Thursday, May 24, 2018

My Ex Just Announced Her Results!

If you have read about the previous post about my Ex, I am updating here that she just announced her full year results!

And I was right! The dividend has decrease from 33 cents to 18 cents!

If the retailer investor is looking for 5% dividend yield, then he will be expecting the share price to fall to $3.60!

But I have my doubt that the share price will drop till so much!

If you read about the news article, there are a lot of hidden messages. Are you able to catch them?

For existing retailer investor, I advise you to ignore the news report and spent some time to look at their latest financials results. Hopefully you will be able to pick out their "important" numbers.

There are 2 "firsts" over the last 3 years in the most ignored portion of the financial results! If you picked them out, that will be great!

Next, for existing retailer investor, it is also important to remember "why did you invest in Bukit Sembawang Estates Ltd"?

Once you remembered the reason, go back to the facts and see if the company still have "it".

As for me, let's just see how much the share price will drop!

Please do your own due diligence before you invest this counter.

If you are interested to know more about The Ultimate Scorecard or Full Analysis, do visit the Fundamental Scorecard website for more information! Do sign up to get the latest scorecard of all the SGX counters now! Only about $10 a month!

You can also purchase a copy of our Guide to SG Stock 2018 for only $8 via this link.

Oh... and do remember, please like our Facebook page (T.U.B Investing) and follow me on InvestingNote.

Sunday, May 20, 2018

What Is A Moat?

Recently for my Big Idea 1 and Big Idea 3, I have been talking about discovering "Moats" of the companies.

But I am wonder if those information that I provided are really "moats"of a company? Or am I using this term too loosely?

As per Investopedia (do read this page for a much deeper understanding), an economic moat is a competitive advantage that one company has over other companies in the same industry; this term was coined by Warren Buffett, a renowned investor and executive at Berkshire Hathaway. The wider the moat, the larger and more sustainable the competitive advantage of a firm. By having a well-known brand name, pricing power and a large portion of market demand, a company with a wide moat possesses characteristics that act as barriers against other companies.

The website further explains that economic moat describes a company's competitive advantage derived as a result of various business tactics that allow it to earn above-average profits for a sustainable period of time. Companies that obtain defensible competitive advantage from patents, cutting-edge technologies and other cost advantages can have a wide economic moat that curbs competition within their industry. Also, firms that enjoy strong economic moat tend to demonstrate solid financial performance and rising returns on capital over time. The most common sources of economic moat are cost advantages, switching costs, efficient scale, intangible assets and network effects.

In laymen terms, my understanding of the explanation is that A MOAT is a COMPETITIVE ADVANTAGE over its competitors, that could potentially allow it to earn a HIGHER OR AN INCREASING REVENUE AND NET PROFIT, showing GREAT RETURN OF CAPITAL OVER TIME.

Some examples of a moat can be patents, franchised rights, know-how, and being a market leader. On the other hand, many moats can also be caused by government intervention - such as Singapore require a Telco provider to be licensed.

In addition, I underline "OVER TIME" is that certain comparative advantage, while allowing a company to earn a high revenue, net profit with great returns, is not sustainable. Thus, I believe it is important to understand this concept and analyse a business correctly by placing an emphasis that the comparative advantage is sustainable.

It is also important to note "moats" does not make a company invincible. Just take a look at the traditional businesses getting disrupted over the last few years. An example is Comfort Delgro's drop in taxi revenue with the introduction of Grab and previously Uber. Another example is SPH reducing advertising revenue when internet becomes widespread.

Therefore, even if a company has a moat, there could be a possibility that it could eventually be destroyed. With that in mind, it is important that a company continue to innovate and improve, in order to continue to maintain or improve the company's financial standing.

1 question I have in mind is if a company having cyclical earnings can be considered having a moat? In my opinion, if the revenue and net profit is not consistent, I do not think the company should be considered having a moat.

However, if you disagree, do comment below!

If you are interested to know more about The Ultimate Scorecard or Full Analysis, do visit the Fundamental Scorecard website for more information! Do sign up to get the latest scorecard of all the SGX counters now! Only about $10 a month!

Oh... and do remember, please like our Facebook page (T.U.B Investing) and follow me on InvestingNote.

Sunday, May 13, 2018

Big Idea 3

After writing about Big Idea 1 and Big Idea 2, I will talking about the next Big Idea.

Big Idea 3 is actually quite a new company in my portfolio. I have only held it for about 1 month.

It was also never mention in any of my portfolio listing. Upon checking, I realize that I have only written about this counter in a 2015 post.

Reasons Why This Counter Qualifies as a "Big Idea"

1. Discovering Its Moat

I must confess that this company do not really have a significant moat. In fact, its industry have a low barrier of entry.

However, as this company sells a "luxury niche product", it creates an invisible barrier of entry.  This is because consumers will not just go to any shop to buy this "product". They tend to choose renowned shops that they TRUST to buy this "product".

Since it is also a "luxury niche product", not anyone can just straight away open a new shop to sell this "product".

In my opinion, this company is also a market leader within this "luxury niche product" space.

Thus, with a company's name that is easily recognised by consumers intending to purchase this product and also being the market leader within its space, I believe these are possibly the company's moat!

2. Improving Margins + Better Than Its Direct Competitor

Counter's Financial

Direct Competitor's Financial

Firstly, you will notice that the company's Gross Margin and Net Profit are improving over the last 3 quarters. If you compare it to 2017 4th quarter, there is a high possibility that the next quarter's Gross Margin and Net Profit could improve further.

Next, if you compare the company's margin against its direct competitor's margin, you will realise the company is performing much better even though their Gross Margin is almost the same.

Finally, even if the company's "other income" is removed, which in this case is rental income, the Net Profit is still much better than its direct competitor.

3. Management's Words

If you knew which company I am talking about and you read the 2017 annual report's Chairman letter, it have stated that the goal is to reduce the inventory turnover days.

Thus, from the above analysis, the inventory turnover days have reduced significantly every quarter and it is also been faster than its competitor.

With the above improvement in inventory turnover days, I will gladly ASSUME that if the company continue to perform "similarly", the 4th quarter financials will be satisfactory for the investors.

In Short

The above stated reasons are explanations of why I decided to list this counter as one of my Big Idea. Do note that there are still many potential reasons to why I invested in this counter.

Regardless, it is good to note that I do not think the above reasons indicates that the company does have a great moat. But I believe, even without a significant moat, it qualifies as a Big Idea due to its improving margins and financials.

Do note that its full year results will be coming out this month.

Please do your own due diligence before you invest this counter (if you knew what it is).

If you are interested to know more about The Ultimate Scorecard or Full Analysis, do visit the Fundamental Scorecard website for more information! Do sign up to get the latest scorecard of all the SGX counters now! Only about $10 a month!

You can also purchase a copy of our Guide to SG Stock 2018 for only $8 via this link.

Oh... and do remember, please like our Facebook page (T.U.B Investing) and follow me on InvestingNote.

Friday, May 11, 2018

Trip From Beijing

Sorry for the delay in writing, but I just came back from a trip in Beijing. I was expecting a culture shock but it turn out better than expected.

Throughout the trip, I had learnt many interesting aspect of the city, such as the following:

1. Spitting on the ground is common.

2. Seem hard to get any taxi and train stations are quite a long walk away (Or maybe Singaporeans are just too pampered?). End up becoming the "cabbage head" for other transport services.

3. You need to walk a lot, especially in the landmarks. Do need to look out for any trams.

4. Taobao has killed cheap clothing in the city. Shopping became quite boring. Only international/big brands that are not located within Taobao seem to have shops around.

5. High living standards. The food seem to cost as much as those in Singapore.

6. But it is still the ancient city with many landmarks not to be missed.

7. Security is a top priority in the city. Even train stations have checks. There are also a lot of police around. I felt very safe.

8. The pollution is very bad. The sky is clear but the dust in the air look like "snow". I am serious!

9. The power of Wechat and Alipay. If you happen to use cash there, you are not a local. Cash is a thing of the past.

But this trip made me realised why some interesting business can only work in Beijing and not in Singapore?

1. Last Mile Courier.

There is a reason why courier services are "great businesses" in China. You will see a lot of such vehicles in China. This is because Beijing is an ancient city and there are a lot of old houses ("Hutongs") without clear address. Thus, last mile courier services are required to locate each and every customer within the city.



2. Bike Services

Due to the traveling distance between destinations and the location of some of the residential area, these services are definitely required by the public.

Unlike Singapore, everywhere is very convenient and within walking distance from bus stops or train station. But this is different in Beijing.

However, due to the number of operators, this industry seems to be very competitive right now (Yes, both Singapore and Beijing currently have a lot of operators!). Bike services operators have to differentiate themselves to be relevant in future and not to continue "burn cash".

3. Small Transport Taxi


This is really something interesting I found in Beijing. There are quite a lot of these small taxi around in Beijing. However, it seem to be cater to pick up a single passenger only. Thus, I did not take this transport when I was there.

In Short

This trip made me realised 2 important factors - (1) As investors in overseas markets, I felt we should actually go to these countries to take a look and understand how businesses operate there. With extra knowledge, then you will be able to select better businesses that could possibly survive the competitive aspect in each industry. (2) Localisation is required for businesses that are expanding into China or overseas. Without understanding the country and just expand directly into the country will just be a waste of time.

Oh... I also took a picture that is linked to one of my Big Ideas.


If you are interested to know more about The Ultimate Scorecard or Full Analysis, do visit the Fundamental Scorecard website for more information! Do sign up to get the latest scorecard of all the SGX counters now! Only about $10 a month!

You can also purchase a copy of our Guide to SG Stock 2018 for only $8 via this link.

Oh... and do remember, please like our Facebook page (T.U.B Investing) and follow me on InvestingNote.

Words of Wisdom and Big Idea 2

Update on 11 May 2018: Sorry for publishing the draft copy. Amended the draft via the Blogger app and I went overseas to publish them, but end up the draft copy got published instead. 

Before I start talking about my Big Idea 2, here are some words of wisdom I had with A after he read about my previous post.

The conversation are broken down into sessions which I deem are words of wisdom and even if you knew them, it can act as a reminder.

Section 1: Diversification

"The question is about diversification. I have a dual answer to that. If you are not a professional investor, if your goal is not to manage money to earn a significantly better return than the world, then I believe in extreme diversification. I believe 98% - 99% who invest should extensively diversify and not trade, so that leads them to an index fund type of decision with very low costs. All they are going to do is own part of America and they have made a decision that owning a part of America is worthwhile. I don’t quarrel with that at all. That is the way they should approach it, unless they want to bring an intensity to the game to make a decision and start evaluating businesses.

Once you are in the businesses of evaluating businesses, and you decide that you are going to bring the effort and intensity and time involved to get that job done, then I think diversification is a terrible mistake to any degree."

Section 2: 6 Wonderful Business

"If you can identify six wonderful businesses, that is all the diversification you need and you will make a lot of money. I can guarantee that going into a seventh one instead of putting more money into your first one is gotta be a terrible mistake.

Very few people have gotten rich on their seventh best idea. But a lot of people have gotten rich with their best idea. So I would say for anyone, working with normal capital, who really knows the businesses they have gone into, six is plenty and I probably have half of what I like best. I don’t diversify personally.

All the people I’ve known that have done well with the exception of Walter Schloss, Walter diversifies a lot. I call him Noah, he has two of everything."

Section 3: Becoming The Expert

"Diversification is the way to go for many of them. But we are definitely those moving deeper into investment, learning more and doing it. For those with experience and competency, we will find things that look so much better and safer than to public. So you find a gem, you put in 20% of your portfolio.

I guess it might be a natural thing to concentrate, or at least only accumulate your best positions as we move towards being an expert. Of course, the important thing is not to over estimate our abilities and kill ourselves."

Section 4: Conversation Between WB and CM

"WB: If we were running only our own money, putting 75% of our net worth in a single position is not a problem if it is something we really have high confidence in. Putting 500% or more of your net worth in a position is a problem. Several times, I have had 75% of my non-Berkshire net worth in a situation. You will see things where it would be a mistake not to act. You won’t see them often, and the press and your friends won’t be talking about them. Wouldn’t you say, Charlie? 75% is not a real significant amount?

CM: Sometimes, I have had more than 100% in an individual investment.

WB: You just had a good banker. Look at LTCM — they put 25x their money in things that had to converge but couldn’t play out the hand. There are people in this room with more than 90% of their worth in Berkshire. I saw things in 2002 in junk bonds that would have been worth going heavily into. You could have bought Cap Cities in 1974 — selling for one-third the property value, with the best manager, and in a good business. You could have put 100% in Coca-Cola when we bought it and that wouldn’t have been a dangerous position.

CM: Students learn corporate finance at business schools. They are taught that the whole secret is diversification. But the exact rule is the opposite. The ‘know-nothing’ investor should practice diversification, but it is crazy if you are an expert. The goal of investment is to find situations where it is safe not to diversify. If you only put 20% into the opportunity of a life-time, you are not being rational. Very seldom do we get to buy as much of any good idea as we would like to."

Section 5: Concentration

"Concentration is a passage of rite once someone reaches a certain level, they will find things that makes sense to them. They may still be wrong, but less likely so. Expensive or not we will only see after a while."

Section 6: Share Price

"All I see is some price floating up and down. The market is there to serve you, not to instruct you. Drop in price doesn't mean the company really worth less. In fact, we probably make more money when the volatility of the market is higher.

When I do invest, I don’t care if the stock price goes from $10 to $2 but I do care about if the value went from $10 to $2. When price drop, all you have is bargain. The company is still worth so much more. Any drop is temporary and an opportunity. But when value drop, all you have left is an empty shell."

So that's all of the words of wisdom.

As for Big Idea 2, I do not think I will be writing more about it anymore. I have after all written a few post totally dedicated to the company. In addition, the last one I even tried to find out the fair value of the business. Nevertheless, do note that I have held this counter for more than 1.5 years.

The important aspect of Big Idea 2 is that it has a subsidiary and an associate listed in SGX. It also have another associate listed in ASX.

Thus, if the market continue to be on a bull run, I believe Big Idea 2 will also continue to do well and achieve remarkable results when it report its full year financials in August.

Please do your own due diligence before you invest this counter (if you knew what it is).

If you are interested to know more about The Ultimate Scorecard or Full Analysis, do visit the Fundamental Scorecard website for more information! Do sign up to get the latest scorecard of all the SGX counters now! Only about $10 a month!

You can also purchase a copy of our Guide to SG Stock 2018 for only $8 via this link.

Oh... and do remember, please like our Facebook page (T.U.B Investing) and follow me on InvestingNote.

Tuesday, May 1, 2018

Big Idea 1

I have stated numerous times that I wanted to consolidate/reduce my positions in my blog. But it has been in vain.

However, a chat with Simple Investor SG recently made me understand the real power of a concentrated portfolio (Read his last year review here). If you knew about his current returns in 2018, you will get a reality hit like me.

Thus, I decided to focus and cut down from 26 counters at last count to a current 20 counters. I foresee myself reducing further after World Cup and Full Year Results releases in May/June.

Nevertheless, I have also decided that I will focus about up to 50% (could rise to 60% or more) of the portfolio on a group of 6 to 8 counters (not yet decided fully on the exact numbers), which I will rename them as "Big Idea". These counters are meant to be potentially vested till the end of the year (unless it rises too fast).

Image from Freepik.com

Big Idea 1
will be the company that I stated in this previous post.

I released minimum information about the company in that post and many of you may brush off this idea. But I will be revealing more information about this company and why I intend to keep it as a "Big Idea".

Do note that I have written about this counter before and have been vested in this counter for more than 1 year as of today.

Reasons Why This Counter Qualifies as a "Big Idea"

1. Discovering Of Its Moats

Comparsion to Competitors

This will be a much better presentation that the one in my previous post.

Big Idea 1 financials are in the 2nd column as compared to its competitors. It was able to gain a higher Gross Profit Margin (GP Margin) as well as an incredible net profit margin (NPAT Margin) as compared to its competitors.

Do note that I consider Company 1 to be its direct competitor and you do have to look at the differences.

Although not all the competitors are listed here, but I deem the above as some of the better companies in the industry. 

Therefore, I deem this discovery as a Moat. The reasons below are my assumption/considerations of why this company was able to achieve such good results as compared to its peers.

2. Low Cost Of Goods As Compared To Direct Competitors

After reading the full post and if you already knew which counter I am talking about, then you should looked into their "products". 

The company do not sell this particular product as compared to its competitors, and I am not solely referring to the competitors I stated above. 

Although it refers itself to a certain branding/industry and a customer will directly relates the company to that product, but if you look closer, it does not sell that particular product in its shops. 

I believe it is able to keep its cost of goods low because they do not sell this product as compared to its direct competitors (not sole referring to the one listed in reason 1).

3. Multi-brand Strategy

Firstly, investors should acknowledge that Singaporean like new stuff. With a Kiasu attitude, we want to be the first to try out the new stuff in the shopping malls.

This company must have understood this concept since it was established in Singapore in 1997. Therefore, with a multi-brand strategy, the company is able to switch the shops around if a certain brand is not performing well as compared to others in that particular location.

By switching brands, it injects a new atmosphere in the shop and will encourage shoppers to come back to the shop.

4. Location, Locations and Locations

The company has over 45 shops in Singapore. In your mind, you will be wondering that the rental cost will have killed their operating expense. Then why is it able to achieve such high net profit margin?

Locations of the Shops
I have 2 reasons for this question. 

Firstly, renting in bulk is always cheaper than renting 1 location. From the pictures above, you will have notice that the company have many shop locations under each mall management. This will potentially reduce their rental expenses for each location. 

Secondly, competition for tenants for shop rentals should be high. You can take your reference to this IN post or just look around the shopping malls and see how many outlets have changed tenants over the years. 

Therefore, if you are a mall management firm, will you give in to a company that has many shops located under your management if it comes to you to negotiate the rent?

5. Overseas Expansion With Local Partners

In my opinion, another good strategy that the company engage in is its overseas expansion. Most of its overseas expansion are franchises or joint venture with local partners. Although this could results in lower returns, but there are also lower risk involved. In fact, this strategy will potentially boosted its net profit without gaining much expenses.

In Short

The above stated reasons are explanations of why I decided to list this counter as one of my Big Idea. Do note that there are still many potential reasons to why I continue to stay vested in this counter. But the above discovery of its Moat and the factors behind it made me more assured that this is a counter to keep for the longer term unless fundamental changes occurs.

Please do your own due diligence before you invest this counter (if you knew what it is).

If you are interested to know more about The Ultimate Scorecard or Full Analysis, do visit the Fundamental Scorecard website for more information! Do sign up to get the latest scorecard of all the SGX counters now! Only about $10 a month!

You can also purchase a copy of our Guide to SG Stock 2018 for only $8 via this link.

Oh... and do remember, please like our Facebook page (T.U.B Investing) and follow me on InvestingNote.