Wednesday, November 22, 2017

Review Of Value Momentum Workshop

I went together with Simple Investor for Heartland Boy's seminar on 21 Nov 2017 evening. 

I was interested in his investment theory – Value Momentum. After all, he had a picked a few exceptional winners over the last 3 years.

Before I continue, I just want to say that I did met Heartland Boy at the Invest Idol competition previously. Although both of us did not make it to the final, he did left an impression on me. I am not sure if his theory started then, but at that time, I already felt that “this guy do know his stuff”. Eventually, at this seminar, he continue to show me that he does know his stuff WELL!

Picture taken from InvestingNote's Blog - The Signal Blog
The seminar started with Heartland Boy explaining he is a self-taught investor and his “Value Momentum” theory basically came about from reading Adam Khoo’s Winning The Game Of Stocks. In his words, this theory was basically 80% fundamental analysis (FA) and 20% technical analysis (TA).

This was the first time I heard about a combination like this and I was intrigued.

Throughout the seminar, Heartland Boy explains in detail about the 8 criteria he used. The first 7 of them being FA related and the last one is TA related (Read his post here and here to understand better).

His FA theory made sense and there was similarities to what Simple Investor did on the Full Analysis Scorecard as well as what I did towards my Ultimate Scorecard.

The main difference was the TA portion and what he said made sense too! It made me wonder if I should include TA as a portion towards my Ultimate Scorecard.

Furthermore, he also went on to explain when to sell and this is something I believe I have to start learning. This year have been bullish and I believe I was able to sell at a good price for most of my counters.

Throughout the event, Heartland Boy was able to articulate precisely and clearly what he wanted to share. He was also able to came out with Singapore counters examples which many of us are able to relate to.

Finally during the Q&A session, Heartland Boy also took his time to answer every single question even for those that are not related to his seminar.

Overall, it was a good seminar and I believe I learnt quite a lot that evening.

If you are interested to know more about The Ultimate Scorecard or Full Analysis, do visit the Fundamental Scorecard website for more information! Do sign up to get the latest scorecard of the SGX counters now!

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Tuesday, November 21, 2017

Reverse Take-Over Situation

When a company engages in a RTO exercise, it is not necessary a cashing out opportunity for the new owners. To them, it may be just a valuating activity.

Normally for RTO, you will hear the "circus" behind the team. There will be quite a lot of news on them so people will know this counter and push up the share price. 

But what happens if the RTO doesn’t have any "circus", especially on the fact that it is so hard to find information on the company that is intending to take over the listing? Does this meant that it is some sort of shady business? What is it all about?

That’s when the investigator in me came out.

Recently, I got caught in this mode when I wanted to invest in a company that is currently in a RTO exercise now. The propose RTO has not been completed. Thus, I will not be stating the company’s name. I will just name it “ABC”.

Nevertheless I will be putting up information on this page which are public information on SGX and the net, which you may straight away know which counter I am talking about.

In addition it is also IMPORTANT TO NOTE that ANYTHING WRITTEN HERE IS BASED ON MY ASSUMPTION. I MAYBE WRONG AFTER ALL SINCE NOT ALL INFORMATION ARE REVEALED.

So what has happened?

Here are some abstract from the announcement:




TL;DR:
  • ABC is going through a RTO exercise with Racecourse Road Properties Pty Ltd, Fifth Avenue Lifestyle Pty Ltd, Tambusu Pty Ltd and Stanley Street Projects Pty Ltd.
  • It will acquire 4 freehold properties in Brisbane and operate under a chain of properties with a concept that has been created and developed to target business owners in the beauty and wellness industry.
  • There are 2 vendors. One of the vendors is an existing director of ABC and owns about 28.4% of ABC. He will eventually become a consultant for the future ABC.
  • The properties has an estimated net asset value of A$9 million dollars.
  • New ordinary shares will be issued at $0.035/share to the vendors.

What I found out:

Googling the 4 companies name and I found out about this - http://www.fifthavenuelifestyle.com/

In fact, this website totally tallies with the information above.

Its business is in Brisbane and it is renting studios to the entrepreneurs within the wellness and beauty industry in Brisbane starting at A$295/week.

From the website, you can also see the locations for the 3 commercial properties. From the people whom travelled to Brisbane before, they stated that these are suburb area catering to the neighborhood.

In addition, I emailed the company on 16 November and they replied me through a 3rd party agent on 20 November.

Extract of the email is below:


Here are my thoughts:

Positive:

1. Rental income. Seems like a REIT model.

2. Pop-up stores seems to be work better for small business owner. Lower startup cost.

3. Brisbane Property yet to fully peak.

4. The website seem to show that the company is expanding. The extra properties will most probably come from the companies in the RTO exercise.

5. The issue share price is $0.035. This is about more than 20% premium about the current share price range.

Negative:

1. The website is designed in 2017. – Seriously?! This business was established only in 2017??

2. The existing director will become a consultant – So he can cash out and say bye bye? This does not make sense to me.

3. The number of consideration shares are not stated. In addition, it seems to suggest that the RTO will release new shares into the market and not a conversion of existing shares. It sounds more like a rights exercise. Dilution?

4. The market value is an estimated figure and the exchange rate used is rather high.

5. No moratorium period stated. Existing directors can sell off anytime.

6. Why was the email replied via a 3rd party agent? – Extra cost, lower profit margin!

7. Revenue calculation: 295/week/studio x 15 studios x 52 weeks (assuming 100% occupancy) x 5 locations (As per website, they will open 2 more places) x 1.08 (Australia exchange rate) = S$1.24 Million - Too low! Furthermore I am assuming a very positive scenario here.

In Short

I have 1000 shares of this counter. But the total value of these 1000 shares can only buy you a few set of McDonald's meal. If you had followed me, you will know which counter I am talking about.

Although I am vested, but with all the negativity I have stated, I will not be adding to my holdings. I prefer to allow the RTO to take place first and see what is actually happening behind the scene.

Lastly I will end of with these words below…

If you are interested to know more about The Ultimate Scorecard or Full Analysis, do visit the Fundamental Scorecard website for more information! Do sign up to get the latest scorecard of the SGX counters now!

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Sunday, November 19, 2017

A "Rubbish" Company

Nowadays, my analysis of counters is fast and easy with the help from Fundamental Scorecard website. I used to require hours to analyze counters. But with the website, all I need is "time on the bus in the morning" to decide on a counter. I will even have extra time to look for additional information - especially those qualitative information.

Anyway I had wanted to write a review of all the counters I wrote in 2017. But I decided to write a review of this counter instead that I bought 2 weeks ago, during one of the morning on the way to work.

I had actually targeted this counter MANY YEARS AGO when it was still 15 cents. However, I was stubborn and only wanted to purchase it at a lower price. To my dismay, it's share price just kept on climbing. After a few months, I reach a conclusion then that its share price will never go back to 15 cents and I completely ignore it ever since.

Share price shot up!
It was only until recently that it caught my attention again, when it passed the Ultimate Scorecard and had a high score for Full Analysis as per Fundamental Scorecard website.

Profile In Short (As per SGX)

Colex Holdings Limited (aka Colex), an investment holding company, provides waste management services in Singapore. The company primarily engages in the provision of waste disposal services for domestic, commercial, and industrial waste; the sale and rental of equipment; and the repair of waste compactors. It also offers recycling, refuse disposal, and contract and general cleaning services. Colex Holdings Limited provides its waste disposal and recycling services for various clients, including commercial offices, shopping complexes, food courts, cineplexes, residential buildings, and warehouses. The company was incorporated in 1971 and is based in Singapore. Colex Holdings Limited is a subsidiary of Bonvests Holdings Limited.


How did it fare against Fundamental Scorecard?


Colex passes the Ultimate Scorecard as of 13 Nov 2017 based on a share price of $0.390.


Colex has a high score on the Full Analysis as of 13 Nov 2017 based on a share price of $0.390.

Other reasons why I purchase the counter...

1. Barriers of Entry


As per NEA website, it is stated that "NEA appoints public waste collectors (PWCs) through open tenders to serve domestic and trade premises in Singapore by geographical sectors. The tenders are open to companies that meet the pre-qualification criteria*. Successful bidders are awarded licenses to provide waste and recyclables collection services for the respective sectors over contract periods of seven to eight years.

Currently, there are four PWCs operating in Singapore. The sectors they serve are indicated on the map below. The seven sectors will be further consolidated into six sectors when the new contracts for Pasir Ris-Tampines and Bedok commence in 2018."

The barrier of entry is high in this industry;
- You have to be appointed as a PWC by NEA.
- There is a list of pre-qualification requirements by NEA in order to bid for the tenders.
- Once you are awarded the tenders, it will be a contract period of 7 to 8 years.
- There are only 4 PWCs at the moment serving 7 sectors.

Thus, in order to enter into this industry, there are very high capital expenditure cost and you must have significant experience.

Colex is currently 1 of the selected PWC serving 1 of the sectors in Singapore, and has won the tender to serve the jurong sector till March 2020.

2. Increase in Revenue, Net Profit, Operating Cashflow and ROE


Base on the information above (screenshot of Full Analysis), you can see that the revenue has been increasing over the years, expect for the latest trailing year. This has also led to the increment in net profit and operating cash-flow over the years, which also led to the increase in ROE as well.

3. No Debt

Despite having a rising ROE over the years, Colex has never taken on any debt.

4. High Insider Shareholding

78% of the shares are owned by Goldvein Holdings Pte Ltd, which is a subsidiary of Bonvests Holdings Ltd. This will be able to stabilized the share price and not allowing it to drop significantly suddenly.

5. Future Growth of Colex

Colex has recently proposed to purchase Vemac Services Pte Ltd. The latter is a company that
carries on the business of the repair and maintenance of refrigerating, air-conditioning and ventilating machinery and equipment.

It seems that, other than rubbish collection and cleaning services, Colex is intending to transform into a full fledged service company. This could potentially increase Colex recurring income ONLY IF the proposed acquisition went through.

The Risk Involved...

1. Low Dividend Yield

Despite the generation of Free Cash Flow on an yearly basis, Colex has not been really increasing its dividend.

Colex current dividend yield is still less than 3%.

2. Higher Future Cost

Salary has been a significant major cost to Colex and it is set to increase in future as stated in their 2016 Annual Report due to the Tripartite Cluster for cleaners on the revised Progressive Wage Model (PWM) for the cleaning industry.


As per the information above, it can be shown that staff cost is a significant factor towards Colex profitability.

However, when compared to one of their most direct competitor, 800 Super, the latter has a higher amount of staff cost.

But on a deeper look, it can be analyse that 800 Super's revenue growth is much faster than its growth in staff cost as the ratio got smaller. For Colex, the ratio has been increasing which meant that the increase in revenue is much slower than the growth in the staff cost.

3. 800 Super Highly Possible In Winning Pasir-Ris Bedok PWC Contract



As per the thread on Valuebuddies and article on the Edge, 800 Super will have a high chance of getting the Pasir-Ris Bedok PWC Contract.

This will meant that Colex will have lost a short term catalyst for the share price.

In Short

If you invest in Colex now, you should be expecting a stable company but with a slow rising share price. If you are looking for significant short term gain or one with possible explosive share price, I guess you are looking at the wrong counter.

Do note that there are significant risks ahead for Colex, especially when it comes to staff costs. Net profit could suffer and "propaganda news" will have push the share price down.

Nevertheless, in view of the positive points that I pointed out, I decided to go ahead and purchase the counter!

In addition, although the 3rd Quarter results are not out yet, but there has been a financial disclosure that its net profit for the current quarter has gone down.

Current Price: $0.400 as of 19 Nov 2017.

Please do your own due diligence before you invest in this stock. 

Do note the author is vested in this counter/company at an average price of $0.408.

If you are interested to know more about The Ultimate Scorecard or Full Analysis, do visit the Fundamental Scorecard website for more information! Do sign up to get the latest scorecard of the SGX counters now!

Oh... and do remember, please like our Facebook page (T.U.B Investing) and follow me on InvestingNote.  

Wednesday, November 8, 2017

It Is About Time Someone Wrote About This Company...

Being a blogger and yet an investor of this company, I met Reyna at the Invest Fair 2017. She is the Financial PR rep office of The Trendlines Group Ltd (aka Trendlines).

Even though she is not a direct rep of Trendlines, she was able to answer my questions very clearly. This was unlike the other companies there whose employees are unable to answer some of the simple question I posted.

She impressed me with her understanding of the company and I immediately went back and bought Trendlines' share – a small portion but this is a start.

Then 1 week later, she actually invited me to Trendlines' management briefing. I agreed straight away.

So guess what happens after the briefing?

I bought more of Trendlines after the briefing.

The reason is because despite having 2 CEOs, Todd Dollinger and Steve Rhodes, they seem to be able to complement each other very well. In addition, they were upfront, honest and were able to articulate their strategy very well to the audience that day.


Profile In Short (As per their website)

The Trendlines Group is an innovation commercialization company. Trendlines invents, discovers, invests in, and incubates innovation-based medical and agricultural technologies. As intensely hands-on investors, they are involved in all aspects of our portfolio companies from technology development to business building. They invest principally through their incubators: their two Israeli government-franchised incubators, Trendlines Medical and Trendlines Agtech, their Singapore incubator, Trendlines Medical Singapore, and their in-house innovation center, Trendlines Labs. Simply stated, they create and develop companies to improve the human condition.

How did it fare against Fundamental Scorecard?

No information via the Ultimate Scorecard due to the company being listed less than 5 years.

Then why did I still buy them?

*Didn’t you already said that you should stick to your Ultimate Scorecard strategy in the previous post!

1. CEOs have been buying

Both of the CEO have been buying the shares of Trendlines since the start of 2017.

2. Strategic Review and Dividend Policy

The CEOs decided to reduce their salaries as an example of expense reduction. I will say this is very very interesting and they set an example across the company.

Trendlines also propose a dividend policy. As much as I will say their dividend policy is a bit confusing, but it is better than having none! The shareholders have been asking the company to pay dividend since they were listed, and at last, their wishes were answered!

3. Consistent Updates of Their Portfolio Companies

Seriously, if you are really interested in their portfolio companies, then you should go and read their updates. Trendlines do update on a monthly basis on their “Most Valuable Portfolio Company” and “10 Companies to Watch”.

Once you read their updates, you will be amazed to know what their portfolio companies are making!

4. They have Almost “No Liabilities”.

In their 2nd Quarter, the company provided a FAQ.

In the FAQ, they explain that, “…Although reported as debt, about 99% of our long-term liabilities are non-recourse and, as such, are conditional debt– coming due and payable in cash only when certain value-building events occur. Our two largest items in this section, loans from the IIA and deferred taxes, only come due upon successfully exiting portfolio companies. If we write off or write down a portfolio company, the part of our long-term liabilities attributable to that portfolio company is also written off or written down.

There are three main long-term liability items:

1. Roughly $2 million of our long-term liabilities as at 31 December 2016 are the long-term portion of Deferred Revenues, which, as explained above, represent our commitment to provide two years of services to some portfolio companies in exchange for shares that we received.

2. Just over $4 million of our long-term liabilities as at 31 December 2016 are made up of Loans from the IIA. This debt is primarily comprised of non-recourse loans received from the IIA under an old funding program, and are presented at fair value. Each loan was granted in regard to a specific portfolio company and is only repayable if we exit from that specific portfolio company for which the loan was received. This method of funding by the IIA is no longer in effect and IIA funding is now given as a grant directly to the portfolio company and not through our balance sheet.

3. The largest part of our long-term liabilities is Deferred Taxes, which at 31 December 2016 was approximately $12.5 million. Deferred taxes derive mainly from the difference between the carrying value and tax basis of our portfolio companies and are recorded mainly when there is an increase in the carrying value of our investment in portfolio companies. These taxes only become due upon a taxable event, when we sell all or a portion of our holdings, such as in the event of an exit. When the value of a portfolio company increases or decreases, the corresponding deferred tax liability will increase or decrease accordingly. If we write off or write down a portfolio company, the deferred taxes attributable to that portfolio company, are also written off or written down.”

At the end of the day, many of the liabilities are repayable only when they exit an investment or sold off a portfolio company.

So if there is no exit, there will be no liabilities payable. Furthermore, it seems that their exits have been very profitable.

During the briefing, it was stated rather explicitly that, in the event Trendlines intend to exit/written off a portfolio company, it will be done at a very early stage so that not a lot of liabilities are recorded.

5. Strategic Partner

Trendlines also have a major strategic partner in B Braun Melsungen AG.

As per Wikipedia, “B. Braun Melsungen AG is a German medical and pharmaceutical device company, which has offices and facilities in more than 50 countries. Its headquarters are located in the small town of Melsungen, in central Germany. The company was founded in 1839 and is still owned by the Braun family.”

6. Trendlines Innovation Labs

Other than the portfolio company, Trendlines also have its own innovation labs. Any product that is created by the lab will not be able to be shown in the balance sheet as there is no value to it yet.

However, once it has signed up some contract or sold some royalties, they will the information recorded in the balance sheet.

This also meant that there could be hidden value in this company that has yet to be revealed.

7. Expansion into China

Trendlines have currently expanded into China. In my own opinion, China has been a very innovative country with the uprising of BAT. However, in my own opinion, for medical devices, they seem to be still lagging behind. I believe this will be the next catalyst for Trendlines in the next few years.

But what about the risk?

The main risk we should take note of is that the how the valuation of each portfolio company is calculated. 

Although this was explicitly explained during the briefing and within the FAQ, but I still have my reservations. On the other hand, based on Trendlines's management experience, it seems like they were mostly able to make a significant gain on their exits.

Another concern I have is if any of the portfolio company that were write off were explicitly stated.

In Short

My conclusion on Trendlines is that it is hard to measure the company quantitatively due to its hidden value. But qualitative-wise, the company does have many positive points and it seems to be expanding in an exponential way.

Finally it is important to note that their product are eventually biomedical/bioagri products, which will definitely have a use if it is produced and market in the right way.

And... I bought more of this counter today!

Current Price: $0.165 as of 8 Nov 2017.

Please do your own due diligence before you invest in this stock. 

Do note the author is vested in this counter/company at an average price of $0.153.

If you are interested to know more about The Ultimate Scorecard or Full Analysis, do visit the Fundamental Scorecard website for more information! Do sign up to get the latest scorecard of the SGX counters now!

Oh... and do remember, please like our Facebook page (T.U.B Investing) and follow me on InvestingNote

Monday, November 6, 2017

There Are No Gurus...

Before I start talking about the main topic, let me conclude a happy event this month. Simple Investor SG and I had just completed our 2nd Value/Growth Investing Workshop. Although the room is a bit tiny, but everyone turned up. There was even an uncle that came all the way from Hong Kong, which was a nice surprise!

Back to the main topic...

This post is basically inspired by SG Thumbtack Investor's article.

He talks about people reporting huge gain this year and explains that if it was just a 1 year huge gain, investors should not be not happy. This is because they forgot about the power of compounding. He went on to explain that if an investor makes 20% every year for the next 35 years, he will make more money than someone who has inconsistent gains ranging from negative 10% to 60% every 5 years.

On the other hand in a Facebook group, BIGS World, there were people questioning about the probability of making 20% every year. But Brian posted a picture stating these superinvestors did.


This led me to the next question - What did they have that so many of us didn't?

I guess the answer is Discipline.

We lack the discipline that these superinvestors have. These superinvestors tend to have a fixed strategy and focus on it consistently.

However, many of us do not have this formof discipline and tend to be tempted about other forms of investment strategy.

Even for me, despite a bull year, I had make mistakes too.

1. Secura Group - I purchased this counter at 137 cents with conviction that I made the right choice, EVEN WHEN IT FAIL ULTIMATE SCORECARD. However, when the counter keep dropping, I continue to BELIEVE THE STORY I CREATED on this counter. Even after its GM and CEO was sacked/resign, I continued to believe MY OWN STORY. When the latest financial report finally showed the turnaround in profit I was looking for, it has to comment that there will be impairment for their recent acquisition of RSPL. So I decided I will end my love for Secura Group asap!

2. Traditional Blue Chips - Anyone who held traditional blue chip counters like M1, Singpost, Starhub, ComfortDelGro or SPH will be having a very "red" year. Generally, traditional blue chips did not do well this year with so many disruption coming from all around the world. Out of the 5 counters, I used to own 2 of them and I am still currently holding on to ComfortDelGro. Similarly, if only I stick to my Ultimate Scorecard strategy, my gains will have much more this year.

In short, I was lucky to have quite a few of counters rising more than 20% and about 2 multi-baggers this year. These gains offset my losses and also contributed to my last count of "18%" portfolio gain. If I have stick to my Ultimate Scorecard strategy, my gains will definitely be much more.

Thus, with this lesson learnt, I hope 2018 (in 2 months time) will be better.

Finally, I will end with this sentence - always know that "there are no gurus". Once you start thinking that you are, that is where you start making mistakes.

If you are interested to know more about The Ultimate Scorecard or Full Analysis, do visit the Fundamental Scorecard website for more information! Do sign up to get the latest scorecard of the SGX counters now!

Oh... and do remember, please like our Facebook page (T.U.B Investing) and follow me on InvestingNote