Gone Girl: GMG Global and Super Group

I finally submitted my acceptance of the Halcyon Agri offer for GMG Global shares. This will result in me having odd lot shares of the enlarged group, with fractional entitlements being rounded down. This leaves me slightly worse off. I do not have a significant investment in GMG Global and I am content to let the share ride into the sunset or sunrise, the latter being preferred.

As for Super Group, the new offer by the Dutch company will only take me to my breakeven point. I have been acquiring the company's shares since 2014. The bonus issue was supposed to bring me joy but alas.

With two more months of the calendar year, I am now tasked to look for suitable stocks to deploy the cash that will be freed up from the Super Group offer.

Why this Singaporean thinks Donald Trump will be President of the United States (POTUS)

First off, I do not support either candidates for POTUS. My interest in the US elections are the outcome, namely, who gets elected to be POTUS. I do have wager with a friend on the outcome of the elections. Furthermore, just because I think Trump will win, does not mean I think Trump should win. Meaning, I do not agree with the things he says or the way he does things.

I think Trump will win because of his skills as a public speaker. Some of us will be critical about the things he says at rallies, but he does connect with most Americans. He may seem to alienate non-White voters but that is because his speeches are often contorted by the US mainstream media. The US MSM is owned by Wall Street, who want Hillary to be POTUS. Hillary's connection with Wall Street is a fact that other Democrats, such as Bernie Sanders and his supporters, are well aware of and have documented.

Why is it I think Hillary is weak as a public speaker that I do not think she will win in November? I asked those around me who watched the conventions, which was better, the Republican National Convention (RNC) or the Democratic National Convention (DNC). They, mostly women, said it was the DNC. The DNC has the Obamas and Bill Clinton speaking and they were in good form. There were balloons and katy Perry! However, they added that Hillary Clinton pales in comparison to them. Something about her that makes them feel suspicious of Hillary. She is very cold and clinical.

I have said it elsewhere, Bernie Sanders would be a better candidate against Trump. He may seem to have the support of only university kids, but I think he voices out the issues that Middle America is facing. At the issues levels, he will give Trump a good fight. However, as we have found out, Hillary is the preferred candidate from the time Obama was elected and re-elected as President. She is the establishment's choice.

With less than 100 days to the elections, polls suggest that Hillary has an advantage over Trump. Interestingly, telephone polls put Hillary more ahead of Trump than in online polls. In online polls such as the Reuters/Ipsos, I think Americans are less shy to say they will vote for Trump.

Trump will continue to face challenges from being himself as well as the US press, but if he avoids major faux pas, he will win. Hillary on the other hand faces the challenge of facing the American public continually without the Obamas pitching in beside her. We might see her being strained from all the travelling, possibly affecting her already poor health.

End-July portfolio analysis

For July 2016, my portfolio fell 4.8% month on month, compared to the slight gain of the STI (+0.8%). Year-to-date, my portfolio is ahead by 11.3% compared to the Singapore benchmark's hair cut of 0.6%. For July, my biggest losers were Delfi (formerly Petra) and KrisEnergy. Delfi carried out a capital reduction, returning 13.3 cents to shareholders but share price fell 45 cents. KrisEnergy has been affected by the route in the oil and gas space, following Swiber's liquidation filing and subsequent judicial management u-turn.

Prior to the Swiber fallout, a friend asked me for my opinion on Sembcorp Marine. He was thinking of accumulating the shipyard's shares, which is at the lowest in its history, in anticipation of a sudden swing upwards when oil price recovers. I told him to wait it out as the market is correcting. Upside is marginal but downside is significant, unless you are hoping for a privatisation. It is the survival of the fittest in the O&G space. Clients are not paying and there is no demand for drilling rigs, which is in oversupply. I agree that there is always a possibility of recovery, but as the shipping (NOL), commodities (think Noble and WIlmar) and property markets have shown us, the downturn is long and painful. Gravity applies. 

About a year ago, I warned readers not to buy shipbuilders and services companies. I said:

Any uptick in oil prices may not increase the demand for new vessels given a surfeit of them. For the services company, competition may prevent day rates from recovering to pre-crisis levels.

Personally, I feel that the worst of the sector has yet to come. No one really knows how long oil prices will remain low. I guess that there will be consolidation in the market as some of the E&P, shipbuilders and services companies face financial difficulties. That is another story altogether. 

This would have saved you huge amounts of money and from heartaches.

Company merger looms nearer

Not much happened in between the three months since my last serious post at the start of April. I was busy with my evening classes and darts. Day to day work was busy, rushing through consulting projects and client presentations. Work life was punctuated by news of colleagues leaving mostly involuntarily as the company sought to trim headcount ahead of the impending merger as well as in response to the weak market situation.

After abandoning the much-loathed strategy of serially acquiring companies, our company went big and announced it was merging with another company (let's call it Equal). A strategy of acquiring companies is good for shareholders (including the company executives who have share compensation plans) in the short-term because it boosts earnings as well as market share. It is also a means for the company to acquire capability.

However, studies have shown that companies tend to overpay for acquisitions. As a result, share price will underperform in the longer term, despite the vaunted synergies. Just do a simple online search and you will find endless studies supporting this. Evidence that suggest otherwise are typically submitted by M&A consultants who wish to stroke the egos of CEOs. And make the advisory fees of course. At the employee level, it means lesser cash that could be spent on investing in organic capabilities. With a bigger product suite, there is the need to integrate them but this always face resistance where the capabilities overlap.

In a span of three months after the initial announcement, the merger with Equal will take place in a few more weeks. Given that Equal is focused selling to another industry, the impact of the merger will be minimal to me in the short term. Those working in functional groups such as IT, HR, Finance and Estate will probably be edgy. After all, the heads of the two companies promised shareholders that there will be immediate cost savings. There is a very likely possibility that Equal employees in Singapore will move into our current office. Cramp conditions, especially poor toilet conditions will be the order of the day. What will be most interesting to watch is how the senior managers jockey for limited offices.

Stock portfolio posts 16.8% YTD returns

Despite Brexit, my stock portfolio managed to post a year-to-date increase of 16.8% compared to the Straits Times Index's 2%. The portfolio increased from SGD105,200 at the end of 2015, to SGD122,900 at the end of 1 July 2016.

My top performers in terms of dollar contribution were Colex Holdings and Delfi (former Petra), each adding around SGD8,000 to the portfolio. F&N was the worst performer in terms of dollar contribution, losing me SGD910.

Excessive amounts of time spent playing darts

I was on afternoon off yesterday. Without anything firm in mind, I decided to play soft-tip darts yesterday before heading home. This turned out to be a 2 hour affair. Another short 1 hour session ensued after I left Bugis. This time, I threw my darts at a pub much closer to home. I must be playing at least twice or thrice a week. Those sessions where I fly solo, I only spend 1 hour each time. Those weekends with groups, usually last three hours as there is talking, drinking, eating and the watching of football. This probably has helped take my mind off the falling Straits Times Index. Oh, but I just received my tax bill too. Time to earn my keep!

Singapore stock rally helps lift Q1 performance

The Singapore stock rally in late-February and early-March helped lift the portfolio. My basket of shares gained 14% (inclusive of dividends received) compared to three months ago, compared to the STI, which fell 1.6% during the same period. Transactions were limited to the purchase of 12,000 Super Group shares over on two occasions, as well as, the receipt of F&N dividends. There is about SGD220 in free cash.

GMG Global saw the sharpest percentage share price gains. The rubber planter grew 90% mostly on news of the merger with Halycon Agri. Petra Foods was distant second, rising 33% during the same period, mostly on very thin trading volumes. Dollar-wise, Petra added the most to my portfolio, increasing it by SGD7,600. F&N was the only counter that failed to register gains.

In line with my March forecast, I expect the road to recovery ahead, to be less bumpy. I do get the sense that while the depressing macro news - recession, unemployment, falling housing prices - has just started being reported, the worst (in terms of emotions) is over. I will be building up cash though, as it is a goal that I have been neglecting.

Another day, another dollar

At the MRT, on the way to work, a colleague tapped on my shoulder. While catching up on the weekend's football matches, he told me that he had tendered his resignation and that his last day was in the coming weeks. He is a relative senior colleague in his late-30's. He shared that he was joining a competitor but I couldn't quite guess which one it was. It was good for him. Our company has been having a few bad quarters and retrenchments - or reduction in force - has been on going. Budgets have also been scaled down although I would point out that investment in organic capability was scarce. The company preferred to grow revenue by acquiring other companies.

Colleague who had tendered agreed with us that the company didn't really care about employee feed back, despite appointing "champions" to better understand the issues that affected employee happiness. The track record of being ignored has been consistent during both our times with the company

Lunch. It was a very warm day but I made my way with some other colleagues to the nearby hawker centre. I had salad because I have not had enough fibre in my diet. The others had Malay food as well as some famous wanton noodles. I ended my lunch with ah balling. It almost caused another of my shirt button to explode. The first one came out in the morning and I shoddily sewed it back on with thread with a non-matching colour.

Lunch discussion escalated quickly after one colleague asked if I knew this person was a new colleague. She said she was busy this week because she was tasked to give colleague M training on how to use one of our products. Others in the lunch party started to chime in with their thoughts that another colleague D should be the one providing the training. The lunch party suggested that our product was easy to use and training could have been self directed.

Back at the office, I stood along the hallway that joining the lift lobby and the cubicles. The hallway was much cooler than the rest of the office, offering me respite from the stifling heat and humidity encountered on the way to and back from lunch. At my seat, I knew I hardly spoke to my team mate as we both had our own research agenda.  Most other days, we exchanged the daily pleasantries an nothing further. It was colleague K's gym day and so he did not join the lunch party. I let K know that another colleague had tendered his resignation.

The day came to a quick end. It was uninteresting. Deadlines loomed closer for me but I did not make significant headway as more research was needed. Research which included literature review. I was drained by the mental exertions. Nevertheless, I slowly made my way to the west for my dinner.

Three stages of Singapore's bear market

I believe that aside from liquidity, sentiment is a key driver of stock markets. A few posts earlier, I wrote about the the three distinct phases of a bear market. I found a well written article which describes the idea that I probably stumbled upon while reading finance literature. It says that the denial, concern and capitulation are the three stages of a bear market and it defines capitulation as:

"At this point the market may rally again as many observers feel that the decline has ended and that a new bull market has begun. This rally, also characterized by weak breadth and low volume, subsequently fails and heads down. At this point the majority becomes exceedingly bearish and throws in the towel, fearful of further declines and the potential disappearance of their assets. This is the capitulation phase, when stocks are sold on fear and emotion rather than on rational analysis. It is at that point that the market is finally ready to make an important bottom."

I have called 21 January 2016 a the bottom of the market in my recent post. Some have told me that it is too early to call or too risky to time the market. However, I believe that we capitulated. My own capitulation came on the last week of January when I received news from my company regarding the state of affairs for 2016. I believe that we are entering a recovery phase that started with somewhat a bang. A bull market does not announce itself but this is just the initial recovery stage. Interestingly, I came across a blog post which said that when the market is at the lowest and thus the best time for investment, it is also a time when you may lack the ability to invest because you might have lost your job or not received a good bonus!

I am writing this in response to an article that talked about people's fears of missing out or FOMO. I initially thought it meant the fed's open market operation. As long as there is FOMO, I think the market will be on the path to recovery, speed notwithstanding. The bull market needs to climb the proverbial wall of worry. Other walls of worry I expect the market to climb would be the American Presidential elections. Suddenly, concerns about ISIS has taken a back seat to the race to the White House.

If you do have any way of measuring sentiment, do share. It will be useful in refining my sense of an already abstract indicator. My next major alert is when the market starts to get a little too frothy.

Bought more Super Group

Decided to put my money where my mouth is. I bought 4,000 shares of Super Group at SGD1.04. This brings my average cost down to SGD1.26 from SGD1.60 at the start of the year. My capital injection of SGD10,000 for 2016 has been maxed out. Perhaps will build up a smaller cash portfolio of SGD5,000, in case more opportunities arise. Was contemplating between F&N and Super Group. However, Super's yield is much higher than F&N (same amount, but Super has a lower share price). Fingers crossed.

Are we missing out on the recovery in the Singapore stock market?

In my 16 January post, I mentioned that I expect the market to hit a bottom between February and October 2016, with the bottom to be around 2,200-2,400. The market has recently touched the 2,700 mark (2 March 2016). It could be that we have reached the end of the third phase of the bear market, with 21 January being the end of that phase and the bottom of the market. A silent recovery could be quietly taking place. Or it could be the calm before the storm, when the market does plunge to 2,200-2,400.

My take is that we have probably (75% +/- 12%) past the market bottom. A lot of China money is recently entering the market after efforts by the PBOC to cut rates. This is has the knoock-on effect of reinjecting liquidity into local markets but might not be sustainable for China.

My personal approach will be to wait one to two weeks before deciding to enter market, looking out for market drops to enter the market. If the market can stay above 2,700 for more than 2 weeks, it is probably recovering quietly. There is limited downside from current levels to 2,200, if it indeed a calm before the storm scenario. I still shun oil and gas stocks, preferring companies that have have taken a beating but have good business fundamentals.

Short Trip To Kamala in Phuket, Thailand

This was the first time going to Phuket, Thailand. I was told to choose place that is not Patong by my girlfriend as she just wanted some place with peace and quiet. The process of elimination meant that we stay in Kamala, which is about 10-minutes away from Patong.

I flew into Thailand by Tiger Air (SGD 190/head) as usual and the flight was about 2 hours long. When I arrived at the Phuket airport, we arranged for the hotel, Ayara Kamala to pick us up. Took us about 50 minutes to reach the hotel which was situated up a slope and we could only check in at 2 pm.

The wait was worth it. I had booked a deluxe room with pool access (~SGD310/night net) and I think I cannot get the same value in Singapore.

The resort feel was very strong and it showed in how they decorated the room with elephant motifs and the sprinkling of flowers. I did a google and found out that Ayara did not mean elephant but rather, poem, in sanskrit.

You might think that I paid quite a bit for the room but if you have the view below and a pool, I do not think you will complain. I spent most of the time dipped in the pool or tanning by the front yard. It is shared by 4 other rooms but we did not all use the pool at the same time. I do not have a morning shot but the views were fabulous and post card perfect. I guess it was what you would call a blue sky holiday.

Back from Phuket, back to work

Went to Phuket, Thailand, for a quick getaway. Spent three days at a lovely resort there in Kamala. However, it is starting to look poorly timed as both work and school are chasing me for assignments! Some photos and a short write-up of the trip will follow in the next 1-2 weeks.

Bought Super Group (The Singapore One)

Bought 8,000 shares of Super Group on Tuesday near closing time. Buying them ahead of their financial results next week, in case they surprise me. This averages down my cost of 22,000 shares SGD1.60 to SGD1.30 or about 45% underwater based on current market prices. 

Super pays out 50% of its net profit each year. Based on the third quarter results, earnings are likely to be 60-70% of FY2014. As such, the final dividend might just be 1 cents per share, making it 2 cents for the FY2015, giving it a current yield of 2.8%. Will be looking forward to the results next Tuesday.

Separately, I am also heading to KrisEnergy's investor event next Friday. Management will likely talk up its prospects and give operational updates. I might do a field report if I do get there. I am quite excited as it is the first time I am attending a event linked to my portfolio holdings. I have yet to attend an AGM over the past 6-8 years.

Singaporeans Play Soft-Tip Darts, Stockpicker Picks Soft-Tip Darts Set

Forest 2 darts cafe located at Shenton House, opposite SGX Centre

The SGX Stockpicker started playing soft-tip darts recently - 3 times this year. The last I played darts was more than a decade ago, when I played steel-tip darts during my army times, after lunch. The first time I played soft-tip darts in 2016 was when I wandered into Wiser Sports Bar at Ah Rood Road after my Japanese lunch date. The second time, I was driven to Arena Bar at Serangoon Gardens after having dinner with my friend. The most recent darts games was a planned visit to Forest 2, some 4 minutes walk from my office.

The mechanics are generally the same but soft-tip darts is gaining popularity in Singapore because it is accessible. Unlike steel-tip darts, the soft-tip machine counts the score for you and you can choose to buy a card, that connects you with other users, and level up.

I bought my own darts set on the most recent visit (see the photo below) and it set me back SGD207 dollars. I originally planned to spend only SGD100 but ended spending more (!) and I will explain.

On the top left is the barrel of the darts, which costs SGD98. I originally though that this was darts as I know it. I was wrong. The barrel is where your fingers hold on to the darts and it can be a straight barrel or a front-loaded barrel. Mine is front-loaded and made of 95% tungsten and supposedly made in England. All these adds to the costs. 

On the bottom left is the shaft which I paid SGD42 for. This part connects the barrel with the flight. I got a no.4 spinner, which according to the sales lady, was good for a beginner like my self.

The flights - the ends of the darts - cost me a certain amount which I couldn't remember (SGD25?) but it helps to stabilise the flight when you throw.

The front/tips of the darts, the point, is really cheap because they break very easily. This can be seen from the fact that one of the darts has a white tips and the black tips are of uneven lengths.

On the bottom right is the container. Sensing that I was into black colour, she sold me the casing which probably costs SGD25. Finally, on the top right is the ID card that will allow to store you in-game data as well as participate in competitions by connecting with people online.

On hind-sight, if I were not rushing to play with my friends who were already there, I would have probably done a bit more homework and pay not more than SGD157 all-in. Areas that I would have cut down are the flights and the container. The rest of the parts are quite value-for-money. 

In terms of marginal costs, you pay about SGD1 for two games, which is cheap like a visit to the video arcade. The downside of playing darts in general is that you are compelled to buy a drink or eat fried bar food. Not only are you adding to the cost of the game, these adds calories to a "sport" that does not cause you to burn much calories. Unless you count walking to-and-fro the oche.

Why Singaporeans should not cheer for negative Japanese interest rates?

The Straits Times Index jumped by more than 2% on the last trading day of January after the Japanese central bank announced that a key interest rate would be made negative. Despite this intervention and same-day reaction, I am sticking to my prediction that there will be a tumble to 2,200-2,400 levels before recovery because other central banks have used the same negative interest rate policy with little effect on the stock market. I believe the Japanese central bank's intention is to weaken the Yen than stimulate the stock market.

If anything, that last day jump means we are closer to that last phase of the bear market, where the mood of the market turns from surprise/disbelief into despair. This is because, to steal a movie quote, there can be no true despair, without hope. Japan's central bank intervention represents that hope before the STI tumbles into 2,200-2,400 levels. A quiet recovery, not noticeable by many until after the fact (2-3 months out) will ensue after true despair has set in.

Meanwhile, I have been trawling through blogs, valuebuddies and sharejunction for ideas on which stock to pick up. SingPost remains on my watchlist but I have added Riverstone and NSL and Lee Metal Group for future considerations. The temptation to average down on KrisEnergy however, has become very strong.

The weak Singapore job market starts to hit me

I work as an analyst for a US multinational corporation. Business conditions have been poor because of the weak commodities market affecting our major clients. Several rounds of layoffs have occured globally, including in Singapore. Thus, it was a great worry two days ago when my senior manager sent out an email at 10pm to attend a conference call held at 11pm the same night. Of course I missed out on the conference call. I was busy catching up on my sleep.

It was definitely not positive news because the next day, I received multiple meeting invites from various managers - I work in a company with a very complicated structure. Turns out that the company was going to freeze promotions as well as pay for the coming year. The upside we were told by the team leader, was that our jobs would remain secure until end-2016 and that the our incentive would still be paid out. The team broke out in laughter.

Straits Times Index Bear Market into 9 months, Sharp Plunge Ahead

If we took April 2015 as the peak and end of the bull market, we are now entering the ninth month that the market has trended down. This is essentially a bear market. As I have written in my previous post, I argued that there has been two distinct phases in the bear market and that there will be one more phase. This is the phase where there will be sharply declines but the mood of the market turns from surprise/disbelief into despair. This is also where the market starts to recover.

I have made some predictions for the first three months of the year and I have been spot on so far. And if history is any indicator, on average, we should see an inflection between one and nine months time or between February and October 2016. In the last financial crisis, the STI was at its lowest around 1,600 points at one level. My opinion is that we will almost certainly (93% +/-6%) not hit sub-2,000 like in the GFC.

Singapore Stock Market Outlook 2016

Those viewing my blog on a desktop version will see my latest prediction for the coming year. For the benefit of readers viewing my posts on their smartphones, the below is my market outlook as of 31 December 2015.

Singapore Stock Market 2016 Outlook

3 Month Outlook: The market will decline sharply (more than 6% decline from peak to trough) and will probably (75% chance, +/-12%) touch 2,600 levels.

3+3 Month Outlook: Market will decline (3% from peak to trough) or have (volatile day-to-day swings of +/-1.5%) sharp swings.

6+6 Month Outlook: Market will embark on a slow recovery (start of the right side of the "V"), likely to end the year at 2,900 level +/- 50 points.

Notes:

3 refers to the immediate following three months

3+3 refers to the 3 months period after the first three months

6+6 refers to the 6 months period after the first six months

Please do your due diligence. I am only a blogger. The aim of the predictions is just to share with your my sentiment of the market using more precise language. This will allow me to test my predictions. It will be updated on an as and when basis, but at least every 3 months.

Organising your mind for 2016

If you find yourself constantly forgetting things or not really performing at work due to the lack of focus, you should read The Organized Mind: Thinking Straight in the Age of Information Overload by Daniel Levitin.

This is the book to read to understand why our memories are getting poorer with the smartphone among other things. For instance, we take notes on our smartphone, but it is also the same device where we store photos and videos. Although it is very helpful in externalising our memory, as a result of the multi-functionality of the device, our memory does not "associate" clearly or link with the phone. This is compared to the olden times where each device only had one function. One of the ways he suggests to help your improve memory, is to have two phones, one for work-purposes and the other for taking videos and photos.

The first half of the book explains how our mind works and how it is being challenged by distraction caused by the age of the Internet and smartphone. We are simply too distracted to focus on a task, to allow the memory linkages to build in our minds. In the second half, he prescribes simple methods that will help improve our memory as well as reduce distraction.

Having read that book, for 2016, I will very likely have a paper notebook to jot down work-related instructions and thoughts. I will also switch off my office's instant messenger and emails during windows of time. This includes hiding my mobile phone in a hard to reach place.