Courage to take Risk

I read Ken Teng's blog and I like this quote "Life is inherently risky. There is only one big risk you should avoid at all costs, and that is the risk of doing nothing."

I remembered two years ago I wrote in one of my notes "I will make myself redundant on when I am 35". I was praying hard and God answers my prayers. God is good all the time and all the time he is good.

I see this year as a breakthrough year. However, I see this year full of challenges, dispairs and troughs. I hope to see some fruits of labour by end of this year as I need to put food on the table for the family.

Things I need to do for my stockbroker business:
1. Setup a system for the business
2. Setup stock filter system, stock analysis system, buy and sell system
3. Setup personal cashflow system
4. Setup business cashflow system

Singpost FY 2016/2017

Q3 FY16/17 Summary

Revenue rose 16.8 per cent to S$369.4 million for the third quarter of FY2016/2017. Underlying net profit was down 28.5 per cent due to operating losses in the US eCommerce business, Regional eCommerce Logistics Hub costs, and a decline in domestic mail volumes. Q3 FY2016/2017 dividend of 0.5 cent per share declared compared to 0.15 cent per share for last year. Operating Profit decreases from Q3 FY15/16 54.6M to Q3 FY16/17 37.3M. 

Revenue movement is pointing towards a stronger business than previous year. I like this part of the story where it is seen as a holistic e-commerce and logistics company with the support of Alibaba Group. This is a move by Alibaba to pit itself against Amazon. In fact those in ecommerce will understand Aliexpress/Alibaba complements Amazon instead of been seen as a competitor.

I dislike this portion of the acquisition. The question here is "Did Singpost overpay for the new headcount?"

I am concerned on the lower mail volumes. As we are moving into the digital age and alot companies are going green by using e-statements/ soft copy, the demand for letter mail will naturally decrease. 

Looking at Cashflow Statement, FY 2016/17 is a better year than FY 2015/2016 as all the CAPEX has been spent already. The total Free Cashflow is improving for this FY 2016/2017. However, I saw a big ticket item on increase in bank loan, increases from 253,113 to 522,031. Nonetheless,  Interest coverage ratio remained healthy at 24.7 times, compared to 42.1 times last year,  its cash position is relatively good but at the expense of cutting dividend. I still think Singpost's dividend policy should not be changed. They should reduce their staff cost, pay them with dividend. You can use your dividend model to derive the intrinsic share price of Singpost. This is on my watchlist for now.

13/2/2017

Mr Market whacked the share price of Singpost and share price tumbled more than 7 percent in the morning. TradeGlobal, the US ecommerce firm Singpost acquired in 2015 is expected to incur losses for full year. TradeGlobal accounted S$169 million in goodwill and S$43 million in customer relationships in the intangible asset. I am waiting patiently for the big cut in price.

14/3/2017
Today the share price hit lowest at 1,32, Let's see whether it will reach close to 1.25.

HPH Trust FY 2016

Overview

2016 full year throughput of HPH Trust’s deep-water ports was 6% below last year. YICT’s throughput was 4% below last year. Combined throughput of HIT, COSCOHIT and ACT dropped 8% yoy. Although outbound cargoes to US and EU showed a positive trajectory in 2016 and grew at a faster rate in the fourth quarter of 2016, YICT’s throughput overall declined compared to 2015 as it was adversely impacted by the decrease in empty and transshipment cargoes. The decline in HIT’s throughput was mainly attributed to weaker intra-Asia and transshipment cargoes. Revenue and other income was HK$11,912.3 million, HK$700.5 million or 6% below last year. 2016 full year NPAT was HK$2,954.0 million, HK$90.6 million or 3% below last year. NPAT attributable to unitholders was HK$1,713.6 million, HK$31.3 million or 2% below last year.

Outlook and Prospects

As a result of the strong rebound in economic activity in the US in the second half of 2016 supported by robust employment data, outbound cargoes to the US escalated in the fourth quarter of 2016. However, there remains a high level of uncertainty on the policy stance of the new US administration and its domestic and global ramifications on the US economy and trade in 2017.

The moderate uplift in outbound cargoes to Europe when compared to 2015 is largely supported by the stable, albeit slower pace of growth of the European economies in 2016. However, continued weak consumer sentiment and high unemployment rate is expected to hinder the speed of economic recovery in Europe and the pickup of the European trade in 2017.

In addition to the economic performances of the US and Europe, HPH Trust's performance is also impacted by the outcomes of the structural consolidation within the container shipping industry. The service rationalization of various global shipping alliances has negatively impacted the transshipment volume of both HIT and YICT in 2016.

Shipping lines continue to deploy mega-vessels to achieve economies of scale, reform their carrier alliances to improve efficiency, control costs and expand the coverage of vessel-sharing schemes to enhance competitiveness as seen by the recent announcement by Japan’s big three shipping groups, Kline, MOL and NYK to merge their container shipping businesses. HPH Trust is well positioned to be the preferred port of call for mega-vessels given its natural deep-water channels and unparalleled mega-vessel handling capabilities. The recently signed co-management arrangement for the 16 berths across Terminals 4, 6, 7, 8 and 9 in Kwai Tsing, Hong Kong is expected to deliver cost and operational synergies as a result of a more efficient use of the facilities and manpower resources which will enhance the overall competitiveness of the services offered by HPH Trust in 2017. The acquisition of HICT in 2016 is expected to provide additional handling capacity and generate operational synergies with Yantian International Container Terminals through sharing of resources and better utilization of port and related facilities in 2017.

Key Business Update

Revenue 

Total Capex - Need to explore throughout all the years

Distribution

DPU for the year ended 31 December 2016 is 30.60 HK cents which is about 9% yield based on USD 0.435 market price. 

Financial Results

Due to changes in depreciation to a shorter duration, the depreciation amount is increased. Staff costs decreased from 306.6 to 297.4 in 2016 which is 3% improvement. I look at Singapore companies such as SIA engineering, they increase staff cost at the expense of shareholders whereas HK and US companies will run their company more prudently by keeping cost low. Such is the typical lives of employees. 

The Profit after Tax for FY 2016 in my context (prudent) = 2954 - 70.5 - 357 = 2526.5

Profit after Tax for FY 2015 = 3044.6 - 155.5 = 2889.1 

We see a decrease of 12.5%

I see that both current liabilities and non-current liabilities increase by approximately 14%.

Cashflow Statements -> Operating Cashflow increases but it is due to tax savings. Nonetheless, the cash generated from operations is flat compared to the year before. It is good sign to see that CAPEX is been reduced but there can be a limit before the equipment needs to be renewed/repaired/replaced. 

It is interesting to see that the total borrowings for FY 2016 is lesser than FY 2015. Is it a sign that things are turning around? HPH Trust USD has higher free cash flow than last year.

Conclusion

I believe the company has sufficient cash to continue to pay dividend. 

Singtel 9MFY3/17

·9MFY17 core earnings are within expectations

·3QFY17 core earnings were up 4.2% YoY (+3.6% YTD) on lower financing cost and stronger associate contributions 

·3QFY17 core EBITDA was stable YoY (-1% QoQ), supported by cost rationalisation initiatives, notwithstanding the topline pressure (-2% YoY) from stronger competition affecting Optus. On a constant currency basis (AUD gained  3% QoQ against the SGD), group revenue would have dipped 4% YoY. 

· Regional associates remained the bright spot with contributions up 3% YoY in 3QFY17 (+ 9% YTD), led by Telkomsel (+31%) which offset the intense price- focused competition by new 4G entrant, Reliance Jio, affecting Airtel (-27% YoY) 

I believe market is expecting Singtel to spin off NetLink Trust and this will create a special dividend. I like this business, superior cash flow and debt level is not as high as its counterparts in Singapore market. In the near future, I will definitely attend their AGM and question how the CEO deploys the cashflow. It is also not ideal to leave too much cash in the company pocket and spend unwisely to fatten the management's purse is not a good thing. I will like Singtel to issue a higher payout or acquire selective telco/companies.

I just check SGX platform and Singtel has purchased 232,563 shares on 10/2/2017. Good stuff!

I hope Temasek will "Make Singapore Great Again"!

Brink of a New Chapter

Yesterday my 2nd boss got us into the room and talked to us individually. He started the conversation with,"As you are aware how the market is like, just to give you the heads up, I believe it is time to start spending the rest of your time to look for a job. Reach out to your mate and industry friends."

In short, I have about 1-2 more months time to look for a new role as the company is looking at closing the Singapore office. 

First I will like to list down my feelings and how I feel towards this matter. It has been 10 years. I graduated in 2007 and I still remember my first job at Jurong Shipyard with a 2nd upper honours only command S$2,500. After deducting my CPF and contribution to Chinese organisation, I was left with S$1,999. I remember vividly that I wanted higher salary and I was always complaining how much the business school students were making back then with their cushy banking jobs. My income increases over the years and I am drawing a very comfortable pay cheque. However, at the back of my mind, I always know that there is nothing known as job security or iron rice bowl. 

I felt helpless when the reality set in. I was thinking of all the expenses and the liabilities. There are a lot of self-doubt, worry and concern. I have never gone without jobs since the start of my career. I understand these are unnecessary but those thoughts just creep into my mind, making me depressed for the entire evening. The only relief was when I brought my kid for a walk. I realize my family is the key reason why I need to continue to work hard. As long as I work hard in Singapore, I am sure that my family will not go hungry. I should not let my job determine who I am. I may lose my job but I still have my health, my family and friends to be thankful for. 

The uncertainty and helplessness is really scary.

I remember this from the movies.

“Let me tell you something you already know. The world ain't all sunshine and rainbows. It's a very mean and nasty place, and I don't care how tough you are, it will beat you to your knees and keep you there permanently if you let it. You, me, or nobody is gonna hit as hard as life. But it ain't about how hard you hit. It's about how hard you can get hit and keep moving forward; how much you can take and keep moving forward. That's how winning is done! Now, if you know what you're worth, then go out and get what you're worth. But you gotta be willing to take the hits, and not pointing fingers saying you ain't where you wanna be because of him, or her, or anybody. Cowards do that and that ain't you. You're better than that! I'm always gonna love you, no matter what. No matter what happens. You're my son and you're my blood. You're the best thing in my life. But until you start believing in yourself, you ain't gonna have a life.” 

― Sylvester Stallone, Rocky Balboa

After gathering my thoughts, I decided to actually pen down my next course of actions. 

Step 1 Understand Your Financial Status

I need to review my financial status. I need to look at my family cash flow statement and balance sheet. I need to understand how long my CPF and cash will last me to pay my home mortgage. Next, I need to pay down all my short term liabilities. Following that, I need to look at the expenses section, I need to cut away all unnecessary expenses and focus on necessities only. The winter is coming and I need to conserve all the cash to tide us through this storm.

Step 2 Uncluttered Your Stuff

I had already sold my watches and helping my wife to sell some of her bags. I got some cash back to finance my side-hustle.

Step 3 Update of Resume

I am sick of applying for a job. I have been bitching all my life on starting my own business. I will not apply another job but I will become a dealer. At least, I will be paid $2k for the start.

The first table is for dealer, assuming a salary of S$2k/month. The second table is for remisier. The risk is the same. I will transit to become a remisier once I achieve a revenue of S$8-10k for three consecutive months.

Step 4 Becoming a Dealer/Remisier

I will submit my CV to the brokerage house and go for my exams. Target to get my license within 3-4 months. Meanwhile, I will do Grab/Uber, tuition, affiliate marketing and e-commerce to supplement my income. 

Starhub FY December 2016

Starhub Key Financial Highlights

The total revenue for Starhub is flat Q-on-Q, net profit after tax decreases from S$81m to S$54m for 4Q16. For the full year, net profit after tax decreased from S$372m to S$341m which is about a reduction of 8%.

Starhub proposed the final dividend of 5 cents per share for FY2016. Starhub intends to reduce quarterly cash dividend of 4 cents per ordinary share for FY 2017.

The staff cost continued to increase by 11.4% from S$66.1m in 2015 to S$73.6 in 2016. This is not good management, an increase in staff cost but it did not lead to increase in revenue. 

Looking at Cashflow Statement is demoralizing, Net Cash from Operating Activities decreases from S$122.6m to S$81m. Free cash flow for 4Q2016 was a deficit of S$45.5m, due to lower cash from operating activities and higher CAPEX payments. For the full year, free cash flow was S$31.7m lower at S$184m as a result of higher CAPEX payments.

Conclusion
We will look at it after further price reduction and with a dividend yield of 9-10% based on reduced dividend forecast.

2/2/2017 Major Position Movement

Assume I am addressing my stakeholders of JC Fund, I will mention the following.

Today, I made a major switching of position by selling 20 lots of OCBC at S$9.44 and buy into 26 lots of Company M which was mentioned in previous post. Hence, my total holdings in Company M will become 33 lots. 

I sold 20 lots incurring a position loss of S$9k+. The reason of selling is twofold. I saw the impairment issue of EMAS Chiyoda which means DBS is going to write down further losses. I am sure DBS has already catered for this under NPL. I am just not confident of the quality of the loans, the O&G positions are just a small portion of banks' portfolio. The larger portion belongs to the property developers and construction companies. To add salt to the wound, SME loans will further deteriorate in the next 2 years. 

My OCBC original position consists approximately 30% of my portfolio which is overexposed in the finance sector. I want to reduce the holdings to a comfort level of 10%. The 26 lots of company M which I switched to will generate approximately S$14k of dividend. This will cover my loss and have a margin of safety for my entry price. My downside is covered.

I think back, maybe I should switch out slowly. 

Only time will tell whether this move is right or wrong. Let's reflect this again.

09/02/2017 Reflections on my actions

From the previous post, I did not think deeper and on a hindsight, it is a rash decision. Emotion is at play. Looking at the above chart, OCBC today is at S$9.71 range. I believe eventually this will close up higher to S$10 and I will not incur any losses at all. There is an additional factor which I have ignored. There will be the final dividend which will amount to 20,000 x ~S$0.2 = S$4k. All in all, my this move is equivalent to a loss of S$14k.
Yes, the future company M's dividend should cover this loss.

What I could have done is to wait a while longer for OCBC to rise, get the dividend and immediately switch to Company M. Well, if I am that accurate, my net worth should be a few folds more than now. 

24/2/2017
The switching out from OCBC is about to breakeven. Hang in there.

28/3/2017
The price went past breakeven point. The switching works. Now Mr Greed is in the hot seat. I sold 5 lots already. By mid of April, I will sell down more.