Shinsho Corporation: Is the stock a bargain?

I was reading SG TTI’s post on Shinsho Corporation and Kobe Steel (read here), and I think it is a good read. For one, it spurs me to find out more about Shinsho Corporation. Or shall I say nudge me a bit out of my slumber :p


I like companies embroiled in scandals, especially scandals that do not affect the business fundamentals of the company but causes a temporary share drop. It reminds me of my experience with Sun Hung Kai Properties.

I typically don’t treat these stocks as long-term plays (unless in the rare case, it turns out to be a really good growth company with long-term profitability). It is basically about going in with the guns flaming and leaving when the hype of the news dies down. I am more concerned about the nature of the scandal (eg. will it have a long-term impact on its business), and whether the company has a strong balance sheet, and profitability to ride out the crisis.

More often than not, it is the stock which chooses me rather than me being the one picking the stock. These are situational plays and it can occur to any company at any time.


In the case of Shinsho Corporation, it is a cyclical stock and I typically don’t like to have a buy and hold strategy for cyclical stocks. And true to its nature, Shinso’s financials is… for a lack of better word, lumpy.



Shinsho Corp Balance Sheet


Generally, Shinsho asset to liabilities ratio looks ok. However, I wouldn’t think too much about asset values. Its values tend to tank in a worst-case scenario.


The latest Current Ratio of 1.19 seems slightly low but not alarming. (Acceptable current ratios vary from industry to industry and are generally between 1.5 and 3 for healthy businesses). The Current Ratio has been trending upwards which is good.

Financial leverage is on the high side. But the figure has been trending downwards which is also good.

Debt/Equity ratio is also on the high side, but not alarming. From a pure risk perspective, lower ratios (0.4 or lower) are considered better debt ratios. However, again the figure has been trending downwards which is also good.

In gist, not exactly in the best shape but not in an alarming dismal state. Most importantly, I reckon it should be able to survive periods of low profitability.


Shinsho Exposure to Kobe

SG TTI mentioned in his post that for the year ending March 2017, as Kobe Steel is a client of Shinsho as well, Kobe bought ¥259,479mil of materials for equipment from Shinso. Now let’s extrapolate this back furthermore. Remember: Cyclical = Lumpy results; Quick buy and sell- no point extrapolating too far back…






Looking at the results from 2014 to 2017, we can see that the Sale to Kobe Steel accounted for approx. 37% of Shinsho’s revenue (average out). Note: I can’t find the sales amount figure in Kobe Steel 2013 Annual Report. It only reported the Sales of Kobe product not the purchase amount from Shinsho.

The tricky bit is forecasting how much Kobe’s revenue will drop (and how much it would impact Shinsho’s sale to Kobe). Kobe has retracted its annual financial forecast, saying it doesn’t know how much the scandal will end up costing.

Kobe Steel is forecasting profit of 35 billion yen (US$313 million) in the year through March 2018, after two annual losses, mostly recently because of falling margins in its steel business and a one-off loss related to its China construction machinery unit.


While the immediate impact from the cheating scandal exposes 500 companies to potential safety issues, Kobe Steel’s total client base is far larger.
In Japan alone, more than 2,100 companies deal with the company, according to credit research firm Teikoku Databank. The majority of these firms, 56 percent, are the small to medium enterprises which make up the backbone of Japan’s economy.
(read here)


Looking at Kobe Steel’s financial (see below)… hmm how shall I put it… Under normal circumstances, I would not take a second look at this company. There isn’t any trend, and if there is – it is downwards.

Kobe Steel has lost money in five of the last 10 years. Then again, it might be the best time to invest in this cyclical stock.

Kobe F.jpg

A key point highlighted by SG TTI is that the industry is doing so well right now that Kobe Steel’s customers cannot switch to their peers even if they wanted to, as all their peers are running at full capacity right now.

In a best case scenario, the cleanup won’t cost Kobe more than a few hundred million dollars, leaving the company humbled but intact, according to analyst Takeshi Irisawa at Tachibana Securities Co. in Tokyo. In a worst case scenario, fines from the U.S. Department of Justice and claims from overseas customers could get a lot more expensive. (read here)

As of now, articles highlighting that Kobe Steel is losing certifications over its metal products and facing lawsuits have been popping up… so the exact impact will not be immediate. Come to think of it – it may not turn out to a hit and run kind of stock. The share price might continue further south in the immediate period.

Well, let’s just assume the worst. For instance, there is totally no sales to Kobe steel by Shinsho. Hence, 37% of Shinsho’s revenue / EPS will go up in smoke for the second half of 2017. This is even a worse case scenario than stated by SG TTI. The final year EPS will only be approx. 525.5 yen (Eg. 2H 2017 will be 63% of 1H 2017 EPS which is 322.41yen).222.jpg

Thoughts on the Price to Earnings Ratio and Price to Book Ratio for Shinsho Corporation

Share-price of Shinsho on 12 Jan 2018 is 3,505 yen. So that gives us a Price to Earnings value of 6.7. That figure is not at the low end of Shinsho’s historical PE. For example, the PE was 5.20 in 2015 and 4.82 in 2011.

And if we assume EPS will not be that much affected, the current PE of 7.02 is higher than the 5-year average PE of 6.75.


On the other hand, Price to Book is also an important metric when looking at a cyclical stock. The current Price/Book Ratio is 0.64. Again historically that is not low. In fact, it is higher than the 5-year average figure of 0.55.

I like to have a bigger margin of safety should I choose to invest. Perhaps the bigger hit (and impact to its financial) to Kobe Steel is yet to be announced, and consequently a bigger drop in share price in the future.

Still, it is a tempting stock to purchase. That is primarily due to the second part of SG TTI’s thesis. The booming steel industry in Japan.

The slight above average Price to Book ratio seen in the context of the booming steel industry does indeed make the stock look like a bargain.

  • Boom for Japan’s largest steel mill on China clean air push (read here)
  • China’s Push for Cleaner Skies Is Good News for Global Steelmakers (read here)

Typically for cyclical stocks, one should look for a high PE and low Price to Book value – which is the period prior to the boom when earnings are low. Often it means that a company is passing through the worst of the doldrums, and soon its business will improve.

Peter Lynch who made many investments in cyclical companies, mentioned that cyclical investors need to think differently. He said that with most stocks, a low PE ratio is a good thing, but not with cyclicals. Buy high, sell low. (read here)

Another article mention that investing base on P/E for cyclical stocks is tricky (read here): Investing based on a low price-to-book value is a much smarter strategy. When a company is priced below book value, investors are saying that its future is so bad that the firm isn’t even worth the money that management has spent on assets to conduct business. Buying at a price below NCAV allows you to achieve significantly higher returns than your peers when the industry eventually turns, while taking far less risk. The approach is to buy cyclical NCAV stocks when the industry is deeply depressed and then to sell those stocks shortly after they reach their average earning potential.

When the Boom is already here


However, given the fact that the Japan Steel Industry is already having a boom (since mid-2017). We are already past that stage when companies have terrible earnings – and investors are already aware of the boom and bidding up the share prices. So looking at the PE ratio is tricky.

  • Global steel riding high as profits soar at Japan mill (read here)

Looking at the chart below, we can see that the share prices of Nippon Steel & Sumitomo Metal, JFE Holdings, Kobe Steel and Shinsho Corp have all been steadily marching up since mid-2017. (UACJ Corporation share price seem range bound).

The plunge in the share prices of Kobe Steel ad Shinsho Corp in early Oct 2017, only seems to temporarily slow down their upward march. Shinsho Corp share price prior to the plunge seems to be enjoying a huge rally.


Looking at the below Price to Book ratios of the various companies, we can see that the Price to Book value in 2015 is, in general, the lowest among the other years’ values.

That is with the exception of Kobe Steel. The current Price to Book value of Kobe Steel is lower than its value in 2015.


Just as the global steel industry basks in a return to profit after the worst slump in years in 2015, the outlook has soured for Kobe Steel, Japan’s third-largest producer, after the company admitted that it faked data on metal products for years. (read here)

Shinsho’s Price to Book ratio is a bit more tricky. It isn’t exactly low or cheap (in relation to 2015 value).

However, given the context of the steel boom (and rare sweet spots that Japanese steelmakers are in), it could present an opportunity.

Anyway just my 2 cents.

munger 2.jpg

Posted in Hong Kong Shares, Japan Shares | 1 Comment

Sarine Technologies: A turn for the better?

I have been cruising in a low gear when it comes to my investment so far. But every once in a while I will do some short-term investments.


Sarine Technologies

I recently bought more shares of Sarine Technologies. The recent news pertaining to the company has been positive and this is reflected in its share price. After stagnating at the lower prices since early Oct 2017, the price has in recent times shown a strong rebound.


That is the thing about Sarine Tech (typically low volume but high volatility). I have previously written a post about Sarine Tech in Oct 2017 (read here).

Somehow, over the years, I have kind of have this thinking about some of the stocks in my portfolio. There are stocks who basically don’t have much volatility… not in a bad way. Overall the share price trend is still up (kind of like Fu Shou Yuan, Vicom, Riverstone, Colex…). But In the case of Sarine Tech, it is a roller coaster. I can take it as a bad thing or take it as a good thing… Bad as in, it often gives me ‘heart palpitation’, good as in I can scoop up more shares when it drops. There are always opportunities – because the news surrounding the industry is very unpredictable.

  • Christmas Special: Sarine Technologies – Will This Hidden Gem Shine Again? (read here)

Nevertheless, fundamentally the company has a good balance sheet and proactive management. So I am not too worried about the company riding out the macro environment issues. Funny, it is often the company itself who announce the bad news (before the official results release)… they are pretty upfront if the impending quarter financial results are going to bad.

It is just how patient I need to be. And I did mention that once there is good news, the stock will rally hard.

  • Record Number of Over 10 Million Rough Diamonds Scanned by Sarine Galaxy® Systems in 2017 (read here)
  • Sarine to sue overseas manufacturer for fraudulent misuse of Galaxy system (read here)

Sarine Tech appears to be doing well on both fronts: The performance of the business of Sarine Tech and the issue on the illicit operations of parties infringing on their intellectual properties. The results may not be immediately apparent in their financials… but we will see.

However, there is one issue which I think is not yet resolved: The diamond retail industry experienced a glut of polished diamonds in 3Q2017, which could be due to the “weaker market conditions”. Hopefully,  the festive demand to lap up excess inventory by early this year.

  • Unexpected industry glut impacts Sarine on top of illicit competition (read here)
Posted in Sarine Technologies Ltd | Leave a comment

Portfolio Update


It has been a while since I last did an update on my portfolio. My previous update was in June 2017 (read here).

In the previous post, I did mention that I wanted to increase my war-chest and perhaps reduce my allocation to equities.


Back in Nov 2015, my cash holdings (including the amount in my SRS account) was only a mere 7% of my total net worth (which excludes the property I am staying in). It then increased to 33% in June 2017.


Today (1 Jan 2018), the cash proportion in my portfolio is now 40%. Well, that may not seem much, but when I compare it with my stock holdings, the proportion becomes much bigger.

The reason being is Stock and Cash is typically the 2 major variables in my portfolio.

The rest of the components like CPF, Insurance Cash Value and Crowd Funding (which is now almost close to zero as I have since stopped investing in P2P loans and Invoice Financing) are more or less fixed, except for the monthly top up from my active income. I don’t use the money in my CPF Ordinary Account to invest, but I do use the money in my SRS account to invest (when the opportunities arise).


Technically, I can say I am now ‘65%’ in cash. And I am still trying to increase that cash percentage.

The below table shows the cumulative profit or loss I have achieved by holding to the stocks. Those yellow highlight rows are for stocks which I have sold or have been delisted (eg. totally divested). So far it has been positive. And the profit/loss takes into account the capital gain/loss via the rise or drop in share prices as well as the total dividend payout received.


Actually, the results aren’t that great as it was over many years, and oh yeah, I did not really record down all the dividends I received esp. in the earlier years. The big rise in the equity markets in the US is not really reflected in the equity markets in Asia (for the past 10 years). And the rise seems to be only concentrated in some industries.

I am sure many who have invested in cryptocurrency would have much higher percentage gains over a much shorter period.


I think my shortest holding period for a stock is approximately 4 months (eg. TalkMed). However, do note that I do sometimes buy and sell the shares, from the time I first bought the shares to the time I totally divest my holdings in that particular stock.

Most of the time, I just add on to my position. I don’t really like to sell my stock holdings unless there is something fundamentally wrong with the company. With that in mind, I also do occasionally fall into the ‘value traps’ while attempting to bottom fish stocks which have declined in price.

The reason why I am reducing my stock holdings is primarily due to the fact that I feel that equities are on the expensive side, and market volatilities are low…. again, there is no science about it. Maybe I just wanted to take a break. I am not forsaking stocks forever. It is difficult to time stocks. Ideally, people want to get out of stocks when they are expensive and then buy when the market corrects or crashes. However, that would be hoping to be right twice. It is the hardest thing to do.

On the other hand, this phrase “Regret Minimization Framework” used by Jeff Bezos do occasionally pop up in my head. I think about the two possible scenarios. (A) Keep the gains and miss the potential upsides… or (B) Remain in stocks and risk my gains. Which option I want to go for so that I would have the least regret? I can’t predict the future, but I know at this point of time, to reduce stock holdings and keep my gains (while increasing my war-chest), seem to be the option which allows me the least regret.

Well, I don’t need the passive income from my stocks to survive. I have a job. There is no rush.

  • The Jeff Bezos Regret Minimization Framework (read here)

I am terrible at timing … and this is especially apparent in Fu Shou Yuan. Actually, I was quite reluctant to sell Fu Shou Yuan. But oh well, a gain is still a gain….


Having said that, there are stocks which I am glad that are divested from my portfolio eg. SIA, SMRT, CapitaLand… to name a few. I feel that stocks in some ways can be a mental burden, especially when the companies (or the industries they are in) have a lot of issues/headwinds. I may have sold SIA at the wrong time given the run-up in its share price after I have divested, but still, I don’t see how SIA can rev up its profit margins anytime soon.

Moving forward, I do intend to further increase my war-chest, and perhaps lock in some of the gains in my remaining stock holdings.

Nevertheless, I do hope that there will be opportunities to increase my equity holdings and perhaps invest in more income stocks. And of course, I will like to buy back those shares which I have divested should they become under-valued again.

So far, my net worth, to me are just figures on a computer screen (or ATM screen). Kind of like playing a PC game (a multi-year one :p). I secretly wish that one day I can actually see the actual amount in the form of cold hard cash. You know, to know how it is like to have that amount in my hand. The pile might look better (or shall I say ‘more substantial’) if the notes are in small denomination :p (eg. like in 2 dollar notes or 10 dollar notes)…..The bank teller would probably think I am nuts hahahahaha…

  • US Debt Visualized in $100 Bills (read here)
  • Sim Lim Square shop pays $1,010 refund in coins (read here)
Posted in Portfolio | 4 Comments

The FOMO feeling…


I always feel that investing is like taking a stance on a particular idea. Either you believe in the thesis or not. There is no in between. It is either you are right or the market is right.

There is no standing on fence and hope that things would work out better or decide after you have bought the stock. In fact, I find it pure mental agony.


Which is why I have avoided cryptocurrency. There are hardcore cryptocurrency believers and then there are those who are against it, and then there are those in between who just want a piece of the action.

Right now it is impossible to avoid the noise. Mainstream news is constantly informing us how bitcoin has reached another new high (hack – I can’t even watch Youtube videos without seeing an Ad about Bitcoin).

  • The Winklevoss twins are now Bitcoin billionaires (read here)

Sure I can SPECULATE with the money that I can afford to lose. But that is not investing. I have no thesis or idea to rely on once the price tank (neither do I know why the price rises). I don’t have an idea that I can live with.

However, having such a rational thinking has its cons. To achieve alpha returns, you need storytellers, the dreamers, those who believe in the narratives more than the numbers. To see things most people can’t.

I always felt that the ‘rationals’ ensure you ‘rational’ returns :p, while big dreams give you ‘outlandish’ returns… however, it is also the rational thoughts that prevent you from ‘outlandish’ failures most of the times, that pull you back from doing crazy things most of the times. To enable you to run longer distances (at a slower speed)… and not many people have the patience. Because it is just tooooo.. damn slow and boring. A younger me would probably be killed by the boredom -seriously. But then again, I did not come to the market to seek entertainment.

Look, I do admit that I do not know much about cryptocurrency.

Is rising price itself, good for the usage of bitcoin? Nevermind the investors. Even as new money flows into crypto assets, businesses are pivoting away from bitcoin to build on other blockchains. That means countless transactions that could be processed with bitcoin, pushing up its price, will now take place on other blockchains, instead of boosting their prices.

Bitcoin is moving in the direction of acting as a store of value, rather than a currency. The new Gold or Silver.

Then, I would always question— with so many other variations of cryptocurrency, doesn’t it kind of dilutes the notion of its (Bitcoin) scarcity. A man-made limited quantity commodity sounds like an oxymoron to me. In the case of synthetic diamonds, there is no cap on how much we can all produce…. otherwise they would definitely be worth more than most natural diamonds given their perfection.

How sure are we that the theoretical total number of bitcoins, 21 million will be the actual final number in circulation? Then again is just having a limited number the main driving force behind its high price.

As Aswath Ddamodaran mentioned in his post (see below): “Scarcity is neither a sufficient nor even a necessary condition for something to be a commodity. Sand is a scarce resource but it is not a commodity because I cannot think of a good use for it; so is bull manure, but that is a discussion for another time and day.”

  • Bitcoin Backlash: Back to the Drawing Board? (read here)

And if Armageddon does occur, will there be electricity or even a mobile device to transmit cryptocurrency?




Moving away from Cryptocurrency, not too long ago, I heard about this idea of investing in foreign properties. Properties in the UK, Thailand and the Philippines. You see, some of the people I work with – they did invest successfully in these properties (especially with the Duterte’s ‘Build, Build, Build’ plans in the Philippines echoing in the background). Well, they were either from that country or have stayed in those countries for long periods or have spouses from there.

  • Duterte’s ‘Build, Build, Build’ plans hit Philippine peso (read here)

Imagine at a table of four, I am the only one with no other properties (except for my humble HDB flat)… Then again, I work in the construction industry… :p

  1. ‘A’ is a Singaporean, who has a HDB apartment unit near central Singapore and another condo unit in Singapore.
  2. ‘B’ is from the UK. Worked in many different countries in Asia (eg. Thailand, China, Hong Kong….). I think he has a property in the UK and another one in Thailand.
  3. ‘C’ is a Filipino. He is a PR in Singapore. He has a condo unit in the Philippines and intends to get one more.

They are hardcore property investors who swear that properties are the best assets (given the many years of good experience).


My parents have bought a condo some time back and are in the process of paying for the condo (while the development is under construction). Even my neighbor has jumped on the bandwagon some time back and has bought a completed condo unit. They are now looking for tenants for their new condo unit.

Looking at the prices of some of the resale condo units… I do believe that they have somewhat increased  (from the last time I checked many months ago). Some are not on the market anymore. Probably due to the en-bloc fever in Singapore these days.

So again, this herd mentality impulse would start stirring within me. No harm finding out… I thought.


But I guess, sometimes, I do need people around me to gently knock some sense in me and ask me… am I getting into this primarily because others are already successful in these ventures… or have I really done my research and making a sound decision.

To make you realize that you are falling into the FOMO trap.



The FOMO (Fear of Missing Out) feeling is especially strong in a rising market when asset prices are rising and you see people around you raking in profits. Telling you how much they have made.

People are social creatures…. we don’t like to stand out and look like a fool.

However, the fact is, there will always be people richer or more successful than you. At the same time, there will also be opportunities which fall within your circle of competency. You just have to be patient (hard right…:p).

I am still in the process of trying to increase my war-chest…. slowly…

Excuse me now while I retreat back to my cave … :p

Posted in Portfolio | 2 Comments

The continuing Saga of Moya Holdings Asia Limited

You know I have been watching bits of the movie “The Big Short” on YouTube. In the movie, there is this character called Mark Baum. Mark Baum, this character is loosely based on an American businessman and investor called Steven Eisman.

There is one statement from him which kind of resonates with me (read here):

Do your own homework. I can’t overstate the importance of this. When things start to go bad, speaking to the management of the company may be the worst thing you can do. You can walk away thinking things are okay when in fact they’re not, because seeing outside your own paradigm is sometimes the hardest thing to do. In the big-bank industry from 1995 up until the crisis, every year was basically a good year. Every year, people got paid more, and every year the leverage got bigger. What happened is that the people who ran these firms mistook leverage for genius. If you had gone to one of the senior people in one of these firms in 2006 or 2007 or 2008 and said, “Dude, the entire assumptions by which you have governed your career are wrong,” they would have said, “Are you crazy? I made $50-million last year. How could I be wrong?”

Greed is a very powerful force. I see it in the cryptocurrency saga, the penny stocks run-up… etc.


People want to listen and read what they want to believe, especially if they have already committed money to it or have seen their investments soar. If it is doing great…. it shows that their belief is RIGHT, right? Eg. What do all those people out there know… did they make as much (in % terms), or more? If they are so right, why aren’t these people raking in the money and turbocharging their way to retirement (like me)? The one who makes the most money is right.

Actually, if you ask me, the most volatile factor/item in my portfolio is the (Stock) Price. The business of the company behind the price, management, vision, balance sheet, business environment, etc… or even my thesis for buying or selling the stock does not even come close (in changing). If I did not invest in stocks, my net worth every day would be about the same (except for the active income I rake in or the monthly expenses I incur – which are really very predictable). However, having stay invested for many years, this net worth figure becomes kinda volatile every single day. It is just mind-numbing (some days I am a ‘hero’, or other days I am a ‘zero’ financially).

Frankly, if I base my success or failure on this short-term net worth figure – I would have a huge headache. I rather have a good night rest.

  • Stock Market Investors Are Too Impatient (read here)

The rate at which people trade today is faster than any development ever seen. A recent article estimated that the average holding period for stock market investors in 2017 was just 22 seconds.


I don’t trade cryptocurrency nor do I trade penny stocks. In fact, given the choice, I rather watch YouTube videos than research on them (hence I’ve probably missed out on a lot of the run-ups). Oh, by the way, I do think there is a much deeper thesis behind the science of cryptocurrency…but it’s too complex for me.

In gist, I just think that a value system base on the monetary value of my stock portfolio is not for me.

Actually, I don’t really aim for the ‘super-fast profit’ kind of strategy, I aim for the ‘avoid bad companies and invest during the direst situations (whereby price is below intrinsic value)’ kind of strategy. :p Like how Howard Marks define ‘playing the loser’s game’ (read here). Just stay in the game.

I did a post about Moya Holdings Asia Limited some time back in Aug 2017 (read here).

To be frank, I probably won’t bother about this stock … except for the fact that someone asked me about it. There are a lot of penny stocks out there….most of the time, I have no idea what their business is about. Perhaps they want it that way in the first place.


The recent drop in its share price is not really unexpected. I can’t really forecast when it will drop… but I am not surprised. The stock dropped from SGD o.118 to SGD 0.1030 from 12 Oct 2017 to 16 Oct 2017. That is 12.7% decline in less than a week.


A quick search revealed that on 12 Oct 2017, the Indonesia’s Supreme Court ordered the government to restore public water services to residents in Jakarta after finding private companies “failed to protect” their right to water.

Foreign Private Companies in Indonesia’s Water Resources Management, such as Aetra (which is a subsidiary of Acuatico Pte. Ltd) – and now under Moya Holdings Asia Limited might be impacted if such ruling is realized.

  1. Indonesia’s Supreme Court Upholds Water Rights (read here)
  2. Indonesia’s Supreme Court Says No to Water Supply Privatization (read here)
  3. Moya Holdings Asia sees dismissal of lawsuit against latest acquisition
    (read here)
  4. Palyja analyzes water privatization termination (read here)
  5. Coalition opposing Jakarta water privatization wins appeal (read here)

Interestingly, in the 4th article above, it mentions that Private water operator PT PAM Lyonnaise Jaya (Palyja) respected the Supreme Court’s decision to terminate water privatization in the capital. And Palyja believed the court’s decision would provide legal certainty for investors in Indonesia.

FYI, Acuatico and Palyja, are the number one and two largest water firms in the country, respectively, by water volume produced.

Acuatico produces nearly 10,000 liters/second and caters to more than 2.8 million customers, some 90% of them in its concession area of East Jakarta. Palyja, an abbreviation of PT PAM Lyonnaise Jaya, is a close second in size to Acuatico, with about 8,500 liters per second, covering West Jakarta.  (read here)

I am not familiar with the government policies or judicial system in Indonesia, but this factor is worth noting.

This is kind of deja-vu for me, as many years ago I have invested in Golden Agri (still holding onto the shares).

Indonesian lawmakers have tried (and are probably still trying) to restrict foreign ownership of plantations to no more than 30 percent. Foreign plantation firms currently operating in Indonesia include Singapore-listed Golden Agri-Resources and Wilmar International, Malaysia’s Sime Darby Bhd and Cargill, and this law would definitely affect them and their shareholders. (read here)

In the case of Moya Holdings, I am content to just watch the development unfold from the sidelines.


The other thing that kind of piqued my interest is the valuation of Acuatico Pte Ltd via Moya’s reverse take-over of Acuatico in June 2017.

I am not familiar with the financials of Acuatico since it was only recently a private company. But let’s do a simple exercise of comparing it with the Chinese water plays such as China Everbright Water and Citic Envirotech.

It is like for anything if you do not know, the only way to judge is to compare. You don’t know if it is worth it, but in comparison, you know if it is ‘cheap’ or ‘expensive’ if you compare apple to apple. Flawed in essence.. but we do it all the time.

Let’s just ignore the balance sheet of Acuatico/Moya Holdings for the time being. We are aware of the valuation and FY 2016 pretax profit of Acuatico base on the acquisition announcement.

  • Salim Group acquires Aetra Air, Jakarta tap water operator (read here)


Let’s think in terms of pretax profit (which I know is not really very accurate as tax is not factored in and tax rates in Indonesia and China differ, moreover it is just one-year pretax profit). Well… that’s all I can work with, with the data given for Acuatico.

Let’s see the companies as purely money generating vehicles, and place a value on each.

The pretax profits of China Everbright and Citic Envirotech are approx. 2.7 times and 3.75 times the pretax profit of Acuatico respectively. However, the market cap. of China Everbright and Citic Envirotech are approx. 3.75 times and 5.1 times the valuation paid by Moya Holdings for Acautico. Much more than the respective proportions of the pretax profits.

The price/pretax profit ratios of China Everbright and Citic Envirotech are also higher than the price/pretax profit ratio of Acuatico.

Put it in another way, using a back of the envelope calculation, given the current ratios, if China Everbright made a pretax profit of US$25.76 million in FY2016, its market cap. would be US$344 million. And if Citic Envirotech made a pretax profit of US$25.76 million in FY2016, its market cap. would be US$333 million. While Acuatico that supposedly made pretax profit of US$25.76 million in FY2016 is valued at US$245.18 million. That is almost US$100 million cheaper than China Everbright’s ‘valuation’.


If we factor in debt since both China Everbright and Citic Envirotech also have debts (lots of it as well)… what do we get? Let’s face it – debt is a big factor in valuation.

Actually, leverage by itself if used properly can be great for a company. However, if the profits are low and the company essentially does not pay any dividend, I don’t see why people would want to invest in the company and hold it for years. It is not a bond that actually pays the investors interests anyway. It is just a ticking time bomb and debt kind of accelerate the whole process.


The top 2 tables show the net debt position of China Everbright and Citic Envirotech. Subsequently, the following 3 tables show the valuation of the companies after stripping away the debt from the valuation. The valuation of Acuatico excluding its debt becomes painfully low if we look at the price/pretax profit ratios (in comparison to China Everbright and Citic Envirotech).


Why is Acautico priced so cheap, at the current market rate? Is it because more than 1/2 of it consists of Acautico’s debt (62.1% to be exact).

Look there is no lack of analysts or reports stating how great Acuatico is or the huge market potential in Indonesia… I get it. But why so cheap?


I started the post with a video clip. Shall end it with another.

Posted in Moya Holdings Asia Limited | Leave a comment

My thoughts on Sarine Technologies Ltd (SGX: U77)


The thing about Sarine Technologies is that there isn’t really a consistent trend in its revenue (well, at least in recent years). Its recent report on the expected revenue and profit for the nine months ended September 30, 2017, has triggered a sell-off in its shares.

I have previously written a few blog posts on Sarine Technologies Ltd (see below).

  • Sarine Technologies Ltd and the rise of the Synthetic Diamond Industry (read here)

9 Month Revenue and Profit History

If we trace back the nine months ended September 30 results from 2010 to 2017… we can see why.



There appears to be an uptrend from 2010 to 2014 until it was ‘disrupted’ in 2015. 2015 was a particularly bad year with a net profit of only US 2.1 mil.

As reported in 2015:

  • Business conditions in the diamond manufacturing industry deteriorated as various market challenges persisted;
  • Unsustainable disparity between rough and polished diamond prices, coupled
    with existing polished inventory resulting in significantly reduced quantities of new rough diamonds entering the midstream, resulted in lower GalaxyTM processing revenues and reduced demand for the Group’s capital equipment.

Things appear to be turning better in 2016 (in comparison to 2015).

Sarine Tech reported a record 60 GalaxyTM family systems delivered in the first nine months of 2016.

On 10 November 2016, the Group announced its new and groundbreaking technology to provide automated, objective and consistent Clarity measurement and grading for the diamond industry. In addition, the Group has also developed a new advanced computerized Colour evaluation technology. According to Sarine Tech, the combination of these two new capabilities will broaden the Group’s existing offerings for polished diamonds with revolutionary new products and services for Clarity and Colour grading.

That is until their recent 2017 Profitability Guidance and Industry Conditions Update:

  • Build-up of surplus inventories of polished diamonds in the mid-stream, which, in fact, worsened built up further in the third quarter, causing manufacturers to slow additional production;
  • Ongoing illicit operations of parties infringing on their intellectual properties, and uncertainties stemming from litigations pertaining to these issues.

2 points on a chart do not make a trend. The uptick in 2016 was undone in 2017. Investors, in general, do not like unpredictability. This is also not a stock covered by many analysts.

  • Rough Supply Up, Polished Sales Down, and Stockpiles Created (read here)

From a business point of view, Sarine Tech has to deal with external issues such as the build-up of surplus inventories (which they clarified is typical of 3rd quarters – read here). Previously it was the unsustainable disparity between rough and polished diamond prices. However, they seem to somewhat come to terms with it by catering new technology that is applicable for both rough and polished diamond (in 2016).

Only to have the subsequent double whammy issue of external parties infringing on their intellectual properties.

Cost wise, Sarine Tech also had ramped up on the marketing expenses to promote their new capabilities. The stronger US dollar also did not help.

From another angle, the profitability of Sarine Tech has also gone down in recent years. If you compare 9M2015 and 9M2010 revenues and net profits, you would notice that although revenues for both periods are somewhat similar, the net profits for 9M2015 is however much lower as compared to that in 9M2015. Innovations, marketing, and expansion do not come cheap. Read an article stating that it costs Sarine Tech approx. USD 10 million per year for R&D.

The Diamond Market

Diamond / Jewellery, in essence, is not a necessity, and the demand fluctuates. Moreover, there have been reports that the diamond market is no longer monopolized by De Beers (read the article below). So hence, there is this variable factor when it comes to Sarine Tech income.

  • A Diamond Market No Longer Controlled By De Beers (read here)

Sales in diamond jewelry have been clobbered by a perfect storm of wilting demand from China, as well as falling oil prices which have hurt sales in big luxury markets like the Persian Gulf and Russia.

Then there are factors pertaining to the recent rise of synthetic diamond and a public market for the trading of diamond (there has been mention of valuing diamonds like gold).

  • Diamonds can now be new gold for investors, says Singapore diamond exchange (read here)

The effect and demand of synthetic diamond are not widely reported. However, ultimately there will still be a demand for natural diamond. Yes.. in today’s ‘synthetic perfect’ world, a premium is allocated for natural imperfect “perfection”, as in the case of cultivated vs natural pearls.

Synthetic diamonds have no resale value. So the market for natural diamond will still be there, but a new equilibrium in market demand is still forming.

“Lab-created synthetic diamonds have no resale value. No jeweler will buy them back and if you try to sell them on eBay, you’ll get pennies on the dollar for it. So, from a value perspective, you would need to buy the lab-created diamond at a massive discount to justify giving up the value retention of natural diamonds……

So for identical diamonds, the lab created choice was 25% more expensive than the natural diamond. That’s right: the claims that lab-created diamonds are 30-40% cheaper are WAYoff-base. In fact, synthetic diamonds are actually about 20% more expensive on average than comparable natural diamonds…….

Given the fact that you are losing all the resale/investment value from your purchase, it seems that lab created diamonds offer very poor value indeed.” Read here.


“Undisclosed lab-grown diamonds are a major threat to our industry. Grading laboratories are essential to ensure the natural pipeline is free of undisclosed lab-grown diamonds and consumers worldwide can be confident of their purchases”, concluded Ms. Azar. (read here)

The trading of diamonds will also place a premium on a natural certified diamond. The creation of an investable market for the gem, might affect the demand for diamonds, especially natural diamonds sealed with certificates of authenticity.

This is where Sarine Tech groundbreaking technology comes in handy (as compared to relying on human’s valuation). Wholly computerized, the clarity grading process need no longer be vulnerable to subjective, human perception.

  • New Israeli machine to standardize diamond grading (read here)

Oh BTW, the world’s first electronic trading platform for the precious gems was launched in Singapore. The Singapore Diamond Investment Exchange has been live since the start of May 2016 and total trading volumes as reported in June 2016 are well on their way to $1 million. Not much, but growing.

  • Singapore Just Made Trading Diamonds Easier (read here)
  • Diamonds may be the next big thing in the futures market (read here)
  • Investing in Diamonds: Should They Be Traded Like Gold? (read here)

Nevertheless, I view the above two developments as positive for Sarine Tech, and they will boost the demand for Sarine Tech technology.

Others with Grading Technology

Other companies involved in the grading technology include De Beers’ International Institute of Diamond Grading & Research (IIDGR), Ogi Systems, GIA and HRD Antwerp.

  • De Beers Grading Firm Makes Asian Debut (read here)

In the case of the Singapore Diamond Investment Exchange (SDIX), the mark on the Diamond Bullion is developed by the International Institute of Diamond Grading and Research.


While the technologies applied by these institutions are constantly improving, we still have not gotten to an industry-wide standard that consumers can feel 100 percent confident to use when making a purchase decision.

Ogi Systems: It has developed a suite of tools, including FireTrace, which measures a diamond’s brightness, fire, and scintillation objectively, along with SimCut, which measures a stone’s symmetry and asymmetry features.

GIA: It has created a product called Facetware available to the diamond market, free of charge. It can be downloaded onto a computer, tablet, or mobile phone. Facetware references a GIA database of more than 40 million diamonds, to determine the cut grade of a diamond after being scanned and compared to references in the database.

GIA’s DiamondDock is perhaps the industry standard tool in human color grading.

HRD Antwerp: It has developed a tool to measure the smoothness of a diamond’s faceting, which a polisher can measure without removing the stone from the polishing tang. 

International Institute of Diamond Grading and Research (IIDGR), a member of the De Beers group of companies: Introduced a new Synthetic Diamond Detection course, to complement some of its newly released detection equipment.

  • Technology in Diamonds – Grading Technology (read here)

In some cases, these companies use the technologies of others for their in-house grading process.

For instance, in the case of IIDGR, each diamond passes through roughly 37 steps before it’s declared a Forevermark stone. The first task involves weighing the diamond: Forevermark measures the carat weight down to six decimal points, as opposed to the industry standard of two. The next step relies on a Sarine machine to determine polish proportions and build a 3-D model of the diamond. (read here)

The Volatility of the Stock

Personally, for me, I first bought Sarine Tech shares in April 2015 and have held on to them until today. However, these shares only account for a small percentage of my portfolio as I was initially doubtful about the sustainability of their high ROE and EPS growth.

I have recently bought a few shares due to the sudden drop in their share price (still a small percentage of my portfolio).

I believe Sarine Tech is able to overcome the issue on the illicit operations of parties infringing on their intellectual properties. I do hope they learn from this and tighten their own ‘security’. It has happened to Steve Jobs (before he created the iPhone). They can’t really prevent it, but they can get smarter about it. It’s a constant battle.

  • What Steve Jobs really meant when he said ‘Good artists copy; great artists steal’ (read here)


As for the external issues of the business conditions in the diamond manufacturing industry and build-up of surplus inventories and the stronger US dollar, nobody can predict and Sarine Tech can’t really do much about it (although they did expand their product range to cover the ‘upstream and downstream‘ markets).  Through new products and services, the company has entered the higher value-add downstream retail segment of the industry, which is more than twice the size of its traditional midstream
market and commands higher valuations.

And as a bottom-up investor, I am not really concerned about the external factors.

Fundamentally, within Sarine Tech itself, I do not see any major issues. Sarine Technologies continues to have a strong balance sheet that has US$37.1 million in cash and equivalents and zero borrowings. And they have been actively upgrading their technologies and marketing them in India and China (not the best place to protect intellectual properties though).

It is not a stock for the faint-hearted. Kind of a roller coaster type of stock (as you can see below). Not one of the better stock in my portfolio – but I have this penchant for down beaten up shares that everyone ignores (I am weird like that I guess).

Its business does not have a strong moat, but they do have an edge over their competitors (which kind of explains the copycat threat). Sarine is the market leader in precision equipment for the midstream segment of the diamond industry. And I see most of their issues as external rather than internal.

On the plus side, once there is an announcement of better market conditions and improvement in revenues and profit, the stock will rally strongly.

And in recent years there has been fewer share repurchase by the company. Which I reckon is due to cost needed for the new technology and marketing.


Posted in Sarine Technologies Ltd | 7 Comments

Why I decided not to use 8 Securities


This post is a continuation of my post dated 23 July 2017 (see below).

  • 8 Securities: Broker to trade US and Hong Kong Stocks (read here)

So yes, 8 Securities does not have holding fees, if I am to buy and hold Hong Kong or US stocks (being a foreigner not residing in HK or US respectively buying these stocks).

I have always been doubtful as to how do 8 Securities earn any commission by not having any holding fees. So I decided to do a small experiment.


Well, I did not actually buy or sell stocks using 8 Securities. My experiment is very simple. I simply transfer USD 50 to and from my 8 Securities account.

So on 7 Aug 2017, I transferred USD 50 from my local bank account to 8 Securities account. Now the exchange rate if I am not wrong (converting from USD to SGD) is USD 1 = SGD 1.36. So USD 50 = SGD 68.

I was notified when transferring online, to pay a transfer fee.


Below, is the statement from my bank account after the transfer. Note that there is another SGD 64.28 on top of the actual amount (SGD 68.55) transferred.

07 Aug 2017 FUNDS TRF – TT
8 Securities Limited
SGD 68.55
07 Aug 2017 SERV CHARGE
8 Securities Limited
SGD 64.28

Now, after I am sure that the amount of USD 50 is reflected in my account, I selected the option to withdraw the amount (without doing a single trade. Then again, what can I buy with USD 50 :p).

I received a phone call from 8 Securities shortly on the next day, asking me if I am certain about withdrawing the amount. And was told that there would again be a fee. I can’t remember the percentage (or absolute amount).

However, the eventual deposit amount I received after the fee is only SGD 37.38 (see below table). Well, the exchange rate might have changed, but not by much. So in effect, just by transferring USD 50 (to and from 8 Securities), I had to pay approx. SGD 95.45 (or USD 70).

I reckon to transfer a larger sum would involve a much larger sum (fee).

25 Aug 2017 INWARD TRF – TT
SGD 37.38

What initially attracted me to 8 Securities was the below 3 key points:

  1. Stocks in 8 securities will be held in a nominee account without any holding fees. 
  2. No minimum trading activity fee.
  3. No minimum deposit requirement.

However, after weighing the transfer fee, I decided not to use 8 Securities.

I reckon, the fee of SGD 2 per counter per month for using a Singapore Brokerage to hold US or HK stocks may not be that great (in comparison to 8 Securities’s transfer fee).


Posted in Hong Kong Shares, Portfolio, US Stocks | 15 Comments

Tencent Holdings Ltd 00700 – Trailing PEG and Intrinsic Value


Mobile Messaging App

Tencent is often compared to Facebook, since its mobile messaging apps dominate the China’s social networking market. Last quarter, its flagship app WeChat hit 938 million monthly active users (MAUs), its older QQ messaging app reached 678 million MAUs, and its Qzone social network had 632 million MAUs.

Video Game Publisher

However, that’s not all — Tencent is also the biggest video game publisher in the world, and its portfolio of blockbuster games include e-sport favorite League of Legends and the mobile hit Clash of Clans.


The robust growth across its social networking and gaming businesses is also reflected in its stock price.


The growth of WeChat as an all-in-one “super app” is making it a top stop for internet advertisers (much to Baidu’s chagrin), while new Chinese games like Honor of Kings and Dragon Nest Mobile are holding its domestic rivals at bay.

However, my personal take is that gaming industry is typically a low moat business, where customers are extremely fickle.

Nevertheless, its business (if we compare to the US model) has aspects of Facebook, WhatsApp, Youtube, PayPal, Apple Music plus its gaming business all rolled into one.

Tencent’s revenue and earnings respectively rose 48% and 42% in 2016. Looking ahead, analysts expect its revenue to rise another 47% and for its earnings to climb 43% — which are incredible growth figures for an 18-year-old company.


Tencent Holdings Ltd 00700 is traded on the Hong Kong Stock Exchange.

Financial statistics

A quick study on the financial statistics of Tencent Holdings Limited (data below was obtained in Yahoo Finance on 27 Sept 2017).


When looking at growth stocks, I try not to look too deeply into their valuations (else I will be sorely disappointed). Let’s look at its profitability and see if it justify the price.

  1. The Profit Margin and Operating Margin is definitely high.
  2. The Return on Equity is good (near 30%) and FYI better than Alibaba’s.
  3. The balance sheet is strong. The resultant cash (after deducting debt is now HKD 2.29B.
  4. Total debt/equity level is not exactly low. Not good but very bad.
  5. The current ratio is not good at 1.36. Not good but just slightly below acceptable levels. Note:  Acceptable current ratios vary from industry to industry and are generally between 1.5 and 3 for healthy businesses.
  6. Tencent offers very little dividend.

Financial Historical Data


If Tencent is a Student. He/she would be in the Gifted Programme. The perfect A kind of student who never ever perform poorly.

Just looking at its historical revenue, net income, earning per share and free cash flow above – the growth is definitely incredible (esp. since it is a large cap. stock).

Top and bottom lines are growing at 40% to 50% annually at the current time!

The current annual TTM Revenue and TTM Net Income are approx. USD 28.7 billion and USD 8.1 billion! It’s 2016 revenue was USD 22.89 billion. Alibaba’s 2017 revenue was USD 23.86 billion.

However, that is still small compared to Apple whose 2016 revenue was USD 215.6 billion.


Nevertheless, ROA, ROE and ROIC have moderated over the years. But its TTM ROE at 30.28 is still very good. Making it a growth stock. The key metric of ROIC at >20 is also great.


The growth is also no debt-fueled.

Its balance sheet is not exactly great but marginally below acceptable levels. The current ratio is marginally below the acceptable level. Acceptable current ratios vary from industry to industry and are generally between 1.5 and 3 for healthy businesses. The Debt/Equity ratio is also slightly above the ideal level of below 0.4. From a pure risk perspective, lower ratios (0.4 or lower) are considered better debt ratios.

The narratives and figures above show that the company has a high return on capital / low capital expenditure business model.


Coming back to growth. Given the huge market cap. size of the stock (at HKD 3.19T which is USD 410 billion), the growth is astonishing. Over a ten-year period, its EPS has an average growth rate of 43%! It is Big and Growing Fast.



Trailing PEG and Intrinsic value

Let’s do a quick study on the trailing PEG and intrinsic value of Tencent Holdings Ltd.

1) Trailing PEG

P/E: 50.6
Dividend Yield (%): N.A.
EPS compound growth rate (10 yrs): 43.26%
The trailing PEG will be 50.6/(43.26+0) = 1.16. Which is not good (> 1), however, it is very close to ok.

2) Intrinsic Value

I am going to use 2 methods to calculate the intrinsic value.

Method 1

First, let’s look at the estimated 10 years earnings growth. Given EPS and a PE ratio, the stock price can easily be calculated for any company. Using the below formula.

F = P(1+R)N where:

  • F = the future EPS
  • P = the starting (present) EPS (HKD 4.87)
  • R = compound growth rate (Using the 10 yrs EPS CAGR which is 43.26%. However let’s take a 20% discount, and use 34.6%. as I am not really sure if growth can be maintained.
  • N = number of years in the future (5)
    Estimated future EPS: HKD 21.5

I will be estimating the future PE of Tencent Holdings Ltd to be 41.59 (See below data from Morningstar) – average of the PEs from 2007 to 2016.


Future Stock Price

P = future stock price
EPS = future EPS
PE = future PE
Hence future stock price of Tencent is 21.5 x 41.59 = 894.19

Intrinsic Value

P = present (intrinsic) value
F = future stock price (894.19)
R = MARR (15% or 0.15)
N = Number of years (5)
Hence, the intrinsic value of Tencent is HKD 445.

Given that the share price of Tencent Holdings Ltd 00700 on 27 Sept 2017 is HKD 338.400, there appears to be a margin of safety.


Method 2

However, if we factor in Risk-Free Rate, Equity Risk Premium, Beta, Operating Cash Flow and Total number of Shares Outstanding, the intrinsic value of Tencent Holdings Ltd 00700 is HKD 320.37 (see below). Then there is no a margin of safety.




Look, I don’t intend to purchase Tencent stocks given the huge run-up in its share price. However, it is worth noting its intrinsic value and to pick it when markets decline.

Posted in Hong Kong Shares | 4 Comments

AerCap Holdings N.V. (AER): Intrinsic Value and Trailing PEG


AerCap Holdings NV is an aircraft leasing company. Its major activities include leasing, financing, sales and management of commercial aircraft and engines. It operates in Mainland China, Hong Kong, Macau, USA, the Netherlands, and few other countries. They also provide aircraft asset management and corporate services to securitization vehicles, joint ventures, and other third parties. Through its subsidiary, the group also provides engine leasing, certified aircraft engines, airframes, and engine parts.

  • AerCap Holdings Is A Value Investor’s Dream Stock (read here)
  • AerCap Holdings (AER): Owned by savvy investors (read here)
  • Mohnish Pabrai Buys AerCap (read here)

I was surfing the web, and the name AerCap kind of popped up. I was curious about this company/stock’s fundamentals and decided to do a quick study.

It is listed in the New York Stock Exchange.

As per its financial fundamentals (see below), it is not perfect.


Looking at the above figures:

The Good points:

  1. In terms of valuation, P/E (7.37) and Price/book ratio (0.94) is low.
  2. The PEG is also below 1 which is good.

The Bad points:

  1. In terms of Management effectiveness, the figures are not great. Eg. ROE is not greater than 20%.
  2. Balance sheet-wise: There is a lot of debt. After subtracting the cash, there is a net debt of USD25.55 Billion.
  3. Nevertheless, the current ratio at 1.19 is too high. A high current ratio can be a sign of problems in managing working capital. (Acceptable current ratios vary from industry to industry and are generally between 1.5 and 3 for healthy businesses).
  4. The current ratio at 1.19 is low. (Acceptable current ratios vary from industry to industry and are generally between 1.5 and 3 for healthy businesses).
  5. There is no dividend yield to speak of.

Seems like there are more bad points than good.

Trailing PEG and Intrinsic Value
Let’s do a quick study on the current share price of USD 49.90 – via Trailing PEG and Intrinsic Value.

1) Trailing PEG

P/E: 7.87
Dividend Yield (%): N.A.
10 years EPS compound growth rate: 10.65


The trailing PEG will be 7.87/10.65 = 0.74. Which is good (below 1).

2) Intrinsic Value

I am going to use 2 methods to calculate the intrinsic value.

Method 1

First, let’s look at the estimated 10 years earning growth which is 10.65%. Let’s assume a 20% discount, the figure will be 8.52%.

F = P(1+R)N

  • F = the future EPS
  • P = the starting (present) EPS (USD 6.32)
  • R = compound growth rate (8.52%)
  • N = number of years in the future (5)

Estimated future EPS: 9.51

I will be estimating the future PE of AerCap to be 8.64.

Average of the PE from 2007 to 2016.


Future Stock Price


  • P = future stock price
  • EPS = future EPS
  • PE = future PE

Hence future stock price of AerCap is 9.51 x 8.64= USD 82.1664

Intrinsic Value


  • P = present (intrinsic) value
  • F = future stock price (82.1664)
  • R = MARR (15% or 0.15)
  • N = Number of years (5)

Hence, the intrinsic value of AerCap Holdings N.V. (AER) is USD 40.9

Given the current stock price of AerCap Holdings N.V. (AER) on 22 Sept 2017 is at USD 49.90, there is a NO margin of safety base on the estimated intrinsic value.

Method 2

However, if we factor in Risk-Free Rate, Equity Risk Premium, Beta, Operating Cash Flow and Total number of Shares Outstanding, the intrinsic value of AerCap Holdings N.V. (AER) is USD 73.54 (see below).


Given the current stock price of AerCap Holdings N.V. (AER) on 22 Sept 2017 is at USD 49.90, using this 2nd method there is a margin of safety (around 32%) base on the estimated intrinsic value.

In gist

I was initially curious to know about the intrinsic value and trailing PEG value of this stock.

However, upon looking at the financial fundamentals, this company is not as perfect as I thought it to be.

The trailing PEG and method 2 of the Intrinsic Value seem to suggest that the stock is undervalued. However, I am not comfortable with its high debt level and low management effectiveness (eg. ROE) and no dividend yield.

Posted in US Stocks | 2 Comments

Timing (TalkMed and Chipotle Mexican Grill)

AAEAAQAAAAAAAA1YAAAAJDE1NzM4Y2YzLTljMmEtNGU4Zi05MmYzLTRmOTBjMDNhZjY4MA.jpgMaybe the title should be “Mistiming”. I have a long history of having a bad timing in buying shares.

I was reading the recent article in the Sunday Times (see below).

  • The best investors sit on plenty of cash (read here)

One statement resonates deeply with me: “But holding cash can be very painful financially since it earns me virtually nothing.”

It doesn’t help when you read about others with much bigger portfolio (heavily invested) in the upmarket reaping record high dividends. On track for their yearly dividend payout target. Somehow, the notion of a sharp market downturn does not faze them. No risk no gain.

I haven’t invested much since mid-2015. Sold some shares in 2017.

However, I did dip into 2 counters some time back. First is TalkMed, and the second is a US counter, Chipotle Mexican Grill. Both saw sharp drops in their share prices prior to when I bought their shares.

I see them as situational distress declines. Even though this does not totally ‘eliminate’ the risk of further drops (as shown by TalkMed), especially if there is a worldwide market crash …. but it I do hope the majority of the issues have been factored in the price which I bought them in.

Actually, I am kind of anticipating a crash anytime soon (but I am still invested)….



I have previously done the intrinsic values of their share prices and studied these companies business before thinking about buying their shares. The share prices which I bought the stocks were near or below the intrinsic values calculated then.

Of course, things have changed. TalkMed CEO was suspended for 8 months (which resulted in the sharp drop), while Chipotle was hit by reports of rats, norovirus at its restaurants.

In the near term, all these will have the material impact on their earnings and performance. In fact, someone (in InvestingNote) has mentioned that TalkMed share price should be SGD 0.35 given the CEO suspension and its consequential impact to its earnings.


However, I am looking way beyond that …… frankly currently I am waiting for share prices to drop further (or weighing if I should wait for a crash and build up my war chest more). Perhaps here I am taking a more bottom-up approach in these 2 cases. Hope they are not value-traps hahahaha.. been there.

Back to why I still invested (even though I am anticipating a crash or correction)… I dunno. For one, I suck at market timing. Sure, I could sell now, wait for the crash and buy later when market trend up… if only life is that simple. There is always this psychological barrier as to when is the right price to buy (won’t it go lower?)….

I basically see myself as a collector of stocks (you know like collecting stamps… always have the album with stamps inside). Just keep collecting, and buy when prices are low. Just stick to the values you have calculated.

Over time, I have also paid more attention to the dividends I received (though I am not really a true blue dividend investor). Hope, it (the number of shares) would keep increasing regardless of market conditions (anyway, I can’t predict the market).

FYI, I am sitting on quite a significant unrealized loss for the TalkMed counter, given the continued drop in its share price (even after the initial knee-jerk drop after the announcement of the suspension). Talk about “bad timing”… :p

Actually, quite a number of stocks have taken a beating (QAF, Singapore O&G, Raffles Medical, Colex, 800 Super, Isoteam, Dutech, CEI Ltd, Sarine Technologies….)

Some of them are low liquidity stocks – which means that their stock price fluctuations can be quite extreme. In the case of Colex, its share prices are basically little changed for many days before taking a huge drop recently.

While the US Market S&P500 is reaching new highs, the Singapore STI has kind of went the other way. :p

Posted in Healthcare Stocks, US Stocks | 2 Comments