s 1H of 2024(SGD $6.2m). The property sales are the star performer for Laguna resorts and hotels.
I have been listening to Ho Kwon Ping’s(KP) interview from various podcasts on his views about the hospitality industry. In his words, the surge in residential demand in Phuket was due to a growing trend of people buying a second home. The digital nomads could work anywhere in the world. If one can choose to work anywhere in the world, why not a nice, relaxing resort?
There are also security concerns in Ukraine and Russia. The war, unfortunately for many and fortunately for Banyan, did inspire many Russian and Ukrainians to seek a safe haven in Phuket. In process, improved residential sales on the island. Will the war in the Middle East see a new wave of wealthy Middle Eastern buyers into Phuket? Will more and more “climate refugees” be heading to Southeast Asia due to inhospitable weather?
Banyan Group is the largest private residential developer in Phuket with a landbank close to 4 square km that is equivalent to 2/3 the size of Choa Chu Kang. That piece of land was purchased during the 80s at very low price when Phuket was more or less an undeveloped island. The insanely high margin in property development can be seen in Laguna Resorts and Hotels first q result. Revenue of THB 2.739b produced THB 680m in net profit. Even stripping one off items like revaluation and bargain sale from the results. The company still produced close to THB 600m in net profit.
The merits of Phuket can be explained through 13 international schools, a good hospital, many marinas for those who love boating and direct flights from many countries making it a top choice for a resort home. A small condo unit carries a starting price of around SGD $300,000 at one of Banyan Group’s developments. There is also a potential upside to Phuket’s economy if the Thai government decides to build a casino on the island. If I have to put a thumb on the location of the casino. It is likely to be in downtown Phuket(see map. green) where Central Phuket is located. The distance between Bang Tao beach to Central Phuket is approximately 20km. Phuket is one of the four chosen locations for an integrated resort. The Thai government will debate the bill for a casino in parliament during a session next month. The Thai government is likely to back the idea given the softness in their tourism sector and the economy in general. I did a pros and cons on Banyan Group recently. You can read about it here.
KP did an amazing job as chairman, selling his vision for sustainability of the company. KP is one of the best business leaders in Singapore in my opinion. He is charismatic, eloquent and intelligent, but the emphasis on total shareholders’ return should now take precedence. The decade-long poor shareholders’ return has to be addressed. The shareholders don’t have the luxury of sitting on a stock which has produced very little returns since IPO. The situation would be different if shareholders were paid $2m a year by the company. The low valuation did get the attention of the substantial shareholders. KP mentioned in his interview with Nikkei Asia on Feb 2024. The company has given high priority on restructuring to address the shares’ underperformance. One of the ways is to split the hotel management and properties arm into two separate entities. One and a half years have since passed. Shareholders will appreciate an update from the management. Take nothing away from KP. Our ecosystem of listed companies can be better with leaders like him.
The company restructuring should include some sort of value-unlocking exercise. For example, a sale and leaseback exercise involving its 12 hotels will be one way to achieve an asset-light business model which will hopefully usher in an era of higher valuations for Banyan Group. If everything fails, a joint privatisation offer with other key shareholders to buy out the minority is another option. In that sense, restructuring can be done in private for as long as the company requires, without the burden associated with a listed company. Listed Laguna Resorts and Hotels is on a one-year suspension due to non-compliance with a minimum 15% free float required for a listing on the Thai Stock Exchange. They are likely to be delisted if no remedies are found.
Most shareholders don’t have any lofty ambition of saving the earth. Improvement to the environment and the local communities are important issues to undertake, but most retail shareholders are just pragmatic investors looking for a reasonable return on their capital. I like the company’s approach to sustainability and CSR, but then again, sustainability doesn’t pay my bills. For the past 18 years, Banyan Group cumulative dividends have paid out less than 10c. If shareholders had bought the shares at 97c during the IPO 18 years ago. They are still licking their wounds to the tune of a 50% loss to their capital. Holly Molly!
There are risks to the Banyan Group business. The tsunami in 2004 that devastated part of the island and COVID in 2019 exposed the risk of having their fortune tied to a single island location. They have since diversified into other locations.
Banyan Group remains one of the greatest mysteries of the Singapore stock market. With a strong brand name, undervalued assets, robust earnings growth, strong management and a business that has a worldwide footprint. Why is the stock price trading at a decade-low valuation even with a substantial shareholder like Qatar Investment Authority among its ranks? I don’t have an answer. Some self-help internally is necessary. Maybe MAS 5b EMDP can help turn a page on the dismal record.
There are plenty of ways to increase shareholders’ value organically and inorganically. I leave the task to the smart bankers advising the company. Of course, our market has to bear some of that underperformance. It is quite difficult to fathom with the current state of our market, especially in the small and mid-cap space. With the improvement in earnings, I am cautiously optimistic. If I can make a profit in Banyan Group, I will be proud of myself, less on the monetary aspect, but for being able to solve one of the greatest mysteries of SGX. God bless 🙏.
ComfortDelGro
The stock seems to be caught in time. If one had not been catching up with the market for a month, the price is the same when you left for a holiday. The recent Middle East conflict has woken the sleeping dragon in oil. Although CDG is less affected by the rising oil price due to fuel indexing, a lower price is not that unhelpful to its business. I will be watching its 1H result in mid-Aug to have some reassurance about their performance from their acquisitions’ strategy. CDG spent close to $750m last year to improve its profitability. Shareholders will also like an increase in the half-year dividend from the company.
There is news about CDG moving out of their Headquarters in Braddell by 2026. It has been their HQ since the 70s. I guess it is a good move to consolidate their real estate requirements. Gone are the days of the company needing such huge amount of real estate. SBS Transit used to have a higher market share in bus service prior to the bus contracting model. CDG had closed to 17,000 taxis during the peak. Currently, the taxis fleet is less than half of the amount.
As mentioned, in a lot of my previous posts on CDG. The company may need to undertake some value unlocking exercise. A listing of their wholly owned Australia or UK arm could be considered, given they had grown to a significant size. It is time to improve their appalling shareholders’ return over the last 10 years.
Cash
Cash yield is trending down. Major banks are cutting their saving rate in basic and web account. Short term risk-free rate is around 2%. There was a decrease in cash due to Banyan Group purchase.
Summary
Lone Wolf Fund was up 2% for the month as at the end of 27th June. Pushing the YTD performance back to positive territory. Year to date, LWF is up 1.5% (unleverage, excluding dividend and cash yield). This month’s improvement was due to Banyan Group strong debut. I will be keeping an eye on the situation in Middle East before further deployment of capital. I will end this month update in a truly Trumpism way. THANK YOU FOR YOUR ATTENTION ON THIS MATTER! God Bless. 🙏
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