Tuesday, December 31, 2019

Happy New Year!

As we bring the year to a close and usher in the new year, I will just like to wish everyone a Happy New Year and a Belated Merry Christmas, as well as an advanced Happy Chinese New Year!


This year has been a blast for me - because my daughter is born. No matter what my returns are, nothing will be greater than her coming into my life.

Thus, she is also the main reason I am away again for more than 1 month. Had to help to take care of her during the holidays as well as her taking up all my spare time.

So I gave my wishes in advance and also my apologies for being away.

Nevertheless, readers will know where to find me.

Being the admin, I am super active on my Fundamental Scorecard Telegram Group. Please support and join.

I am also continuing to share on my TUBInvesting Facebook Page. Do comment if you have any thoughts.

I also tend to be lesser on IN nowsadays. But you can also find me there.

Finally, I am also kept busy because I have restarted my portfolio (Yes, again!) and been constantly reviewing companies for "My Crazy Portfolio".

Before I continue, if you are interested in my past and current returns, do check them out here. A note of advice, they are not great by my standards. So much more to improve on!

With that I like to end the year with revealing the companies in my portfolio (I did write up on some of them):

SG Portfolio:
1. OCBC
2. Straco Corporation
3. Starhill REIT
4. Japan Food Holdings
5. HongKong Land
6. QAF
7. *This has to be kept secret*

HK Portfolio
1. IGG Inc
2. Medialink Group Holdings

US Portfolio
1. UVE
2. DIS
3. GSB
4. CTEK
5. QD
6. CVGI
7. RMNI

Some of you may have noticed that my portfolio has changed somewhat. 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!

Huat ar!

Sunday, November 24, 2019

Don't Get Trapped...

Yesterday, during our FATA Seminar's Stock Discussion, we discussed about some companies and I pointed out some of their issues in the financials.

Do note that for our FATA Seminar, we will allow participants to ask about some companies. After which we will discuss about these companies' FATA prospects.

Many of the issues came from S-Chips' financials, which many had already cautioned about.

However, we discussed about this Singapore company's in the F&B sector, where I mentioned about some figures in the financials that were presented very interestingly.

Income Statement

Balance Sheet

Cashflow Part 1

Cashflow Part 2

Share Price since IPO - Source: Yahoo
Let me explained some of the interesting findings:

1. Changes in financials occur due to SFRS 16: Leases
2. Previously, leases were stated under operating leases - these were expenses. Currently, they are capitalised - these became assets under PPE.
3. Under income statement, depreciation increases, property rental and related expenses decreases. In actual fact, total cost remained the same related to their leases.
4. When leases were capitalised, their deduction comes from "financing activities" and not "operating activities". 
5. These changes resulted in significant increases (in fact, almost 3 times) in net cash from operating activities. 
6. Free cash flow also increased significantly.
7. However, if the S$48 million of leases under "financing activites" were deducted, the free cash flow will have been lower.

Many investors who do not read financials but solely follow many website indication of PCF or PFCF, will not have known about this issue.

There are many other issues that I pointed out during the seminar, but I prefer not to write here.

Oh... just 1 more point - Period of Moratorium is usually 6 months. If you look closer at the share price changes, you will understand even more about the company. 

Anyway we hope to see more participants for our next FATA seminars. Do note that other than pointing out issues, I also provided an interesting company listed in US.

If you want to know more about other interesting finds in the company or other companies, feel free to join our Fundamental Scorecard Telegram Group.

Thursday, November 21, 2019

GSB Announced Good News + Other Existing Companies In Portfolio

Short Post

GSB, which I had just written about recently on 9 Nov 2019, has recently released some good news!


Yes! Shortly after I invested in the company, it announces a special dividend of US$3.35!

That more than 30% of return!

So far that is the 2nd piece of good news since the launch of the Crazy Portfolio. I do hope it continues!

As for other overseas companies, it is good to note that previously written companies like UVE, GDOT and IGG, still exists within the Crazy Portfolio.

Thus that is 5 companies that I have written about. Stay tuned for more!

This is the final call!


Join us this coming 23rd Nov (Sat)  |  10.30am to 5pm in understanding both FA & TA to make better trading decisions. 

iFAST@Ocean Financial Centre
10 Collyer Quay, #26-01 Ocean Financial Centre, Singapore 049315


Course Fee: SGD$30

Register Link Here

Thanks for your support!

Saturday, November 16, 2019

FATA Idea Room a.k.a The Trading Investor

Hi all,

It has been a while since I ran a seminar.

I have been trying to collaborate with a TA guru to come up with a Fundamental-Analysis-Technical Analysis (FATA) seminar/course.

As you can see...we have yet to decide on the name...

The reason for doing this is mainly to value add to our respective communities.

I do believe that having some TA knowledge can help an investor find a better entry point. For a trader, having simple FA knowledge can bring about better gains or what happens if you miss a stop loss?




The seminar structure will be as follows:
- Intro
- FATA Mental Framework
- FA - The Most Important Ratio
- TA - Her Unique Style
- Lunch
- Stocks Discussion (Highlight of the day)
- End

In my opinion, the stocks discussion is the highlight. For whoever that sign up, I will ask you for a counter. Then we will try our best to talk about all the counters during the seminar.

Course Date: 23 Nov 2019 (Saturday)
Course Time: 10:30 am - 5 pm (Apprx)
Course Location : iFAST@Ocean Financial Centre
Cost: $30
Address: 10 Collyer Quay, #26-01 Ocean Financial Centre, Singapore 049315

Please sign up using this LINK.

Appreciate your support. Look forward to meeting you!

Wednesday, November 13, 2019

KEM - The One That Got Acquired Before I Could Write Extensively

Short Post

With the start of Crazy Portfolio, TUBInvesting new direction is to be the diary of the portfolio and to put up post about my journey to eventually achieve my crazy target!

Thus, it was natural that I wanted to record down all the companies that was part of this portfolio.

However, this company, Kemet Corporation was acquired by Taiwan-based electronic component manufacturer Yageo for $27.20/share in cash, for a deal valued at $1.8B including the assumption of debt, before I could even do a proper write up.

Read about the acquisition here

I personally feel the purchase price is too low. Anything above US$30 will be more reasonable.

To give you some perspective, the 2018 10-k stated the following:

1. "...The Company has entered into agreements with three of its largest customers pursuant to which the customers have agreed to provide interest free loans to the Company in exchange for assurance of future supply. These interest free loans are being used by the Company to fund the purchase of certain production equipment and to make other investments and improvements in the Company and its operations in order to increase its overall capacity to produce various electronic components." Which customer, in the right mind, will give their supplier interest free loan?

2. "Our customer base includes most of the world’s major electronics original equipment manufacturers (“OEMs”)....Major OEMs: • Bosch Group, Cisco Systems Inc., Continental AG, Delphi Technologies PLC, Tesla Inc., and Denso in the automotive segment. • Apple Inc., Western Digital Corporation, Dell Inc., Nintendo, and Google LLC in the Computer and consumer segment. • ABB Group...." Just look at the customers!

Thus, I do hope some other company will come up with a better offer!

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

Saturday, November 9, 2019

GSB - Enhanced File Transfer On Cloud Services

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

For future posts, I will be talking about my positions in the Crazy Portfolio.

Numbers/Finance

Increasing Revenue, Net Profit – Over the last 3 years, the total revenue has just been increasing. So does the Net Profit. However, if you look at the TTM (Trailing 12 Months) figures over the last 5 years, it is very clear the company’s top line has been improving every quarter, so does the bottom line.
Data from Seeking Alpha - Annual Revenue

Data from Seeking Alpha - Annual Net Profit
Data from Seeking Alpha - TTM Revenue

Data from Seeking Alpha - TTM Net Profit
Reasonable Balance Sheet, but Great Returns – Balance sheet has been reasonable with very low debt. Its not exactly a NCAV company and it has significant intangible. But it has great returns.

Data from Investing.com
Low Capex, Good FCF – It has consistently generated FCF for the last 5 years.

Data from Seeking Alpha
Piotroski F Score – This is interesting. Based on the chart below, the F Score has improved over the last 3 years. Currently based on TTM figures, there are at 7.

Data from Finbox
Business Model

One of the leaders in Managed File Transfer Industry – It develops and sells managed file transfer software that provides secure information exchange, data transfer, and file sharing capabilities. Its flagship and main product, EFT, is highly reliable, easy to install, and is delivered as on-premise software or through cloud and hybrid deployments. Based googling thru the various review websites, this company is definitely one of the dominate players in the Managed File Transfer Industry.

1 Product, B2B and not B2C, Direct Sales and Partners – The company only has 1 product, or in this case over 97% of the FY2018 revenue comes from 1 product. It operates in the B2B and not B2C industry, since B2B requires less headcounts (B2C will generally requires higher operating expenses since need customer services). It uses direct Sales and partners to sell their products.

Stickiness of Business Model and Recurring Cashflow – As per FY2018, it was stated “when customers purchase our on-premise software, they almost always purchase the first year of M&S. At year two, customers are not required to purchase M&S, but the vast majority renew their subscription.” Remember when did you change your Anti-virus software?

Cataylst

New Product: EFT Arcus – It is a “pay-for-what-you-use” pricing model and a centralized platform to streamline the management of all data transfer activities in the cloud, on-prem and in between. It integrates with Azure and AWS (Read more here).

Focusing on Optimal Capital Allocation – The company has been focused on an optimal capital allocation strategy – doing share buyback and giving our dividend. So far its cash and cash equivalent has remained around US$10 million.

As stated in the FY2018 shareholder letter, “Globalscape embarked on a mission in 2018 to enhance the Company’s performance by improving cash flow per share. To achieve this objective, we focused on three things: revenue, operating expenses, and capital allocation. We are pleased to report that results of this three-part effort are evident in the Company’s superior fourth quarter financial performance. We believe shareholders and customers will be further rewarded as we continue to execute our revised business plan and capital allocation strategy.”

Risk

Side Agreement / Wire Fraud in 2018 – An investigation occurs in Mar 2018. After the investigation ended, there were 40 lay-offs and the CFO changed. There were various excuses used to describe the lay-off, but any layman should be able to see that it was related to the investigation. Although the event has been settled, but this has probably created some negative reputation to the company. 

Furthermore, as stated in the article here, “Most notably, on June 15, 2018 we regained compliance with NYSE American continued listing standards and on August 20, 2018 we announced the settlement of a class action lawsuit for $1.4 million related to our 2016 and 2017 financial restatements. While there continue to be legal matters that present risks, we are pleased to be past the matters that were resolved.” 

1 Product – What happens if the product is no longer required in the market?

Lower Revenue from New Product In Short Term – As highlighted in FY2018 on EFT Arcus, “For the first 24 to 36 months that a customer subscribes to EFT Arcus, we believe that the cumulative cost of ownership will typically be less than the total cost of purchasing an EFT platform perpetual license combined with an M&S contract. Accordingly, we expect the revenue we earn during that period from an EFT Arcus customer will be less than the revenue we would have earned from that same customer during that same period if the customer had purchased a perpetual license with an M&S contract. However, we believe thereafter and over the long term, the cumulative, recurring revenue stream we will earn from an EFT Arcus customer will exceed what we would have otherwise earned from the sale of a perpetual license combined with an M&S contract.” In my opinion, it’s a right direction, but there are short term consequences. 

Outsourced some development to Russia Firm – Not sure if this should be a risk? But will there be future implications?

Management Change – CEO unexpectedly passed away on 1 Apr 2019. He has been the CEO since 2016 and will this cause a change in the way the company is managed?

Competition – There are competition from direct competitors like Axway as well as major companies, like IBM, Citirix Systems and Progress Software, subsidiaries.

Intrinsic Value  

I will based my valuation solely on PE ratio because this company is all on its earnings.

Based on Finbox:
• GlobalSCAPE's latest twelve months P/E Ratio is 16.8x.
• GlobalSCAPE's P/E Ratio hit it's four year low in Dec, 2015 of 18.9x.
• Looking back at the last four years, GlobalSCAPE's P/E Ratio peaked in Dec, 2017 at 55.9x.
• GlobalSCAPE's operated at median P/E Ratio of 22.0x from fiscal years ending Dec, 2014 to 2018.
• GlobalSCAPE's P/E Ratio for fiscal years ending Dec, 2014 to 2018 averaged 27.2x.

With that, if we assumed the company about US$2.4 million (which translate to US$0.14) per quarter, it will make about US$9.6 million (~US$0.56) per year.

Based on last 4 years average PE ratio of 27.2x, it is US$15.232. 

Do note that competitors like Box or Axway has either negative PE or PE in the hundreds. 

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

Monday, October 28, 2019

Start of The Crazy Portfolio - Today!

This is just a simple post to dedicate to the start of the Crazy Portfolio for the next 10 years.

This meant that those companies I intend to allow to remain in my portfolio will restart as of its share price on 28 Oct 2019.

As stated previously that this portfolio will be more focus on overseas companies, with SG listed companies setting a base. The ratio will probably be 60/40. In the event I hit my target within 10 years, I may just stop at that.


A new start and I look forward to a bright 10 years.

Ready, Get Set, GO!!!!!!


Wednesday, October 9, 2019

Crazy Portfolio Target - 200% to 400% in 10 years

As you grow older and your life changes, you tend to have different goals and different objective.

With a newborn, I tend to think more about the future and if I have the ability to provide the necessary for her, especially her future university studies.

(For those that are curious, daily needs is met. So just thinking about the major expenses in the future lah...)

Its definitely gonna be expensive with all the inflation and dependent on what kind of course she wants to take.

These thoughts just fill my mind and I think its time to plan ahead.

I probably have 15 to 18 years ahead of her university studies.

As an ordinary man/employee, my only belief is that I invest slightly better than average.

So I hatched a CRAZY plan:

To create a portfolio for the next 10 years with a target of 200% to 400% gain.

The long tenure period of the portfolio is also a cushion to allow the economy to recover from all the issues that is happening in the market (Trump, Trade War, Brexit, HK Protest, etc) currently. It is also a hedge against any crisis in the short term (1 or 2 years later).

Furthermore, for this portfolio I will have a higher focus on overseas sector - Probably 40/60 or 30/70 breakdown. I do believe it is easier to achieve these targets with an overseas focus.

In addition, companies selected in the portfolio might have a more qualitative approach than a quantitative one. Thus, if I invest in some high PE or PB companies, its probably more on the qualitative stuff than the quantitative stuff.

Finally, for those that is interested in the daily discussion of investing theories and companies, as well as how I intend to achieve this objective, feel free to join our Fundamental Scorecard Telegram Group

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.