Saturday, October 10, 2015

The Holy Grail to Unlocking Value in Singapore Stocks

Note 1: This does not only applies for Value Stocks, but also for every other stock in the SGX.
Note 2: Although this is written from a value investor perspective but it is still applicable even if you are a trader.

As a value investor, capital appreciation is always on my mind - What is the "Holy Grail" that will cause a stock price to rise?  When will a stock unlocks its value, especially in the Singapore Stock Market?

Some people may disagree with me, but I think value investing is still not popular in Singapore. 

Unlike the US Stock Market, people do not recognize these value stock as quickly. In addition, US Stock are more popular/well-known as they are advertised/marketed/broadcast more often.

Just imagine - Singapore only has Channel News Asia. 

USA has BBC, CNN, CNBC, ABC, Fox and CBS (Noted that some of them may not be a US channel but I just want to emphasize that how much a US stock will be broadcast to the public).

I cannot imagine them doing a coverage on for example, Chuan Hup Holdings Ltd.

You get my point?


Thus, what can be the "Holy Grail" of the stocks in Singapore?

Here are some of factors that I think can be considered to be the "Holy Grail" (Ranked according to Effectiveness in my Opinion):

6. Share Buyback - "In the olden days", when a company suddenly declared Share BuyBack Mandate, its share will rise. But due to the Muddy Water and Iceberg reports on Noble and Olam, Share Buyback nowadays does not have much effect on stock price. It seems to be a mechanism to hold the stock price stable instead. Read this - S$43 million in Share Buybacks in First Half of July (15 July 2015)

5. Change In Business Model - A construction firm that suddenly decide to enter into property development in Singapore, may result in a rise in share price. However the public will only take action if they deem the change in Business Model as positive. I am still waiting for Sapphire Corporation price to react...zzZZZ...

4. Dividends - A price may rise if a company that never declare dividend before suddenly declare dividend. It can also be a company declaring very high dividend suddenly. However if this high dividend is deem as special, the price reaction may not be huge. Read TTJ,

3. Turnaround Year - If a company has been making losses for a number of years, then when it turn profitable for that year. The price will rise. However if the profit is not due to its business, such as an increase in fair value, the price may reduce subsequently. As per BigFatPurse's post on Fu Yu, "Fu Yu is a clear case of number 1. The earnings finally turned around and improved after 7 years of consecutive losses in their precision tooling and plastic moulding businesses."

2. Delist - If a stock intend to delist, it MUST offer a higher price than what is on the market right? However that may not be the case as to the delisting of MIIF. Normally, companies intending to delist will offer a higher price - Like Eastern Holding.

1. Sudden Investor Interest/New Investor - When a stock suddenly caught the eye of a BB (aka Big Boys) and BB starts to buy the stock, it will push the price up. It will also push the price furthermore when they want to accumulate. Read CH Offshore or Hock Lian Seng.

Note CH Offshore is more of an existing shareholder trying to accumulate more via an offer and Hock Lian Seng is a new investor buying off market purchases. I will prefer the latter as there is no "cap" on how high the price can go and traders will follow and push it even higher. 

Anyway after the price react to the news, it may not stay there for a long time.

As an investor/shareholder of the company, we will need know if we need to take action to sell! - That will be another article for another time.

If you can think of another event that may cause the price to rise, please share with me!

PS: All information above are just my own opinions.  

No comments:

Post a Comment