crisis stock Archives - Page 2 of 3

11 Singapore Healthcare COVID-19 Stocks (生死关头)

Posted on September 4, 2020 Written by Dr Tee (Ein55)

Between life and money, which is more important? In this article, you will learn from Dr Tee on 11 Singapore Healthcare Giant Stocks which are efficient in making money with life as an economic moat, while some surge in prices during COVID-19 stock crisis.

1) COVID-19 “Crisis as Opportunity” Stocks

Medtecs International Corporation (SGX: 546)

UG Healthcare Corporation (SGX: 41A)

Top Glove Corporation (SGX: BVA)

Riverstone Holdings (SGX: AP4)

2) Medical Services Stocks

Q&M Dental Group (SGX: QC7)

Raffles Medical Group (SGX: BSL)

3) Healthcare Products Stocks

Tianjin Zhong Xin Pharmaceutical Group (SGX: T14)

Haw Par Corporation (SGX: H02)

4) Healthcare REITs

First Reit (SGX: AW9U)

ParkwayLife Reit (SGX: C2PU)

IHH Healthcare (SGX: Q0F)

There are about 37 Healthcare stocks in Singapore, a natural move for medical related businesses to get listed to leverage on capital from stock market for further expansion:

Accrelist Ltd (SGX: QZG), Alliance Healthcare (SGX: MIJ), Aoxin Q & M Dental (SGX: 1D4), Asia Vets Holdings (SGX: 5RE), AsiaMedic (SGX: 505), Asian Healthcare Specialists (SGX: 1J3), Beverly JCG (SGX: VFP), Biolidics (SGX: 8YY), Cordlife (SGX: P8A), First Reit (SGX: AW9U), Haw Par Corporation (SGX: H02), HC Surgical Specialists (SGX: 1B1), Healthway Medical Corporation (SGX: 5NG), Hyphens Pharma International (SGX: 1J5), IHH Healthcare (SGX: Q0F), ISEC Healthcare (SGX: 40T), IX Biopharma (SGX: 42C), Lonza Group (SGX: O6Z), Medinex (SGX: OTX), Medtecs International Corporation (SGX: 546), OUE Lippo Healthcare (SGX: 5WA), ParkwayLife Reit (SGX: C2PU), Pharmesis International (SGX: BFK), Q&M Dental Group (SGX: QC7), QT Vascular (SGX: 5I0), Raffles Medical Group (SGX: BSL), RHT Health Trust (SGX: RF1U), Riverstone Holdings (SGX: AP4), SingMedical Group (SGX: 5OT), Suntar Eco-City (SGX: BKZ), TalkMed (SGX: 5G3), Thomson Medical Group (SGX: A50), Tianjin Zhong Xin Pharmaceutical Group (SGX: T14), Top Glove Corporation (SGX: BVA), Trendlines Group (SGX: 42T), UG Healthcare Corporation (SGX: 41A), Vicplas International (SGX: 569).

From the table sorted below for 37 Singapore Healthcare stocks, only 2/3 are profitable (25 / 37 stocks were making money in businesses last year). Therefore, careful choices of giant healthcare stocks are critical, not just buying any healthcare stock with rising in share prices which may not be sustainable in longer term.

There are 1/3 stocks (13 / 37) having Price-to-Book ratio ($ / NAV = PB) < 1 with discount over asset but only 2 stocks (First Reit and Haw Par) have high quality asset related to cash or properties which will be discussed further. Buy undervalue stocks require patience, buying low may not able to Sell High in future if there is no alignment with one’s unique personality and other consideration of investment.

No	Ticker	PB = Price /NAV	ROE (%)
1	Accrelist Ltd (SGX: QZG)	0.31	0.0
2	Alliance Healthcare (SGX: MIJ)	1.89	12.6
3	Aoxin Q & M Dental (SGX: 1D4)	1.17	-0.1
4	Asia Vets Holdings (SGX: 5RE)	0.57	3.9
5	AsiaMedic (SGX: 505)	2.53	-0.1
6	Asian Healthcare Specialists (SGX: 1J3)	2.51	12.3
7	Beverly JCG (SGX: VFP)	6.67	-0.7
8	Biolidics (SGX: 8YY)	8.33	-0.4
9	Cordlife (SGX: P8A)	0.74	5.0
10	First Reit (SGX: AW9U)	0.45	5.7
11	Haw Par Corporation (SGX: H02)	0.78	5.8
12	HC Surgical Specialists (SGX: 1B1)	2.78	21.5
13	Healthway Medical Corporation (SGX: 5NG)	0.82	0.0
14	Hyphens Pharma International (SGX: 1J5)	2.72	14.8
15	IHH Healthcare (SGX: Q0F)	2.15	1.9
16	ISEC Healthcare (SGX: 40T)	2.60	11.7
17	IX Biopharma (SGX: 42C)	16.88	-1.0
18	Lonza Group (SGX: O6Z)	0.63	9.9
19	Medinex (SGX: OTX)	2.02	25.5
20	Medtecs International Corporation (SGX: 546)	5.33	1.8
21	OUE Lippo Healthcare (SGX: 5WA)	0.64	1.3
22	ParkwayLife Reit (SGX: C2PU)	1.98	10.4
23	Pharmesis International (SGX: BFK)	0.53	-0.3
24	Q&M Dental Group (SGX: QC7)	3.20	14.7
25	QT Vascular (SGX: 5I0)	4.78	-2.5
26	Raffles Medical Group (SGX: BSL)	1.69	7.2
27	RHT Health Trust (SGX: RF1U)	0.92	-0.1
28	Riverstone Holdings (SGX: AP4)	9.39	16.52
29	SingMedical Group (SGX: 5OT)	0.82	9.4
30	Suntar Eco-City (SGX: BKZ)	2.49	0.0
31	TalkMed (SGX: 5G3)	6.48	43.0
32	Thomson Medical Group (SGX: A50)	2.87	-0.2
33	Tianjin Zhong Xin Pharmaceutical Group (SGX: T14)	0.83	11.6
34	Top Glove Corporation (SGX: BVA)	20.89	15.3
35	Trendlines Group (SGX: 42T)	0.53	0.0
36	UG Healthcare Corporation (SGX: 41A)	6.75	25.7
37	Vicplas International (SGX: 569)	4.36	7.0

Interestingly, none of the 37 Singapore Healthcare stocks are 30 STI component stocks but a few could be related (eg. Haw Par is related to UOB Bank and UOL):

DBS Bank (SGX: D05), Singtel (SGX: Z74), OCBC Bank (SGX: O39), UOB Bank (SGX: U11), Wilmar International (SGX: F34), Jardine Matheson Holdings JMH (SGX: J36), Jardine Strategic Holdings JSH (SGX: J37), Thai Beverage (SGX: Y92), CapitaLand (SGX: C31), Ascendas Reit (SGX: A17U), Singapore Airlines (SGX: C6L), ST Engineering (SGX: S63), Keppel Corp (SGX: BN4), Singapore Exchange (SGX: S68), Hongkong Land (SGX: H78), Genting Singapore (SGX: G13), Mapletree Logistics Trust (SGX: M44U), Jardine Cycle & Carriage (SGX: C07), Mapletree Industrial Trust (SGX: ME8U), City Development (SGX: C09), CapitaLand Mall Trust (SGX: C38U), CapitaLand Commercial Trust (SGX: C61U), Mapletree Commercial Trust (SGX: N2IU), Dairy Farm International (SGX: D01), UOL (SGX: U14), Venture Corporation (SGX: V03), YZJ Shipbldg SGD (SGX: BS6), Sembcorp Industries (SGX: U96), SATS (SGX: S58), ComfortDelGro (SGX: C52).

For healthcare business with strong economic moat, eg. having special knowhow or patents in medical solutions, limited suppliers of critical medical appliances, etc, would naturally be the preferred choice for stock investing. Most people would choice life over money (eg. during COVID-19 health crisis, 生死关头) but if one could integrate both life and money through giant stocks, the probability of success in investing would be high.

Here, let’s focus on 11 Singapore healthcare giant stocks over 4 main categories:

1) COVID-19 “Crisis as Opportunity” Stocks

There are 4 “lucky” stocks helped by COVID-19 crisis as they are crucial medical appliance suppliers, sales and profits surge during pandemic:

– Medtecs International Corporation (SGX: 546) – personal protective apparel

– UG Healthcare Corporation (SGX: 41A) – gloves

– Top Glove Corporation (SGX: BVA) – gloves

– Riverstone Holdings (SGX: AP4) – gloves

Their share prices have been speculated to over 5-10 times during COVID-19 stock “crisis” (which is an opportunity). This is a form of positive speculation (strong business fundamental with share price speculated to very high optimism level), especially for Top Glove and Riverstone which have strong business performances even before COVID-19 crisis. However, for Medtecs and UG Healthcare, both only have moderate good businesses before COVID-19 crisis, the sudden high growth in business would not be sustainable when fear of COVID-19 has subsided in 6-12 months. Stock such as Biolidics (SGX: 8YY) has even weaker business fundamental (losses in the past) but share prices surged due to speculation, traders may suffer huge loss if investing in long term for stock which may not have sustainable business beyond COVID-19.

Therefore, these 4 COVID-19 healthcare stocks are more suitable for shorter term trading as optimism level has been speculated to very high. Trend-following trading strategy may be applied to “Buy High Sell Higher” but when price trend is reversed, a trader would need to exit, even if it is a loss due to sudden correction. If not, do not speculate, even these companies make a lot of money during pandemic. Stock market is forward looking, their strong business fundamental are already considered in rising prices. One day, when they could not perform as strong as now with lower demand (despite still profitable), the share prices would be corrected significantly, especially for Medtecs and UG Healthcare.

2) Medical Services Stocks

These are the 2 “unlucky” stocks which save lives or reduce pains but due to nature of businesses which require interaction with patients (how to cure without seeing the patients), business performances are affected, including share prices at lower optimism levels.

– Raffles Medical Group (SGX: BSL) – Hospitals

– Q&M Dental Group (SGX: QC7) – Dental Clinics

Both stocks have been growing the business through expansion locally and abroad. Raffles Medical has extended businesses to China cities (eg. Shanghai, Chongqing, etc), even before COVID-19 crisis, the share prices have been corrected due to ambitious expansion which would take a few years to breakeven in investment for new hospitals. During pandemic, Raffles Medical loses overseas patients due to international travelling restrictions. Similarly, Q&M Dental has expanded to be the largest dental service provider in Singapore, business has been affected during COVID-19 due to close interaction required between dentists and patients.

However, COVID-19 could only slowdown, not stopping patients from seeking medical help (saving life or tooth pains), therefore when fear of COVID-19 has subsided, both giant stocks would perform normally again, accumulation of demand (non-urgent cases, eg. medical or dental check-up) would surge and balance out in longer term business.

Since both giant stocks are at lower optimism level, they are more suitable for longer term cyclic investors with “Buy Low Sell High” strategy while collecting moderate dividends during the recovery phase (as if fixed deposit investing in a medical bank).

3) Healthcare Products Stocks

These 2 stocks have healthcare products which have no strong correlation to COVID-19. So, they could still perform normally in businesses during pandemic:

– Tianjin Zhong Xin Pharmaceutical Group (SGX: T14) – Traditional Chinese Medicine (TCM)

– Haw Par Corporation (SGX: H02) – Tiger Balm and Others

Tianjin Zhong Xin is a highly cyclic growth stock (dual listing in both Singapore Stock Exchange – T14 and Shanghai Stock Exchange – 600329) with very strong business fundamental. It is more suitable for longer term cyclic investor, optimism is just recovering from low level. Share prices in Singapore and Shanghai stock exchanges are aligned in general direction but sometimes one market could perform better than another (eg. China stock market is relatively more bullish than Singapore in current market condition). Tianjin Zhong Xin is an all-rounded stock, also paying high dividend yield of 5-6% (depending on the share prices, higher if one could investing during crisis). It is not suitable for shorter term trader or investor with weak holding power, buy low may get lower during bearish stock market, despite business fundamental is strong.

Haw Par is not a pure healthcare stock as majority of revenue and income are actually on investment of 2 other stocks of Mr Wee Cho Yeow (Top 10 richest person in Singapore, UOB Chairman) stocks: UOB Bank and UOL. Therefore, investing in Haw Par is an indirect investment of UOB and UOL stocks. With the current lower optimism prices of Haw Par stock with ownership of equivalent values of UOB and UOL shares, the main “business” of Tiger Balm and other products are virtually “free” for undervalue stock investors. However, patience is required for undervalue investing (owning high quality asset of cash from UOB Bank and properties from UOL). Haw Par has strong support of Singapore Giant stocks, UOB and UOL, all under Mr Wee Cho Yeow. If Mr Wee continues to be the Top 10 richest person in Singapore, implying these 3 giant stocks are doing well in both businesses and stock market.

4) Healthcare REITs

These 3 stocks are special integration of healthcare with property sectors as Healthcare REITs:

– First Reit (SGX: AW9U) – Healthcare REIT with hospitals mainly in Indonesia

– ParkwayLife Reit (SGX: C2PU) – Healthcare REIT with hospitals mainly in Singapore

– IHH Healthcare (SGX: Q0F) – Sponsor of ParkwayLife REIT

Both healthcare and property are promising sectors in general for stock investing, therefore healthcare REITs (rental collection from hospitals as tenants) are defensive in nature as they could pay consistent dividend with long term tenant agreement (eg. 15 years), slow growth but steady. Therefore, they may be considered for longer term investing, crisis usually is a good opportunity to own healthcare REITs to generate consistent passive incomes.

However, stock has price component which may give surprises to investors, for example First REIT share prices have been corrected to less than 1/3 of peak prices over the past few years due to various concerns, mainly due to poor sponsor and customers (who owns Siloam Hospitals), Lippo Karawaci group which has cashflow issue due to ambitious property expansion in Indonesia.

This concern of sponsor has resulted instability to other Lippo Group related stocks, eg. OUE Group. Second sponsor of First Reit is OUE Lippo Healthcare, also not a giant stock, could not help much to restore the confidence of investors, worrying potential rights issues (nightmare for dividend investors, paying passive incomes, instead of collecting dividends). Despite First REIT is a giant REIT (even as of today) but this is a supported giant stock, mainly dependent on sponsor, main customer and major shareholder (multiple roles in 1). The immediate risk is cut of dividend payment (rental relief during COVID1-9 requested by sponsor) and also possible future rental payment for new agreements in Rupiah (about 25% of portfolio) in Year 2021, which could reduce overall dividend yield by 1/8 (Rupiah has depreciated more than 50% against SGD over the past 10 years in earlier agreement). Based on current crisis price of $0.44/share (lower than IPO price), dividend yield is nearly 20% but actual payment could be only 10% due to rental relief. Before a stock investor may enjoy 20% dividend yield, First Reit has dropped more than 20% share prices with capital loss in just a few months.

So, First REIT is an indirect crisis stock, not due to the Reit itself (a giant stock) but more dependent on performance of weak sponsor. Current Price-to-Book is less than 0.5, rare for a Reit, even if sponsor goes bankcrupt, First Reit investor could still recover the share prices with selling of Reit properties. The main concern is the REIT likely could operate normally (especially Siloam Hospitals and Lippo Group would perform better after fading of COVID-19 crisis) but short term to midterm bearish share prices could affect the confidence of investors who collect high dividend yield but also suffer huge capital losses.

Parkwaylife Reit is an opposite of First Reit, having a strong sponsor, IHH Healthcare (also a giant stock), therefore enjoying the stability with gradual growth under triple net lease. Parkwaylife owns local properties which rent out to customer (Parkway Pantai) who owns profitable hospitals, eg. Mount Elizabeth Hospital, Gleneagles Hospital, Parkway East Hospital, etc. When sponsor and customer and major shareholder (3 roles in 1) are strong, it provides stability to long term rental payment and therefore, dividend payment to stock investor of Parkwaylife Reit.

Despite Parkwaylife is suitable for longer term or event lifetime investing (if there is no major change in sponsor financial condition), it is crucial to buy below fair price, ideally during stock crisis such as COVID-19. This would help to maximize the dividend yield. So, an investor may apply “Buy Low and Hold” strategy. Value is what you get and Price is what you pay. Integration of value and price are crucial for investing success.

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Choice of 11 healthcare giant stocks have to align with one’s unique personality, eg. for shorter term trading (eg. momentum or swing trading) or longer term investing (cyclic investing, undervalue investing or growth investing). Readers should not just “copy and paste” any stock (What to Buy, When to Buy/Sell) as successful action taking requires deeper consideration (LOFTP strategies – Level / Optimism / Fundamental / Technical / Personal Analysis) which you could learn further from Dr Tee Free 4-hr Webinar.

Drop by Dr Tee free 4hr webinar (learning at comfort of home with Zoom) to learn how to position in global giant stocks during COVID-19 stock crisis with 10 unique stock investing strategies, knowing What to Buy, When to Buy/Sell.

Zoom will be started 30 min before event, bonus talk (Q&A on any investment topics from readers) for early birds. There are many topics we will cover in this 4hr webinar, Dr Tee can have more time for Q&A if you could stay later after the webinar.

Dr Tee will cover over 20 case studies, Singapore giant stocks, eg. CapitaLand Mall Trust (SGX: C38U), Singapore Exchange (SGX: S68), Keppel Corp (SGX: BN4), Top Glove (SGX: BVA), Jardine Matheson Holdings JMH (SGX: J36), Vicom (SGX: WJP) and many others, Malaysia giant stocks, Hong Kong giant stocks and US giant stocks, both long term investing and short term trading.

There are limited tickets left for this 4hr free webinar, please ensure 100% you could join when register: www.ein55.com

Filed Under: Fundamental Analysis, Market Cycle Investing, Stock Market Tagged: crisis stock, glove stock, Healthcare Stocks

Temasek Giant Stocks Corporate Actions (淡马锡股)

Posted on August 18, 2020 Written by Dr Tee (Ein55)

Having a strong sponsor or major shareholder is crucial for stock investment, especially during period of uncertainty such as COVID-19 stock crisis. In this article, Dr Tee will review these 7 Temasek stocks with 4 major corporate actions:

1) Keppel Corp (SGX: BN4)

– Abandon of Partial Acquisition by Temasek

2) Sembcorp Industries (SGX: U96) & Sembcorp Marine (SGX: S51)

– Successful Demerger under Temasek

3) Singapore Airlines, SIA (SGX: C6L)

– Impact of Rights & Bonds Issues for Survival

4) CapitaLand Mall Trust (SGX: C38U) & CapitaLand Commercial Trust (SGX: C61U)

– Merger of CapitaLand (SGX: C31) Giant REITs with coming change in 30 STI component stock with Keppel DC REIT (SGX: AJBU)

Temasek helps to manage national wealth of Singapore, having over 40 stocks globally with about S$300B investment (淡马锡股). There are at least 26 Temasek / GLC stocks in Singapore, controlling shareholder with 15% or more ownership directly or indirectly:

Singtel (SGX: Z74), DBS Bank (SGX: D05), ST Engineering (SGX: S63), Singapore Airlines (SGX: C6L), SIA Engineering (SGX: S59), Singapore Exchange (SGX: S68), SATS (SGX: S58), Sembcorp Industries (SGX: U96), Sembcorp Marine (SGX: S51), Olam (SGX: O32), CapitaLand (SGX: C31), CapitaLand Mall Trust (SGX: C38U), CapitaLand Commercial Trust (SGX: C61U), Ascendas Reit (SGX: A17U), Ascott Hospitality Trust (SGX: HMN), Ascendas Hospitality Trust (SGX: Q1P), CapitaLand Retail China Trust (SGX: AU8U), Ascendas-iTrust (SGX: CY6U), Keppel Corp (SGX: BN4), Keppel Reit (SGX: K71U), Keppel DC Reit (SGX: AJBU), Keppel Infrastructure Trust (SGX: A7RU), Mapletree Logistics Trust (SGX: M44U), Mapletree Commercial Trust (SGX: N2IU), Mapletree Industrial Trust (SGX: ME8U), Mapletree NAC Trust (SGX: RW0U).

Temasek stocks portfolio also affect about 15% of STI index stocks, which has strong impact on Singapore stock market. Here are 30 STI component stocks:
DBS Bank (SGX: D05), Singtel (SGX: Z74), OCBC Bank (SGX: O39), UOB Bank (SGX: U11), Wilmar International (SGX: F34), Jardine Matheson Holdings JMH (SGX: J36), Jardine Strategic Holdings JSH (SGX: J37), Thai Beverage (SGX: Y92), CapitaLand (SGX: C31), Ascendas Reit (SGX: A17U), Singapore Airlines (SGX: C6L), ST Engineering (SGX: S63), Keppel Corp (SGX: BN4), Singapore Exchange (SGX: S68), HongkongLand (SGX: H78), Genting Singapore (SGX: G13), Mapletree Logistics Trust (SGX: M44U), Jardine Cycle & Carriage (SGX: C07), Mapletree Industrial Trust (SGX: ME8U), City Development (SGX: C09), CapitaLand Mall Trust (SGX: C38U), CapitaLand Commercial Trust (SGX: C61U), Mapletree Commercial Trust (SGX: N2IU), Dairy Farm International (SGX: D01), UOL (SGX: U14), Venture Corporation (SGX: V03), YZJ Shipbldg SGD (SGX: BS6), Sembcorp Industries (SGX: U96), SATS (SGX: S58), ComfortDelGro (SGX: C52).

At the same time, over the past 1 year, there are 4 major corporate actions in these Temasek stocks which worth review here.

1) Keppel Corp (SGX: BN4)

– Abandon of Partial Acquisition by Temasek

The partial acquisition offer by Temasek (increase ownership of Keppel Corp to 51% at price of $7.35/share) was initiated before COVID-19 stock crisis. Under this unprecedented health crisis, global stock market suffers 30-50% correction. Therefore, it does not make sense for Temasek to acquire Keppel Corp at premium price before COVID-19 crisis.

Keppel Corp was making loss in Q2/2020, providing an option for Temasek to withdraw the acquisition as cash or capital may be more critical for other Temasek stocks during this period of uncertainty. Temasek could also use the money for other better investment, eg. recently increase stake in BlackRock (NYSE: BLK), a giant fund stock with $4.8B which is clearly stronger than Keppel Corp.

Despite it may be a sound decision for Temasek but other Keppel Corp shareholders could be disappointed with share prices falling below critical $5/share support, nearly last 10 years low. Keppel Corp is mainly supported by property segment of business as Oil & Gas segment has been making losses due to low optimism oil prices.

Keppel Corp stock investor may need to align decision making (sell or hold) with own personality. Current share price is low optimism, it would be “Sell Low”. The situation is different from SIA which is also at low optimism share prices but business is making loss. Keppel Corp still has strong property business while oil & gas has strong potential to recover with rising oil prices (higher demand with fading of COVID-19 threat). It is also an option to copy Temasek action to “Change Horse” (Sell weaker Stock A, Buy stronger Stock B), eg. transferring the capital to invest in stronger giant stocks such as BlackRock. Afterall, not all could be a patient long term investor for Keppel Corp to regain giant stock title as 10 years ago during bullish Oil & Gas sector.

Although with controlling ownership (over 51% shares), it may be easier to implement potential plan for merging of Keppel O&M with Sembcorp Marine but if outcomes are beneficial to both stocks, a major shareholding (21% of Keppel Corp) may be sufficient to initiate this potential corporate action in future.

2) Sembcorp Industries (SGX: U96) & Sembcorp Marine (SGX: S51)

– Successful Demerger under Temasek

With abstain of voting by Sembcorp Industries and Temasek, the demerger during EGM is still successful, partly because there is no strong second major shareholder (less than 1% shareholding), especially for Sembcorp Marine.

Fundamentally, parent company Sembcorp Industries (with more defensive utilities and growing land development businesses) is much stronger than subsidiary Sembcorp Marine (declining Oil & Gas over the past 5 years) but 1/3 overlapping in accounting (revenue) has dragged down the share prices of Sembcorp Industries which is tied with the same boat under Oil & Gas crisis.

Therefore, after demerger, Sembcorp Industries share prices generally move higher while Sembcorp Marine is still at relative low price position. In medium term, Sembcorp Industries would become a “new company” without 1/3 negative Oil & Gas business. In longer term, cyclic Oil & Gas sector could help Sembcorp Marine investors to have higher upside but patience is required. In general, Sembcorp Industries and Sembcorp Marine are 2 very different type of stocks, differences in share prices would be clearer in future.

Again, Sembcorp stocks investors need to make decision (Buy, Hold, Sell, Wait, Shorting), aligning with own unique personality. The world of stock market is large, over 1600 global giant stocks, there may be no need to “fall in love” with a stock for life.

3) Singapore Airlines, SIA (SGX: C6L)

– Impact of Rights & Bonds Issues for Survival

Airlines sectors has been in very critical condition, some airlines (without strong sponsor) even go bankrupt as passengers drop over 90% compare with before COVID-19, business could sustain more than 6 months. Vaccine development may take another 6-12 months before COVID-19 crisis could be over.

Impact on Singapore Airlines could be more severe during pandemic as it does not have domestic flights (Singapore is too small), therefore the Rights and Bonds issues came in right time to ensure the company could survive through the most critical 12 months period, before Singapore Airlines could fly again proudly.

However, even after the corporate action, SIA share prices continue to decline, about half price since the beginning of COVID-19, about 1/3 of peak prices (after adjustment of rights issues). In fact, Singapore Airlines business fundamental has been declining gradually over the past decade, not just during pandemic (sudden dip). This is due to competitive airlines sector which need to provide good services (well known for SIA but at the price of higher cost) at lower price, therefore earnings and profit margin would be affected.

A stock investor needs to carefully select the right industry or sector for investment. During pandemic, healthcare and technology (eg. online / software solution) stocks would have higher chances to recover than airlines stocks. “Buy Low” is reasonable with condition a stock business fundamental is not much affected. It would be a rare opportunity if business of a stock is growing but share prices fall due to fear driven sales during global financial crisis.

4) CapitaLand Mall Trust, CMT (SGX: C38U) & CapitaLand Commercial Trust, CCT (SGX: C61U)

– Merger of CapitaLand (SGX: C31) Giant REITs with coming change in 30 STI component stock with Keppel DC REIT (SGX: AJBU)

CapitaLand is under Temasek portfolio, the 2 giant REITs, CMT and CCT will be merged by end of 2020 to become the third largest REIT in Asia (largest Asian REIT is Link Reit, HKEX: 823). A giant stock may not need to be large in size, internal business strength with strong economic moat is even more crucial.

Merging and demerging are neutral corporate actions, impact depends on the long term plans of major shareholders. Both CMT and CCT are defensive REITs which could generate steady passive incomes (about 5-6% dividend yield, depending on the share prices). However, the growth is slow (but steady), therefore an investor may position as a defender while diversifying capital over a portfolio of other giant stocks including mid-fielders (eg. growth stocks) and strikers (eg. cyclic stocks or momentum stocks).

When CMT and CCT are merged, would form a new stock, CICT with only 1 stock. Therefore, 30 STI index component would invite the next reserve stock, Keppel DC Reit (SGX: AJBU) which is also a REIT but much stronger growth. The best time to buy a growth stock is usually during global stock crisis (eg. COVID-19 pandemic) with great fear in the market but business continues to make money each month.

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A smart investor may carefully design a portfolio of global giant stocks (defenders, mid-fielders, strikers) while an experienced trader may take action following the trend with S.E.T. (Stop Loss, Entry, Target Prices) in trading plan.

Filed Under: Fundamental Analysis, Market Cycle Investing, Personal Analysis, Stock Market, Value Investing Tagged: crisis stock, keppel corp, sembcorp industries, sembcorp marine, sia, temasek

Singapore and Malaysia National Giant Stocks (国庆财股)

Posted on August 9, 2020 Written by Dr Tee (Ein55)

Both Singapore and Malaysia celebrate National Day in the month of August. It is timely to share the 4 National Giant Stocks in each country which preserve the national wealth. Learn from Dr Tee on how to position these stocks during COVID-19 stock crisis.

4 Singapore National Stocks:

1) DBS (SGX: D05)

2) Singtel (SGX: Z74)

3) OCBC (SGX: O39)

4) UOB (SGX: U11)

4 Malaysia National Stocks:

1) Maybank (Bursa: 1155)

2) Top Glove (Bursa: 7113) / (SGX: BVA)

3) Hartalega (Bursa: 5168)

4) Public Bank (Bursa: 1295)

Stock market is a hidden way to preserve and grow the national wealth. For Singapore SGX, there are 30 large cap stocks in STI Index (^STI), which can be sorted below by size of market cap (share price x number of shares) with ROE (Return on Equity):

No Name / Market Cap(M) (ROE, %)

1 DBS Bank (SGX: D05) 52304 (12.3)

2 Singtel (SGX: Z74) 38761 (4.0)

3 OCBC Bank (SGX: O39) 38413 (10.3)

4 UOB Bank (SGX: U11) 32687 (11.0)

5 Wilmar International (SGX: F34) 30509 (7.7)

6 Jardine Matheson Holdings JMH (SGX: J36) 29865 (9.4)

7 Jardine Strategic Holdings JSH (SGX: J37) 22731 ( 6.1)

8 Thai Beverage (SGX: Y92) 15195 (20.1)

9 CapitaLand (SGX: C31) 13844 (8.8)

10 Ascendas Reit (SGX: A17U) 12489 (4.8)

11 Singapore Airlines (SGX: C6L) 10346 (-0.1)

12 ST Engineering (SGX: S63) 10042 (26.0)

13 Keppel Corp (SGX: BN4) 9830 (6.3)

14 Singapore Exchange (SGX: S68) 9236 (37.9)

15 Hongkong Land USD (SGX: H78) 8635 (0.5)

16 Genting Singapore (SGX: G13) 8204 (8.5)

17 Mapletree Logistics Trust (SGX: M44U) 8027 (8.2)

18 Jardine Cycle & Carriage (SGX: C07) 7659 (12.8)

19 Mapletree Industrial Trust (SGX: ME8U) 7490 (10.3)

20 City Development (SGX: C09) 7463 (5.2)

21 CapitaLand Mall Trust (SGX: C38U) 6937 (9.0)

22 CapitaLand Commercial Trust (SGX: C61U) 6294 (6.0)

23 Mapletree Commercial Trust (SGX: N2IU) 6130 (9.4)

24 Dairy Farm International (SGX: D01) 5897 (26.8)

25 UOL (SGX: U14) 5491 (4.8)

26 Venture Corporation (SGX: V03) 5449 (14.5)

27 YZJ Shipbldg SGD (SGX: BS6) 3801 (10.0)

28 Sembcorp Industries (SGX: U96) 3394 (3.1)

29 SATS (SGX: S58) 3017 (10.4)

30 ComfortDelGro (SGX: C52) 2990 (10.2)

It is clear that the Top 4 stocks with the largest market cap in Singapore are DBS (SGX: D05), Singtel (SGX: Z74), OCBC (SGX: O39) and UOB (SGX: U11). Company size may not be the right criteria of a giant stock, therefore an investor has to monitor business fundamental changes (especially during COVID-19 pandemic), eg with ROE and other indicators.

For 30 STI stocks, only Singapore Airlines, SIA (SGX: C6L) records losses in last financial year. For 30 STI stocks, COVID-19 has different degrees of impact on near future business. There is also on-going crisis, eg. low optimism crude oil price which affects the Oil & Gas sector, including Keppel Corp (SGX: BN4) and Sembcorp Industries (SGX: U96), which may take longer time to recover with strong support of sponsor, Temasek.

3 major bank stocks (DBS, OCBC, UOB) in Singapore have contributed to about 1/3 of Singapore stock market. Bank stocks are sensitive to interest rate changes, therefore current low interest rates globally (driven by nearly 0% interest rate by the Fed of US) have reduced the Net Interest Margin (NIM), resulting in lower interest related income. At the same time, Non-Performing Loan (NPL) is increasing during COVID-19, banks have to increase more provision funds to prepare for possible default in loan payment of some countries, including Oil & Gas sector (eg. Hin Leong which has high debt to 3 major banks). As a result, it is not surprised to see bank stocks report poorer quarterly results for Q1 and Q2 / 2020.

MAS has requested 3 major banks in Singapore to cap the dividend payment for FY2020 to maximum of 60% of FY2019. This implies for an average dividend yield of 6%, an investor may only receive 6 x 0.6 = 3.6% for the next 1 year. As a result, 3 major bank stocks were under significant price correction recently (which also affect performance of STI). However, a long term bank stock investor should not consider dividend payment as a criteria to decide on investing. In fact, the share price correction of over 3% in 1 week has compensated for the “loss” of dividend (which is kept as retained earnings in balance sheet, a form of saving for investor, similar to many REITs in Q1 and Q2 / 2020 to preserve cash).

Here is a list of 30 Banking & Finance stocks in Singapore, an investor may focus on 3 major bank stocks:
AMTD IB OV (SGX: HKB), B&M Hldg (SGX: CJN), DBS Bank (SGX: D05), Edition (SGX: 5HG), G K Goh (SGX: G41), Global Investment (SGX: B73), Great Eastern (SGX: G07), Hong Leong Finance (SGX: S41), Hotung Investment (SGX: BLS), IFAST Corporation (SGX: AIY), IFS Capital (SGX: I49), Intraco (SGX: I06), Maxi-Cash Finance (SGX: 5UF), MoneyMax Finance (SGX: 5WJ), Net Pacific Finance (SGX: 5QY), OCBC Bank (SGX: O39), Pacific Century (SGX: P15), Prudential USD (SGX: K6S), Singapore Exchange (SGX: S68), SHS (SGX: 566), Sing Investments & Finance (SGX: S35), Singapore Reinsurance (SGX: S49), Singapura Finance (SGX: S23), TIH (SGX: T55), Uni-Asia Group (SGX: CHJ), UOB Bank (SGX: U11), UOB-KAY HIAN HOLDINGS (SGX: U10), UOI (SGX: U13), ValueMax (SGX: T6I), Vibrant Group (SGX: BIP).

Singtel is also a crisis giant stock in bearish Telco sector (started a few years before COVID-19), an investor who “Buy Low” may get Lower in share price, gaining dividend yield (eg. 5%) but making capital loss (lower share price). Telco business is saturated, economic moat is narrow as most Telco services could be easily replaced by other competitors, therefore profit margin is lower with intense competition not only in local market but also in regional market (Singtel has over 50% revenue from overseas markets).

OCBC, UOB and Singtel are relatively at lower optimism region while DBS is at moderate optimism level. Each giant stock requires different strategy (crisis, cyclic, growth, etc) in positioning, either for short term trading or long term investing.

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Malaysia Bursa with 30 KLCI (^KLCI) stocks, top 4 giant stocks by market cap has significant changes recently. Maybank (Bursa: 1155) is still the largest but both Top Glove (Bursa: 7113) / (SGX: BVA) and Hartalega (Bursa: 5168) have surpassed Public Bank (Bursa: 1295), mainly due to speculation in stocks during COVID-19 for glove related stocks. Top Glove has dual listing in both Malaysia Bursa and Singapore SGX, therefore the wealth of a nation could be shared by global investors, regardless of nationality.

Here is a list of 30 Malaysia Bursa KLCI Index component stocks which may be considered (investor has to focus only on giant stocks for investing):
CIMB (Bursa: 1023) CIMB GROUP HOLDINGS BERHAD, DIALOG (Bursa: 7277) DIALOG GROUP BERHAD, DIGI (Bursa: 6947) DIGI.COM BERHAD, GENM (Bursa: 4715) GENTING MALAYSIA BERHAD, GENTING (Bursa: 3182) GENTING BERHAD, HAPSENG (Bursa: 3034) HAP SENG CONSOLIDATED BERHAD, HARTA (Bursa: 5168) HARTALEGA HOLDINGS BERHAD, HLBANK (Bursa: 5819) HONG LEONG BANK BERHAD, HLFG (Bursa: 1082) HONG LEONG FINANCIAL GROUP BERHAD, IHH (Bursa: 5225) IHH HEALTHCARE BERHAD, IOICORP (1961) IOI CORPORATION BERHAD, KLCC (Bursa: 5235SS) KLCC PROPERTY HOLDINGS BERHAD, KLK (Bursa: 2445) KUALA LUMPUR KEPONG BERHAD, MAXIS (Bursa: 6012) MAXIS BERHAD, MAYBANK (Bursa: 1155) MALAYAN BANKING BERHAD, MISC (Bursa: 3816) MISC BERHAD, NESTLE (Bursa: 4707) NESTLE MALAYSIA BERHAD, PBBANK (Bursa: 1295) PUBLIC BANK BERHAD, PCHEM (Bursa: 5183) PETRONAS CHEMICALS GROUP BERHAD, PETDAG (Bursa: 5681) PETRONAS DAGANGAN BHD, PETGAS (Bursa: 6033) PETRONAS GAS BERHAD, PMETAL (Bursa: 8869) PRESS METAL ALUMINIUM HOLDINGS BERHAD, PPB (Bursa: 4065) PPB GROUP BERHAD, RHBBANK (Bursa: 1066) RHB BANK BERHAD, SIME (Bursa: 4197) SIME DARBY BERHAD, SIMEPLT (Bursa: 5285) SIME DARBY PLANTATION BERHAD, TENAGA (Bursa: 5347) TENAGA NASIONAL BHD, TM (Bursa: 4863) TELEKOM MALAYSIA BERHAD, TOPGLOV (Bursa: 7113) TOP GLOVE CORPORATION BHD.

Strong fundamental stocks (eg. glove business) with market greed usually result in market speculation or bubble. Each positive news would be used as a reason to buy high for share prices. Despite strong business fundamental, glove stocks are more suitable for short term trading with trend-following strategies, Buy High Sell Higher. However, due to relative high optimism level, each unexpected correction may incur high losses if a trader does not have a trading plan with S.E.T. (Stop Loss, Entry, Target) prices.

Maybank and Public Bank are aligned with Singapore and global banks at relatively lower optimism levels. Bank stocks are cyclic in nature, therefore investing in national banks (usually supported by local government) during global financial crisis would have higher chances of success for longer term investors who could overcome the market fear, investing with progressive entries of capital (eg. 10 x 10%, 5 x 20%, 2 x 50%, etc). Saving in banks would receive less than 1% return in interest but investing in giant bank stocks could receive over 100% return over a market cycle.

Each country or region has its own national blue chip stock. For example, TSMC (NYSE: TSM) contributed to 1/3 of Taiwan TSEC Stock Index (^TWII). With bullish semiconductor / 5G stocks, TSMC has doubled its share price in 6 months, contributing to higher index value of Taiwan stock market. TSMC has monopoly of 5 nanometer technology in wafer fab, a crucial pillar for emerging 5G Telco business over the next 10 years.

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Dilemma of investors for global growth stocks (eg. technology, glove, healthcare, etc) are share prices are not cheap when market is not fearful. Therefore, crisis is always an opportunity, especially when a stock price drops significantly during an unexpected crisis (eg. COVID-19 pandemic) but business fundamental is not much affected or even growing.

Drop by Dr Tee free 4hr webinar to learn how to position in global giant stocks during COVID-19 stock crisis with 10 unique stock investing strategies, knowing What to Buy, When to Buy/Sell.

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Zoom will be started 30 min before event, bonus talk (Q&A on any investment topics from readers) for early birds. There are many topics we will cover in this 4hr webinar, Dr Tee can have more time for Q&A if you could stay later after the webinar.

Dr Tee will cover over 20 case studies, Singapore giant stocks, eg. CapitaLand Mall Trust (SGX: C38U), Singapore Exchange (SGX: S68), Keppel Corp (SGX: BN4), Top Glove (SGX: BVA), Jardine Matheson Holdings JMH (SGX: J36), Vicom (SGX: WJP) and many others, Malaysia giant stocks, Hong Kong giant stocks and US giant stocks, both long term investing and short term trading.

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Filed Under: Macroeconomy, Market Cycle Investing, Market Outlook, Stock Market, Technical Analysis Tagged: bank stock, crisis stock, dividend stock, glove stock, growth stock, telco stocks

Rights Issue and Demerger of Sembcorp Marine from Sembcorp Industries (难兄难弟)

Posted on June 8, 2020 Written by Dr Tee (Ein55)

Rights Issue Demerger Sembcorp Marine Sembcorp Industries Temasek Keppel Corp

Temasek stocks of Sembcorp Industries SGX: U96, parent stock) and Sembcorp Marine (SGX: S51, subsidiary stock) just announce 2 bundled corporate actions of rights issue for Sembcorp Marine and then demerger from Sembcorp Industries. In this article, Dr Tee will compare both Sembcorp stocks and share the possible causes and effects of such actions with deeper analysis.

Recently, Temasek stock of Singapore Airlines, SIA (SGX: C6L) just completed the rights and mandatory convertible bonds (MCB) issues to inject extra capital to save the company from Covid-19 crisis encountered in airlines sector with over 90% drop in number of flights. Temasek would become the sponsor to take up additional rights and bonds if not taken up by other shareholders.

Temasek may have modified the “rescue” recipe for another company (Sembcorp) which need helps under both Covid-19 and Crude Oil Crises. Temasek owns 49.3% of Sembcorp Industries, a parent stock which subsequently owns 61% of Sembcorp Marine from oil & gas sector (see diagram).

The proposed corporate actions are bundle of 2 actions (see diagram), requiring both to pass together to be effective. Sharing here are for educational purpose, please make your own decision in investment.

Rights Issue Demerger Sembcorp Marine Sembcorp Industries Temasek

1) 5-for-1 Rights Issue for Sembcorp Marine

There are a few ways to “borrow money” for a business, eg. borrowing from banks or issue bonds but this would increase the debt level (both Sembcorp Industries and Sembcorp Marine have relatively high level of debt over asset) and additional cost to business with interest of loans. Therefore, an alternative way is to “borrow” money from shareholders through rights issue as this strategy would not increase the debt level and no interest is required. However, if shareholders don’t welcome this move (may be under pressure to invest with new capital), they may reflect the negative sentiment with lower share prices which affect the market cap of company or hidden wealth of shareholders.

Sembcorp Marine hopes to raise S$2.1 billion under 5-for-1 renounceable rights issue at an issue price of $0.20 per share. Based on recent average price of $0.74 for Sembcorp Marine, the theoretical ex-rights price (TERP) is

TERP = [($0.20 x 5) + ($0.74 x 1)] / 6 = $0.29/share

Since the rights are renounceable (similar to previous SIA rights), current shareholders of Sembcorp Marine may either accept the rights (requires extra cash to invest more on this stock) or they could simply sell the rights in stock market at later stage if action is approved.

Action of rights issue is a neutral corporate action, there is no right or wrong, decision partly depends on how the new capital is used (eg. paying debt, saving company or expanding the business, etc) and also whether a stock has strong business fundamental or strong sponsor. Similar to SIA, Sembcorp Marine needs additional capital to cope with the current crisis which is even worse, not limited to shorter term Covid-19 crisis (affecting most sectors) but also longer term oil & gas crisis with bearish crude oil price (affecting most oil & gas companies, including Sembcorp Marine and Keppel Corp, SGX: BN4).

When crude oil market was bullish 10 years ago, Sembcorp Marine and Keppel Corp were still giant stocks, doing well with growing businesses. However, when crude oil price dropped from over US$100/barrel since Year 2015 to less than US$50/barrel over the past few years, businesses of Sembcorp Marine and Keppel Corp (business segment of Keppel O&M) turn to negative, becoming losses.

Sembcorp Marine revenue size is about 1/3 of Sembcorp Industries, seriously affecting the earnings of parent company, which could still remain profitable with support of other business segments (energy/utilities and urban) but it has been weaker over the past 5 years. Keppel O&M (not listed) also contributes to most losses of Keppel Corp which is mainly supported by property segment. Due to prolonged oil & gas crisis over the past 5 years, these 3 Temasek stocks have lost the titles of giant stock (based on Dr Tee criteria): Sembcorp Industries, Sembcorp Marine and Keppel Corp.

Therefore, as a stock investor, decision of whether to take up rights issue is similar to additional investment, whether Sembcorp Marine worth investing. Currently crude oil market is still at low optimism but it is on recovery phase. It might take a few years for customers (oil producers) of Sembcorp Marine and also Keppel Corp (Keppel O&M) to become profitable and increase the capital investment. So, the cold winter of business might be much longer for Sembcorp Marine and Keppel O&M which could be a stopper for recovery of share prices despite at low optimism level.

Besides accepting / selling rights issue, current shareholders also have the option to sell the stock before corporate actions (but price may correct down if mass market views the action negatively). If the action is “Sell”, a shareholder may not suffer permanent loss if knowing how to “Change Horse”, use the remaining capital (after selling) to “Buy” an oil & gas giant stock or even a non-crisis giant stock on the same day. During oil & gas crisis period of last few years, a few oil & gas companies actually profit from the crisis, eg. those related to oil storage.

2) Demerger of Sembcorp Industries and Sembcorp Marine

Although Sembcorp Marine is only a subsidiary of Sembcorp Industries with 1/3 revenue but it contributed to most of the losses of parent company. From the chart below, it is shown that over the past 14 years (since 2006), both Sembcorp Industries and Sembcorp Marine behave more like siblings (难兄难弟), instead of parent-subsidiary relationship, having very close long term stock price trends (key difference is Sembcorp Marine is more volatile than Sembcorp Industries).

This implies 1/3 business connection of 2 Sembcorp stocks have contributed to nearly 90% strong correlation in share prices. Therefore, the proposal of demerger of 2 stocks would help Sembcorp Industries more in longer term. Sembcorp Industries shareholders would get compensation through dividend stocks of between 427 and 491 Sembcorp Marine shares for every 100 Sembcorp Industries shares owned. After demerging, since there is no connection in business, Sembcorp Industries would become more profitable (growing earnings contributed by energy/utilities and urban business segments) without affected by possible losses of Sembcorp Marine. Currently, Sembcorp Marine is as if a negative asset (contributing to losses) to Sembcorp Industries, therefore if parent company could sell away with some compensation, this would help Sembcorp Industries become a giant stock again.

After demerger, Temasek would become direct sponsors (major shareholder) for both companies which would become siblings or even cousins in Temasek family of stocks. The future losses of Sembcorp Marine would be sustained partially by Temasek, not by Sembcorp Industries anymore. In fact, energy/utilities (gas / power / water / waste / renewable energy) business of Sembcorp Industries are defensive in nature, would support the future share prices of “new” Sembcorp stock without “Marine” business segment. The smaller “Urban” segment (land and property development) is only 3% of company revenue but contributes to about 25% of company profits, a highly potential segment to grow further when “burden” of Marine is put aside.

To be fair to Sembcorp Marine, it is a stock with high potential but currently more suitable as crisis stock investing, implying if the potential losses in next few years could be sustainable (partly with help of rights issue), when crude oil price may be back to high optimism as 10 years ago, then Sembcorp Marine could outperform Sembcorp Industries.

Therefore, after demerging, both Sembcorp stocks would be clearer in personalities with more unique businesses. Sembcorp Industries would be mainly suitable for gradual growth, defensive investor. Sembcorp would be more for crisis stock investor who view high volatility (both potential high losses and high gains) as main driver for capital gains. Of course, a stock investor also has the option not to consider either Sembcorp stocks by selling them or not considering at all.

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Current Sembcorp Industries and Sembcorp Marine shareholders have to make a few decisions in the next few months. With support of Sembcorp Industry as major shareholder, likely the rights issue of Sembcorp Marine could be approved. However, this action is conditional based on the approval by both Sembcorp Marine and Sembcorp Industries for the other action, acceptance of demerger of 2 companies, which both Sembcorp Industries and Temasek would abstain from voting.

In short, the bundled corporation actions ultimately depend on minority shareholders for approval, therefore it is fair from democracy point of view. After excluding Temasek and Sembcorp Industries which are 50-60% ownership in both stocks, remaining minority shareholders are scattered (some are big funds), a simple majority >50% votes is required for both companies to approve the entire package.

Therefore, it may be similar to an election process, hard to predict the outcome unless there is alliance or rally among the minority shareholders. When 1 “party” feels in disadvantaged position, it may not approve, then whole deal would fail.

There are at least 26 Temasek / GLC stocks in Singapore including Sembcorp Industries and Sembcorp Marine, controlling shareholder with 15% or more ownership directly or indirectly:

Singtel (SGX: Z74), DBS Bank (SGX: D05), ST Engineering (SGX: S63), SIA (SGX: C6L), SIA Engineering (SGX: S59), SGX (SGX: S68), SATS (SGX: S58), Sembcorp Industries (SGX: U96), Sembcorp Marine (SGX: S51), Olam (SGX: O32), CapitaLand (SGX: C31), CapitaLand Mall Trust (SGX: C38U), CapitaLand Commercial Trust (SGX: C61U), Ascendas Reit (SGX: A17U), Ascott HTrust (SGX: HMN), Ascendas-hTrust (SGX: Q1P), CapitaR China Trust (SGX: Au8U), Ascendas-iTrust (SGX: CY6U), Keppel Corp (SGX: BN4), Keppel Reit (SGX: K71U), Keppel DC Reit (SGX: AJBU), Keppel Infrastructure Trust (SGX: A7RU), Mapletree Logistics Trust (SGX: M44U), Mapletree Commercial Trust (SGX: N2IU), Mapletree Industrial Trust (SGX: ME8U), Mapletree NAC Trust (SGX: RW0U).

The results of SIA rights issue and subsequently the Sembcorp resolutions, could give some direction of what possible actions to take for other Temasek stocks which may need help in business. Among the 30 STI component stocks with Temasek control (over 15% share ownership), these 4 Temasek stocks would need more help: Singapore Airlines, Sembcorp Industries (linked to Sembcorp Marine which was STI component stock before) and Keppel Corp.

So, regardless the outcome of Sembcorp actions, Temasek may also consider other options in future, eg. demerger of Keppel O&M from Keppel Corp, merging with Sembcorp Marine for cost saving of 2 oil & gas companies. For all the actions, there is a positive common point, which they all have a strong sponsor, Temasek. It is a bonus to have a strong sponsor but a business still needs good management with right strategies for each of the business sector. These performances would be reflected in both yearly financial reports and daily stock prices, especially for longer term trends. So, it may not be difficult for a stock investor to make a sound decision (Buy, Hold, Sell, Wait, Shorting), aligning the right Temasek stock with own personality, supported by growing business.

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On surface, this topic seems to be just on corporate actions of 2 Sembcorp stocks. When understanding further, it requires understanding of 2 current financial crisis, Crude Oil crisis and Covid-19 crisis, when they may end or fade away. When going to another deeper level, it may also involve political economy and global stock market, especially potential impact of US-China trade war. So, a stock investor should master at least 5 key LO-FTP strategies (Levels 1-4, Optimism, Fundamental, Technical, Personal Analysis).

There are 30 STI index component stocks including Sembcorp Industries (investor has to focus only on giant stocks for investing):
DBS Bank (SGX: D05), Singtel (SGX: Z74), OCBC Bank (SGX: O39), UOB Bank (SGX: U11), Wilmar International (SGX: F34), Jardine Matheson Holdings JMH (SGX: J36), Jardine Strategic Holdings JSH (SGX: J37), Thai Beverage (SGX: Y92), CapitaLand (SGX: C31), Ascendas Reit (SGX: A17U), Singapore Airlines (SGX: C6L), ST Engineering (SGX: S63), Keppel Corp (SGX: BN4), Singapore Exchange (SGX: S68), Hongkong Land (SGX: H78), Genting Singapore (SGX: G13), Mapletree Logistics Trust (SGX: M44U), Jardine Cycle & Carriage (SGX: C07), Mapletree Industrial Trust (SGX: ME8U), City Development (SGX: C09), CapitaLand Mall Trust (SGX: C38U), CapitaLand Commercial Trust (SGX: C61U), Mapletree Commercial Trust (SGX: N2IU), Dairy Farm International (SGX: D01), UOL (SGX: U14), Venture Corporation (SGX: V03), YZJ Shipbldg SGD (SGX: BS6), Sembcorp Industries (SGX: U96), SATS (SGX: S58), ComfortDelGro (SGX: C52).

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Filed Under: Commodity Market, Fundamental Analysis, Personal Analysis, Stock Market, Value Investing Tagged: crisis stock, keppel corp, sembcorp industries, sembcorp marine, singapore airlines, temasek

8 Glove Stocks & 6 Sectors Profit in COVID-19 (易如反掌)

Posted on June 1, 2020 Written by Dr Tee (Ein55)

Crisis glove stocks Top Glove Hartalega Kossan Supermax Riverstone Covid-19

In this article, you will learn 8 glove manufacturer stocks in Singapore and Malaysia and 6 other sectors which could profit from Covid-19 crisis, each requiring unique stock strategies for investing or trading.

1) Top Glove (SGX: BVA) / (Bursa: 7113) – Singapore / Malaysia Giant Glove Stock

2) Hartalega (Bursa: 5168) – Malaysia Giant Glove Stock

3) Kossan (Bursa: 7153) – Malaysia Giant Glove Stock

4) SuperMax (Bursa: 7106) – Malaysia Giant Glove Stock

5) Riverstone (SGX: AP4) – Singapore Giant Glove Stock

6) Comfort Gloves (Bursa: 2127) – Malaysia Glove Stock

7) Careplus (Bursa: 0163) – Malaysia Glove Stock

8) Rubberex (Bursa: 7803) – Malaysia Glove Stock

Crisis is opportunity for stock investing, especially true for glove manufacturers during Covid-19 crisis as demand for gloves are surging. In the past 1 decade, glove stocks are in the best time of era, strong growing business supported by 4 main factors:

1) Growing economy – higher manufacturing needs, especially glove is consumable (cheap but frequently used / replaced), recurring income.

2) Pandemic – higher healthcare needs, including Covid-19, H1N1 and other virus outbreaks.

3) Lower cost – especially for latex glove as rubber price has been low optimism due to bearish global commodity market. Thailand and Malaysia are rubber main producers, supplying to factories of these glove manufacturers within the same countries, saving more cost.

4) Stronger USD – forex becomes advantage for glove manufacturers as local expenses are mostly paid in ringgit but customers are based from overseas (world), therefore collecting payment (incomes) in USD which is stronger relative to ringgit. Of course, this advantage may become a weakness in future when USD becomes weaker.

Fundamentally, Covid-19 crisis helps to improve the business of these glove stocks, Q1/2020 financial results are even stronger than previous year. A strong fundamental business when encounter high demand due to market greed (which may be due to fear), the share price could be speculated higher.

Strong Fundamental + Market Greed = Positive Speculation

[Higher Sales + Stronger (USD/MYR) – Lower Cost] + Higher Greed (Pandemic Fear) = Higher Share Price

Indeed, all of these 8 glove stocks have surged more than 2 times in share prices over the past few months of Covid-19 pandemic. However, the current prices are at high optimism, mainly suitable for very short term momentum trading (Buy High Sell Higher).

Top Glove (listed in both Singapore and Malaysia), Hartalega, Kossan and SuperMax are considered the Big Four of glove manufacturers in Malaysia, all are giant stocks (based on Dr Tee criteria), will be discussed in further. Riverstone is a smaller player (listed in Singapore) but having strong business fundamental, will have more comments as well later. As for other 3 glove stocks (Comfort Gloves, Careplus, Rubberex) which are smaller in size, only have stronger business over the past 5 years (likely due to leftover demand, competing with lower prices or niche market), mainly suitable for short term trading, not a giant stock.

So, we will elaborate here mainly on 5 giant glove stocks (Top Glove, Hartalega, Kossan, SuperMax, Riverstone) which may be considered for both longer term investing (when correcting below a fair price with holding power) and short term trading (following S.E.T. trading rule – Stop Loss / Entry / Target Prices).

1) Top Glove (SGX: BVA) / (Bursa: 7113) – Singapore / Malaysia Giant Glove Stock

Top Glove is the world’s largest rubber glove manufacturer with many types of latex and nitrile gloves from manufacturing facilities in Malaysia, Thailand and China. Founder and major shareholder is Lim Wee Chai (27% ownership), also the No 14 richest person in Malaysia (Forbes’ List), supported mainly by rising share prices over the 2 past decades (share price goes up over 500 times since IPO till now). Top Glove has become 1 of 30 KLCI component stock, showing its business strength.

Top Glove has dual listing in Malaysia Bursa (longer history) and Singapore SGX. The relative stock performance are aligned but due to different group of investors, short term share price in SGX (BVA) is even more bullish than in Bursa (7113). Fundamentally, each share (SGX or Bursa) is the same but short term share price may not be due to difference of forex (SGD/MYR) alone.

Top Glove is a strong growth stock (supported by growing businesses with strong cash flow) but highly leveraged (high debt) to expand its capability further, strengthening its position as world’s largest glove manufacturer. Scale of economy is also a form of economic moat, position as bigger player could help to lower down the unit cost, therefore increase the profit margin.

Due to high optimism in share price, Top Glove may be considered as a mid-fielder stock (aiming for high capital gains with little dividend yield as bonus). It may also be considered for very short term momentum trading despite share price is speculated (Buy High Sell Higher strategy).

2) Hartalega (Bursa: 5168) – Malaysia Giant Glove Stock

Hartalega is the world’s largest nitrile glove manufacturer. Founder and major shareholder is Kuan Kam Hon (about 50% ownership with family), also the No 9 richest person in Malaysia (Forbes’ List), supported mainly by rising share prices over the past decade (share price goes up nearly 100 times since IPO till now). Hartalega has become 1 of 30 KLCI component stock, showing its business strength.

Hartalega main product of nitrile glove has higher profit margin compared to latex (rubber) glove. However, this profitable product segment also attracts many competitors, therefore the high growth of Hartalega is getting slower, now is more aligned (sustainable rate) with other major competitors, sharing the big pie of glove industries.

Hartalega is a strong growth stock (supported by growing businesses with strong cash flow) with lower debt level (having potential to expand further with more leveraging if needed). Scale of economy is also a form of economic moat, position as bigger player (nitrile glove) could help to lower down the unit cost, therefore increase the profit margin.

Due to high optimism in share price, Hartalega may be considered as a mid-fielder stock (aiming for high capital gains with little dividend yield as bonus). It may also be considered for very short term momentum trading despite share price is speculated (Buy High Sell Higher strategy).

3) Kossan (Bursa: 7153) – Malaysia Giant Glove Stock

Kossan is the world’s second largest glove manufacturer (technical rubber products, medical gloves, cleanroom products, etc). Founder and major shareholder is Lim Kuang Sia (about 50% ownership), was in 2017 Forbes’ List for Malaysia No 30 richest person, supported mainly by rising share prices over the past 2 decades (share price goes up about 60 times since IPO till now).

Kossan is a strong growth stock (supported by growing businesses with strong cash flow), performance is comparable with the main competitor, Top Glove. Kossan has moderate debt level, having potential to expand further with more leveraging if needed. The glove industry is big enough for major players to share the big global pie of growing demand for gloves in manufacturing and healthcare sectors.

Due to moderate high optimism in share price (compared to other 4 giant glove stocks at high optimism), Kossan has more upside potential, may be considered as a mid-fielder stock (aiming for high capital gains). It may also be considered for very short term momentum trading despite share price is speculated (Buy High Sell Higher strategy).

4) SuperMax (Bursa: 7106) – Malaysia Giant Glove Stock

SuperMax is a leading medical / latex gloves manufacturer. Founder and major shareholder is Thai Kim Sim (about 40% ownership together with wife) who was charged with insider trading in Year 2017. However, this negative news does not stop investors from supporting SuperMax, share price goes up about 60 times over the past 2 decades. During Covid-19 pandemic, SuperMax share price is the most bullish among 5 giant stocks, surging over 5 times in a few months time.

Among 5 giant glove stocks, SuperMax has relatively weaker business (but still a giant stock), earning has been declining despite growing revenue, indicating weaker profit margin which is not comparable with other competitors. Due to very high optimism in share price, SuperMax is more speculative in short term. For longer term investing, other 4 giant stocks are relatively safer for consideration.

5) Riverstone (SGX: AP4) – Singapore Giant Glove Stock

Among 5 giant glove stocks, Riverstone is the smallest player but it has its niche market. Riverstone manufactures cleanroom glove (eg. hard disk drive and semiconductor) and healthcare gloves. Founder and major shareholder is Wong Teek Son (about 50% ownership), also the No 44 richest person in Malaysia (Forbes’ List), supported mainly by rising share prices over the past decade (share price goes up nearly 20 times since IPO till now).

Riverstone is a Malaysia company but stock is listed in Singapore, therefore the share price potential is also partially affected by Singapore stock market. Choice of stock exchange for listing does not affect the company fundamental (same share ownership) but due to different characteristic of global investors in each stock exchange (eg. US, Hong Kong, Singapore, Malaysia), etc, would make a big difference in share prices which is the ultimate goal for a company to be listed. As a result, certain stock exchange is more popular of IPO stocks but may not be fundamentally strong. So, a stock investor has to consider a stock or even stock exchange, aligning with own personality and strategy, either on long term investing or short term trading.

Riverstone is a strong growth stock (supported by growing businesses with strong cash flow), a small player with potential to expand further with more leveraging if needed (current debt level is very low). A giant stock is not determined by its business size, if Riverstone could remain highly profitable within its niche market (also a form of economic moat), it can be a good stock investment.

Due to high optimism in share price, Riverstone may be considered as a mid-fielder stock (aiming for high capital gains with little dividend yield as bonus). It may also be considered for very short term momentum trading despite share price is speculated (Buy High Sell Higher strategy).

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Top Glove and Riverstone are not 30 STI index component stocks but they are much stronger than most of these blue chip stocks in Singapore (investor has to focus only on giant stocks for investing):
DBS Bank (SGX: D05), Singtel (SGX: Z74), OCBC Bank (SGX: O39), UOB Bank (SGX: U11), Wilmar International (SGX: F34), Jardine Matheson Holdings JMH (SGX: J36), Jardine Strategic Holdings JSH (SGX: J37), Thai Beverage (SGX: Y92), CapitaLand (SGX: C31), Ascendas Reit (SGX: A17U), Singapore Airlines (SGX: C6L), ST Engineering (SGX: S63), Keppel Corp (SGX: BN4), Singapore Exchange (SGX: S68), Hongkong Land (SGX: H78), Genting Singapore (SGX: G13), Mapletree Logistics Trust (SGX: M44U), Jardine Cycle & Carriage (SGX: C07), Mapletree Industrial Trust (SGX: ME8U), City Development (SGX: C09), CapitaLand Mall Trust (SGX: C38U), CapitaLand Commercial Trust (SGX: C61U), Mapletree Commercial Trust (SGX: N2IU), Dairy Farm International (SGX: D01), UOL (SGX: U14), Venture Corporation (SGX: V03), YZJ Shipbldg SGD (SGX: BS6), Sembcorp Industries (SGX: U96), SATS (SGX: S58), ComfortDelGro (SGX: C52).

Some investors may be envy of owners of these 5 giant stocks which most founders are Top 50 richest persons in Malaysia. In fact, the easiest way to get very rich may not be through a business. Rather, it is through stock market with a growing business to support the rising share prices which could be over 10-100 times in wealth after IPO (易如反掌). This is the reason why for successful businesses, most of the founders plan to list the stock at certain point of time.

Since all 5 glove giant stocks are mostly controlled (over 50% shares ownership) by founders and families, a key consideration for long term investing is on succession plan to either second generation or capable professionals. A smart retail stock investor has to review a giant stock yearly or even quarterly to ensure it is still a giant stock before continuing the long term support. A sector may not be bullish all the time, including glove industry as profitable business usually would attract many potential competitors which would reduce the profit margins with lower price, lower sales or higher cost.

Here is a list of 30 Malaysia Bursa KLCI Index component stocks which may be considered (investor has to focus only on giant stocks for investing):
CIMB (Bursa: 1023) CIMB GROUP HOLDINGS BERHAD, DIALOG (Bursa: 7277) DIALOG GROUP BERHAD, DIGI (Bursa: 6947) DIGI.COM BERHAD, GENM (Bursa: 4715) GENTING MALAYSIA BERHAD, GENTING (Bursa: 3182) GENTING BERHAD, HAPSENG (Bursa: 3034) HAP SENG CONSOLIDATED BERHAD, HARTA (Bursa: 5168) HARTALEGA HOLDINGS BERHAD, HLBANK (Bursa: 5819) HONG LEONG BANK BERHAD, HLFG (Bursa: 1082) HONG LEONG FINANCIAL GROUP BERHAD, IHH (Bursa: 5225) IHH HEALTHCARE BERHAD, IOICORP (1961) IOI CORPORATION BERHAD, KLCC (Bursa: 5235SS) KLCC PROPERTY HOLDINGS BERHAD, KLK (Bursa: 2445) KUALA LUMPUR KEPONG BERHAD, MAXIS (Bursa: 6012) MAXIS BERHAD, MAYBANK (Bursa: 1155) MALAYAN BANKING BERHAD, MISC (Bursa: 3816) MISC BERHAD, NESTLE (Bursa: 4707) NESTLE MALAYSIA BERHAD, PBBANK (Bursa: 1295) PUBLIC BANK BERHAD, PCHEM (Bursa: 5183) PETRONAS CHEMICALS GROUP BERHAD, PETDAG (Bursa: 5681) PETRONAS DAGANGAN BHD, PETGAS (Bursa: 6033) PETRONAS GAS BERHAD, PMETAL (Bursa: 8869) PRESS METAL ALUMINIUM HOLDINGS BERHAD, PPB (Bursa: 4065) PPB GROUP BERHAD, RHBBANK (Bursa: 1066) RHB BANK BERHAD, SIME (Bursa: 4197) SIME DARBY BERHAD, SIMEPLT (Bursa: 5285) SIME DARBY PLANTATION BERHAD, TENAGA (Bursa: 5347) TENAGA NASIONAL BHD, TM (Bursa: 4863) TELEKOM MALAYSIA BERHAD, TOPGLOV (Bursa: 7113) TOP GLOVE CORPORATION BHD.

Covid-19 could be a crisis for most sectors but there are still few sectors could remain profitable or having less impact than overall economy. Besides glove stocks, there are 6 other sectors which may be considered for stock investing during pandemic:

1) Supermarket stocks – eg. Sheng Siong (SGX: OV8), Dairy Farm International (SGX: D01), Wal-Mart (NYSE: WMT), Costco (NASDAQ: COST). etc. NTUC Fairprice is not publicly listed but it has limited private shares for members of NTUC Fairprice, paying about 6% yearly dividend yield. Those supermarket stocks with online business would have more advantages during pandemic.

2) Telco / 5G stocks – eg. Singtel (SGX: Z74), Apple (NASDAQ: AAPL), Xiaomi (HKEx: 1810), AT&T (NYSE: T), Verizon (NYSE: VZ), etc.

3) Semiconductor / Technology stocks – eg. Micro-mechanics (SGX: 5DD), UMS Holdings (SGX: 558), AEM (SGX: AWX), Frencken (SGX: E28), TSMC (NYSE: TSM), Intel (NASDAQ: INTC), AMD (NASDAQ: AMD), Nvidia (NASDAQ: NVDA), Qualcomm (NASDAQ: QCOM), Broadcom (NASDAQ: AVGO), etc.

4) Online / Software stocks – eg. BAT-FAANG stocks: Baidu (NASDAQ: BIDU), Alibaba (NYSE: BABA) / (HKEx: 9988), Tencent (HKEx: 0700), Facebook (NASDAQ: FB), Amazon (NASDAQ: AMZN), Apple (NASDAQ: AAPL), Netflix (NASDAQ: NFLX), Google / Alphabet (NASDAQ: GOOGL), etc.

5) Healthcare stocks – eg. 3M (NYSE: MMM), Gilead Sciences (NASDAQ: GILD), Raffles Medical Group (SGX: BSL), Q&M Dental Group (SGX: QC7), IHH Healthcare (SGX: Q0F), etc.

6) Stock Index ETF or stocks – eg. stronger defenders of major stock indices (STI, KLCI, DJI, S&P 500, MSCI, etc). STI ETF (SGX: ES3) / (SGX: G3B) or STI index component stocks with stronger businesses: DBS Bank (SGX: D05), OCBC Bank (SGX: O39), UOB Bank (SGX: U11), Singapore Exchange (SGX: S68), ST Engineering (SGX: S63), CapitaLand Mall Trust (SGX, C38U), Mapletree Commercial Trust (SGX: N2IU), Mapletree Logistics Trust (SGX: M44U), Jardine Matheson Holdings JMH (SGX: J36), Jardine Strategic Holdings JSH (SGX: J37), etc.

A stock investor may study Q1-Q2 / 2020 financial reports to compare the global giant stocks relatively to understand impact of Covid-19 for 3 group of stocks during pandemic with 3 unique stock strategies:

1) Profitable stocks – trading at higher prices with momentum trading (similar to glove stocks, Buy High Sell Higher strategy).

2) Defensive stocks – stable business with some price correction, collecting higher dividend yield or gradual growth in share prices (Buy Low and Hold strategy).

3) Crisis stocks – business disrupted by Covid-19 but no major risk (eg. bankruptcy), buying at low optimism price with cyclic investing or trading (Buy Low Sell High strategy).

Drop by Dr Tee free 4hr investment course to learn how to position in global giant stocks with 10 unique stock investing strategies, knowing What to Buy, When to Buy/Sell.

You are invited to join Dr Tee private investment forum (educational platform, no commercial is allowed) to learn more investment knowledge, interacting with over 9000 members.

Filed Under: Fundamental Analysis, Market Outlook, Stock Market, Technical Analysis, Trading, Value Investing Tagged: Bursa Malaysia, coronavirus, crisis stock, glove stock, growth stock, hartalega, Riverstone, supermax, top glove

5 Genting Group Casino Stocks (神机妙算)

Posted on April 30, 2020 Written by Dr Tee (Ein55)

Genting Gerhad casino stocks Malaysia Singapore Hong Kong Plantation

Genting Group is a famous regional casino with 50 years of history, started in Malaysia (Genting Highland), then extending to whole world, including Singapore, UK and US, currently aiming for Japan casino license. Usually there is no certainty in a business but casino is a unique sector which is almost guaranteed to win due to the “unfair” design of games (神机妙算) in favour of the house if there are positive incoming tourists in the region with supporting local government.

Casino stocks are usually cyclic in nature as business is dependent on economy condition, especially on wealthy gamblers (VIP and premium members) which may have more capital for gambling when stock market is bullish or vice versa.

Read the article further to understand the potential of Genting Group, both risks and opportunities, not learning only 1 but all 5 Genting stocks: Genting Berhad, Genting Malaysia, Genting Singapore, Genting Hong Kong, Genting Plantation.

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Genting Berhad is the parent stock, owning other 4 subsidiaries Genting companies with 4 distinct businesses:

1) Genting Berhad (Bursa: 3182) – Malaysia Giant Blue Chip Stock

2) Genting Malaysia (Bursa: 4715) – Malaysia Giant Casino Stock

3) Genting Singapore (SGX: G13) – Singapore Giant CasinoStock

4) Genting Hong Kong (HKEx: 678) – Hong Kong Cruise / ResortStock

5) Genting Plantations (Bursa: 2291) – Malaysia Giant Palm Oil / Property Stock

Genting Group main business is related to casino (main focus of this article). It diversifies business into plantation / property (through Genting Plantations, a giant stock but affected by low optimism palm oil prices) and cruise / resort (through Genting Kong Hong, a weak fundamental stock, would get worse during Coronavirus crisis).

Genting casino business depends on licenses issued by local country: monopoly in Malaysia, duopoly in Singapore (another casino is MBS – Marina Bay Sands), competing with many others in UK (the largest casino operator) and US. Despite casino is a “sure win” business, it requires huge capex in building the casino and integrated resort, paying high tax to local government and business is dependent on tourism (eg. casino business is badly affected for at least 2 months without income during global lockdown).

An investor may invest directly in Genting Berhad (parent stock) if requires more diversification of businesses and also casino business over the world (not dependent on certain country). Here, we would focus on 2 casino stocks in 2 countries, Genting Malaysia (which includes casino in Malaysia, UK, US) and Genting Singapore (which includes casino in Singapore and possibly Japan if license is obtained).

2) Genting Malaysia (Bursa: 4715) – Malaysia Giant Casino Stock

The founder of Genting is Mr Lim Goh Tong (林梧桐) who was already a successful businessman before taking high risks in building the first casino in Malaysia without government assistance in 1960s. During the construction of Genting Highland resort (which later becomes a casino), he nearly died 6 times in various unexpected accidents. He is awarded the only casino license (more than 50 years till now), a legend in Malaysia history.

When Dr Tee was still a small kid, I remember my first trip in life was around 9 years old to Genting Highland. Of course, I could not enter casino as a child. After growing up, I have been to casino all over the world: US (Las Vegas, Atlantic City), Malaysia (finally), Macau (a few there, see earlier article in my trip report to Hong Kong / Macau), Australia (Melbourne, Brisbane), etc, except for Singapore (well, there is admission fee for local Singapore people). I like to visit casino but I seldom gamble (similar to windows shopping) because I understand lower probability of winning for most games, only those who are lucky may win eventually (with condition to stop gambling for the rest of life after the win). Instead, I like to watch the reaction of gamblers, 9/10 are not smiling, likely losing money, trying to gamble more to win back the money.

Stock “investing” with stock tips or rumour or “insider news” is similar to gambling. A smart stock investor has to firstly understand the business (both risks and opportunities), sector prospect and stock market outlook for country and even the whole world. Let’s learn step by step here.

Genting Malaysia is a giant casino stock, business has been stable over the past 10 years, growing in revenue but stagnant in net profit, partly due to higher tax and also global expansion plans with more casino. It could generate steady cash flow (due to unlimited greed of gamblers who volunteer to donate or contribute money unknowingly) and having a culture to pay dividend which is growing each year (current dividend yield is 6.3%).

Of course, cash flow of Genting worldwide casino would be reduced by at least 2/12 months during the global lockdown, 20% or even more deduction in Year 2020. The situation would improve gradually when Coronavirus has subsided over the next few months. It is hard to stop an addicted gambler from gambling for 2 months, likely the person may double the capital for gambling next time when Coronavirus fear is over. It is a sad social issue why some people are against gambling as it could destroy a family, although it also brings additional national revenue.

Over the past few years with weaker Malaysia stock market, Genting Malaysia has dropped more than 50% in share prices (low in last few months of global stock crisis is comparable to 11 years low in Year 2009), currently at low optimism < 25%, aligning with bearish KLCI Index in Malaysia (recovering in last few weeks). Both Genting Berhad and Genting Malaysia are 2 of 30 KLCI component stocks in Malaysia. More importantly, casino business has 50 years of history in Malaysia, the monopoly business would continue to be a strong economic moat for Genting Malaysia. When KLCI recovers, both Genting Malaysia and Genting Berhad would get more support in uptrend share prices.

3) Genting Singapore (SGX: G13) – Singapore Giant CasinoStock

Singapore took a long time to finally accept casino operating in the island. Many years ago, Singapore gamblers have to go overseas (nearest is cruise in international sea or Genting Highland) when nature calls. Now, they could gamble within the island (local people has additional restrictions such as admission fee but probably could only stop some people such as Dr Tee from visiting), either in Resort World Sentosa (RWS, belongs to Genting Singapore) or MBS (belongs to Las Vegas Sands, NYSE: LVS, another overseas casino stock with reasonable business fundamental). This way, at least the losses of gamblers could be recycled to help the Singapore needy people (through government tax) and also Singapore investors (who invest in Genting Singapore).

In fact, gamblers of Genting Singapore are mostly from overseas, eg. China, Malaysia and regional countries. So, lockdown in the regional during Coronavirus pandemic would definitely affect the Genting Singapore business. During the last few months of global stock crisis, Genting Singapore share price is corrected by about 40%, low of 51 cent/share is 11 years low since Year 2009 (last Global Financial Crisis). Currently Genting Singapore is still at low optimism < 25%, aligning with bearish STI Index in Singapore (recovering in last few weeks). Genting Singapore is 1 of 30 STI component stocks in Singapore, trends of prices are well aligned with country and global stock market due to better outlook of Coronavirus condition.

Singapore government has granted both Genting Singapore (RWS) and MBS to expand further in future with more investment in non-gaming infrastructures to exchange for exclusive casino licenses till year 2030. Building of integrated resort and other new tourist attractions (capex for casino companies) would help to attract more overseas tourists to Singapore. So, this is a positive long term plan but will take up a lot of cash (capex) from Genting Singapore which may reduce the free cash flow and dividend for the next 10 years. The application of casino license in Japan is both a risk and opportunity for Genting Singapore as the share prices will be up or down, depending on the unpredictable outcome. Regional expansion is a good move, especially in related casino and integrated resort business. For Genting Singapore and most casino, main revenue generator is gaming business (over 70%, especially VIP and premium members). “Integrated resort” is mainly a way of marketing to attract more tourists to come, which some of them would drop by casino during free time, contributing some money to local economy through gambling.

Both Genting Singapore and Genting Malaysia are cyclic in nature for share prices, therefore buying casino stocks at lower optimism prices in bearish economy would have higher upside potential as casino business is more defensive in nature (assuming Coronavirus pandemic would end eventually, gambles coming back again). However, it is more suitable for investors with stronger holding power because what if economic condition is beyond recovery (eg. permanent job loss, lower productivity with negative GDP, etc), stock market may fall to a new low during global financial crisis (of course, gamblers would continue to gamble, especially when they have limited money, thinking casino is the quickest place to make money). Genting Group has good culture of dividend payment over the decades, the same Lim family (Chairman is son of founder, Lim Kok Thay) would help to support the stock investors with 5-6% dividend yield (assuming casino may lose 50% gamblers, still have 3% dividend yield) during the winter time.

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So, gambling in casino is to give money to casino (not acceptable). However, investing in casino stock is to share the profits of gambling with casino and contributing high tax to local government to help the needy people (could be considered). However, not all casino stocks are good, therefore careful selection is important. In fact, there is another casino giant stock (the owner is also the Top 10 richest person in Malaysia, same list as Lim Kok Thay, boss of Genting Group) listed in Hong Kong, even stronger than Genting casino business. I won’t mention here, interested readers may do a google of Top 10 richest person in Malaysia and their related businesses.

There are 30 STI index component stocks including Genting Singapore (investor has to focus only on giant stocks for investing):
DBS Bank (SGX: D05), Singtel (SGX: Z74), OCBC Bank (SGX: O39), UOB Bank (SGX: U11), Wilmar International (SGX: F34), Jardine Matheson Holdings JMH (SGX: J36), Jardine Strategic Holdings JSH (SGX: J37), Thai Beverage (SGX: Y92), CapitaLand (SGX: C31), Ascendas Reit (SGX: A17U), Singapore Airlines (SGX: C6L), ST Engineering (SGX: S63), Keppel Corp (SGX: BN4), Singapore Exchange (SGX: S68), Hongkong Land (SGX: H78), Genting Singapore (SGX: G13), Mapletree Logistics Trust (SGX: M44U), Jardine Cycle & Carriage (SGX: C07), Mapletree Industrial Trust (SGX: ME8U), City Development (SGX: C09), CapitaLand Mall Trust (SGX: C38U), CapitaLand Commercial Trust (SGX: C61U), Mapletree Commercial Trust (SGX: N2IU), Dairy Farm International (SGX: D01), UOL (SGX: U14), Venture Corporation (SGX: V03), YZJ Shipbldg SGD (SGX: BS6), Sembcorp Industries (SGX: U96), SATS (SGX: S58), ComfortDelGro (SGX: C52).

There are 30 Malaysia Bursa KLCI index component stocks including Genting Berhard and Genting Malaysia (investor has to focus only on giant stocks for investing):
CIMB (Bursa: 1023) CIMB GROUP HOLDINGS BERHAD, DIALOG (Bursa: 7277) DIALOG GROUP BERHAD, DIGI (Bursa: 6947) DIGI.COM BERHAD, GENM (Bursa: 4715) GENTING MALAYSIA BERHAD, GENTING (Bursa: 3182) GENTING BERHAD, HAPSENG (Bursa: 3034) HAP SENG CONSOLIDATED BERHAD, HARTA (Bursa: 5168) HARTALEGA HOLDINGS BERHAD, HLBANK (Bursa: 5819) HONG LEONG BANK BERHAD, HLFG (Bursa: 1082) HONG LEONG FINANCIAL GROUP BERHAD, IHH (Bursa: 5225) IHH HEALTHCARE BERHAD, IOICORP (1961) IOI CORPORATION BERHAD, KLCC (Bursa: 5235SS) KLCC PROPERTY HOLDINGS BERHAD, KLK (Bursa: 2445) KUALA LUMPUR KEPONG BERHAD, MAXIS (Bursa: 6012) MAXIS BERHAD, MAYBANK (Bursa: 1155) MALAYAN BANKING BERHAD, MISC (Bursa: 3816) MISC BERHAD, NESTLE (Bursa: 4707) NESTLE MALAYSIA BERHAD, PBBANK (Bursa: 1295) PUBLIC BANK BERHAD, PCHEM (Bursa: 5183) PETRONAS CHEMICALS GROUP BERHAD, PETDAG (Bursa: 5681) PETRONAS DAGANGAN BHD, PETGAS (Bursa: 6033) PETRONAS GAS BERHAD, PMETAL (Bursa: 8869) PRESS METAL ALUMINIUM HOLDINGS BERHAD, PPB (Bursa: 4065) PPB GROUP BERHAD, RHBBANK (Bursa: 1066) RHB BANK BERHAD, SIME (Bursa: 4197) SIME DARBY BERHAD, SIMEPLT (Bursa: 5285) SIME DARBY PLANTATION BERHAD, TENAGA (Bursa: 5347) TENAGA NASIONAL BHD, TM (Bursa: 4863) TELEKOM MALAYSIA BERHAD, TOPGLOV (Bursa: 7113) TOP GLOVE CORPORATION BHD.

It is better to learn how to fish (investing), instead of waiting for the fishes (stock investing ideas). Drop by Dr Tee free 4hr investment course to learn how to position in global giant stocks with 10 unique stock investing strategies, knowing What to Buy, When to Buy/Sell.

You are invited to join Dr Tee private investment forum (educational platform, no commercial is allowed) to learn more investment knowledge, interacting with over 9000 members.

Filed Under: Fundamental Analysis, Macroeconomy, Market Cycle Investing, Market Optimism, Market Outlook, Stock Market, Value Investing Tagged: Blue Chip Stocks, casino stocks, crisis stock, cyclic investing stock, dividend stock, Genting, Genting Berhad, Genting Malaysia, Genting Plantations, Genting Singapore, Las Vegas Sands, Malaysia Stocks, MBS, RWS

Temasek Acquires Crisis Stock Keppel Corp (趁虚而入)

Posted on April 3, 2020 Written by Dr Tee (Ein55)

Temasek has offered partial acquisition to Keppel Corp (SGX: BN4) shareholders at the price of $7.35/share up to 51% ownership over 1 year period (with some conditions applied). Since this is not a full acquisition, some investors may be confused of what is fair price for Keppel Corp. Let’s study this acquisition offer in details.

Temasek owns 20.45% of Keppel Corp, intending to purchase shares owned by remaining shareholders (100 – 20.45% = 79.55%) to top up to 51% (still need 51% – 20.45% = 30.55%). So, it is partial acquisition of 30.55/79.55 = 38.4%. It means for every 1000 shares, 384 unit will be acquired.

The offer price of Temasek at $7.35 is about 20% premium over the average price before acquisition, aligned with several other acquisitions in Singapore. However, it only has 38.4% power, not the same as 100% power as other full acquisition (eg. Breadtalk current acquisition offer of $0.77, price would surge near to this price overnight after the announcement). Assuming the Keppel Corp share price is $5/share (on certain day), the theoretical share price after 38.4% partial acquisition = $5 + (7.35 – $5) x 0.384 = $5.90/share. Reader may replace this equation of $5 share price with any latest share price of Keppel Corp before acquisition.

Over the past 1 month of global stock crisis, Singapore stocks fall by about 30% in average but Keppel Corp only falls about 20%, aligning with 38.4% potential acquisition by Temasek which is about 1/3, therefore the stock corrections is also reduced by about 1/3 from 30% to 20%.

It means the global stock crisis still has about 60% impact on Keppel Corp prices. Therefore, an investor has to make decision mainly based on global stock crisis and current stock market condition with Keppel Corp value, not to assume price would recover to $7.35/share price eventually.

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Keppel Corp is a diversified corporation with 4 businesses: offshore &marine, property, infrastructure and investment. The 2 main pillars are Property (Keppel Land, contributing to about 50% company profits) and Oil & Gas (Keppel O&M, main source of losses over the past few years). Over the past 5 years after the oil price fell from $100 to $27/barrel, Keppel Corp suffers directly as main clients reduce the capital expenditure (eg. oil rigs), therefore Oil & Gas becomes a losing segment.

Since 2015 crude oil crisis, Keppel Corp has temporary lost the giant stock title, currently a marginal giant (likely will become giant stock again after oil & gas sector recovery). Luckily Keppel Corp still has 50% earnings from Property (eg. Keppel Land and Keppel Reit), even Oil & Gas is a loss for several years (recovering to small profits in last 1 year), the entire company as a whole could still make a profit. Compared with competitor or sibling, Sembcorp Marine (SGX: S51, also owned by Temasek through Sembcorp Industries) which has full risk exposure to oil & gas crisis, losing money for several years, resulting in share prices falling from $5 to $0.70 (last 17 years low).

Some may think it is “cheaper” to invest in Sembcorp Marine stock (85% correction) compared to Keppel Corp stock ($13 falling to $5/share during oil & gas crisis, about 60% correction). This comparison is only valid if both companies are giant stocks (which are not) because “crisis is not opportunity” if business fundamental is weak, eg for the case of Sembcorp Marine. For Keppel Corp, it is still a 50% giant stock due to strong property business. Therefore, investor of Keppel Corp is actually investing in value of Keppel Corp property (main value) while taking advantage of falling share price (due to Oil & Gas crisis). It was a good move in year 2015 (beginning of oil & gas crisis) for Keppel Corp to offer full acquisition of Keppel Land which 100% profits of property business goes to Keppel Corp, offset the losses in Oil & Gas segment in Keppel O&M.

Assuming Temasek could successfully own 51% of Keppel Corp by end of 2020, it is a full control of company. This may allow possibilities of strategic merging of Temasek subsidiaries companies (eg. Keppel O&M and Sembcorp Marine) or restructuring of Temasek companies, eg. Keppel Corp and Sembcorp Industries (Temasek nearly has 50% control), etc, to maximize the asset values.

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During crude oil crisis with Keppel Corp at low optimism prices, Temasek leverages on crisis to have majority control of Keppel Corp at reasonable low price of $7.35/share. This also provides an option for Keppel Corp investors to sell for 20% profit. However, the global stock crisis has disturbed the plans as prices of Keppel Corp are falling even lower than before acquisition news.

Analysis on Keppel Corp is beyond stock and Temasek, also requires understanding of property market and crude oil commodity market. So, it is a stock with complicated interactions of market signals, reflecting in final share prices.

Here is a special Ein55 style, 50% Discount Method for investing in Keppel Corp during crisis (with or without Temasek acquisition) with multiple entries to fight against unknown market crisis ahead. Assuming $10 is a common high level prices (occurred during when economy and crude oil market are bullish), an investor may apply 50% discount in prices each time before each multiple low due several unforeseen market crisis.

$10 = High Level Price (potential future selling price level)

$5 = Crude Oil & Stock Crisis (3 times in 2009, 2016, 2020) after 50% discount x $10

$2.50 = Global Financial Crisis (17 years low) after another 50% discount x $5

$1.25 = Great Depression (20 years low) after another 50% discount x $2.50

This is a non-linear version of multiple entries for very conservative investor who hopes to buy low but afraid of prices could get lower. Assuming all the crisis come (hopefully not), this is average price after 3 entries (like Keppel Corp with property pillar could still survive):

($5 + $2.50 + $1.25) / 3 = $2.92

This is lower than using linear average down method at low optimism (assuming 3 entries with $1 lower each time):

($5 + $4 + $3) / 3 = $4

Each method (linear or non-linear 50% discount) has its benefits. Linear method is more likely to achieve in practical market, for those who wish to reduce downside risk through averaging (eg. 3 times x 33% capital). Non-linear method is for very conservative investor, demanding 50% discount each time before willing to take out precious cash from the pocket for investment. During the long holding period (could be 1-3 years, depending on severity of crisis), Keppel Corp investor may be given an average of 4-5% dividend yield (past 10+ years record), assuming the dividend is also cut by 50% due to crisis, one could still get about 2% dividend yield which is higher than fixed deposit in banks with 1% interest rate. After the crisis is over, assuming the average entry price is only $5 (only 1 crisis experienced), an investor may not need to sell at $10 average high prices for 100%, could even sell near to Temasek fair acquisition price of $7.35 which is over 40% higher than $5 price.

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Charlie Munger (partner of Warren Buffett) said the big money is not in the buying and selling, but in the waiting. Global stock crisis may happen only every 5 to 10 years. Similar to a lion ambushed, waiting patiently for target, when opportunity comes near, only then strike for higher chance of winning. It is the same for current global stock crisis, for investors “ambushed” for many years, it could be the right time to plan for a strategy to take action in stocks.

Frankly speaking, there are over 100 global giant property stocks and 44 global oil & gas giant stocks (based on Dr Tee criteria), which are much stronger than Keppel Corp. Some of these giant stocks are also falling in prices 20% – 50% recently, “Crisis is Opportunity” investing in these growing business (value) with significant discount in prices.

There are at least 26 Temasek / GLC stocks in Singapore including Keppel Corp, controlling shareholder with 15% or more ownership directly or indirectly (investor needs to focus only on giant Temasek stocks):
Singtel (SGX: Z74), DBS Bank (SGX: D05), ST Engineering (SGX: S63), Singapore Airlines (SGX: C6L), SIA Engineering (SGX: S59), Singapore Exchange (SGX: S68), SATS (SGX: S58), Sembcorp Industries (SGX: U96), Sembcorp Marine (SGX: S51), Olam (SGX: O32), CapitaLand (SGX: C31), CapitaLand Mall Trust (SGX: C38U), CapitaLand Commercial Trust (SGX: C61U), Ascendas Reit (SGX: A17U), Ascott Hospitality Trust (SGX: HMN), Ascendas Hospitality Trust (SGX: Q1P), CapitaLand Retail China Trust (SGX: AU8U), Ascendas-iTrust (SGX: CY6U), Keppel Corp (SGX: BN4), Keppel Reit (SGX: K71U), Keppel DC Reit (SGX: AJBU), Keppel Infrastructure Trust (SGX: A7RU), Mapletree Logistics Trust (SGX: M44U), Mapletree Commercial Trust (SGX: N2IU), Mapletree Industrial Trust (SGX: ME8U), Mapletree NAC Trust (SGX: RW0U).

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Filed Under: Market Outlook, Property Market, Stock Market, Technical Analysis, Value Investing Tagged: acquisition, Blue Chip Stocks, crisis stock, keppel corp, oil & gas, Property, Property Stocks, reit, sembcorp industries, sembcorp marine, temasek, undervalue stock

Change Horse Strategy: SIA to SATS (塞翁失马)

Posted on March 28, 2020 Written by Dr Tee (Ein55)

Nightmare of a long term investor is to hold on to a weak fundamental stock with declining share prices over the decade, wasting both time and capital. It is painful to cut loss halfway, therefore many retail traders (especially those who follow tips to invest) may initially plan for short term trading but when encountering global stock crisis falling from high stock optimism, making losses, forced to be a long term investor since then.

Singapore Airlines (SGX: C6L), SIA, is not a giant stock nor junk stock, under-performing in business (see details of SIA stock in another earlier post), both long term investors (hold for 10 years) or short term traders (hold for 1 month) may make significant losses. So, some investors may be mentally conditioned (despite having option) to subscribe to new rights and bonds issues to avoid future share dilution, investing more new capitals in unknown future of SIA in competitive airlines industry.

Many people may think big names (especially blue chip stocks with decades of history) equals to strong companies. SIA is a big reputable company, therefore some may think it is also a good stock investment, especially backed by Temasek, 55% major shareholder.

There are at least 26 Temasek / GLC stocks in Singapore including Singapore Airlines and SATS, controlling shareholder with 15% or more ownership directly or indirectly (investor needs to focus only on giant Temasek stocks):
Singtel (SGX: Z74), DBS Bank (SGX: D05), ST Engineering (SGX: S63), Singapore Airlines (SGX: C6L), SIA Engineering (SGX: S59), Singapore Exchange (SGX: S68), SATS (SGX: S58), Sembcorp Industries (SGX: U96), Sembcorp Marine (SGX: S51), Olam (SGX: O32), CapitaLand (SGX: C31), CapitaLand Mall Trust (SGX: C38U), CapitaLand Commercial Trust (SGX: C61U), Ascendas Reit (SGX: A17U), Ascott Hospitality Trust (SGX: HMN), Ascendas Hospitality Trust (SGX: Q1P), CapitaLand Retail China Trust (SGX: AU8U), Ascendas-iTrust (SGX: CY6U), Keppel Corp (SGX: BN4), Keppel Reit (SGX: K71U), Keppel DC Reit (SGX: AJBU), Keppel Infrastructure Trust (SGX: A7RU), Mapletree Logistics Trust (SGX: M44U), Mapletree Commercial Trust (SGX: N2IU), Mapletree Industrial Trust (SGX: ME8U), Mapletree NAC Trust (SGX: RW0U).

We may study Temasek portfolio (about 40 global stocks, about half are giant stocks, half are non-giant stocks, based on Ein55 giant criteria), focusing on top 10 Temasek giant stocks, buying them at low optimism prices (could be lower than Temasek’s entry price for some stocks now), selling them at high optimism prices in future, protected by Temasek (eg. even for non-giant stocks: Olam, SIA, etc).

Temasek has a giant stock, SATS (SGX: S58), spinoff from SIA many years ago. Although both SATS and SIA are low optimism stocks (both related to airlines industry, suffering in Coronavirus crisis), SATS is a much better opportunity than SIA to buy at low optimism.

SATS controls about 80% of Changi Airport’s ground handling and catering business. SATS has 2 main businesses (about half each), gateway services and food catering services (including to non-airlines sectors). Similar to SIA, SATS is also affected by airlines sector crisis due to Coronavirus spreading, over 90% flights are down, business will be affected in next 12 months. However, in a longer term, SATS has 2 times stronger business fundamental than SIA. The performances of 3 key financial statements over the past decade are exactly opposite for SATS and SIA:

Income Statement:

SATS = increasing earnings

SIA = declining earnings

Balance Sheet:

SATS = increasing equity, declining debt / equity

SIA = declining equity, increasing debt / equity

Cashflow Statement:

SATS = increasing free cashflow

SIA = declining free cashflow

At current share prices, SIA is about 4.9% dividend yield (potential value trap, crisis is crisis), SATS is 5.6% dividend yield (crisis is opportunity).

For SIA investor who holds to SIA stocks with losses but could not sell due to loss aversion, may sell SIA and buy SATS on the same day with same capital remaining (fine even if 50% loss), transferring the fund (soul) from a old horse (SIA) to a young horse (SATS) which has a brighter future and strong energy than SIA to climb higher for capital gains in long term.

This is Dr Tee (Ein55) powerful “Change Horse” Strategy, suitable for those “stubborn” long term investors holding losing stocks for many years. This is a strong Personal Analysis (PA) method as an investor could tell husband or wife that they never actually sell the stock (eg. SIA), just change the stock name to SATS, offspring of SIA. This is important for those who assume sell a losing weaker stock implies immediate loss, they could continue to hold the stock but through transfer of capital to another giant stock, future winning probability would be higher than continue with than the weak stock (may be worse if double the investment with average cost strategy with new rights).

SIA vs SATS may not be the best example to illustrate “Change Horse” strategy because SIA is not a junk stock and SATS is a giant stock but suffering Level 2 (sector) crisis of airlines industry. This strategy will be even more powerful if readers could apply changing a junk stock with a strong giant stock in a promising sector (low optimism in stock prices but not having crisis in business or sector).

A mistake (eg. making losses in stock investing) is not a mistake if one could learn from the mistake, not too late, even knowing after this article. It is a blessing in disguise（塞翁失马、焉知非福）if an investor could learn to overcome own biggest enemy (oneself) to change a weak stock with a giant stock immediately. SATS may not be the best example to “change horse” as there are over 1500+ global giant stocks based on Ein55 giant stock criteria, one may select 10 giant stocks aligned with own unique personality to form a dream team stock portfolio.

You are invited to join Dr Tee private investment forum (educational platform, no commercial is allowed) to learn more investment knowledge, interacting with over 9000 members.

Filed Under: Personal Analysis, Stock Market Tagged: airlines, Blue Chip Stocks, crisis stock, f&b stocks, growth stock, investing strategies, sats, SGX, sia, singapore airlines, stock strategies, temasek

Singapore Airlines Rights/Bonds Issues (插翅难飞)

Posted on March 27, 2020 Written by Dr Tee (Ein55)

SIA Singapore Airlines Rights Bonds Issues

Singapore Airlines (SGX: C6L), SIA, is Singapore national airlines, icon of Singapore when flying proudly in the air for decades. Over the past few months of Coronavirus crisis, Singapore Airlines fall in share prices over 30%, aligned with the airlines industry as the business drops by about 90% due to international travel restrictions in many countries.

As a customer, many people enjoy the premium services given by SIA, including the high safety standard with newer aircraft than the peers. However, as an investor, SIA is not a giant stock worth investing (mentioned before in earlier post). The high standard services, skillful pilots and newer aircraft come with a price which affects the business.

Therefore, the on-going Coronavirus crisis may not be a short term crisis for SIA, even when Coronavirus may stop by this summer. In the mid term (within a year), airlines industry would recover gradually, those weaker in free cashflow (including SIA) would need extra funding. SIA has decided to issue rights and convertible bonds.

Luckily, both the rights and bonds issues are renounceable, meaning investors who have SIA, has the options to sell (or buy more) such rights, although the price may not be up to expected prices under current crisis for airlines industry including SIA.

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Let’s examine both options (sharing for educational purpose, please make your own investment decision):

1) Rights Issues

SIA just announced 3-for-2 rights issue, for every 2 shares owned, entitled to 3 rights to buy at $3/share. Comparing to last price of $6.50/share, the theoretical ex-rights price,

TERP = [($6.5 x 2) + ($3 x 3)] / 5 = $4.40/share

Rights issues usually is a pain for investor who looks for passive income (eg. collecting dividend), now may need to pay passive income in return. If an investor does not buy the extra shares of rights nor sell the rights, then the shares holding will be diluted, TERP price of $4.40 is just a reference, actual price after ex-rights could be lower when market sentiment is bearish.

Therefore, the decision for rights (whether renounceable or not) should be base on a new investing perspective. It is as if someone look at the current SIA stock, need to decide to buy at current SIA price at low optimism (regardless of rights issues). Is it a good investment?

“Crisis is Opportunity” (eg share price drops by over 30-50% to low optimism < 25%) only if it is a giant stock with strong business fundamental. Unfortunately, SIA is a blue chip stock (big reputable company with strong sponsor, Temasek which holds 55% SIA shares) but not a giant stock following Ein55 criteria. A giant stock is not defined by the size of company, rather it is by its internal strength. So, even a small cap stock could be a giant stock, many of these companies which are stronger than SIA, share prices even fall more than SIA over the past few months, therefore from investment perspective, SIA rights issues are not attractive.

“Crisis is Crisis” if the company has poor business fundamental. SIA is not a junk stock, it has reasonable business performance but over a long term period (10 years), all 3 key financial statements are not doing well:

1) Declining earning (intense price competition in industry with higher cost of extra services),

2) Declining free cashflow (negative due to high capex, eg, purchase of new aircraft),

3) Declining net asset value (NAV or equity) with higher debt / equity (therefore this time SIA prefers to borrow money from shareholders through rights and bonds issues with little cost).

The worst is SIA is a long term cyclic stock, average capital gains for long term investor over the past 10 years of holding is nearly 0% (eg. share price from $9/share in year 2009 to same $9/share in year 2019, before falling to $6+/share in the next 1 year). It means SIA is more suitable for short term / mid term trading within months or years, following the price trends.

So, taking up rights issues, even at low optimism price of SIA now, an investor has to take the risk of potential mid-term risk as airlines industry may take more than 6-12 months to recover, even Coronavirus may end in this summer. Buying shares with rights issues are more suitable if this is under short term with bullish stock market (if so, one may consider the stocks directly, not the rights).

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2) Bonds Issues

Besides short term “borrow” of money from shareholders through rights issues, SIA also borrow money in long term through Mandatory Convertible Bonds, MCB (amount could be converted to shares upon maturity). For every 1000 SIA shares, there is option to buy 2950 MCB at $1/unit with zero coupon (no interest paid).

Over the next 10 years, value of bonds would increase with average growth rate of 6% CAGR, $1000 MCB value would become $1806.11, if not redeem earlier (like a bond price with about 6% higher price yearly), will be converted back into shares at a fixed price of $4.84/share (near to TERP price).

This decision has to think from long term investing perspective. If SIA share could be more than $10/share after 10 years and bond not redeem earlier, then $4.84 equivalent of entry price is good. However, based on SIA past 10 years of price record (0% capital gains), for share price to be above $10/share after 10 years is even a question mark, although it is possible to be more than $5/share as this is a low optimism price, therefore less likely to make a loss, although may not be huge capital gains (depending which price cycle of SIA after exactly 10 years later, high, mid or low optimism).

Even for bond investor perspective (about 6% equivalent of coupon, assuming SIA redeem earlier, possible if share price may be low, SIA may not let long term supporter to make a loss as they help SIA during crisis), the deal is average as there are other short term corporate bonds (bond reasonable coupon and bond price discount) or dividend stocks which could easily pay 6-10% dividend yield while having 10 years to sell for extra capital gains.

The main strength of SIA is having a strong sponsor, Temasek. Even if minority shareholders don’t follow to buy rights or bonds issues, SIA can still “fly” with 55% funding from Temasek to help in low free cashflow (negative) now, not to mention extra funding from government to airlines industry to fight against Coronavirus crisis.

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In summary, rights and bonds issues of SIA is not attractive (but safe for long term investing as company unlikely to go bankrupt with strong sponsor). Since there are so many giant stocks with stronger fundamental and lower optimism (more discount in price below intrinsic values) in global stock market, an investor may not need to take up the offer, especially it is renounceable (can be traded, eg selling the rights to others but may not at a fair price).

We believe SIA will recover again soon, can fly again proudly in the sky, we will continue to be their faithful customers (passengers) but not a long term investor. Even one is interested in crisis investing on airlines stocks, therefore are other much stronger airlines giant stocks (please search past articles by Dr Tee if interested).

Although the analysis above for rights and bonds issues are for SIA, the same consideration could be applied for any stock with similar corporate actions. Check the stocks are for investing or trading, whether it is a giant stock, then align the decision making with own personality.

There are at least 26 Temasek / GLC stocks in Singapore including Singapore Airlines, controlling shareholder with 15% or more ownership directly or indirectly (investor needs to focus only on giant Temasek stocks):
Singtel (SGX: Z74), DBS Bank (SGX: D05), ST Engineering (SGX: S63), Singapore Airlines (SGX: C6L), SIA Engineering (SGX: S59), Singapore Exchange (SGX: S68), SATS (SGX: S58), Sembcorp Industries (SGX: U96), Sembcorp Marine (SGX: S51), Olam (SGX: O32), CapitaLand (SGX: C31), CapitaLand Mall Trust (SGX: C38U), CapitaLand Commercial Trust (SGX: C61U), Ascendas Reit (SGX: A17U), Ascott Hospitality Trust (SGX: HMN), Ascendas Hospitality Trust (SGX: Q1P), CapitaLand Retail China Trust (SGX: AU8U), Ascendas-iTrust (SGX: CY6U), Keppel Corp (SGX: BN4), Keppel Reit (SGX: K71U), Keppel DC Reit (SGX: AJBU), Keppel Infrastructure Trust (SGX: A7RU), Mapletree Logistics Trust (SGX: M44U), Mapletree Commercial Trust (SGX: N2IU), Mapletree Industrial Trust (SGX: ME8U), Mapletree NAC Trust (SGX: RW0U).

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Learn from Dr Tee free 4hr investment course to position in global giant stocks (stronger than SIA) with tremendous discount in share price below the intrinsic values, suitable for long term value investing for capital gains and passive income (high dividend yield during stock crisis).

You are invited to join Dr Tee private investment forum (educational platform, no commercial is allowed) to learn more investment knowledge, interacting with over 9000 members.

Filed Under: Market Outlook, Stock Market Tagged: airlines, Blue Chip Stocks, bond market, crisis stock, rights issues, sia, singapore airlines, stock market crisis, temasek

Triple Short Term Crisis of Oil & Gas Stocks （屋漏偏逢连夜雨）

Posted on March 9, 2020 Written by Dr Tee (Ein55)

Global Oil & Gas sector has been under crisis mode over the past 6 years, Brent crude oil fell from US$115 (year 2014) to $27 (year 2016) per barrel, about 25% of peak price, a very low optimism for the past 2-3 decades, ending the mega bull run for commodity market (including crude oil, gold, agricultural products, etc).

Over the past 4 years, crude oil together with commodity market in general has been struggling with recovery in prices, achieving an intermediate high of US$86 (year 2018), falling down again to $50, then gradual growth, stable between $60-$70 in last 2 years with joint effort by OPEC and non-OPEC (eg. Russia) oil producer countries to control the oil supply, in an attempt to stabilize the market prices.

Unfortunately, Crude Oil is currently facing triple short term crisis over the past 2 months:

1) Coronavirus

There is less global demand for crude oil. There is less manufacturing in countries such as China which is a major energy consumption country. Some global airlines also cut down flights by more than 30%.

Less demand = Lower price for crude oil.

2) Fall in global stock market

Fear driven stock market fall (especially in US) has affected the confidence of global investors who also invest or trade crude oil, anticipating lower demand for crude oil.

Bearish emotion = Lower price for crude oil

3) Political Conflicts (OPEC vs non-OPEC)

After expiry (end of Mar 2020) of agreement on production cut, it is possible for supply for both OPEC and non-OPEC to increase significantly. Of course, it is possible for interested parties to extend the collaboration but their influence would be weaker each time. The global market share of crude oil could be taken by countries who may not follow the agreement (eg. Iran which needs cash or US with shale oil as new major exporter with lower cost per barrel).

Higher Supply = Lower price for crude oil

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As a result of triple short term crisis, Brent Crude Oil drops to US$45/barrel currently. $40-$45 is an important support zone (low prices during 2009 global financial crisis), if breaking below $40 while there is no quick solution in a few months with reversal for 3 short term crisis above, it may challenge the last long term support, $27/barrel recorded in early 2016 during the earlier Oil & Gas Crisis.

If so, global Oil & Gas stocks would be under price pressure, falling back to low optimism again. Upstream Oil & Gas sector (eg. exploration of oil) would suffer the most from falling in oil price, following by integrated oil & gas companies. Mid-stream (eg. storage and delivery of oil & gas) and Down-stream sectors (eg. refinery, processing of petro-chemical) would have less impact on its business. Careful selection of Oil & Gas stocks are critical, especially if the current Level 2 (Oil & Gas sector) crisis may be combined with bigger scale of Level 4 black swan (Global Financial Crisis.

Oil & Gas stocks are generally cyclic in nature due to fluctuation of oil price, therefore better to position with Buy Low Sell High strategy, more suitable for trading.

“Crisis is Opportunity” is true only if one knows What to Buy (giant stocks), When to Buy (timing, too early may catch the falling knife) and When to Sell in future (taking profits or potential cut loss if trading in an uncertain global stock market at high optimism).

Learn from Dr Tee Free 4hr investment course to position in global giant stocks with discounted prices, mastering the investment clock for entry / exit. Register Here: www.ein55.com

Filed Under: Commodity Market, Macroeconomy, Stock Market Tagged: crisis stock, crude oil, oil & gas stocks

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