Saturday, September 21, 2019

UVE - A Company That Thrive In The Most Competitive and Dangerous Landscape!


This post is a reminder for myself of why I invested in the above company. I am vested and comments maybe biased.

Numbers/Finance

Increasing Revenue, Net Profit, Dividend – Over the last five years, the total revenue has just been increasing. Although you can’t say the same for net profit, but on an overall basis, it has also been increasing. As for the dividend, it has also been increasing. Love it (Remember this trend and it will be explain further in the catalyst).

Source: FY2018 10-K
Improving Balance Sheet – Balance sheet has been improving with the rise in total asset along with the rise in Book Value.

ROE, Long Term Debt, Combined Ratio – Return on equity has dropped, but it has maintained at 20+%. But this ROE comes along with low Long Term Debt (Hint!). In addition, just looked at the returns of UVE vs competitors. Furthermore, Combined Ratio* continued to remain below 100%.

*As per Investopedia, “The combined ratio is a quick and simple way to measure the profitability and financial health of an insurance company. The combined ratio measures whether the insurance company is earning more revenues from its collected premiums relative to the claims it pays out.”

Source: Csimarket.com
Source: FY2018 10-K
 Generating FCF – It has consistently generated FCF for the last 5 years.

Source: SeekingAlpha
DCF calculation – My own high discount, zero growth DCF allows me to come up with a figure at over US$30! This is a very conservative figure!

Reasonable Ratios – The ratios are not screaming “Buy Me!” but they are definitely reasonable when compared to industry.

Source: Csimarket.com
Piotroski F Score (Based FY2018) – 5 (Not the most accurate due to different financial statement). However, this figure is not really up to my standard. Nevertheless, it is good enough due to other positive factors.

Business Model

Property and casualty insurance Company Solely Operating in the US – It is a holding company offering property and casualty insurance and value-added insurance services.

Main Business in Florida – 85% of revenue generated in Florida.

Now you must be wondering: Why Florida? It seems to be appearing in the news VERY often due to Hurricanes. Just look at the number of Hurricanes that had hit Florida as stated by Wikipedia! (Read Catalyst).

Source: Wikipedia

Source: Investor Presentation
Cataylst

An unknown Company – In “One Up on Wall Street”, Peter Lynch stated to find companies Wall Street has yet to pounced on. Please read the latest transcript in Seeking Alpha and look at the number of analysts covering it. Its pathetic for such a good company!

Share Buy Back – In Dec 2018, UVE’s Board of Directors authorized a new share repurchase program to repurchase up to $20M of its outstanding shares of common stock through May 31, 2020. This new authorization follows the completion of the $20M share repurchase program announced on November 8, 2017.

Share Price Movement vs Improving Financials – I will be expecting the share price to just keep going up due to improving financials. Hmm… it does not seem like the case.

Source: SeekingAlpha

Reinsurance Program – This is the most important catalyst for UVE and it also showcase its ability to survive in Florida despite being in such a competitive and dangerous landscape. Do read their 10-k to understand their reinsurance program. But basically, they reinsured their risk outwards and expected loss is limited.

Source: FY2018 10-K

Risk

Catastrophic Event – In all insurance companies, the main risk is catastrophic event. Although they have a great reinsurance program. But what happens if the event hit the whole of US? Do note that they do have businesses out of US.

Website Down Outside US (?) – This is probably a joke. But I cannot seem to access their website. If you are working in UVE, it will be good to reflect this to your management!

For those that is interested in the daily discussion of investing theories and companies, feel free to join our Fundamental Scorecard Telegram Group.

Saturday, September 14, 2019

IGG (HK Listed) - A Company with Amazing Returns!

This post is a reminder for myself of why I invested in the above company. I am vested and comments maybe biased.

Numbers/Finance

Amazing Returns in 2017 and 2018 – ROA are more than 45% and ROE are more than 65%! In addition, no comparison among competitors in terms of returns based on 2018 figures:

Feiyu Technology International Co Ltd (1022) - Loss making
Zynga Inc (ZNGA) - Loss making
Ourpalm (300315) - Loss making
Linekong Interactive Group Co Ltd (8267) - Loss making
Netmarble Games Corp (251270) - Super high PE + Low ROE/ROA
Colopl Inc (3668) - Super high PE + Low ROE/ROA
Digital Hollywood Interactive Ltd (2022) - Super high PE + Low ROE/ROA
NetDragon Websoft Inc (0777) - high PE + lower ROE/ROA
Boyaa Interactive International Ltd (0434) - Low ROE/ROA
FingerTango Inc (6860) - Listed 2 years… reasonable ROE/ROA
iDreamSky Technology Holdings Ltd (1119) - Listed 2 years… reasonable ROE/ROA
Zengame Technology Holding Ltd (2660) - Listing less than 1 year
NCsoft Corp (036570) - high PE + Reasonable ROE/ROA
Com2uS Corp (078340) - Worse off performance

Rovio Entertainment (ROVIO) - high PE + lower ROE/ROA

No Debts – Despite being labelled as a growth company and having such high profit, it does not have any debts!

Generating FCF – It has consistently generated FCF for the last 2 years.

DCF calculation – My own high discount, zero growth DCF allows me to come up with a US$0.931 per share (Do your own maths to convert to HK$). This is a very conservative figure!

PE and PFCF – Should be below 7. Very low for a growth company!

Piotroski F Score (Based FY2018) – 7

Business Model

Mobile Games Developer – They are a global mobile game developer. No other weird business going on. 


Attract Talent via Share Options – Looking through Glassdoor, they do not seem to pay too well. But they give LOTS of share options to their employees. Thus, this is how they attract and keep talent. Even with the share options, their number of shares have been going down over the years (to be elaborated under catalyst).


Cataylst

Share Buy Back – In 2018, they bought back 57 million shares for US$75mil in total. In 2019, they have been constantly buying back!


New Games – They just need 1 new massive hit title to break new highs. Recently they have been increasing their R&D cost, which is good. I do believe more innovation is required now more than ever in view of their stagnation of their revenue (to be elaborated in the Risk portion).

Mobile to PC – Recently they have released Lord Mobile to play on PC via download on stream. I do not believe the impact will be great, but it can still boost the revenue slightly. In addition, this provides the company an opportunity in future to create games for mobile as well as PC!

Risk 

Concentration of revenue on Lord Mobile – 80% of the revenue comes from 1 game. If Lord Mobile losses its attraction, the company’s financial will be directly impacted. This has started to show in the interim 2019 figures. (On the other hand, being able to get so much revenue from 1 game that has been running since 2016 is truly amazing as well! If the management can just create another hit title with such amazing results!)


No Moat – In my opinion, there is no moat in such an industry. The rise and fall of a particular game can be fast, within months. Thus, it is important that the company consistently comes up with innovative games to attract new gamers.



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Sunday, September 8, 2019

GDOT (US Listed) - Reasons I Invested In It

This post is a reminder for myself of why I invested in the above company. I am vested and comments maybe biased.

Numbers/Finance

Growing Revenue, Net Profit, Cash from Ops, with consistent FCF generated – A business taking on market share and continuously generating FCF.

No more debts – A growing business allows the company to reduce its debts. Currently it do not have any debts. Thus, there will be significant interest saving moving forward. US$6.5 million of interest expense is paid in FY2018.

DCF calculation – I have a weird way of doing DCF (high discount rate of 15% to 30%) with 0 growth based on the past 5 years of FCF. This DCF allows me to come up with a $19.77. But what happens if 1% of growth occurred and a more regular discount rate of 10% is taken into effect.
Reasonable Ratios - PE stands at 13.15 and PFCF stand at 7.94. This doesn’t shout value. But they are reasonable comparing to other Fintech out there which is still burning cash. (I compare with Fintech because GDOT main clients are deem to be fintechs – To be explained below).

Piotroski F Score – I calculated. It has an 8.

Business Model

Unique Service – From a debit/credit card business model, GDOT has evolved out with a unique service - BaaS (Banking as a service) - that allows the company to act as an escrow agent and doing more as well such as providing card services.

Co-brand Cards – This allow them to work with non-banking parties like Walmart to come up with co-branded loyalty cards.

Working on Tax payment – It seems like it is quite hard to make payment for tax in US for the corporates. Working with intut probably smoothens out the process.

Working with Apple – Yup. Apply Pay platform is managed by GDOT. Apple pay will grow bigger so will the services from GDOT to Apple users.

6 Step Plans – I always love it when management comes up with a plan to build the business. The management here seem to be following it closely and it has been producing results.

Cataylst

Working with Fintechs – Fintech are the next growth phase globally. Thus, they will need a company to service their backend. The company is GDOT due to their ability to be innovative and flexible with their offering. In the Q1 2019 transcript, the company has signed on numerous new partnership with fintech in the US. They are also intending to work with Monzo.

New Partners – Latest transcript stated that 253 new partners who have chosen Green Dot RapidPay for their corporate PayCard solution.

Risk 

Losing Walmart Cobranding – They have a long term relationship with Walmart on a co-brand card that is expiring in May 2020. The management has refused to provide more colour on the working relationship. Losing this relationship will definitely hurt GDOT business. The share price has also react strongly to this by falling from US$50+ to the current share price.

Fintech taking over – There is a chance that Fintech, that work with GDOT, will eventually want to lose them but taking over the services themselves. However, with many fintech still making losses, the threat is small.

Blockchain – Will blockchain presents a threat to GDOT? Yes. When? In my opinion, still miles away.

Paypal/Square/Visa/Mastercard – This is the main threat in my opinion. It is very easy for them to replica what GDOT is doing. However, GDOT is trying to work with all of them one way or another. In this way, it tries its best to eliminate the competition.






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Tuesday, September 3, 2019

The Usage of Timeless Theories

In the world of investing, there are numerous Gurus which came up with different theories that allowed them to make significant gains over the super long term.

Many of us tried very hard to mimic these theories in real life and we gave up half way.

There are many reasons why we gave up:

1. We cannot wait so long.
2. My holding power is not as long as theirs.
3. We are in a growth stage.
4. Recession is coming.
5. We are not them.

and many more...

In my opinion, whoever follows these timeless theories must understand the following 3 points: 

(1) the main gist of the theory: 

For example, Ben Graham theories requires you to understand liquidation value, while Warren Buffett/Charlie Mungar requires you to understand competitive edge.

(2) the theory behind long term holdings:

Long term holdings doesn't really mean buy and hold forever. If there are negative fundamental changes, we should be quick to sell those holdings.

In my view, long term holdings meant that when you buy, you are prepared to holding for a longer period like at least 1 year. However, with the world changing constantly, if you made enough gains, or there is a better choice out there, you can always sell!

(3) I buy doesn't mean you should buy:

We probably should not buy into companies that the Gurus bought. This is probably because you pushing up the share price will only help them and not you. What we can learn from these Gurus' purchases are the reasons why they go into these companies and we can always look for companies with similar traits.

Another simple post which I hope allowed you to understand more about investing.

For those that is interested in the daily discussion of investing theories, feel free to join our Fundamental Scorecard Telegram Group.

Sunday, August 25, 2019

Met An Angel and My Trade-War Portfolio

Yesterday I met an angel investor. I meant he was definitely rich and successful when we communicate. But when he gave me a figure (a figure I felt could be more than my annual package) and stated it is nothing much. It really made me think twice.

This is not the first time I talk to entrepreneurs, the successful ones that has sold businesses and made tons of money, and he made me felt small.

So small - I am not being emo here again, just sharing my thoughts.

It made me felt that no more time should be wasted - Thus, next month things will restart and I hope more good things will come along!

We also had a chat about what I am doing here on this blog and Fundamental Scorecard. The conclusion - its a hard way (Probably the worse) to make money!

Nonetheless, since I have already been on this journey, I decided I should probably give myself another 2 years - Before I decide to go back and just focus on the corporate ladder and the rat race.

My Current Portfolio

I have made changes to my portfolio due to the events in the last few months and what I felt could be much more drastic ahead.

1. Still a concentrated portfolio in terms of position sizing, but a diversified one in terms of number of companies.

2. More allocation for my overseas portfolio, mainly HK and US companies, increasing from 20% to 30%.

Without Further ado... Here it is!

SG Listed Companies:

  • Big Idea 1
  • Big Idea 3
  • Big Idea 5
  • Big Idea 8
  • Big Idea 9
  • Big Idea 10
  • Big Idea 11
  • Big Idea 12
  • An Diversified Companies with 190 years of History and within Oil and Gas Industry
  • One of the local Bank
  • Another finance firm
  • 5G Solutions Firm
  • European REIT
  • SG Hotel + Developer
  • Medical Properties Owner

HK Listed Companies:

  • Shoe-maker
  • Games Developer
  • China Bank

US Listed Companies:

  • American diversified multinational mass media and entertainment conglomerate
  • Patent + IoT Firm
  • Property Insurance Company with main market share in Florida
  • Mall REIT within Philadelphia
  • Manufacturer of wood-based panels and the world's largest producer of OSB
  • global supplier of complete cab systems in the heavy-duty truck
  • Banking As A Service

To be honest, it might be easier to just write down the name of the companies. Just that with regards to the recent guideline by MAS, it is probably better to keep the companies to myself as of now.

But I have been very honest to the members on the Fundamental Scorecard Telegram Group! You can always ask me there in the group.