Monday, April 9, 2018

ComfortDelGro (C52.SI)

Data source: from various internet sites, such as Yahoo!, shareinvestors.

ComfortDelGro is a local favorite. Writing anything on it will likely attract some strong objections from either side of the camp.

A few of local bloggers which I followed, in this year, have loaded with this counter upon its recent price weakness. It got me interested too, but to predict future price movement is always a difficult thing, even if not unachievable task. (用中国话来说,是一个容易“被打脸”的事情)

I didn't read all its annual reports before putting down the following analysis, so the assessment is purely mathematical, without a deep business understanding of its competitive environment, future aspect, market price improvement initiatives, or mgmt. effort on unlocking values for shareholders.

I just applied some simple(similar) rules taught by the 'master', from what I recently read.

Financial Info of ComfortDelGro for last decade
ComfortDelGro business is fairly consistent,easy to analyze.

Its revenue is growing at an annualized pace of 2~3%, by observing the history record, its revenue seems increased every 3 years, then kept there for a while, then got another jump, probably related to taxi fare adjustment allowed by gov every few years.

Given the control of government on taxi tariff level, balancing of its profitability vs. general public's affordability, I think this pattern will continue. With the current road traffic loading, as well as general public's ridership behavior will not change drastically, the revenue projection of this counter can be estimated with certain level of confidence.

Its SG&A cost is quite consistently at 4% in recent years, I don't think it will swing too much either in the near future.

Over 10-y average, NI % is 7.1%, ROE 12~13%;  FCF/NP is ~90%, meaning the quality of earning is pretty real. Interest coverage is 20 times, it is a safe company in term of financial health.

Over a 10-y horizon, it earned 2.6B net profit, 2.3B FCF in aggregation: or 260m$ NP, 230m FCF annually (on average).

I ask myself:
  • Here is a business which is allowed to adjust its price level at 2~3% annually(on average), if I was a potential buyer of such business with 250k profit per annum , maybe I'm willing to pay 2m~2.5m? what about 4.5m asking price, is that too high or too low? 
  • Ok, maybe increase a bit, a business offer 300k profit per annum, is 3.6m(to acquire it w/o even counting all the debts yet) a reasonable price tag?

Well, may be yes, may be not:
  1. Because its dividend yield is 5%(2018/04/09, based on Yahoo! Finance info), I'm satisfied w/ this, since it is much better than SGD time deposit
  2. Because it offers ROE 12% @ PB 1.72 at current $2.09/piece, much better than a lot of other SG counters, it is not priced unreasonably inflated
  3. Because it has very few competitors? Its business volume is more or less guaranteed for foreseeable future
Your judgement?

To me, even it dropped from $2.7+ in Apr 2017, to $2 now, it doesn't look like a bargain as it appeared at the first sight.
Caveats, with its gov-link background, similar to SPH etc, it might have a lot of hidden gems(assets), which cannot be simply analyzed by just putting up such a summary table, a serious investor has to thoroughly review its whole potential by reading each year's report and analyst reports.

For me, as a full time employee in other business lines, this is enough time spent on this counter, at least to give a pass, even if those gems can be found later, I'll, at least for now, don't feel being too tempted.

- M&A(w/ internet ride hailing company)?
- AI driver?

P.S. It is very time consuming to keep on blogging. I really admire the persistence of some of the well-know SG bloggers.

Refresh to continue (the journey)

Time flies fast.

It is already 3mth passed from my early Jan's blog post this year.

What and how did I do so far this year?

I reopened my old books, finished one more round of reading again. One of them I purchased in Y2003. Time flied fast.

  • I regretted that I should have followed it more closely long long time ago.
  • I felt that I'm now better equipped, and a lot of previously ambiguous concepts are now all linked properly with each other, even Warren Buffett's letters to partisanship from 1957 can be referenced into this book, concepts such as: generals, workouts, controls,... 

This is a relatively thin book, just a quick flip-thru to refresh the basic financial concepts in a company's annual report, amazingly a lot of those are still very relevant even today.

  • I shall do a few more experiments on SG counters myself as followup.

Work wise, this is THE month of the year, it is the mth of payout of my AWS (aws here is not Amazon Web Service, but my bonus of last year).

Monday, January 8, 2018

SG Bloggers


I rather randomly followed a couple of SG bloggers after coming back, selection is mainly based on my personal preference and quality of their articles, most of them post articles in the area of stock investment, financial planning and financial freedom, these areas are my interests.

- SG Wealth Builder, one of my liked bloggers recently put up a subscription based banner, I cannot any longer read his article w/o signup as a member. What a pity.

- ASSI, another locally known blogger has gone into semi-retirement mode since 2nd half of Y2017, he has reduced frequency of updates.

Time to make efforts to do my own home study more. Such time will anyway come by, sooner or later.

On personal improvement side, based on someone's recommendation, recently I finished reading "The art of thinking clearly".  I do not really appreciate every single fallacy summarized by Rolf Dobelli(the author). Even though the book serves a good pocketguide for quick reference, I still prefer master piece from Darrell Huff: How to lie with Statistics, or even Taleb's "Fooled by Randomness".

But one thing, I learnt from Rolf's book and thus would like to blog it down is: alternative path, when our investment return is good, is that because of our skill or our luck? It is more of a skill if thru alternative paths, I achieved the similar status/result/outcome.

That serves a sober reminder if I made some improvement on my stock investment.

Monday, January 1, 2018

Reflections on 2017 and Target for 2018

2017 is over. I have made some progresses and some mistakes.

In term of share investment, here is my result table.

Return in Index
In local currency
Avg Position
Total aggregated return
12.55% (in constant currency)

I didn't do good enough in either STI or Hongkong or US market, with average position usually below 50%, most of the time around 30%. This was probably, in retrospect, a bad decision, as being too concern of the markets.

In 2017, I got the following IPOs:
- Dasin Retail TR, 0.80, didn't earn much money, sold in the 1st week of listing
- Netlink NBN TR, 0.81, still holding on to it
- RE&S, 0.22, made some nice profit and unloaded in the 1st week of listing
This is the first year I applied IPO in SG market, as it is usually not open to Singapore investors when they are overseas resided; I'm still getting used to the IPO scene locally.

Investment into STI ETF on installment basis turned out to be decent result, while my selection of SingPost and TTJ didn't work too well: SingPost is a rush-in after reading Alibaba's investment, even though my entry price is lower than theirs, it is still a bit too high after which I started reading its annual report and its fraud investment case in the US eCommerce space. TTJ, still monitoring it further.

Good performance is actually from Tat Seng Pkg and Sinostar Pec, I got in both counters at relatively low price.

Turnaround story is Keppel and DBS.

My SG investment is 27+% return on the counters I'm holding in 2017, but since I allocate my current asset into 3 equal portions: cash, stock, and living expense reserve. Overall return on this asset class is then 9.12%.

A new year resolution of mine in 2018 is to work harder, to stay healthy.


Thursday, October 5, 2017


Updated: 2017.10.06
Data source: SPDR ETF annual report 2017, AIA fund report semi-annual report 2017

I got the pdf files from both web sites, both reports recorded respective funds performance ended Jun 2017. Because AIA's file is password protected, cannot copy and paste the figures into EXCEL file for comparison, so we have to live with the image captures.

AIA Fund performances

Spider STI ETF performance

STI ETF's annualized return is boosted by dividends over the years, approx. 3% improvement.

I suppose that AIA's fund return is before cost, meaning after mgmt cost deduction---assuming a 20:80% split, the unit trust holders of these funds are generally poorer than directly invest into SPDR STI ETF.

Of course, AIA funds are usually provided together with insurance products with certain level of insurance protection.

Sunday, July 16, 2017

NetLink NBN Trust (IPO)

Data source: IPO prospectus
Date: 2017/07/17

I have been reading on this prospectus (total 536 pages) over the last week and entire week end. Netlink is closely related to the industry I'm in, so naturally its IPO attracts my attention.

Given it is one of the largest IPO in the recent years, a lot of financial bloggers have written about their views on its list price of 0.81SGD.

I decided to post my blog only after today's IPO application is closed (at 12pm) so as not to affect anyone's own decision.

The corporate structure is very complicated in this IPO, there are many 'Trust's involved, it is important to understand which and when Trust word is referring to.

To be listed is Netlink NBN Trust (Trust), the underlying business is from Netlink Trust(NLT, another trust, or the original trust). There are two sets of financial statements in prospectus, the audited NLT group's 2015, 2016, 2017 FR; and unaudited pro forma Netlink NBN Trust (Trust)'s 2016, 2017FR. If this has not caused confusion, please refer further to the structure on pg 65.
As IPO subscribers, we are applying to the middle triangle(in dark color)'s units.

The idea of this complication model, is that NLT (the triangle at the bottom which is actual the original trust that owns the operational biz) is to use this method to be in QPDS(qualified project debt securities scheme), so that IRAS can agree to tax exemption on its interest return(further on this point later, NLT Notes) to Trust(the dark triangle, to be listed)

First thing first, who makes a bulk of money?
Answer: Singtel
In order to be listed, Netlink NBN Trust (Trust) is to acquire from Singtel's portion of NLT(bottom triangle) units with a consideration of SGD$1.8878b(pg 63 notes 1), of which $1.095b paid in cash, with remaining in Trusts(IPO, top triangle) Units: 24.99% (or 966m Units), which is to be held under Singtel Interactive (HoldCo, full subsidiary of Singtel).

I wasn't in Singapore when OpenNet(predecessor of NLT) was setup, so not clear what Singtel's original investment was. But quiet clearly to me, when compare two sets of FR in the prospectus, this action created an intangible asset(goodwill I assume) for Trust, at slight above $1b.

It means: Singtel sold its portion of NLT which is NAV at 0.8878b(1.8878-1) to Trust(IPO we are subscribing to) at $1.8878b, got a cash coffin of over $1b, and 966m Trust Units (at 0.81 per piece) in return.
That is what I call Investment. The goodwill created by this acquisition, will be carried on Trust BS, and amortized over 50years at ~$20m each year.

Trust mgr basically get a piece of business at a higher rate(from Singtel), and then float basically the same biz onto the security market at a lower rate (to NAV, whether due to market condition, other whatsoever reason), of course Trust mgr doesn't have to fork out that short fall(then who?)

Do you go IKEA to get a piece of furniture at 188 and sell it later below 188? Maybe yes, because that is your friend's money, and you get a commission cut from such transaction.

(where is customer's yacht)?

How does TRUST fund its DPU(read as attract its IPO investor)?
The projection is DPU at 5.43% and 5.73% in FY2018, FY2019.
As large CAPEX period is over, depreciation of PPE and amortization of licence/intangible assets etc are largely non-cash items, as long as NLT sets aside enough money for future growth ($211m CAPEX for 2018, 2019 projection) and working capital for daily operation, the remaining(majority) cash generated operationally can be funneled back to Trust, thus allow Trust to distribute all its income to Unit holders.

So much of the fanfare is on an non-SFRS number: EBITDA, a much likened figure of Telecom sector, projected at 240m, 150m for 2019, 2018 respectively, some of which will be the source for NLT to pay Trust.

Of IPO proceeds, $1.1b will be used by NLT to repay its external ST facility agreement, which carries 2.9(or 4+)% interest rate, since Trust is going to help NLT to repay all that ST facility, NLT in term owes 1.1b NLT Notes (pg 119) to Trust(at a rate of 10.5%), a whopping rate jump.

Why would NLT instead of using a ST facility which is at much lower rate, replacing it with NLT Notes to Trust at 10.5%, until 2037?

On the other hand, because IRAS' tax exemption is on the condition that the distribution from NLT to Trust, must be distributed to Trust Unit holders within 3(or 6)mths, thus means interest earned by Trust on NLT Notes, around $110m has to be distributed semi-annually. It is my understanding that this contributes to the 5.43% DPU projection in prospectus; in other words, the actual operationally generated cash for distribution (CAFD) from underlying business of NLT is much smaller.

Should a unit holder rely on DPU based on organic business growth, or based on return of one's own fund (Trust IPO to raise fund from unit holder, pass it to NLT, NLT to repay ST facility, NLT to issue NLT Notes to Trust so as to be QPDS, Trust get interest from NLT and other operating cash income, Trust to distribute cash to unit holder as DPU).

Nonetheless, given fiber is currently already 86% of residential market, and presumably the capex will dwindle down over the years when it reaches saturation, NLT will turn to a cash-cow type of business, with only large depreciation carried on BS, w/o actual cash outflow.

Few things still puzzle me:
- NLT recved $732m in grants for building the nationwide passive fiber infra(amortized at 29m by NLT over 25years). But upon completion of Trust acquisition, this deferred financial support grant will be derecognized at Trust group level. Why? what is the reason this obligation is no longer required?
- Given it is a high regulated market, will IMDA(SG gov) allow NLT(or thus Trust) to earn an abnormally high level of ROI? If not, how can Trust, who relies on NLT business, earn higher return? Without a higher underlying ROI, how does Trust improve DPU? It is further loaded with all the extra structure(thus mgmt fee, commissions, agent fees). Obviously, from another angle, IMDA won't let Trust be in the red, either.
(main revenue contributor, residential connection fee is $13.8/mth, it is revised from previous $15, IMDA review this every 3,5 years, only downtrend foreseeable)

Cut the crap, straight to the point
Whether $0.81 a piece is attractive? Will price go up or down? I have no clue, market price is influenced by many factors, I cannot predict the price movement, especially the short term ones. There are also over-allocation units, stabilization period, lockup commitment to 'stabilize' this big creature.

As I'm really new to such biz trust, my analysis could be error-prone, read with your own care. I myself learnt a lot during this study.

I'll apply some shares(with my own money), I want to keep 100 units to revisit it in 2019. It must be a good learning experience for myself.

Monday, May 15, 2017

STI at 50, GDP, HDB, Private Property Index and CPI

Draft: 2017/5/15

Source: Straits Times Article by Lorna Tan, her original article can be found online.

I read this article over the weekend, it is from Lorna Tan, editor of Straits Times Business Section.

I like this article, because it gives a lot of info from STI's history. 50-year is a long duration, with Singapore's own relatively short nation history, it is more precious to have such info.

Quick calc of annualized return on STI over 50-year is 7.2%, and for the most recent 15-year, it is 7.3%.

The benchmark index ended last week at 3,255.29 - a long way from its starting value of 100 points in 1966

During this period, the Singapore Exchange (SGX) has gone through many peaks and troughs, with the latter including the Pan-Electric crisis in 1985, the global stock market crash in 1987, the 1997 Asian financial crisis and, a decade later, the global financial crisis.

The first public mention of the index was on Jan 4, 1967

There are two ETFs tracking the STI that retail investors can invest in: the SPDR STI ETF and the Nikko AM Singapore STI ETF. The SPDR STI ETF has the longer track record, dating to April 17, 2002.

"Since inception, an investor would have received an annualised 7.3 per cent return over the past 15 years, not including dividends which are distributed on a semi-annual basis"

@copyright Straits Times

From this source and source. Singapore GDP were:

It grows 300 times(check CPI section in the later part of this blog) from 1965 to 2015(50-year), and it grows 3 times from 2000 to 2015(last 15 years).

Now to ES3 ETF:
From its inception, the annualized return is ~7+% too, just coincide with the underlying STI, whose performance in term is aligned with underlying SG GDP growth. The performance of the Fund, inclusive of dividends, is net of all charges payable upon reinvestment.. While 7% is nothing fantastic, it is much better than a savings account, a fixed deposit, a usual corporate bond return, SGS, SSB, and even OA/SA in our everyone's CPF account,  although at any one time of a shorter period, it was beaten miserably by one and many of other 'so-called-safer' investment alternatives.

Thus, for any Singaporean who still has a long time horizon before retirement, ES3 is a good investment vehicle, and I'm happily invested into it.

The statistics tells only the history, whether it is to repeat in the future, anyone's guess.

Updated: 2017/5/17
I thought to add another major asset category for comparison, HDB is almost the de facto option for most Singaporeans.

  • 2001Q4: 69.6
  • 2016Q4: 134.6
  • Nearly doubled in 15 year, ~5% annualized.

As usually, HDB flat is brought through a Loan, meaning leveraged, the return is much higher on the original capital outlay.

SG Private Property

  • 1976Q4: 9.8
  • 2001Q4: 87.6
  • 2016Q4: 137.9
  • 14 times in 40 years, ~6.8% annualized
  • Most recent 15 years, 157% increase. ~3% annualized (worse than that of HDB?)
Updated: 2017/5/18
CPI (inflation rate)
With the help from Statistics Gov, I got annual CPI percentage change, a proxy for inflation rate
  • 1962 over 1961: 0.5%
  • Over 55 years, CPI increased by ~4 times
  • Over recent 15s, CPI increased by 1.3 times
Over last nn of Years  55    15  
Average1.026 1.018 
Median1.019 1.010 
Annualized1.026 1.018 
Product (times)4.033 1.310 

Std deviation4.15%2.16%

I love my own study done in this post.