Friday, 21 October 2016

Why I buy Best World?

I have written a longer write ups on Best World last July in the following two posts:
Best World International Limited

MLM and Best experience with them

This post will summarise my reason for buying it and my expectation. I will also share its latest results.

Why buy?
The following are the key reasons why I purchased Best World.

  • The group gains traction in both Taiwan and China markets and has grown tremendously from 2014.
  • The group obtained its Direct Selling license in China which opens up a giant market for them in the next few years.
  • The group is a cash business. If they can grow their top-line, they would generate cash. And with a dividend policy of 30%, it means more cash-back.

What I expect?
I expect the company to execute their strategies to grow their China market. Execute well, and it should have double digits growth for the next few years. I also think that the company might issue bonus and rights in the next few years to generate further interest in the company. Best World would become a billion company if they can sustain their growth. Longer term, I hope that they can translate their performance in Taiwan to other markets.

When will I sell?
I would be holding on to my stakes for at least the next few years as there is clarity in their growth. I will sell if there is a sudden reversal of their fortune in both Taiwan and China due to regulatory changes. Another reason that I might sell is if the valuation goes crazy like PE 50x. I probably won't sell all but will definitely takes profit. 

Recent results
Amazing 1H results. Revenue up by 154.3% and net profit increased by 466.1%. Dividend of 2 cents and propose bonus shares of 1 for 4. Taiwan continues to be the star performance with revenue up by 275.8% and China is catching up with revenue growth of 164.7% for its export market. Currently, Taiwan and China accounted for near to 90% of group's revenue. Indonesia also saw growth of 122.9% but it is very much smaller in absolute revenue. 

I am happy to see the results even though it was already expected. There is a slight concern that Taiwan accounted for 63.7% of its revenue. However, things should change by next year with conversion of China export model to direct selling.  

I will continue to hold on to my current stakes and might buy slightly more after the bonus issues.

Monday, 10 October 2016

Why I buy Valuetronics?

I got to know Valuetronics after I read articles on NextInsight. I was attracted to its dividend and purchased a small stake. I increased my stake further after reading its past few years of annual reports. I like its story of how it exited LED business in Consumer Electronics (CE) segment and growing in the Industrial, Consumer Electronics (ICE) segment which provides a higher margin. Just before writing this post, I browsed through the posts on Valuebuddies and now know a bit more of its historical business of licensing, to CE and now ICE. 

Why buy?
My main reason to purchase Valuetronics is its high dividend yield. My average yield is about 6.6% if it can maintain is 20 HK cents DPS going forward. How likely is that? I think that in the near term, it is quite possible if they can continue to grow their ICE business which commands a higher margin. 

Reading the posts from valuebuddies confirm my dislike of manufacturing sector which typically has low margin and depends a lot on its customers. Valuetronics has survived near to 25 years since it was established in 1992 and it seems nimble enough to continue to grow its business.

What I expect?
Do not really know what I can expect but I am hopeful that their growth in ICE will make them a bigger player in the Electronic Manufacturing Services provider.

When will I sell?
Of course if what I hope for doesn't turn true or when Mr Market value it 3-5x the annual dividend I am receiving and there is no change in its fundamentals.

Recent results
20171Q revenue and net profit continued to decrease from its exit of LED segment since 20163Q, partially offset by the growth in ICE segment. Management has guided that revenue of CE segment is more or less stable at about HK 140 mil to HK 160 mil. Entry to automotive industry will be its next driver.

So all is well, within expectation and I will continue to hold on to my small stake.

Thursday, 6 October 2016

Why I buy Capital Retail China Trust?

My first exposure to China retail sector was my purchase in Metro in 2008. Bought with CPF, I have held on to it until now, with near to 200% return (including dividend) and yield based on purchase price is near to 15%. Just two days ago, Quarz Capital Management have written an open letter to urge Metro to return cash. Hopefully that will get Metro to take some action to further unlock shareholder's value.

I decided to purchase Metro rather than CRCT was due to my familiarity to the brand then and hence CRCT seldom came to my mind as a purchase idea.

Why buy?
My main reason to purchase CRCT is its high dividend yield. I was attracted by the more than 7% yield and the trust have increased its dividend payout over the years, though the increase is not linear and dropped in two years.  With these information, I believe that the group can continue to give consistent dividend in the coming years.

What I expect?
I expect that in near term, the dividend payout will be pretty stable. While the recent purchase of Galleria, Chengdu is DPU accretive for the trust, I feel that the impact will be pretty small.

When will I sell?
I will sell when Mr Market decides to value it higher and provides me a return of at least 3 years of dividend, without any change in its fundamental.

Recent results
20161H revenue and net profit income is pretty stable and there is a slight dip in the interim DPU. I will continue to hold on to my lots to collect dividend.

Monday, 3 October 2016

Why I buy Singapore Technologies Engineering?

I bought and sold ST Engineering shares numerous time over the past 12 years. I decided to dig into my record and check the details and these are the details.

2003 - Purchased a lot at $1.81 and sold at $1.96 within the year.
2009 - Purchased 5 lots at $2.38 and sold at $3.10 in 2010. 
2011 - Purchased 10 lots at $2.81 and sold at $3.35 in 2012.
2015 - Purchased 5 lots at $2.985 and sold ???

My purchase in 2003 was of course during a time when I was still clueless about investing. Yes, I made a gain of $100 but that was without any homework done. If I know the financial of the company better, I would have definitely held on to my lot and even buy more at a price below $2.

The subsequent purchases weren't really much better. By 2009, I roughly know what the company does but its business is very much more complex for my simple mind. As you can see from the purchase price each time, it has been creeping up, though the last 2 purchases were below the previous price that I sold. 

So unlike my purchase of Best World, Parkwaylife Reit, Raffles Medical, Straco and Starhill Global Reit, I don't seem to be buying ST Engineering for long term.

Why buy?
Based on its track record, ST Engineering delivered a pretty stable performance. From 2011 to 2015, revenue and net profit is around $6 bil and $5.3 mil respectively. EPS is around 17 to 18 cents and DPS is around 15 cents. 

My assumption is that the company will continue to pay out dividend annually and there won't be much change in the amount of dividend in the coming few years. Hence, I have a sense of comfort buying it whenever the price dropped below $3, as at 15 cents, that give me a good yield of 5%.

What I expect?
I expect that in near term, the revenue and net profit should continue to be stable. There might be a dip as economy seems to be drifting at this moment. The dividend payout should remain pretty stable at 15 cents too.

When will I sell?
I will sell when Mr Market decides to value it higher and provides me a return of at least 3 years of dividend, without any change in its fundamental.

Recent results
20161H revenue grew by 5% and net profit grew by 2%. Management guides that revenue would continue to grow in 20162H but profit before tax will be lower. 5 cents of interim dividend declared which is the same as last year.

Will hold on to my 5 lots and continue to monitor.