In the good old days when REITs were riding high, I wrote about them, especially in Number Never Lies and once in No Dilution, No Fun. At the peak of the REIT glory days, an unknown writer named donmihaihai, with virtually no readership, somehow managed to upset a REIT investor enough to have him breathing fire at me. But I liked it. I never liked being part of the REIT-blushing orgy that seems to be going on today.

Investing is about seeing what the crowd is not seeing.

Corporate Monitor is now joining the fun by writing about REITs. I scanned through Parts 1 to 3 written by Royston Yang. I remember him as someone who used to churn out investing articles like a machine gun. Now that he is with Corporate Monitor, I have to admit that the first three parts of his REIT series are actually not bad. They are decent. Much better than most.

Then again, after REITs have underperformed for the last five years or so, who doesn’t have some ideas about them? In fact, it is precisely because of that underperformance that I think REITs are more attractive today than when I wrote Number Never Lies.

It is good that Corporate Monitor understands that incentives determine behaviour. One of the steps in analysing a REIT is understanding the incentives of the REIT manager, sponsor, and directors. Isn’t that what one should do for any normal company—figure out the motivations of management, owner-operators, and directors? Even more so for a REIT.

When a REIT is externally managed, it is effectively hiring an external REIT manager instead of being managed like a normal company. In almost any other situation, a service provider that does not perform can be replaced. This is not the case with REIT managers. It is very difficult to replace them.

So let me ask: where is the incentive to perform?

And what exactly is the KPI of the REIT manager? Is it the metrics of the REIT or the metrics of the sponsor, considering that REIT managers are usually associated with the sponsor? Since REIT managers cannot be fired easily, I would not hold my breath that their primary KPI is to maximise unitholder returns. Growing AUM seems far more likely.

Let’s also be honest when sponsors claim that their ownership stake aligns their interests with unitholders. I don’t believe it.

Read their annual reports. What many sponsors want is an asset-light business model and growing AUM. Their real economic interest often lies in the REIT manager. And while replacing a REIT manager is difficult, it is not impossible. The sponsor’s stake in the REIT serves a purpose: maintaining sufficient voting power should it ever be needed. Determining how much of the REIT the sponsor should own is more art than science. If it were determined purely by economics, sponsors might need to own so many units that the fund management business would become much less attractive.

Now, let’s talk about independent directors.

Personally, I would ignore them. They are directors of the REIT manager, not directors of the REIT itself. Where exactly do their duties lie? One could argue that they operate within the framework established by MAS and SGX. My response would be: don’t all independent directors of SGX-listed companies operate under the same framework? And are they really independent?

Once you understand the incentives of the key players, what else is there to say? The entire game naturally favours those who have control, namely the sponsor. Smart sponsors understand that they need to strike a balance. They cannot simply milk the REIT indefinitely because the backlash could eventually become severe.

Let’s talk a little about paying REIT management fees with newly issued units, which Royston Yang devoted an entire article to.

Ask yourself a simple question. If someone provides a service to your business, would you pay for that service by giving away part of your company? My answer is no. Why would I give away ownership of my business just because someone is providing a service? It makes little sense unless I am desperate or have no alternative.

Forget about alignment of interest. I have already addressed that earlier.

Royston has an interesting way of looking at dilution, distinguishing between units issued below NAV and above NAV. My view is simpler: dilution is dilution, the mathematics remain the same. Math alone cannot determine whether dilution is worthwhile.

Valuation merely determines how many units need to be issued. Whether any dilution is justified depends on whether you are receiving more value than you are giving away. This applies in acquisitions, not in paying operating expenses.

One final point before I end.

Do you really think sponsors are unaware that REITs have underperformed? Do you think they haven’t heard all the criticism about management fees?

What do you think they will do?

I don’t know. But I would not be surprised if some sponsors start pulling back on certain practices because they know they cannot kill the golden goose. At the same time, they will probably try to present themselves in a better light.

Why not take a look at the fee structure of CICT, which is widely regarded as one of the best blue-chip REITs and often said to have among the lowest fees?

And while you’re at it, ask yourself this:

Should REIT management fees be the only thing receiving the spotlight?

I don’t remember the exact letter. That was more than 20 years ago, probably around 2002 or 2003. It was some months, perhaps a year or two, after I “discovered” Warren Buffett. Despite knowing so little, I went on to read all his letters that were available. I believe I read each letter at least twice.

Initially, I didn’t read them because I understood them — quite the opposite. I did not understand most of what was written, nor the ideas, reasoning, and facts behind it. To say I only scratched the surface of investing and how things work would be an understatement. I basically knew nothing. WB’s chairman letters were one of the tools that opened up my mind.

After that, I read each new letter yearly, usually over the weekend. In recent years, I knew it was coming to an end. I could sense it. Even if I couldn’t, it would stop eventually anyway.

Like almost anyone who is interested in investing, I tried to read all the books related to investment and super investors and learn about them. That was what I did for perhaps the first five years after I started investing. After that, I stopped. First, I stopped reading investment books. Then, slowly but surely, I stopped following super investors.

I understand the basics of investing. There is no question about that. The only question is how to find these investments. I need all kinds of different knowledge and common sense, which are hard to find in investment books. I found a lot of knowledge and common sense in WB’s letters, but I don’t know how to acquire structured knowledge through those letters. Common sense — damn yes.

That was WB’s letters.

In the last 20-plus years, except for Berkshire Hathaway, I have hardly read letters or commentary from companies in the Western world. So in that part of the world, I have no experience. But from what I’ve read from SGX-listed companies and in the region, there seems to be a culture or country element.

Letters or commentary from Chinese companies, especially those closer to the government, are — let’s just say — frustrating to read. For the most part, I skip paragraph after paragraph.

Despite not really knowing Western culture, I like Greg Abel’s letter. It makes sense. It lays out what is important, tells you whether they are performing well on those aspects, and acknowledges it and says they will work on it if they are not.

For SGX-listed companies, it is not easy to find companies that communicate in such a straightforward way. There are CEOs or chairmen who write candidly, which is refreshing to read. But what is lacking is clarity on what is truly important for that particular company and how performance is measured against that.

For example, The Hour Glass. What makes a dealer tick? Relationship with principals, relationship with the wealthy, location, and competition in each particular market. Despite the candid tone, we don’t really get that. And by the way, did Henry Tay really write those letters?

Another example would be Boustead. Wong Fong Fui writes nice letters, but he doesn’t consistently write about each segment and how capital is being allocated across them.

These are the better ones. Many major companies in Singapore have letters written by PR or finance people, and that is a different ball game.

So, when all thing being equal, I am more comfortable investing in companies like The Hour Glass and Boustead than the rest.

I guess I’ll be reading Greg’s letter yearly.

The STI ended 2025 at above 4.6K level, which is roughly double its lowest point of about 2.3K in 2020. Throughout 2020, the STI traded below 3K, mostly between 2.5K and 2.8K. Investors had almost a one-year window to double their money over five years (dividends included), which works out to an annual return of about 15% p.a. by investing in the STI.

The drop in 2020 wasn’t steep. At around 2.3K, the STI had fallen only about 15%–25% from roughly 3.3K, which was close to its 2019 high. Despite the relatively modest decline, I called the STI valuation very cheap in March 2020. Later I did link it to the Asian Financial Crisis and the Global Financial Crisis, and I wrote about it in quite a few writings between 2020 and 2023. Looking back, while I did not call it the absolute bottom of the STI at the time, in hindsight it was a major bottom — and my way of saying that this level is unlikely to be reached again.

While it is hard to invest at the exact bottom, investing around the bottom is not that hard. I did it for the Nikkei bottom, which was an absolute beauty. I was buying around the bottom for months, and because my CPF was so dry, I bought only when it accumulated the minimum amount required for a purchase — easy to guess my salary then. What I did thereafter is something I hope I will never repeat. Currently, I also believe I was buying near major bottoms for the HSI, Malaysia, and Europe — if Europe can even be considered an index.

Looking ahead, I don’t think I can add much more to my record, as I am now closer to withdrawing my CPF money. The reason I invested in funds was due to rules that restrict CPF monies from being invested directly into stocks. I like my record of buying around bottoms, but I have little to show for it in monetary terms, largely because I was poor and made mistakes.

I like investing not because I love money (I do love money, but never to the extent of working hard purely for it). I work hard when my career or investing needs it, but not for money — period. Which is why I will never be rich. I invest because I want to be right based on my own decisions and nothing else. If I am right, I own it. And I know this about myself: I don’t just want to win; I want to win with a home run.

Investing at a major bottom is the first half of a home run, and I have not produced a home run yet. I made a major mistake with the second half of the Nikkei. I hope I can still hit a home run with the STI, HSI, Malaysia, and Europe before the window closes. If I don’t, that is on me — and I own it because I have 30 plus years to do it!

2025 was a good year. A good year to tell people, as I have just done, how good I am. A rising tide lifts all boats. An idiot could have done well simply by investing at the start of the year and doing nothing else. Anyone who did not do well — that is on him or her. And when it comes to investing in funds, I am that idiot, sitting on my ass the whole year with no clue what to do. Full stop.

Unlike funds or indices, individual stocks are different. There will always be opportunities regardless of the market. It comes down to whether I can find them — how large my universe is, how strong my competence is, and how hard I work. Even if my universe is small, my competence limited, and I am lazy, I could still do something if I lower my standards — or simply have no standards at all.

Other than YZJFH, I also sold MTQ after its full-year results were announced. “Consistency” is a dirty word — overused and often detached from reality. Earnings volatility is the norm. It was easy to see that MTQ would report lower profits, and it did. But at that point, I realised I had no idea how its future would look, so that was it.

As for purchases, they were Mewah International Inc, The Hour Glass Ltd, and Thai Beverage PCL. It will take some time before I know whether I lowered my standards in 2025. Of these, only Mewah was bought below 0.4× book value. For the rest, I paid up — just above book value for The Hour Glass and about 2× book value for Thai Beverage. Buying below 0.4× book value is my sweet spot, especially for decent companies, but fewer and fewer companies are trading at such valuations.

Since I have no fixed valuation framework, nothing is stopping me to pay up. The real question is whether I am confident enough in a company to justify paying 2× or 3× book value. At 0.4× book value, I can be wrong about many things and still come out fine, this safety valve might not exist at higher valuations. With fewer fish left in the cheap-but-decent pool, I need to step up.

I started with strong returns since 2020, and those who did well seldom boast about it. Let me close by talking about buying the dip — or even TACO, “Trump Always Chickens Out.” In 2025, eEveryone seems to know exactly what to do whenever there is a dip or when Trump tries something funny. It is fun to watch.

But in investing, any trend works only until it doesn’t. Buying the dip always works — until it doesn’t, and instead crashes. Good luck. Don’t be that experiment rat trained by the market, still pressing the lever, unable to leave the cage even when the gate is open

Hongkong Land (“HKL”) is setting up a private fund called Singapore Central Private Real Estate Fund (SCPREF), seeded with MBFC 1, 2 & 3, ORQ and ORL. As MBFC 1, 2, 3 and ORQ are owned by HKL together with its joint-venture partners, HKL is required to offer these properties to its existing partners before any sale or injection.

Keppel REIT eventually took a stake in MBFC 3 out of the four assets, all of which are located in close proximity. As Keppel REIT does not have excess capital, the acquisition was accompanied by a PO. Keppel REIT’s unit price fell the next day.

The point that almost everyone is fixated on is that this acquisition, together with the PO, will result in dilution to both DPU and NAV. Ignoring the short-term unit price reaction, however, this transaction is very much a standard S-REIT playbook. Acquisitions are funded by “giving up a part of yourself” — whether to the seller, new unitholders, or existing unitholders.

I am actually glad that HKL did not take Keppel REIT units as consideration, or that it was even offered by Keppel REIT. For transactions of this nature, the correct thought process should be about returns today and over time, rather than a narrow focus on immediate DPU dilution or accretion, or marginal changes in NAV. So who is to blame here? Certainly not unitholders alone.

Nobody likes dilution. But if dilution is immediate and the gains materialise over time — and the overall return is acceptable — then dilution in itself is not necessarily a bad outcome. The real problem is that it is hard to assess, and I would bet that even the professionals running the REIT are not entirely sure themselves.

So how should investors assess this? Track record.
I do not follow S-REITs closely, but I have always questioned the sector’s track record — particularly whether acquisitions and AEIs have genuinely resulted in higher DPU over time. Prove it with numbers, and I am happy to change my view. If S-REITs in general, and Keppel REIT in particular, lack such a track record, then it is entirely natural for unitholders to worry about dilutive actions.

Who is to blame then? REIT managers will say that investors want yield, so they create yield. Behind closed doors, they might just as well say: “Do I think I can create yield all the time? Don’t be naïve. Feed while I can — someone else will deal with the mess.”

Coming back to HKL — it is not selling MBFC 3, nor injecting MBFC 1, 2, ORQ and ORL, at a premium. The assets are transferred at valuation — which is still not cheap, in my view. Anyone arguing over a few percentage points of premium or discount is kidding themselves, given how imprecise property valuation inherently is. I also find it puzzling how accretion to DPU can be calculated to decimal points — but that is another discussion altogether.

Flipping the perspective, while HKL would obviously prefer to sell or inject assets at higher prices, doing so may not be well received by potential SCPREF investors. Higher entry prices also make it harder to build a credible track record. Injecting assets at valuation is probably fair to all parties, though not particularly favourable to HKL. Viewed this way, I think Keppel REIT got a fair deal.

The bigger question is why Keppel REIT only took MBFC 3 and not the other assets. MBFC 1, 2, 3 and ORQ are effectively identical. If MBFC 3 is attractive, the same logic should apply to the rest. It is also unlikely that Keppel REIT will see another opportunity of similar quality — same asset type, same location, and without a premium — anytime soon.

The constraints are likely dilution, portfolio considerations, and the sponsor’s ability (and willingness) to support a larger transaction. If MBFC 3 is genuinely a good deal, then more of the same should, in theory, be even better. So why not take it all? Is there sufficient sponsor backing for a bigger bet, and does this transaction truly align with the sponsor’s long-term strategy?

At the bigger-picture level, sponsor and REIT strategies rarely align perfectly. If they did, the announcement might have read something like:
“Keppel REIT acquires the premier Singapore CBD offices of MBFC 1, 2, 3 and ORQ, cementing its position as the kingpin of Singapore’s central office market.”

Now that would have sounded far sexier.

Your instinct is correct:

ThaiBev’s overall portfolio is not as strong as it appears on the surface, because:

• F&N beverages is declining in competitiveness
• SABECO’s margin dropped
• Vinamilk’s profit dropped
• Thailand beer & spirits face demand/regulatory pressure
• Myanmar is volatile

This is why ThaiBev trades at a persistent conglomerate discount.

After becoming a paid user of ChatGPT, I wanted to use it — or at least test it — to see how good it is compared to the free version I tried a few times in the past for analysing companies. The outcomes weren’t great then, and they aren’t great now. But to be fair, it is still better than most of what I read elsewhere. The real issue with ChatGPT today is that, although it is fast and appears smart, it refuses — or is unable — to think. Not surprisingly, this seems to be a common pattern I observe in many people as well.

I used it on Thai Beverage because the company just released its full-year results. The results were disappointing, and after going back and forth for a while, the extract provided by ChatGPT summarises their main businesses. The parts that are bolded remain bolded, including the conclusion. That reflects how I see things differently, maybe because my brain is wired in the wrong way.

Certainly, my understanding is not “instinct,” and as for the “persistent conglomerate discount,” how do you even quantify that? On the contrary, it is not that “the portfolio is not as strong as it appears,” but rather that the main businesses actually appear much weaker than they really are.

The conclusions about the current businesses are acceptable, but this alone is not enough. Investing is about the future. Ignoring the food business, understanding the present is only the starting point. From my perspective, based on current profitability, the only business that truly matters is the spirits business in Thailand. As long as its current level of profitability continues, I can ignore the rest and still be fine. I don’t know the answer, but there is a high chance it will continue because the Thai economy and regulatory environment reduce competition — the key to sustaining high profitability.

This is also why I believe Grand Royal Group is in an excellent position: competition is limited. However, its outlook needs to be considered through the lens of the civil war and the Myanmar military–Thai relationship as well.

Then we have SABECO and Vinamilk. I know too little about Vinamilk, except that it is the dominant dairy company in Vietnam. As for SABECO, it is one of the two largest beer companies in Vietnam. It has been underperforming for a long time and appears to be staffed by Singaporeans (ex-F&N?) in certain positions. I don’t like this — it feels like sending some ang moh to run a Singapore company. I am fairly sure that while beer and dairy will never reach the profitability of spirits, their profit levels will still be decent. And that includes Chang beer: if run properly, profitability would be higher.

Then there is F&N without Vinamilk. First, I am not concerned about printing — it is immaterial. F&N is losing in carbonated drinks in both Malaysia and Singapore, and the only bright spot is dairy and its presence in Thailand. If it can build on its dairy position, then it is acceptable, but I am not hopeful.

The biggest issue for F&N is AgriValley, and I am very concerned about it. I went back and forth with ChatGPT because the inputs fed into it produced this “blue-sky, excellent project” narrative. I have read enough stories about brilliant founders or CEOs who saw something others didn’t and pushed hard into a new direction. Backward integration is not new, yet there haven’t been many successful cases until recent years. And F&N’s recent track record is below average. So where did the idea for backward integration come from? Vinamilk? Chinese dairy companies? If so, that’s worrying.

Despite all this, when I look past what we currently know about Thai Beverage, I still see potential — as long as the spirits segment holds up. The company is not as leveraged as people assume because profitability is strong. I don’t see how it can continue on the same path as the last ten-plus years, and it seems the company itself recognises that.

Yangzijiang Financial is hot compared to just over a year ago when it was trading at just below $0.35. Last I checked, YZJFH was at $1.16 — easily 3x the average price from the post–spin-off from YZJSB in 2022 up to September 2023. I believe quite a number of investors who got in after the spin-off are either still holding or have already sold out at a handsome profit, celebrating the joy of finding an undervalued gem that eventually realised its worth.

Not me. I just sat my ass on it for the whole period since the spin-off. Not tempted by its cheapness, never did anything with it until recently. If I had, regardless of what my valuation of YZJFH was back then, I’d probably be walking around with my ass pointing upward and a big smile on my face — maybe even with some makeup. Too bad. If I hadn’t received it free from the spin-off, I highly doubt I would have invested despite the cheapness.

So the real questions are:

1. Why did I invest in it initially?
2. Why didn’t I sell it after the spin-off?
3. Why am I selling it now?

1) Why I invested in it initially
I didn’t. I got it free from YZJSB. Before the spin-off and before the China property crisis, YZJSB’s loan segment was a decent business — still is, actually. At that time, YZJSB’s main businesses were shipbuilding, loans and Shipping. Shipbuilding was stuck in a long cyclical downturn so the rest look bigger than what they were. The trading segment, while big, was an afterthought. I didn’t understand it and didn’t like it, but accepted it as the price of investing in Chinese companies. The shipping and loan segments, though not particularly attractive, provided stability — they were where the extra resources sat. During the height of COVID, I invested more, as YZJSB was trading at below 0.5x book value at one point if I recall correctly. Of course, the news was grim, especially with shipbuilding orders dropping from a 20-year low to a 30-year low. And who didn’t know shipbuilding was a lousy business back then? But in that environment, coupled with vessels’ normal lifespan of 20–30 years, it was an easy decision to buy more.

2) Why I didn’t sell post spin-off
Post spin-off, YZJFH was no doubt cheap — at one point trading at about half of YZJSB’s low P/B valuation. But unlike YZJSB back then, YZJFH wasn’t special. It wasn’t one of the best lenders or fund managers; in fact, it had no track record in the areas it was venturing into. And it wasn’t as if YZJFH was the only company trading cheaply. Perhaps the difference lay in a very promotional management team. Still, the 50% allocation to ventures outside China felt riskier than keeping money inside China. Yes, despite China’s rocky property market, I thought it was safer. With YZJFH becoming riskier and more of an unknown, cheapness alone didn’t lure me in.

So why didn’t I sell? Contradictory as it sounds, the main reason was that it was too cheap. I couldn’t bring myself to sell at that valuation unless something truly terrible happened. They couldn’t waste a few billion just like that — could they?

3) Why I’m selling now
Valuation, of course. But also because I held it far longer than I would have if I’d had a ready alternative for the funds. Now YZJFH is in play, and management — ever promotional — seems addicted to spin-offs. As if a soaring share price chart is proof of their success. Good luck to them. The latest maritime fund? I don’t see how lumping shipping-related businesses into a fund changes the fundamentals of those businesses. But well, YZJFH is hot, and at around 1x book value, it’s not expensive for an average business. It is not that much about the valuation. It is the risk

It’s been a while since I last wrote anything. Nothing much to write about—since I don’t do those so-called deep dives. Nothing I do is deep dive. And those who throw that term around? Shallow as it gets—butt out of the water.

So, just write something.

Local market is alive. Lot of privatisations for the last few years. Recently, there are some warms for IPO, which is great. While I cheer for IPOs, I don’t go near them because this is not my playground. My playground is somehow closer to privatisation. I have no idea which company is next in line for privatisation, but those who going through such process is has the following traits.

1) doing reasonable ok. Not excellent, not a disaster, just ok.

2) the company is trading at cheap valuation or the majority owner think the shares are cheap.

Given that the local market general valuation is on the cheap side, the momentum is picking up. And business owners? They are doing what some of them would know best. Take advantage of what is available.

I saw lot of wxyz about this and SGX even change its listing rules. But SGX is a joke. The recommendation from IFA is a joke. The rules surrounding privatisation is a joke. When I invested in say Sinarmas Land, I did not ask for and certainly didn’t need an IFA to tell me whether it is cheap or worth investing in. So why should I need one when someone is offering to buy me out? I would need them or someone to tell me what are the available options based on current set of rule. I want to know the thoughts of directors and even majority owner. And that is it. But the whole “fair and reasonable” thingy has reach such a joke level. 

In my view, the document from Sinarmas Land should not consist of any recommendation on whether the offer is fair or reasonable. I did not need one when I bought in and I don’t need it now. If the directors or majority owner believe minority shareholders should accept or reject the offer, they should say so. Put it in and standby it. That’s all. What I want is simple, to know what my opinion available based on current rules and what does the directors and/or majority owner think. But what I would like to see won’t happen. People would rather to dance around it than risk any liability. As I said before, I did not read the offer document.

And let’s be honest: get SIAS out of this. They are part of the problem, not the solution. I don’t find them helpful, and I don’t see why minority shareholders need “help” here. What I see is SIAS—and many retail investors—trying to turn the privatisation process in favour of minorities. But let’s be real: if one side gains an advantage, it comes at someone else’s expense. You can’t have it both ways.

Throw those jokes aside. In the past few years, thanks to how cheap SGX stocks have been, many investors should be doing pretty decent, some might be more than decent as long as they didn’t invested in the hottest potato of 5 to 7 years back. Which was REITs. It was fun shinning the light on the negatives of hot potato in Jan 2017. Did I get the REIT top? No, not even close, was maybe 2 years early.  But as compared to the negatives comments on REITs recently, mines was quite a lone negative. And I quite liked it.

Being one of the few positive on local stocks in since 2020, and I am still positive. In general, most companies that I look are trading at valuation that offer reasonable long term returns.

Privatisation is a little tricky. There is never certainty  it will happen or at what price. Take Sinarmas Land as an example again. Even if I am cautious with Indonesian companies, I am pretty sure that if I had discovered Sinarmas Land at its takeover price, I would have bought it, though not a large position. That is where luck comes in. But at my purchased price, it would take something seriously wrong and damn unlucky to lose money. In the end, the only reason why I accepted the offer was due to the loss of free float. Was surprise by the announcement but it also kind of says something about the kind of investors Sinarmas Land had.  

This isn’t the first privatisation I’ve been through either—it’s my third in recent years, after PEC and Penguin. While the holding periods and valuations differed, the gains turned out almost identical. Nothing to shout about—just something that happens quietly in my own backyard, my hunting ground. A rising tide lifts all boats.

2024 ended. Nothing particularly stands out. Oh yes, there was a short excitement over the sharp China rally but that was it. Of course, it doesn’t feel that way for those following the daily news. There are wars, geopolitical tensions, interest rate, US election, etc. But for someone like me, investing for long term, these types of news are not something new. There will be a fresh set of issues next year and the world will likely remain the same if I switch off the news.

It doesn’t mean that event happenings aren’t important. Looking at the big picture, the key issues of the last 5 years or so have been Covid 19, the shift in interest rate environment and the slow shift in geopolitical tension between US and China.

Haw Par Corporation

Did a top up on Haw Par after holding it for maybe 13 years. Haw Par profit doubled during the period and I was able to buy again at price less than double from my initial purchase. On top of that, Haw Par is sitting on more cash than before and UOB looks to operate in favourable interest rate environment. In short, compare to my initial purchase, businesses are doing better, valuation is lower and with more safety. Should be getting close to 20% earning yield at my top up price.

MTQ Corporation

Not outstanding businesses just decent enough and managed to pull through the long offshore winter almost in a piece. Almost because it did raise fund and MTQ was busy during the downturn, building and buying businesses and the results was at best, a mixed bag. As of now, the core business remains the same but expanded in breath and locations.

Offshore is recovering from multi years downturn and oil is not going away. I share the same view as the ex-CEO, so it a plus but the plus might be the past as MTQ has a new CEO. Unless the wind blows differently for current CEO, MTQ should be in good hand with tailwind. But if I am wrong, I might not purchase it cheap enough. And I am actually not too sure about it and in fact a little worry that after walking in the woods for some time, I might take the first lady that I met as a beauty. I hope MTQ is not such case.

For funds, the year started with a bang for China and I bought out a big bucket. Thereafter, it is like entering a winter and who know when spring will come. I am a contrarian after all.

The risk of buying high and selling low.

Let talk about the risk of buying high and selling low since there is nothing much to write. Investment return consist of two parts. Capital appreciation and income. It doesn’t matter if the total return consists of income or capital appreciation or both. The key is return.

Here is the rub, when someone says investment is about getting dividend with no regard to invested capital, pretty much we should know that that someone is sitting on stocks that have dropped. There is no guarantee, but at this point of time, those stocks should be cheaper and considered as better investment candidates than when that person first invested but I would venture and say, if one wants to look for real bargain, then chances are, these are not. Real bargains appear when investors like that person give up. On the other hand, when investor say stock is for appreciation not income, we would know that this person should be on hot winning hand. The investor is pumped up. And those stocks this investor is holding on to should be highly priced and not the place to look for bargain as well. These are my short cut to avoid looking at wrong candidates it can be applied to both individual and market as a whole.

Talk about market is easier. I have zero skill but I know a few things.

1. Long term return from stock/ market is pretty high, from STI 6 to 7% to US of 10 to 11%
2. There will be periods of higher return and periods of zero or negative return. The current example of formal will be US, India and maybe Indonesia markets. There are many examples for the later.    

So, it is simple, to avoid the risk of buying high mean avoiding US market. Many peoples know US is expensive BUT they are willing to take the risk and still invest in it because the return is too sexy. Betting on market in general is a winning bet and the only way to lose that bet is to take on too much risk. Betting on US as of now is betting on the bang but there is a high risk of being banged. The high rate of return will not keep going on year after year and I am not smart enough to know when to cash out right before the crash and do not want to be banged.

Any sharp eyes will know, there are also lot of other markets such as STI, FTSE( or Europe in general) and Nikkei are at or close to all time high. It is true but I would like to quote Benjamin Graham

“The market looks high, and it is high but it’s not as high as it looks.”

He said it in 1955, in front of a penal of Senates who were trying to find out whether the ongoing bull market is going to crash. These peoples still remember 1929 and the great depression. And we know from history, that bull market run till late 1960s.

Putting it together, which is what I am doing, ie avoid the risk of buying high by not investing in market where the long term chart, really long term, 30 to 50 years, look like straight a 45 degree up. Once this is avoided, the rest will be easy. It is just a question of what type of return I would be getting.

Individual stock is different. A stock can be cheap even if it is at all time high and expensive even when it is at all time low. In general, if I can get 10 to 15% annualised return over a long term period, I would be very happy. 10 to 15% annualised return beat market return by a huge margin. How would I know that I will be getting 10 to 15% return? Certainly not from the historical return of that stock. For individual stock, historical return is close to useless. There are only two important things

1. Whether the business is going to generate decent enough return ie decent enough ROE without being highly leverage and I know I understand it.
2.  Buying at a valuation that produce that 10 to 15% return.

#2 is easy, basically just math. #1 is where I spend my time.

Q&A before AGM/EGM arises because of COVID 19 and is here to stay. This is a forced kind of engagement and I believe most of the listed companies doesn’t like it to a bit and some treat it as another venue for PR and I believe only a few tries to engage.

I think the whole exercise is ok, since it is being forced upon by the exchange and only happen before a meeting, which is likely to be once a year. Is it useful? I would say depend, for someone who has been asking and answering questions. The level of usefulness really depends on shareholders asking thoughtful questions and the level of engagement from the company. On the level of engagement, I a nobody, has been drafting the first draft for majority of the received questions which usually being used after some changes and how the remaining questions being answered really depend on who will answer and in what manner they are being answered.

Usually, a company that has been engaging with shareholders through the results will continue to do so in the Q&A and Micro Mechanics is one such company. And I would like to believe that my questions in the last 2 Q&A resulted in Micro Mechanics addressing more of those concerns that come with my questions in the subsequent results announcements. Hopefully this is not a paper exercise for them.

In the latest Q&A, Micro Mechanics sound optimistic on MMUS and indeed, 1QFY2025 shown a turnaround for MMUS and an improvement in the presentation which split revenues into consumable tools and WFE parts. A delayed changes but will show how strong consumable tools is. In term of growth, WFE parts will certainly grow faster if Micro Mechanics is finally able to do it this round, but I would highly doubt WFE parts would reach consumable tools level of profitability.

PEC is the type that doesn’t engage much in normal engagement but doesn’t shy to says the future is rocky. In a way, PEC is more truthful than alot of the listed companies. This round, I did not have a lot to ask except that how rocky is the immediate future and what is the company focus. I don’t think most companies would engage in such question but thankfully, PEC give a straight answer. But I must really learn how to ask question.

Wing Tai is a different animal. After previous experience, I would expect to get nothing out of my questions except that I hope, my questions will pass through the CFO gate and reaches the operating management/directors. Non reply of my questions is ok.

Property goes through cycle. Since Wing Tai is a Cigar butt, I am ok with a slow company. But these are not the main problems of Wing Tai. The main problems are very fat HQ, and this fatness also extended to retail segment, which have been keep losing money without Uniqlo. The message I wanted to send is to let them know, the number show and shareholder has taken noticed.

There are a lot of noise on MAS setting up review group on Singapore stock markets. A lot of bullshits, especially from those smart peoples wanting to mandate certain money from somewhere to invest in Singapore stock markets or Singapore Company to list or has a listing locally. Well, each and every share of all listing companies has an owner, getting these funds or even national team(borrowed from China) to invest in, is to say some of these owners are not good enough, need to be kick out. And if we want mandating and try capital control, we can forget about being a financial centre. Singapore is a place where money flow. 

Looking at the problem, if this is a problem, is that first of all, Singapore is a small country. A small country mean small economy which also mean naturally, there won’t be a lot of big companies. Since Singapore is pretty developed or matured, better companies would already expanded internationally. This is also reflected in Singapore stock market with hardly any huge global company of any significant or a large pool of domestic focus companies. This is what and where we are, which also mean Singapore is constraint when we try to be global finance centre. I believe the majority of companies listed in SGX reflect this environment. 

Talk about stock markets in general, each country will want to has their own stock market. And as what we see right now, there are not many stock markets where companies across the world would want to list. The most global of all would be New York stock exchange and Nasdaq. Hong Kong Stock Exchange was raising nicely until recently. Who know what the future would be, but I won’t be surprise that 50 years down the road, US is still leading in term of global stock exchange and India and China(via Hong Kong) should be the next in the line. And I won’t be surprise if China does not make it to the top. As of the current world, one will not became a global financial centre by hiding behind a wall. These are the tops, and the further down the line, we will have stock markets that is more domestic focus.  

Without restriction, investor and company will go to where the money is. A global company from Singapore will likely go US for listing. And When US market is doing well, investors rush US market looking for gold. Any mandating won’t work unless it is a national team. And you need a lot of money for national team to work. It also doesn’t mean those stock markets that is domestic focus will be down and out. When capital is flowing toward a single place, a boring domestic focus stock markets will turned hot or regional.

The current SGX is not the same as the SGX when it went for listing 20 + years back. Back then, revenue from equity listing/trading/settlement formed a much larger portion of total revenues. Nowadays, it is just one of the segments, a segment that keep reducing its significance as SGX grow with Singapore to be a financial centre. This in my view, reflect the success and failure of SGX. For stock market, with the benefits of hindsight. I would rather not focus on China, REITs or OSV, I would find ways to link with all our Southeast Asia Countries. Get company to list here, be it Malaysia, Thailand, Vietnam or Cambodia. Be it primary or secondary listing. Let be a regional stock market where capital that is interested in this part of the world flow through Singapore. If Singapore can achieve this, then we are punching way above our weight. And we do not need to be like US, Hong Kong, London or even Japan.   

If we want to be something like a regional exchange, then our hard and software must be robust. We need a reputation that assures investors and companies of fair rules, like the rule of law. without bias again any group, whether OPMI or controlling shareholder.

Roti prating with listing rule is not the way to go.

Of course, this is what I think Singapore Stock Market could ultimately achieved. As of the current issue, it is not that there are no problems, but I don’t see them as huge. Basically, we are in a secular bear market since 2008, but this will change. Despite all the unimpressive moves by SGX over the years, it has  not became a domestic focus stock market. It is regional or international, the foundation is somehow laid.

The worse to happen change the course of the voyage with each new CEO, or review. Everyone look smart, but why do smart people keep making stupid mistakes?