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

Tracking list - 7 stocks I am looking at

I am currently tracking a few stocks. Each has some level or underlying themes to back it for the next macrotrend. The global spectre of a crisis is looming while interest rates are probably going to rise in September.

Personally I am considering Keppel Corporation and Starhill Global Reit deeply. This will be purchases for a long term perspective of at least 5 years and I would like to add to this positions over time. In the meantime, I am waiting for attractive opportunities. Here is some that I see on the Singapore Market.

1. OUE Limited (2.16)
- OUE C reit and OUE H trust allows for capital recycling and investment in better assets
- Expected > 5% dividend p.a.
- P/B at close to 0.5
- Urbanization theme

2. Keppel Corp (8.78)
- Triple crown trust structure allow for Build-Operate-Stabilize-Inject model (Keppel Reit, K Infra Trust and Keppel DC reit)
- Expected >4.0% dividend p.a.
- Potential logistics trust
- Yield accretive deal and value buyout of Keppel Land
- Underlying macro theme of urbanization, energy and infrastructure.

3. Sembcorp Marine (3.00)
- Turnaround in oil prices will allow for return of oil rig deals
- Busy docks till 2019
- Energy theme

4. Vard Limited (0.62)
- Innovative design and synergy with parent may allow for more deals to come in the future
- Energy theme

5. Starhill Global Reit (0.86)
- Deal accretive acquisition of Prime CBD mall in Australia
- Optimizing capital structure at 0.35 leverage
- NAV: 0.93 provides some upside
- Asset Enhancement Initiatives allow for a potential upside (think more leasing space)
- Urbanization theme

6. Keppel DC reit (1.04)
- Basic bread and butter for the future data industry
- 6.12% return
- Big data theme

7. Starburst Holdings (0.55)
- Strong Profit Margins
- Scalable model
- Defence industry/theme

Lee Kuan Yew - a highly admirable man

No story would be complete without its end. I was only in the same room with LKY once in my life - that was in the NTU ministerial forum in 2011. What struck me then was that here was a man who had spent his whole life on Singapore. If anyone was to creditably say he succeeded in life - it was lky. Yet here was someone who always felt his work was never done. He famously said the statement "Rest on our laurels? No, you rest when you are dead!"

His work ethics is incredible too, stories of his red box and his sole dedication to making Singapore work went viral as we learnt more about a master politician and visionary leader who was able to gather data, listen to opinions, yet have the guts to take the best pragmatic choice.

He was also driven by the very fact that he cared deeply about Singaporeans. His primary motivation was never about money or luxury. He practiced frugality and focus purely on how this country can progress in this ever changing world. Even when he stepped down as PM, he pushed for the liberalization of the banking sector and mergers of banks such that they become global players - today 3 banks of Singapore are regional players (DBS, UOB and OCBC).

Perhaps the best testament to this was the very fact how nearly half a million Singaporeans queue day and night to simply say goodbye to this gentleman lying in state - myself included (queuing for 9h30min!).

What I truly learnt from him is that when you primary motivation is not money, when your primary motivation is pure passion for doing what is right, what is good for your fellow countrymen and putting your full heart and soul into that - you can achieve great things.

Goodbye Mr Lee. You be dearly missed. Singapore will live on for you - your spirit will live on through us - A nation that will never say die, that against all odds - find a way to triumph and become the best we can be. Simply because we are One People, One Nation, One Singapore

MIIF - winding up the fund doesn't look as good as it seems - (SELL)

I was intrigue by the winding up of MIIF. This fund was a good dividend play and special situation. I thought it was worth a look given its 9.18% dividend yield with possibility of special payout.

It turned out to be a wasted hit. Not wasted valuation as I saved my capital at risk due to the background checks. It turned out that its 81.8% stake valuation with the minus of success fee would only be worth a punt at valuations of less than 0.075 or 0.066 (post-div).

The asset apparently though may be worth more to the person who buys it - current earnings of about 12m.

How was this model build?
I used the assumption that there was a winding up and three case scenarios
(20% probability) Worst case scenario (reaching the success fee) - sale at 77.6m
(50% probability) Base case - sale at NAV 120.2m
(30% probability) Bullish case - China Merchant Pacific was used as a comparable sales valuation
(adjusting upwards the value for dividend yield and downwards for p/b) - I got a value of 137.038m.

Finally - at 81.8% stake in HNE. I computed the cash payout to investors.

Totally not worth it. I would only buy things with a certainty of some sort of 15% return. At that measure, only at a price of 0.081 or 0.072 (post-div). That is a 17% downside from here.

If you are interested in the model, you may leave your email in the comment and I will send it to you.

3 Targets - nothing more nothing less (Y-S-C)

Hi All,

I was identifying some interesting targets. Nothing really exciting in such a bullish market with a increasingly dangerous backdrop...here are my targets. I am rather keen on Yoma and CWT. I probably be a buyer of Yoma at around 0.43-0.46 and CWT from 1.45 - 1.55. Sembcorp would be around 3.8- 4.0 window.

Yoma Strategic Holdings (0.48)
Industry type: Conglomerate
A. Real estate
B. Construction
C. Agriculture
D. Logistics
E. Infrastructure
F. Luxury travel and Tourism
G. Automobiles
H. Strategic Investments - Retail, FMCG, Telecoms, Airport, Elevator Svcs, Steel Mesh Products manufacturing
Graham: 0.366
SOTP:
PE: 25.66
NAV: 0.3769
EPS: 0.0158

Sembcorp Industries (4.24)
Industry type - Conglomerate -
A. Utilities ( Energy, Water, Solid waste management)
B. Marine
C. Urban development
Graham: 5.19
SOTP: 4.25
P.E: 9.73
NAV: 3.02
EPS: 0.413 (trailing average)

CWT Ltd (1.57)
Industry type - Logistics manager
- 4 Streams of revenue
1. Logistics
2. Commodity marketing
3. Engineering services
4. Financial Services
Graham : 2.32
SOTP:
P/E: 8.95
NAV: 1.275
EPS: 0.1873

The investment clock and honest thoughts

Significant changes in prices of commodities, my mind goes back to the investment clock that some experts believe signifies the economy's clock.

What in the world is this?
The investment clock tells us where we should place more of our assets in a tactical discretionary asset portfolio. Its a bit confusing given that we have a few of the factors at different times while government intervention distorts several natural cycles. Here are my honest thoughts:

1. Boom and bust cycles have shorten indeed - some believe that it moved from 10 years to 5 years.
- The last big recession was 2008. Generally a recession comes every 10 years (I still believe this is the case) - 1987, 1997, 2008, 201?.
- My best guess is that somewhere between 2016-2018 is a very cautious period.
2. Now back to the investment clock - Given the falling commodities environment (we appear to be in a recession at 3 o'clock, in Singapore's case - falling real estate makes it a 6 o'clock)
3. However on the flipside, USA and China are keeping or slashing interest rates to boost the economy thus keeping the economy in the recovery cycle - signified by rising shares.

Application
So here is the key question, what do I invest in or do I stay out?
1. Blue chips that have undergone significant correction
2. Growth story of emerging markets is still intact
3. If everything fails - utilities, infrastructure and non-discretionary consumer staples are your best bet

Asset allocation recommended
I believe an asset allocation of 50% equities (30% quality/growth and 20% Reits), 10% special situation investments, 30% cash and 20% bonds would do well.


And last of all here is my watchlist

1. Boustead - ($1.875)
An interesting play on oil, property, geospatial (mapping) technology, utilities. Basically a mini conglomerate with strong orderbook. I did a investor meeting with the IR team before for a competition and I found them an honest bunch of folks with the CEO being a rather lively man despite his age.
Pros: Strong orderbook, strong partnership with Fortune 500 companies, geospatial technology rather useful and a good cashcow
Cons: Rather cyclical in nature given the building of oil storage facilities, utilities (water - rather unprofitable).
Catalyst: Potential REIT

2. Keppel Corp - Pride of Singapore ($9.17)
Under the new leadership - Loh Chin Hua (Former Fund Manager from GIC), Keppel has make headways into the investment fund business. Rarely making a wrong footing, even long only fund manager Aberdeen is a big fan.
Pros: Strong cash position, market leader in offshore and marine (rig-building), Keppel Land has iconic buildings (Reflectiosn, OFC, MBFC) and unique investment markets such as Myanmar and Sri Lanka. Rather balance conglomerate covering the whole business sphere from - offshore support (rig-building), Property (commercial and residential), Infrastruture (utilities - clean energy and water production), Tele and Transportation (Logistics, Data Centres) and Investments (Krisenergy, K1 ventures, M1, Keppel Reit and Dyna-mac)
Cons: Susceptible to market volatility due to the nature of business being cyclical - Property + Oil.

Catalyst: Triple investment trust structure allows parent to monetize the assets and reuse capital (think Keppel Reit, Data Centre Investment Trust and Keppel infrastructure trust).

3. Sembcorp Industries - The utilities whiz ($4.59)
Once a company that had its hand in everything including the Delifrance franchise, sembcorp has truly come a long way and streamline its effort into the defensive company with a growth strategy.
Pros: Utilities has long been stated as a boring business, but for sembcorp - its ability to produce year on year earnings and strong ROE has made it an industry leader in power and water production playing on a huge market in the global market. Even its subsidiary - Sembcorp Marine (61% stake) is worth a good punt at such a reasonable price.
Pros: Defensive with a growth strategy enough said
Cons: Property and investments (gallant venture) has been quite a damper, also affected by falling oil prices due to sembmarine

Catalyst: Payout of higher dividends, moving into new markets and possibly selling some utilities to Investment trusts structures

4. Soilbuild Reit ($0.790)
With little history and not much investment interests. This stock is purely for a good dividend yield (7.8% expected) with reasonable debt gearing to protect against interest rises and possibly make good acquisitions when necessary
Pros: Low leverage, Good management, Fully Occupied property
Cons: Less growth, Lack of institutional interests, Singapore centric business

Catalyst: Surprises on the upside - rental revisions, moving overseas for deal accretive moves

5. ST Engineering - Singapore's defense machine
The nature of this business is quite interesting. Being a huge conglomerate (>$10 bln in market cap), the company has experience quite strong interests in the Aerospace and Marine industry. Its defensive nature "pun-intended" allows it to be quite steady in an environment where everything fluctuates. It is however pretty dependent on Singapore's defence budget (expected to be around 5% of the annual GDP)
Pros: Defensive nature, strong dividend payout (>60% of EPS), unique innovations allow it to compete and build weaponry for europe and middle east markets
Cons: Possibly slow to new opportunities - not a terribly exciting growth stock

Catalyst: Huge bumper orderbook, increase in SG defence spending, new innovations to sell to new markets

To be honest, stick to REITS and Blue Chips for now - stay safe and happy investing!

Regards