Singapore Savings Bonds (For the less savvy investors) - First 3 issues

I personally subscribed to SSB - both October and November issues. They formed about 12% of my entire portfolio assets. I find them decent yielding instruments given the nature of its monthly redeemable nature. Someone quite rightly called it a '10 year bond step up bond with a monthly put' as it gives you the yield of a 10 year bond with the right to sell back any month without any lost ($2 transaction cost is negligible - don't tell yourself otherwise).

Key in mind throughout this discussion that there is a macro theme of rising interest rate and this would most likely begin in December.

Quick thoughts:
1. November issue is the best of the 3
2. December offering is very dismal in the mid to long term (Nov issue dominates it all the way while Oct issue dominates it all the way from 3rd year onwards - see chart 1 to understand fully)
3. You always have options for this unique asset class (subscribe or redeem or do nothing)

You are likely to be in 2 positions
1. The new subscriber
2. The one who subscribed OCT or NOV (or both)

Year	1st	2nd	3rd	4th	5th	6th	7th	8th	9th	10th	Issue Amount
GX15100F (Oct)	0.96	1.09	1.93	2.93	3.25	3.25	3.25	3.25	3.3	3.7	S$413.161m
GX15110F (Nov)	1.18	1.2	2.06	3.1	3.4	3.4	3.4	3.4	3.44	3.83	S$257.3285m
GX15120F (Dec)	1.15	1.15	1.65	2.41	2.81	2.81	2.93	3.08	3.29	3.64	Not Avail

Chart 1

Chart 2

If you are a new subscriber:

In this case - look at the following yield curve (chart 1 & 2) - you would know why this month issue is probably not a good buy as the overall yield is lower than the first 2 issues.
That being said if your holding period is only 2 years, it makes sense to subscribe now and sell it by the end of year 2. You would have been better off than the October subscriber.

P.S. If you are holding for 2 years, go put it in a fixed deposit instead.

If you are an OCT or NOV subscriber

Consider your investment horizon. If you are eyeing 2 years before selling the bond, you may want to redeem and take up the December issue. Although consider your opportunity cost given that the yield is increasingly higher the longer you hold the bond. Otherwise, I would advice just to hold on to your bonds (Oct and Nov) and don't touch the Dec issue.

In conclusion, its all about your timing and the opportunity sets - always ask yourself, 'what is your investment horizon and risk appetite?'.

The author expects december to be severely undersubscribed if any (<S$100m probably).

Cheers!
TFG

Special situations (M&A) in the local SG market

Several Acquisitions stories caught my attention in recent months. Noting that there are no certainty that any of these acquisitions would go through, some of them potentially have a very high chance of going through due to the size and reputation of the acquirer thus removing the arbitrage completely (for example the recent Tiger Air $0.41 offer per share by SIA Ltd). The following are 3 potentially lucrative deals that the market is giving some substantial discount. 

Caveat Emptor. Appreciate the comments/discussion. 

Note: The author doe not own any stake in any of the companies mentioned. You may also contact him directly at joelsiew@gmail.com

No.
1	Company Name	China Minzhong
	Current Price	S$0.77
	CV	S$504.7m
	5 year low	S$0.53
	5 year high	S$1.85
	Acquirer name	CBZ BVI (solely owned by Chairman/CEO Lin Guo Rong)
	Acquirer current stake	0.82%
	Offer price	S$1.20
	Offer Valuation	S$786.55m
	Upside	55.84%
	Required cash outlay by acquirer	$551.05m for 70.1%
2	Company Name	Asiatravel.com
	Current Price	S$0.245
	CV	S$85.9m
	5 year low	S$0.163
	5 year high	S$0.485
	Acquirer Name	Zhonghong Holdings (China)
	Offer price	S$0.30
	Offer valuation	S$105.18m
	Upside	22.5%
	Required cash outlay by acquirer	S$93.15m
3	Company Name	Saizen Reit
	Current Price	S$1.08
	CV	S$311.4m
	5 year low	S$0.65
	5 year high	S$1.14
	Acquirer Name	Triangle TMK
	Offer price	S$1.17
	Offer valuation	S$337.35m
	Upside	8.33%
	Required cash outlay by acquirer	$337.35m

Investing - Criteria and Macrotrends

What should an investor look out for?

Building your criteria .

Namely, I have listed a short 5 point criteria that people should follow with regards to investing, this would give them a safe metric to follow for the less financially savvy

1.  > 4.0% dividend yield (p.a.)
2.  > 500m market cap (USD)
3.  > 5 years of listed status (for forecasting and book building)
4. < 40% gearing (D/A)
5. EV/EBITDA < Industry Average by 1 standard deviation

Macro trends are your best bet to outperforming the market.

Just as I spotted the strong ability of Keppel T&T's Data Centre (30% net margins) and its really unique ride on the digital age. I believe that macrotrends are still the best play in the long run. What is important is whether you recognize this trend early, build up a sizable position, and that it would be realized in the future. The follows are some macrotrends that I think would be fairly alright. Do take note that a substantial risk may be involved for some of them especially frontier investments, commodity types and the turnaround stories.

Singapore/ Australia Markets

a.  Short Term Macro trend – Interest Rate rise
     Beneficiaries – DBS / OCBC / UOB
b.  Frontier market story – Myanmar
     Beneficiaries – Yoma
c.  Urbanization
     Beneficiaries – Keppel Corp / City Development / Capitaland / Sembcorp Industries
d.  Commodities recovery
     Beneficiaries – Wilmar International / BHP Biliton Ltd
e.  REIT plays
     Beneficiaries – Capitacommercial Trust / Starhill / Mapletree GCC / Keppel DC reit
f.  Turnaround stories (with high risk)
     Beneficiaries – Noble Group / Vard Ltd / Sembcorp Marine / Boustead Ltd / Super Group
g.  Steady Companies
     Beneficiaries – CWT Ltd / United Engineers

Bubble, bubble, toil and trouble - A world in volatility once more

The past 6 months were almost crazy. If you are still lost at what is happening, let me give you a quick round up of what happened.

1. China encourages retail investors to join the market

• The chinese index never moves. So it was pretty shocking/interesting to see it rise for the first time and at such a rapid rate. Nothing that goes up quickly ends very well
• More greed fed into the market. students, teachers, farmers - you name it, they all joined the investment business and started feeling like genius when they made money. 
• High usage of margin trading. Increasingly, as the 'margin' in the main island was not enough, mainlanders went over to Hong Kong to open accounts for trading HSI shares.
• It all ended in tears when the chinese index started plunging, and swinging in volatile directions (Aug 24 Marked the Black Monday of China- http://www.bloomberg.com/news/articles/2015-08-25/chinese-stock-index-futures-slump-as-market-rout-seen-worsening)

2. China devalues the RMB

• This took the icing off the cake. Basically, all companies with strong exposure to china saw massive cuts from their market capitalization. The local banks (DBS, OCBC, UOB) were all not spared due to their exposure to that market
• Property companies all with high exposure to china and emerging markets all started seeing their share prices fall

3. Capital flight to safety

• Fear, whether rational or irrational is a dangerous thing. One may jump the gun way too early and miss out on buying at a good price. Greed on the other hand, makes one 'miss out' on selling at a high price
• Capital has left the emerging markets in search for safer assets - the recovery play of both USA and Europe is beginning to show the strain on the surrounding markets in the APAC.

We have 3 key lessons to learn here

• My finance professor once told me, as a trader one should be wary of two emotions - fear and greed. Master the two and you be unstoppable both as a trader (and an investor)
• When it is not based on fundamentals (i.e. prices moving up purely due to trading and not earnings growth), we need to be very wary
• Lastly, when those who do not normally want to invest start to invest, its probably time to get out.

Where do we go from here?

• Since the Black Monday of China, stocks have rebounded and seen a good run. While it is anybody guess which direction the market will go, I believe we need to watch out for certain macro factors that will impact overall portfolio return:

1. China policies and its key macro numbers (PMI and GDP growth)
2. USD and the impending interest rate rise
3. The return of commodity prices

Tips and what to buy

• Logically, the best plays would be interest rate rising (banking) and stocks with proxy to USD (e.g. Venture Corp, ST Engineering)
• The next best plays to pick up would be stocks with have absolutely no relation to the economy - this are the defensive battle pieces (e.g. CWT Ltd, ARA asset management, Sheng Siong and Singapore Shipping Corp)

Am I vested? Yes. 60% Equity / 40% cash and bonds

What am I bullish on? DBS Bank Ltd / Singapore Shipping Corporation (I have yet to accumulate a substantial portion) / ICBC  

Flight to safety (credits to OCBC)

I noticed this recently and took it down. It utilizes the power of 3 to classify where a company falls under and interesting, you can see some notable names from the singapore stock market.

Personally,  I am very excited about the recent cheap prices - I think Keppel Corp, Sembcorp should be on most investor target. I am also interested in Yoma.

Noble Group on the other hand is dismal. I sold it after Michael Dee's scathing attack and warning he send to. Full letter here - http://www.sharesinv.com/articles/2015/05/29/open-leter-noble/
While I bought at 0.95 average and sold at 0.72. Its nothing compared to its 0.44 current price.

Is the end for noble? I don't believe so...but I think the company has to consider seriously how it should run its business and Michael Dee is quite right.
1. Become cash-flow positive
2. Fix your high leverage
3. Increase your transparency

I still own 500 shares, didn't sell it properly. I will hold on to this. And see how it all plays out.

Passed my CFA level 2!!

What a night it has been...I waited 2 hours and finally received the good news that I passed! :)

All those hours of squeezing time out. Being anti-social. Doing exams when I would rather be sleeping. Study until feel like sleeping etc etc.
Thank God for the result. I felt the peace that I felt during this exam was so special, I felt once again that I just had to do my best and trust him. And indeed he made things special in his time.

海底捞 － A distinct mark in service quality (game-changer)

Interestingly. When a game changer enters a market - it makes everything pale in comparison. The company builds brand loyalty, commands higher margins, keeps people happy and does it all right.

The entire experience at 'Hai Di Lao' from start to end was tended to ~ this was not just a dinner session where you sat down, order food, paid and leave. 

Taking a queue number at 6pm, the waitress informed us it would be about an hour wait, pretty reasonable given the crowd size and the stories of booking (2 weeks to 1 month in advance).

The entire experience starts the moment you take your waiting ticket.

Waiting area:

1. Manicure for girls
2. Fruits and snacks for everyone
3. Constant service staff attention to provide more food and drinks
4. Ipad ordering with pictures, prices, table number etc. (Menu in both English and Chinese). 
5. Crane folding session taught by one staff which can earn you some discount

Dining area & Staff

1. The layout was so posh you wouldn't think you were in a suburban mall, sparing no expenses to treat you like "royalty", we were promptly seated and our food orders started arriving shortly.
2. Throughout the meal, the staff constantly filled our drinks (expected experience)
3. Key attention to detail: There was a ladle hook that held your ladle in place so that your food would not be "lost" in the soup
4. Ziplock bags for handphones and aprons for customers would prevent soup from splashing on them.
5. When the staff topped up the soup, she covered the upper part of the kettle nose to prevent the soup from splashing on customers.
6. Even when we feedback/complain on some noodles being made too thick, they quickly offered to make a free set and offered it with a smile.

Fresh food and vegetables

Food quality

1. Soup was a tasty broth of Szechuan and chicken broth (was an interesting tasty mix and the spicy taste was not too overwhelming)
2. Generous portion of fresh food (beef, pork and fish) and vegetables

Overall experience

While the bill came up to $38/pax which can be considered quite pricey for meals, I could certainly see why this place was so unique. They truly knew how to build brand loyalty through reinventing the dining experience. It would be great for all Singapore service companies (Banking, F&B, Retail, Hospitality to consider learning from this 5 star steamboat restaurant who gets it right on almost all accounts). I would definitely be back some other time.

Red Tilapia