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.



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

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.






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

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.

Saturday, August 17, 2019

I am back. I am Terence.

Hi all,

Sorry for the long absent.

Being a dad now to a 3 month old new born, time is probably one of the most precious resource now and in future.

Taking on a new job for the last 4 months has also been quite tough. You realize, again, that it is hard to make everyone happy. When you constantly hit a brick wall at work, you will be amazed at how fast the "fire in the belly" get extinguish.

With those thoughts, you start to question what do you want to achieved in life? Especially with the T.U.B Investing blog and Fundamental Scorecard.

To be honest, I am just an ordinary folk who works a 8 to 6 job and hope to win Toto every single week. I am not a wealthy nor a rich folk and I stay in a four room flat like you. I take the MRT to work and do not have a maid.

With my family, I just want to bring joy and happiness to their life.

At work, I just hope to value add to my company.

Through these years of writing my blog, starting Fundamental Scorecard, starting the telegram group, I only wanted to share my thoughts on investing and hope people benefit from it.

I also never felt I could achieve financial independence. I just hope that by 50, I have some funds or income that allows me to escape the corporate rat race.

So this is me. This is Terence.

Probably the most ordinary folk you meet in your daily life.

With those emo thoughts out of the way, I just like to say that:
- I will try to re-start writing more regularly. But don't expect long post. Just simple post. If it is about ideas, it will probably be in point form.
- Fundamental Scorecard is also under revamp and I really want it to be successful because I do really believe in it.

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

Sunday, April 14, 2019

Hiatus For The Next 3 Months...

The title say it all.

The reason is because I am currently taking on a new role in my working environment and I am also taking on a new role in my personal life.

In addition, I am still investing, managing my FB page and the Fundamental Scorecard telegram group, writing new articles on a monthly basis for the Moat Scorecard subscribers, looking after the subscribers of Fundamental Scorecard website, and once in a while, I will still conduct courses and seminars.

Just too many things. 

Thus, I decided I have to take a break from writing new articles for T.U.B Investing Blog.

Nevertheless, you still can find me at:

1. My Facebook Page - T.U.B Investing
2. Fundamental Scorecard Facebook Page
3. Fundamental Scorecard Telegram Group - This is the place where I shared my new thoughts and ideas much more readily. This is the place where you could ask me and Simple Investor anything. Join Us!
4. Subscribe to Moat Scorecard
5. Subscribe to Fundamental Scorecard Website
6. Find me on InvestingNote

As of now, do note that many of the Big Ideas are doing well. My portfolio just breakeven for the year!

Sunday, April 7, 2019

The Margin REIT Strategy - A Strategy In Writing (Please Complete Reading The Article!)

I am never interested in margin before meeting J.

To me, I always feel human emotions are unable to control the use of margin. Leverage is such a powerful seductive tool that I do not believe any person can escape from it once he/she touches it. Similarly, to believing justice will prevail, I believe in not giving margin a second look.

Nevertheless, I met J recently and he showed me how he used margin to invest and achieved 10% gain p.a. since 2016. To be honest, 10% is not huge. But a consistent 10% is a relatively good return. He basically compares “margin investing” to buying a property. I specifically think it should be compared to buying a 2nd property. This is because his method requires us to consider rental income. I believe we seldom will rent out the 1st property out. The 2nd property will probably be the one to be rented out.

2nd Property Purchase Scenario

You decided on a $1 million property. Since it is the 2nd property, you decided to borrow the maximum 45% Loan to Value (LTV) - which is $450k. Let’s assume you passed the total debt servicing ratio (TDSR) and credit checks. This meant that you will be making monthly installment payment to the bank to pay down your loan. In addition, you have also made plans to make capital repayment, which in turn may reduce your tenure. In a very lucky scenario, you may also already found a tenant for the property and the rent is able to more than cover your monthly installment.

Possible Margin Investing Scenario

Let’s say you had already saved up enough emergency funds and you are left with $1 million disposable cash. You decided to place the sum of money into a margin account which will allow you to leverage to 3.5 times at around 3.28% interest per annum. In order to ensure you will make a return, you decided to only purchase REITs counters. In this way, you are sort of ensure a return of 5% to 8% per annum and is able to have a positive spread which will add on to your return. To my understanding, most of REITs counter are Grade A and allows up to LTV of 70%. Finally, you knew you have a full time job and will receive monthly salary. Thus, you decided to make fixed capital payment to the margin account. Thus, eventually when you fully pay off the loan, you will transfer the shares to your CDP account.

But one will argue that margin investing has a factor that is called “Margin-Call” which property loan do not have! 

Are you sure? Do you know that property loan also has a factor deem as “on-margin call”?
The following extracts are from a MoneySmart article:

“Say you have a property worth $1 million. You take out a home loan to buy it, and after a few years servicing the loan, you still owe $700,000.

Suddenly, the property market crashes, and the value of your house plummets. The bank conducts a valuation, and it determines that your house is now worth only $600,000. This is less than your outstanding home loan of $700,000!

The bank can then choose to issue an on-margin call*, and you would need to top up the difference of $100,000. You can do this using either cash, or your CPF.”
*Please read the MoneySmart article for a full understanding of this on-margin call for property loan.

But others may also argue we should never compare properties with REITs. I am not comparing "apple to apple"!

I do agree that I am not comparing "apple to apple". But I do find a lot of similarities with the 2 products - especially in its demand.

I will not discuss on property, for many of you will understand the reasons behind its demand and how government requires cooling measures to curb the continuous price increase.

However, for REITs, my opinion is that demand is still significant in Singapore due to the following:

- There are numerous Gurus have achieved financial independence via REITs, and there are many others who are intending to follow them into achieving Financial Independence.

- Even after numerous rights issues and bad management decision, you continue to see some of these REITs continue to be listed in SGX. Then again, there could be many reasons to its continued listing such as management has change for the better, etc. But it continues to be there. Google Sabana REIT or Keppel REIT.

- In Singapore, in my opinion, if a company continues to give dividends, there is a chance your company’s share price will recover. This is further supported by Lion Philips REIT ETF and NikkoAM-StraitsTrading Asia ex Japan REIT ETF share price graph. As per the graph below, these ETF has not been performing well over 2018, but recovered strongly in 2019.

REIT ETF Share Price Graph Since Listing (Via Yahoo Finance)
With that out of the way, I created the following table to consider the various factors comparing 2nd property loan vs REITs:


Based on the comparison, I believe both scenarios have their positive factors. Nevertheless, since I am reviewing the Margin REIT Strategy, I will try to amend the strategy to suit more like 2nd property purchase without losing its positive points. 

These are the following rules I came up with to reduce risk and frequency of margin call:

Rule 1: The basis of this theory is because you want to eventually own the REIT. This strategy will not work for trading or short term strategy.

Rule 2: You must have a fixed income job, with emergency cash (at least 6 months of salary) being placed aside. 

Rule 3: To reduce volatility, only pledge cash at the start of the margin account. NO SHARES as COLLATERAL.

Rule 4: Leverage of 3 times of the cash pledged at the start should only be amounting to a maximum of 3 months of your salary.

Rule 5: For each REIT, only loan up to a maximum LTV of 50%.

Rule 6: Ensure that you make fixed monthly repayment to the margin account.

Rule 7: Total Loan should not be higher than 12 months of fixed monthly repayment.

Rule 8: For each REIT you choose, dividend yield must be at least 6% (To be explained below).

Rule 9: Learn to choose a good REIT. I prefer a REIT at Low Price to NAV as per Kenny's website.

Rule 10: Concentrate to get maximum return. Since the total loan amount is not significant, the highest number of REIT should be set to a maximum of 3 REITs.

Rule 11: If the share price of a REIT falls, without ignoring the above rules and ensuring the fundamental does not change, you MAY choose to invest in more of the same 3 REITs. But once you reinvest into the REITs, your 12 months tenure should restart. This is similar to repricing or refinancing a property loan. Thus, there is a need to recalculate.

Rule 12: If a REIT dividend distribution reduces to below 6% or if share price drops more than 30%, DO CONSIDER PAYING OFF THE WHOLE LOAN AND TRANSFER THE REIT TO YOUR CDP ACCOUNT.

The above rules created a situation where it reduces the amount you can loan, but it also reduces the probability of a margin call and helps with getting better returns. 

Nevertheless, the rich can always ignore some of the above rules, and follows their own views. After all, if you are very rich, you will not have any issue passing TDSR and buying a 2nd property too. In addition, if you are very experience and confident enough, you can also proceed to ignore some of the rules above. This is, after-all, still a strategy in writing.

Now, it will be good for us to understand how much return can we earn from this strategy:

Actual Yield Calculation a using Margin with Monthly Repayment
From the picture above, you will realised that a REIT with 8% dividend yield will only return 6.36% dividend yield due to the interest payment.

For a REIT with 4.5% dividend yield, you will end up getting only 2.86%.

On the other hand, for a REIT with 6% dividend yield, you will get a slightly better 4.36%.

However, if you make monthly payment installment to make sure you pay off the loan for the next 12 months, your actual yield will improved as per the table below:

Actual Yield Calculation using a Margin with Monthly Installment Payment 
8% dividend yield minus interest payment – End up 7.11%
4.5% dividend yield minus interest payment – Still a bad 3.61%
6% dividend yield minus interest payment – A slightly better 5.11%

In my opinion, if we took on such a risk, I want to expect at least a 5% dividend yield. Thus, as per my rules above, I believe that we should be repaying monthly and only choose a REIT with at least a 6% dividend yield.

On the other hand, some people may ask – What happens if there is a margin call? What is the probability of a margin call? 

There are many friends informing me that margin call is the worse kind of call you can get in the morning and advised me against doing it (Do note at this point, this is still a strategy in writing). Many have tried it and done it.(Please read the comments in this InvestingNote Post)

So What happens if there is a margin call? - Easy. Just pay up. In fact, pay off the whole loan will be the best. Do note that based on Rule 2 and Rule 4, you should still have some emergency cash that is sufficient to pay off your loan amount.

But What is the probability of a margin call? Thus, I have decided to use First REIT share price as an indicator. Google First REIT on the recent share price drop and scandals it was involved.

First REIT share price (via Yahoo Finance)
First REIT share price (via Yahoo Finance)

Margin Strategy with Share Price Change and Repayment
As per above table and Rule 5, with repayment and LTV of 50%, Margin Call will have a very low probability of happening.

Margin Strategy with Share Price Change and Without Repayment
Even with repayment, at LTV of 50%, the probability of Margin Call is still low. 

However, do note that the First REIT share price is taken on a end-month basis. Margin Call will happen on daily basis and not a monthly basis. During the latest scandal, I remember I saw First REIT fall from $1.200 to a intra-day low of $0.820. This is a fall of more than 30% in share price. 

When I do my calculation on Margin Ratio, a fall in share price of 30% will result in Margin Ratio dropping from 200% to 140%. Anything below 140% will probably result in a Margin Call. Therefore, as per Rule 12, do consider paying off the whole loan and restarting the whole process again. If you are preparing to only top up and average down, please note that you will need to follow Rule 11 and recalculate the whole process.

In Short

The most important issue in Margin Investing is the Human Emotions. One may not be able to handle the "greed" that follows if one made significant gains, or the rash decision when a margin calls happens.

Furthermore, this is a WARNING - if you DO NOT UNDERSTAND WHAT I AM WRITING, please DO NOT PROCEED. 

This is also a rich man's strategy. For many who tried this strategy, it seems that they understand the pros and cons of using margin and has a certain level of networth - thus, able to top up the margin call whenever it happens. 

Nevertheless, this is still a strategy in writing. This is because I still have enough cash and I operate similarly to a fund manager. This Margin REIT strategy is still more suitable for individuals. 

If I have enough cash, I do not believe there is a need use margin to purchase REITs at the moment, since the use of margin will reduce my yield. In addition, there is too much to consider in using a margin strategy. It could be too troublesome. 

Therefore, if I start using my margin strategy, it should be when there is a mini crisis on the market or on a single stock. I intend to use this facility as a market timing tool.

Please do your own due diligence before you engage in the Margin REIT Strategy.

I will also be making a Margin REIT Strategy Tool (still in works) from my excel table above. If you are interested in the tool, please follow the actions below:
- Like TUBInvesting Facebook Page
- Like Fundamental Scorecard Facebook Page
- Join Fundamental Scorecard Telegram Group
- Then PM me on Telegram for the Margin REIT Strategy Excel Spreadsheet (Requires another 2 days, still in works!)

Tuesday, April 2, 2019

I Sold All Of It!


I had sold off ALL OF MY POSITIONS in The Trendlines Group Ltd.

Initially, I believed my losses to be more than 50% due to my excel tracking. But after I calculated, the losses is about 40% instead after holding for about 1.5 years. Nevertheless, it is still a major hit to my portfolio.

The main reason why I decided to take the losses was due to a few reasons:

- I want to have more cash for my margin REIT strategy (Do note I do not add funds to my portfolio. Thus, if I had a new idea, I will probably need to sell an old idea.)

- It is not really about the company. Having already written numerous pieces of the company, I still believe it is a good company. But it is probably not suited to investors living in Singapore whom believes significantly in dividend. Thus, when the company did not release any dividend during the Full Year Report, I decided it was time to breakup with it.

- My new investment enlightenment/philosophy – The importance of certainty and comfort-ability. As I have share to my Telegram group:
  1. Be Certain - Be certain of what company you are investing in. Know it's business, know its moat against its competitors, know how it earns and spent money, etc.
  2. Be Comfortable - After being certain, you have to be comfortable in owning the company. Any noise will not make u think too much, unless fundamental changes.
Thus, do note that I was certain of the company, but uncomfortable to continue to hold it die to its opportunity cost. I foresee it will take at least another year to see some sort of returns given back to investors. 


Therefore, with the above reasons, I hope I explain myself on my decision to sell all my holdings in The Trendlines Group Ltd.

In the next article, I will probably write about my thoughts on the use of margin and my margin REIT strategy.

Please do your own due diligence before you invest/exit in the above counters.

If you are interested in these fundamental investing discussion, do join us at our Fundamental Scorecard Telegram Group

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

Thursday, March 21, 2019

TVB vs Netflix

Recently, I did a poll on InvestingNote. It was an exercise to (1) remove the bias of choosing a company based on brand names and (2) choosing a company to invest in solely using financials.

InvestingNote Screengrab as of 21 March 2.20pm
Without the company name, most investors stated correctly that if solely based on the financials, value investor will choose Company A. Growth Investors will choose Company B.

Overall, it seems that more investors prefer a stable company than one is burning cash. But I have a feeling if I reveal the names of the companies, things may change?

Nevertheless, did I carry out this exercise so that I understand more about investors? NOPE. 

I was actually looking to invest into TVB due to their recent share price drop and negativity news.

Thus, I was looking for a competitor to compare its financials and I picked Netflix.

Many may disagree that they have the same business model. But in my opinion, their strategy as stated below are probably having over 60% similarity.

TVB Strategy

Pros: 

  • Established actors and actress in HK (Some are very famous overseas as well).
  • Stable Base in HK
  • Advertising Revenue 
  • Consistent upbringing of new actor and actress.

Cons:

  • Famous actors and actress leaving for China (Eg Charmaine Seah)
  • Seem to have a reducing base in Asia
  • Does not appeal to westerners.
  • Streaming websites

Uncertainty:

  • Switching to Internet TV
  • The growth into China has always seem to be a roadblock. 

Netflix Strategy

Pros:

  • Use lesser Known Actor and Actress to act as lead, Cheaper.
  • Cheap production + Good story-line
  • Opening up to international audience (Turkey, Korean)
  • Consistent upbringing of new actor and actress to fame or fame again.

Cons:

  • Not getting into Apple TV Service
  • Yet to get into China. 
  • Streaming websites
  • The significant number of dramas on-going - to increase cost

Uncertainty:

  • Short seasons, if the season get more popular, will the actor and actress be willingly to work for less.
  • How long can good story-lines continue to increase?

In Short

After comparing their strategy and their financials, I decided to ignore both companies and move on.

Firstly, I ignore Netflix simply due to its cash burning business and increasing debt. I am uncertain if their business is for the super long hual.

Secondly, I ignore TVB due to their recent negative scandals. Basically, they invested over HK$800 million in SMI Holdings Bonds in order to get more access into China. Since SMI Holdings had to be suspended and restructure, the bonds took a HK$500 million impairment. This resulted in the company having losses of $200 million. 

Although the last sentence do indicate that TVB does have $300 million of cash profit for 2018, but I will have prefer if their impairment was the full impairment of HK$800 million. This is because in this case, I will not need to worry about them taking a second impairment in future. 

On the other hand, I do believe SMI Holdings will recover from the setback and TVB may end up have a controlling stake in SMI Holdings. But these are assumptions with huge uncertainty and significant risks involved. 

Therefore, there seems to be too much uncertainty at stake and I choose not to invest in either company.

Please do your own due diligence before you invest in the above counters.

If you are interested in these fundamental investing discussion, do join us at our Fundamental Scorecard Telegram Group

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Thursday, March 7, 2019

Analysis of Singapore Banks and Finance Firms

As a fundamental investor, I always look at financials statement to analysis if a company is good enough to invest in. However, there is always 2 types of balance sheet we need to take note – The regular one and the Financial Institutions (FI) one.

Normal Balance Sheet
FI Balance Sheet
In the past, if I want to invest in a FI, I used to tell myself – I don’t know how to analyze their financials, let’s skip them!

But as days, weeks, years went past, and you realise that there are numerous financial firms in of Berkshire Hathaway picks, that’s probably an indication for me to start to learn how to analyze a FI financials.

After jotting down a list of criteria and factors, I reduce it to these 4 criteria.

1. Return on Assets (ROA)

Formula: (Net Profit - One-time Gain) / Total Assets x 100%

In my opinion, Return of Assets is the most powerful ratio of them all to calculate the performance of a FI. I believe it is mention by Warren Buffet before (lost track of the write up) and a good indicative ROA is 1%.

For the calculation of ROA, I will remove the one-time gains, such as gains from disposal of subsidiaries or fixed assets, from the earnings figure.

2. Price to Book Ratio

Formula: Share Price / Book Value Per Share

To analyse a stock, I do believe there should be a criterion that relates to the share price in order to indicate if a FI is a good investment at that point in time.

Price to Book ratio is chosen because it looks at the liquidation value of a company.

In the aspect of a financial firm, their assets tends to be more liquid than other companies. Thus, this should be taken into account.

3. Allowance For Doubtful Debt (ADD)

Formula: Allowance For Doubtful Debt / Total Loans & Advances & Receivables x 100%

ADD indicates an FI ability to underwrite the loan applications for its customer. A higher percentage could meant that the credit review for the loan applications is too relax in order to gain market share!

Some companies may not have ADD, and it is not because that their companies are doing really well, but it maybe due to the company's ability to reverse previous years' doubtful debt.

In this case, the ADD is not explicitly stated and we will probably require the annual report to be released before getting the actual information.

4. Net Interest Margin (NIM)

Formula: Interest Income - Interest Expense x 100%

This formula is similar to the Gross Margin and looks at FI's ability to charge more interest to their clients despite providing an almost similar product. This formula relates to a FI's competitive advantage against it competitors.

If you are interested in fundamental analysis as shown above, do sign up for our latest AIM-SG course HERE where we will discuss fundamental investing theories and many more!

The companies selected for review are the following firms:

Banks: DBS, UOB, OCBC
Consumer Finance: Hong Leong Finance, Sing Investment & Finance, Singapura Finance
Diversified Finance Services: IFS Capital

*Do note that Pawnbrokers, IFAST and Net Pacific Financial Holdings are ignored due to their business model.

FI Analysis

From the analysis above, there are a few observations:

1. Higher ROA result in Higher PB ratio. 

I consider ROA to be the most important criteria, but I did not knew it was inversely related to PB ratio.

2. Higher Interest Income Do Not Result in Lower NIM. 

In terms of maths calculation, I thought NIM will definitely be higher if the FI has a lower interest income, but this is not the case.

3. 1-Year Analysis Is Not Sufficient

An analysis of 1 year result is not sufficient to clearly indicate a company's strength or its weakness. More results will be required.

4. ADD % not Significant

There is not much significant difference between the ADD % for the selected FI. A deeper analysis will be required once their annual reports were released.

In Short

Despite the short exercise above, it actually reveals significantly the difference between FI and their target markets.

However, this is just a preliminary review and more analysis will be required if one intends to invest in any FI stated above.

If you are interested in discussing about various fundamental investing thesis, do click HERE to sign up for our latest AIM-SG course. We will also be discussing about various companies selection ideas that we have and many more!

The author is vested in one of the FI discussed above. 

Please do your due diligence before investing in any FI above.

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

Sunday, March 3, 2019

Take A.I.M. - The Singapore Market Version!

With the success of "A.I.M.- Actionable Ideas Movement", Simple Investor and I had decided to conduct a similar course for Investors of the Singapore Stock Market.


I can never say enough. But once again, I will like to say a BIG THANK YOU to everyone that attended AIM. You made the event a success! 

What is A.I.M. – SG Version?

This is an extension of the newly design course – Actionable Ideas Movement – within the Singapore Market.



The main AIM for this course is to:

(1) introduce new investing methods to the Singapore Investors; and
(2) by the end of the course, we hope participants will be able to invest in Singapore Markets with comfort and the right mindset, regardless of the macro environment.

This course also AIMs to provide what participants want such as the following:

1. The course will allow participants to ask questions beforehand. These questions will be answer during the course. (An email will be sent to the email address you registered with eventbrite for the questions you will like me to talk about during the session.)

2. Participants will be allowed to provide and discussed stock ideas in the SG market during the small group discussion facilitated by TUBInvesting and Simple Investor!

3. TUBInvesting and Simple Investor will also come up with the stock idea for the year each for discussion!

4. There will also be a weekday evening FOLLOW UP SESSION 6 MONTHS LATER to review on all the ideas that was discussed (No extra payment required).

Highlights of the Course:

- The revelation behind “Big Ideas Investing Theory” by TUBInvesting

- Moat Investing/Own Business Not Stocks by Simple Investor

- A Explanation of a Step by Step Investment Process

- Answering Your Questions Given Beforehand

- Small Groups Discussion for Ideas Generation

- TUBInvesting Idea for the year!

- Simple Investor idea for the year!

- Get to participate in the next AIM – HK/US version for just $20!

- A booklet of the slides and a simple packed lunch will be provided!

- There will also be an Investment Game at the end of the course!

If you are interested in this event, do sign up via this LINK. I will only be limiting the course to a maximum of 20 pax (Left 15 now!).

A little note to those interested in the Investment Style of Warren Buffet and Charlie Munger, I look forward to meeting you at the event!


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

Thursday, February 28, 2019

Big Idea 13

As indicated in my last post, I had already sold Big Idea 5. Therefore, I am still on the lookout for the next idea to invest in.

Currently, for my Big Ideas Investing Theory, I have wrote about 12 Big Ideas and I had sold about 3 of them. Overall, I am still holding on to 9 of them which contributes about 60% to 70% of my portfolio.

I caught a glimpse of Big Idea 13 on a valuebuddies forum. Then I went to work on it. I was so excited about this idea that I shared it on my Fundamental Scorecard Telegram Group.

Then, Simple Investor shared it on his Facebook Page.

Screengrab of Simple Investor Facebook Page
OMG...this ballooned the members on my Fundamental Scorecard Telegram Group from 48 members to the current 130 members within 2 days. I am still very amazed by the support and will like to still say a Big "Thank You" to the old and new members in the group.

So after my initial analysis on Big Idea 13, I came up with this summary.

"The company has 2 business entity - Semi-con and CEM.
Last year FCF due to Semi-con. CEM still loss-making.
Recently they sold and completed the Semi-con business of 14 million for 84 million.
Current NAV is 20 cent at about 45 million.
84 + 45 = 129 million / 56cent per share.
As per disposal report, they will give out 24 cents as special dividend (May or may not eventually)
Current share price is 34.5 cents. 
Full year result should be announced soon.
The one-time gain on disposal will be huge.
If want to keep for long term, I am not so sure. But short term, share price should spike up.

Please DYODD."

That night, the company released its full year results.

Portion of the full year results
It seems to indicate that I made a MISCALCULATION in my Net Asset Value. Instead of 56 cents, it is just 37 cents. Oh No!

I apologized to the group and continued to do my homework for the next 2 days. After all, I am already vested at this point (The impatient me...and the information below could be biased).

What Did I Found Out?

1. The Company had completed the sales its Semi-Conductor Business at S$84.5 Million (Actual Sale Price). The company is left with its Contract Equipment Manufacturing (CEM), which is loss-making for the last 3 years.

2. 80% of the Actual Sale Price amounted to S$67,600,000 was paid to the Company along with the reimbursement of S$8,000,000 for the cash left by the Company in Semiconductor business.

3. 20% of Actual Sale Price of S$16.9 Million is subjected to the following condition as per its Sales and Purchase Agreement:

a. "...the Purchaser will engage an accounting firm to conduct an audit on the cumulative revenues of the Target Group from 1 January 2018 to 31 March 2019 (the “2018 Revenue”). Should the 2018 Revenue be less than 80% of the cumulative revenue for the period from 1 January 2017 to 31 March 2018 (the “2017 Revenue”), an amount equal to the difference between the two will be deducted from the Escrow Amount and be released by the Escrow Agent to the Purchaser..."

b. "...If the amount to be paid to the Purchaser, as a result of the occurrence of any or both the aforesaid events, is less than 10% of the Actual Sale Price, an amount equal to the difference of the two will be released by the Escrow Agent to the Seller..."

c. "...Should the Deducted Amounts be less than the Escrow Amount, the remaining balance or the balance 10% of the Actual Sale Price, as the case may be, will be held by the Escrow Agent to settle any claim by the Purchaser in relation to a breach of the Share Purchase Agreement against the Seller (the “Escrow Remaining Amount”). The Escrow Remaining Amount will be held in escrow for a period of 18 months from the date of Completion (the “Escrow Claim Period”), and subject to any applicable claims being settled, be released to the Company upon the expiry of the Escrow Claim Period..."

4. Under the Sales and Purchase Agreement, it is also stated:

a. "...The net proceeds from the Proposed Disposal, after deducting all costs and expenses, 5% commission payable for deal introduction and financial advisory services, staff retention and compensation and assuming that the full amount of the Estimated Sale Price of S$84,500,000 is received by the Company, are estimated to be approximately S$77,100,000..."

b. "...intends to return the entire net proceeds from the Proposed Disposal to its shareholders by way of a special dividend or capital reduction, as the case may be. It is anticipated that a first distribution of 24 cents per share based on the first payment received by the Company upon Completion (i.e. 80% of the Actual Sale Price) will be made by the Company as soon as practicable after Completion has taken place..."

5. Number of Shares the company has is 233,916,970 (Round up to 234 Million).

6. Investment Properties is stated at cost and the valuation is much higher. This is indicated on Annual Report 2017.
Abstract from Annual Report 2017 
7. As per an 2018 analyst report from CIMB, it is stated the following:

"In the Contract Equipment Manufacturing (CEM) business, the company's key subsidiaries are i.PAC Manufacturing Pte Ltd (Unlisted), and AMS Biomedical Pte Ltd (Unlisted). i.PAC Manufacturing and AMS Biomedical provide modular and full turnkey assembly, system integration, reliablility testing, packing and distribution services for dierent industries. 

1. i.PAC Manufacturing 's depth of expertise in mechanical, electronics and electrical engineering also embraces vision systems and laser technology, enabling it to handle wide ranging complex projects across multi-electronic sectors such as in displays, semiconductors, storage media, aerospace, solar and other high-tech capital equipment industries. 

2. AMS Biomedical , with its ISO9001 and ISO13485 accreditation, is a leading choice as a contract manufacturer of medical equipment and devices, specically for the medtech industry, according to management."

8. As per 2018 full year results, the following has been stated about the CEM business:

a. "In contrast, the S$18.71m sales for the remaining CEM business represented a significant 52% growth over the previous year. This was due to new customized automation contracts and strong build-to-print sales."

b. "We will focus on getting new customers in the built-to-print area in order to achieve greater stability in our top-line. We also expect further growth in the customised automation area as there are a few promising projects in the pipeline."

9. In addition, as per 2018 full year results, it seems that the loan of S$7 million has already been paid.

Why Did I Continue To Stay Vested?

1. Dividend to be paid out soon = 67.6 Million / 234 Million = 28.8 cents. 
- At this point, we knew the net proceeds will be returned to shareholders and at least 24 cents will be given first.

2. Investment Properties Net Worth = 11.5 Million / 234 Million = 4.9 cents.
- A lower valuation is used for calculation.
- About $600k of rental income is generated.

3. Cash Net Worth = 1 Million / 234 Million = 0.4 cents.
- The company has at least 1 Million of cash left. The company has been reimbursed with 8 Million of Cash and has also paid off a loan of 7 Million.

4. Will the 10% of the Escrow Amount be released after 31 March? ~ Based on my very conservative calculation, it seems that this will not occur.

- 2018 Revenue of Target Group = 36.3 Million (I deem Dec 2018 till Mar 2019 to have no revenue in order to be conservative.)

- 2017 Revenue of Target Group = 53.6 Million + 5.4 Million = 59 Million (I deem Dec 2017 till Mar 2018 to be 30% of the revenue of Half Year 2018 Financial Report.)

- 80% of 2017 Revenue minus 2018 Revenue = 10.9 Million.

5. Present Value of 2nd portion of Escrow Amount = (4.225 Million / 234 Million)/1.15 = 1.5 cents.
- For the 2nd portion of the Escrow Amount, lets just assume only 5% is released after 18 months. 
- Discount given to the 2nd Portion of Escrow Amount = 15%

Deem Estimated Value Of Big Idea 13 = 28.8 + 4.9 + 0.4 + 1.5 = 35.6 cents.

What Are The Risk Involved?

1. No Escrow amount are paid out. Only 24 Cents or less of Dividend are paid.
- Despite all the information being stated in the reports, we cannot be certain that all the stated dividends will definitely be paid without any confirmed dividend announcement.

2. CEM Business continues to be loss-making for a long time.
- CEM Business has been loss making for the last 3 years despite growing top line. We cannot be certain the CEM Business will just turnaround.

3. Significant Cap-ex is required.
- From the 2018 full year report, it seems that the company's fixed asset will be sold along with the Semi-Conductor business. Without machinery, the CEM business will not be able to continue. Thus, we should be expecting some capital expenditure to occur in future.

4. My Calculation Is Wrong.
- My Calculation comes along with many assumptions. Thus, any changes in the assumption will result in the changes the Value of Big Idea 13.

In Short

When my initial thesis on Big Idea 13 was wrong, I panicked and quickly checked back. As I explained to the members of the Telegram Group, the attractiveness of the company has reduced significantly after I checked back. If it was a "10" at the start, it has since reduced to a "6".

But I remained vested due to the above calculation and that, despite being loss-making, we will be getting the "revenue growing" CEM business for free.

One of the point that was not discuss above is that there is a growing inter-segment revenue between the Semi-conductor and CEM business as per 2017 Annual Report. Furthermore, there is a high possibility that the Chairman and Managing Director of the Company, one of the key employees, will be entering into a three-year retention employment contract with the sold Semi-Conductor Business.

No idea comes without risk. But they must be calculated risk.

Oh... I have yet to announced the company's name - It is Manufacturing Integration Technology Ltd.

Please do your own due diligence before you invest this counter.

If you are interested to know more about The Ultimate Scorecard or Full Analysis, do visit the Fundamental Scorecard website for more information! 

We have also released the Moat Scorecard with InvestingNote. Do take a look!

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

Wednesday, February 27, 2019

The New Idea That I Didn't Act On It

This article contains a portion of the Moat Scorecard Analysis Write Up 6 written on 27 Jan 2019 for my Moat Scorecard subscribers. For the Full Write Up, please subscribe to Moat Scorecard.

Having sold off one of my biggest holding of a Big Idea (Big Idea 5 - HongKong Land), I started search for the next possible Big Idea.

Firstly, I was looking at Courts Asia. But before I could make a decision, Nojima made a general offer. Damn!

Then along came Avi-Tech Electronics Limited (Avi-Tech). To be honest, I first came across this company when it passes Ultimate Scorecard in January.

Portion of Avi-Tech Ultimate Scorecard in Jan 2019.

I was surprised to see this new entry in my Ultimate Scorecard. This new company excites me in view that it was able to generate Free Cash Flow constantly for the last few years and the cash profit margin has been consistent.

What Does The Company Do?

The company specializes mainly in Burn-In Services, with a portion in Manufacturing and Engineering services.

However, the fact that it passes Ultimate Scorecard now is due to its share price being on the downtrend.


Why?

I believe it is due to the reasons below:

  • Semiconductor industry had seemed to reach its peak in 2017 and it has been on a downtrend for the whole of 2018.
  • As per RHB Analyst Report on 12 Sep 2018, “In 2HFY18, its engineering segment took a hit due to delays in customer projects as well as a slowdown in orders from clients. This led to the unit booking a loss, which dragged down Avi-Tech’s overall profitability. However, management believes that the segment has likely hit a low already, and business will likely pick up from here, with new customers being secured at the same time. However, it will likely take about 6-9 months to ramp up. As such, the engineering business will likely continue to be a drag on profitability in FY19 – albeit to a smaller extent.”
  • The company’s revenue and net profit has been reducing for the last few quarters as compared to its 2017 figures.
3rd Quarter 2018
4th Quarter 2018
1st Quarter 2019
More Research Done

As per the RHB Analyst Report on 12 Sep 2018 and 2018 Annual Report, it has been reported that Avi-Tech's customers are in the automotive industry rather than the chipmakers. 

RHB Analyst Report on 12 Sep 2018: "As Avi-Tech mainly provides burn-in services for chipmakers in the automotive sector, where there has been gradual and steady growth. We expect the burn-in business to continue to grow by 10-15% pa, and not be impacted by the slowdown in the
semiconductor sector. This is partly due to the fact that the majority of their burn-in customers are from the automotive sector, which is enjoying steady growth."

2018 Annual Report Letter to Shareholders: "...Furthermore, with the slowdown in the electronics sector, the overall semiconductor demand is anticipated to moderate. Nevertheless, due to the continued demand for sector-specific semiconductor chips such as in the automotive, cloud and networking  and data security industries, we are cautiously optimistic as there will be opportunities for growth for our business segments..."

In addition, as per a post on Valuebuddies on Avi-Tech, it has been stated by a CIMB Research Report that the customers of Avi-Tech are not within the chipmakers industry.

Screengrab of Valuebuddies Thread

Thus, with the above understanding of Avi-Tech's customer base, the downward impact to Avi-Tech's revenue and net profit may be less affected than other similar companies within the same industry.

I had also reviewed the last 5 years of revenue and net profit for each different segment.


The results shown that the company's burn-in services generated the biggest gross margin but the engineering services had dragged the Avi-Tech's business downwards. In the event, the company continues to concentrate on the burn in segment and maintain its relationship with this group of existing customer, Avi-Tech's revenue and net profit could rise back up.

In Short

With such deep understanding of Avi-Tech's business, it is important to come to a decision of whether I should make the purchase of the shares at the current share price.

Eventually, I decided NOT TO make the new purchase due to the information below:
  1. 2018 Annual Report Note 9: "Of the trade receivables balance at the end of the reporting period, $2,906,000 (2017: $6,410,000) is due from four major customers."
  2. 2018 Annual Report Note 30: "Included in revenues of $35,720,000 (2017: $39,982,000) are revenues of $12,258,000 (2017: $10,420,000) and $3,860,000 (2017: $5,462,000) arising from sales to two major customers from the Burn-in Services and Manufacturing and PCBA Services business segments. In 2017, included in revenues of $39,982,000 was revenues of $8,788,000 arising from sales to a major customer from the Engineering Services business segment. These revenues account for approximately 45% (2017: 62%) of the Group’s revenue."
  3. RHB Analyst Report on 12 Sep 2018: "However, it will likely take about 6-9 months to ramp up. As such, the engineering business will likely continue to be a drag on profitability in FY19 – albeit to a smaller extent. '
Basically, from the information above, it seems that the major customers had been paying in cash, since revenue from top 2 customer has maintained but trade receivables has decreased significantly. 

Furthermore, the Engineering Business will continue to drag the business for another 3 to 4 months and this will continue to impact its bottom line. With that, its Price to Earning Ratio will increases significantly and I believe its dividend payout will also be affected.

Therefore, I believe Avi-Tech should be on my watchlist, while I await for a higher margin of safety. 

Nonetheless, it is important to note that this is just my analysis as each investor should still make their own decision.

Please do your own due diligence before you invest this counter.

If you are interested to know more about The Ultimate Scorecard, do visit the Fundamental Scorecard website for more information! 

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