Saturday, February 1, 2020

Impact of Wuhan Virus


With uncertainty ahead of us due to the Wuhan Virus, I decided to relook at each of the company in my Crazy Portfolio.

I intend to determine the impact of Wuhan Virus on their business. Eventually I will come up with some conclusion on each company on whether I intend to reduce, add or hold my position.

Indication of Impact: No Impact < Min Impact < Partial Impact < Big Impact < Direct Impact

SG Companies

OCBCPartial Impact due to Wing Hang and general market slowdown. But with Singapore as it’s base, revenue still supported. Consider Adding.

StarhillMin Impact. Only 1 property in Chengdu with 1 long term strategic client. Consider Adding.

StracoDirect Impact. All PRC parks closed since 25 Jan till End Feb (?). SG flyer Close since 25 Nov. 3rd Quarter report show flat earnings, FCF still sustainable for current 3.5 cents dividend. 4th quarter should still be 2.5 cents of dividend. But Q1 2020 will be heavily impacted and even with slow down generally. To Reduce 1/3 and accept some losses.

Special Company*No impact as Company only has Singapore business. But no intention to add or reduce position until FY report out.

Japan food Min Impact. Has Associates in China and marketing Minor Group business in China. As per HY report, associate already losing money. On the other hand, Singaporean may end up eating less outside. Maybe “take away” revenue will balance out. No intention to add or reduce position until next report out.

QAFNo impact. Main business in Singapore, Malaysia and Australia. In fact, Australia Pork prices went up due to Swine flu hit in China. This is a short-term position till FY report out. Expect good results. Consider Adding.

HKlandBig impact but Prices are already very low. Consider Adding.

HK Companies

Wahsun – Manufacture in Cambodia and ship to US and Europe. China factory for administrative purposes, logistic and design. Min Impact. Short term position. No intention to add or reduce position until next report out.

MedialinkMin impact generally since main business not in China. License to sell products also mostly in SEA. No intention to buy or reduce position.

PlaymatesPartial Impact. Property and factory in HK. But generally manufacturing to slow down slightly as orders will probably reduce. Expect dividend to drop slightly in the upcoming FY Report. Consider Adding.

Potentially finding another long term target.

US Companies

QudianDirectly impacted. Recent announcement had a change of tone within 2 months. Change of tone can be view from both extreme. But cons seem to be more than pros. Do not want to hold hopes. To sell all and accept losses.

Disney – Shanghai and HK Disneyland closes. But Disney is a diversified business. Partial Impact and great future potential. Consider Adding

Commercial Vehicle Group, Inc. – Generally worse off due to its industry. Have some exposure in China and there is also a China manufacturing plant. Big impact. Reduce 1/3 and accept losses

GlobalScape – Enhance File Transfer system. Working with cloud services now. No impact. Consider Adding

CynergisTek, Inc. – Cybersecurity for the healthcare industry with US industry. Have a high possibility that business will be better once the impact is over. Will be positive impact if HACKERs tries to enter into Healthcare industry now. Balance sheet is ok. Consider Adding

Rimini Street – Competitor to Oracle and SAP and Salesforce in maintenance business. Under-cut the original players. Already had significant gain. Min Impact. Consider Adding

On Deck Capital – Newest position. USA SME lending financial institution. No impact. Consider Adding

Universal Insurance – US property insurance company. No impact. 2nd Heaviest position. Consider Adding

Potentially finding another long term target.

In view of the conclusion I had on each company, the Wuhan Virus will have an OVERALL IMPACT of a Potential Loss of about 2.5% of the portfolio. 

The 2.5% is calculated because I converted paper losses to actual losses.

Nevertheless, we should have another plan of how we intend to add to our positions. This is because resources are limited. With that, I will like to bring you back to my evergreen post - Steps To Take In A Market Correction


If you are interested to know more, you can ask me on my Fundamental Scorecard Telegram Group, on my TUBInvesting Facebook Page or comment on my blog post!

2 comments:

  1. Hi TUB,

    Why is there a big impact of the Wuhan Virus to HKL, given that bulk of its income is derived from office rental in HK?

    Thanks.

    WK

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    Replies
    1. Hi WK,

      Sorry for the late reply.

      Firstly they are hit by HK protest and now Wuhan Virus. Impact on financials should reach at least another year.

      Furthermore, I realise this line in its latest report - "During the period, the Group acquired a residential site with a developable area of 226,000 sq. m in southwestern Wuhan. Construction is expected to commence later this year with completion in 2022."

      Will there be buyers, will the project gets delays?

      At the end of the day, the business will not suffer much but if the financials are impacted, investors may further downgrade the company.

      Unless your holding period is 2 to 3 years from now, do note that in the current term, the share price is a voting system. From the looks of it, the votes will be negative for at least another 2 to 3 quarters.

      Thus, I decide the impact is huge.

      Hope I explain myself.

      Regards,
      TUB

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