Wing Tai's Smart Moves in the Market: Unveiling the Uniqlo Joint Ventures

Wing Tai's Chairman (Mr Cheng Wai Keung, owns about 61% of Wing Tai as of 18th Oct 2023) and his wife have been making some strategic investments in the market, and it's catching the attention of investors. Their calculated moves since September 8th have led to some fascinating developments, particularly in the realm of Uniqlo joint ventures. Let's delve into the details.

Unveiling the Accumulation of Shares

Post the company's results on August 25th, it became apparent that the Chairman and his wife had accumulated over 2 million shares in Wing Tai. This move coincided with the company's shares trading at around $1.38. The acquisition of these shares has significantly impacted the stock's trajectory, with its current price standing at $1.46.

Uniqlo's Strong Performance

In the company's annual report, it's evident that their joint ventures with Uniqlo in Singapore and Malaysia are paying off. With a nearly 50% stake in both countries, Wing Tai's investments have yielded impressive results. In the past year, Uniqlo's profits, including revenue and overall earnings, have surged by about 40% compared to the previous year.

These robust performances translate to profits of approximately $64 million for Uniqlo Singapore and Malaysia combined. Impressive, right?

Attractive Valuations

From an investment perspective, the Uniqlo joint ventures provide excellent value. If we exclude other assets and investments worldwide, Wing Tai's price-to-earnings (P/E) ratio is approximately 18 times, based solely on the profits generated by Uniqlo. This stands in stark contrast to Uniqlo's parent company, Fast Retail Link, which trades on the Tokyo Stock Exchange at P/E ratios of over 30 times.

Stable Cash Flows

Wing Tai's Uniqlo joint ventures prove to be valuable cash cows. In times of property development slowdown in Singapore, Hong Kong, and China, these ventures have helped to stabilize Wing Tai's earnings. The consistency in Uniqlo's performance over the years makes these ventures even more appealing.

Positive Outlook for Uniqlo

The optimism surrounding Uniqlo is not limited to just Wing Tai. Uniqlo's parent company, Fast Retail Link, recently announced that they expect a robust 2024, with growth in revenue and operating profits for Uniqlo International, including Singapore and Malaysia.

Attractive Dividend Yield

Investors also have another reason to smile. Uniqlo has declared a 5 cent total dividend for 2023, equating to a dividend yield of 3.4% based on the current share price. The dividend payout is scheduled for the end of Novt.

Attractive Valuations Despite Market Slowdown

Despite the slowdown in the property market, especially in Hong Kong, Wing Tai's Uniqlo joint ventures have proven to be a source of strength, supporting the company's consistent earnings growth. The company's attractive valuation, with a price-to-book ratio of 0.35, further adds to its appeal.

In conclusion, Wing Tai's Chairman and his wife's calculated accumulation of shares and their strong performance in Uniqlo joint ventures present a compelling investment opportunity. As Uniqlo continues to shine and the company's valuation remains attractive, barring any unforeseen, the future looks promising for Wing Tai.

Turbulent Times Ahead for Real Estate Investment Trusts (REITs)

In a recent market update, the challenges facing Real Estate Investment Trusts (REITs) were highlighted. Despite a strong US jobs report, the stock market's turbulence and volatility remain concerning. The relief rally following a slight pullback in treasury yields is seen as temporary.

The US non-farm employment data exceeded expectations, with 336,000 jobs added in August. This robust job market raises concerns about potential rate hikes by the Federal Reserve in the near future. While September is traditionally rough for stocks, October hasn't been kind either.

The Asian Real Estate Investment Trust sector, particularly Singapore REITs, hit 52-week lows due to worries about earnings being impacted by prolonged higher interest rates. Only a few stocks, like Fraser Hospitality Trust, showed resilience.

JP Morgan's recent downgrade of many premium names in their coverage, including Capitaland and Fraser Logistics, added to the gloomy outlook. The downgrade is attributed to the expected higher interest rates, which will affect interest expenses and property valuations, potentially leading to higher gearing ratios.

Investors are advised to exercise caution when considering REIT investments. A longer-term horizon may be necessary to weather the storm and ensure interest rate impacts are manageable. Entering the REIT market may become more appealing when the Federal Reserve signals its tapering plans, possibly early next year.

For now, the market remains shaky, with subdued demand expected until year-end. The short-to-medium-term outlook for REIT prices may trend downward due to the hawkish interest rate environment. Investors should stay vigilant and patient during these uncertain times.

Unlocking Opportunities in Singapore's Banking Sector Amidst Rising Rates

Singapore's banking sector is facing a unique set of challenges and opportunities in the current economic landscape. Let’s delve into the dynamics of the banking industry and explore why it might be poised for growth despite certain headwinds.

Loan Growth and Interest Rates

One of the primary concerns for banks is the impact of rising interest rates on loan growth. As rates increase, borrowing becomes more expensive, potentially leading to a slowdown in loan demand. Notably, DBS, one of Singapore's leading banks, has revised down its loan growth estimates from the mid-single-digit range to the low single digits for 2023. OCBC and UOB have followed suit, adjusting their expectations accordingly.

The rationale behind these revisions is clear: as mortgage rates, business loans, and car loans become more expensive, borrowers may be less inclined to take on new debt. This shift in loan growth forecasts underscores the broader challenge posed by an environment of higher interest rates.

Net Interest Margins - A Silver Lining

While loan growth might face headwinds, the silver lining for Singapore's banks lies in their net interest margins. Net interest margin represents the profit banks make from the spread between the interest they earn on loans and the cost of deposits paid to consumers.

DBS, for instance, pleasantly surprised investors in the second quarter by reporting higher-than-expected net interest margins. Initially projecting margins to be between 2.05% and 2.1% for the remainder of 2023, the bank saw them rise to 2.16% in Q2. OCBC and UOB also posted improved net interest margins, indicating that despite concerns over loan growth, banks are still finding ways to enhance their profitability.

Managing Non-Performing Loans

Another factor influencing the banking sector's outlook is the potential increase in non-performing loans (NPLs). The challenging credit conditions brought about by higher interest rates could affect borrowers' ability to service their loans, both individuals and companies alike. However, the good news is that many banks are well-prepared to weather this storm, with robust credit reserves to cover potential losses.

Dividend Potential

Investors eyeing the Singapore banking sector will likely be drawn to the prospect of attractive dividends. Thanks to their strong capital adequacy ratios, particularly OCBC, these banks offer the potential for solid dividend yields, ranging from five to six percent. This aspect could make the sector an appealing choice for income-oriented investors.

Market Sentiments and Timing

However, it's important to consider broader market sentiments. Negative market sentiment can impact institutional and fund appetite for risk-taking. Investors may adopt a cautious approach due to these risk-averse tendencies. Yet, as we approach the third quarter or year-end results, the dividend payments of banks could inject some optimism into the sector, potentially prompting a reassessment of its attractiveness.

Navigating the Risks of REIT Investments

Investing in Real Estate Investment Trusts (REITs) in the current economic climate comes with a set of challenges, as highlighted by the followings:

1. High Interest Rates: The Federal Reserve's decision to maintain high-interest rates can result in increased financing costs for REITs. This can have a detrimental impact on their bottom line, potentially leading to reduced profitability and lower dividend payouts.

2. Gearing Risk: The expectation of continued high-interest rates raises concerns about the gearing, or debt-to-equity ratio, of REITs. If these trusts approach or exceed their established debt limits, they may need to resort to measures like issuing additional shares or selling properties to reduce their debt levels. Such actions can dilute the value for existing shareholders.

3. Uncertainty: The REIT landscape remains shrouded in uncertainty until interest rates stabilize or start to decrease, and inflation shows signs of cooling down. The ever-changing economic conditions can significantly influence the performance of REITs, making it challenging to predict their future prospects accurately.

4. Inflation Vulnerability: The persistence of inflation poses a genuine threat to REIT investments. Inflation can erode the actual value of rental income generated by these trusts, potentially diminishing their ability to offer attractive returns, particularly when considering inflation-adjusted gains.

5. Economic Conditions: REITs are inherently tied to the broader economic environment, including the health of the real estate market and the overall economy. Economic downturns can trigger declines in property values and reduced demand for rental properties, impacting the performance of REITs.

Given these factors, potential REIT investors should conduct a thorough assessment of their risk tolerance and align their investment objectives accordingly. Diversifying one's investment portfolio can help mitigate these risks. 

Analyzing Yangzijiang Financial's Strategic Outlook for H1 2023

Introduction

In the realm of finance and investments, staying updated on a company's strategic moves and financial performance is paramount for making informed decisions. Recently, Yangzijiang Financial released a comprehensive document shedding light on its strategies and outlook for the first half of 2023. In this blog post, we will delve into the key takeaways from this document and explore the potential implications for investors.

Yangzijiang Financial's Four-Pronged Strategy

One of the focal points of the document was Yangzijiang Financial's four strategic initiatives. These strategies aim to guide the company's future growth and navigate the complexities of the financial landscape. Let's take a closer look at these strategies (image source: yjzfin website):

* Leveraging Shipbuilding Expertise: Yangzijiang Financial intends to harness its shipbuilding expertise to expand its maritime fund exposure. This move aligns with the company's goal to diversify its portfolio and capitalize on its core competencies.

* Capital Access for Global Opportunities: Another significant aspect of their strategy involves using their capital access to pursue promising global opportunities. This approach reflects their commitment to seeking new avenues for growth beyond their current portfolio.

* Diversification Away from Salient Positions: Yangzijiang Financial is making strides towards diversifying its business away from positions that have traditionally dominated its portfolio. This diversification effort seeks to reduce risk and enhance long-term stability.

* Reducing NPA (non-performing assets): To further strengthen its financial position, the company has introduced three key policies, including a reduction in real estate exposure, asset seizure, and debt restructuring. These measures are geared towards optimizing their financial health.

Financial Performance Highlights

Some pertinent financial performance highlights:

⇒ Provisions for Real Estate Developers: Yangzijiang Financial has made adequate provisions for real estate developers in China and does not anticipate further provisions in 2023 unless there is a significant deterioration in the Chinese economy.

⇒ Dividend Payouts: The company has committed to paying 40% of its annual earnings as dividends. Based on the first-half 2023 earnings, this equates to an impressive 9.5% yield.

⇒ Positive Outlook: The chairman expressed confidence that the second half of 2023 would outperform the first half, potentially leading to even higher yields for investors.

Valuation and Investment Potential

Yangzijiang Financial's share price has experienced a decline since its debut, making its current valuation quite attractive at 0.4 times price to book. Investors may consider this an opportunity, as it represents a significant discount compared to the company's historical performance.

With a yield of 5%, Yangzijiang Financial appears to be an intriguing investment option. However, it's important to remember that investment decisions should always consider risk factors and individual financial goals.

Conclusion

In conclusion, Yangzijiang Financial's strategic outlook for the first half of 2023 offers a glimpse into the company's plans for growth and financial stability. The four-pronged strategy, along with the positive financial performance indicators, paints an optimistic picture for potential investors. 

Nevertheless, it is essential for investors to conduct thorough due diligence and consider their risk tolerance before making any investment decisions.

Application of High-Purity Polysilicon

High-purity polysilicon, often referred to as electronic-grade polysilicon or ultra-pure polysilicon, is a critical material in the semiconductor and photovoltaic (solar cell) industries. Its exceptional purity and electronic properties make it a vital component in various applications, including:

Semiconductor Manufacturing: High-purity polysilicon is used to create the wafers upon which integrated circuits (ICs) and microchips are fabricated. It serves as the starting material for the silicon wafer manufacturing process. The extreme purity of polysilicon is essential to ensure the reliability and performance of semiconductor devices.

Solar Cell Production: In the photovoltaic industry, high-purity polysilicon is used to manufacture solar cells. These solar cells, often made of crystalline silicon, require high-purity polysilicon as the raw material to achieve maximum energy conversion efficiency.

LCD and OLED Display Production: High-quality polysilicon is used in the production of thin-film transistors (TFTs), which are crucial components in liquid crystal displays (LCDs) and organic light-emitting diode (OLED) displays. These displays are found in a wide range of electronic devices, from televisions and computer monitors to smartphones and tablets.

Photodetectors and Sensors: High-purity polysilicon is employed in the manufacturing of photodetectors and various sensors, such as those used in digital cameras, optical sensors, and environmental monitoring devices. Its electronic properties are critical for sensitive and accurate measurements.

Power Electronics: High-purity polysilicon is used in power electronics components like insulated gate bipolar transistors (IGBTs) and power diodes, which are essential in electrical converters and inverters for renewable energy systems, industrial equipment, and electric vehicles.

Aerospace and Defense: In the aerospace and defense industries, high-purity polysilicon is used in various electronic components, sensors, and systems where reliability and performance are critical.

Medical Devices: Some medical devices, such as X-ray detectors and diagnostic equipment, incorporate high-purity polysilicon components for precise imaging and diagnostics.

Laboratory and Research: High-purity polysilicon is used in scientific research and laboratories for its unique electrical properties, making it valuable in experiments and testing.

The key characteristic of high-purity polysilicon that makes it suitable for these applications is its extremely low level of impurities, particularly metallic contaminants, which can adversely affect the electrical performance and reliability of electronic devices. As technology continues to advance, the demand for even higher-purity polysilicon is expected to grow, particularly in emerging fields like quantum computing and advanced electronics.

#XinteEnergy (1799)

KSH Holdings: Possible Recovery in the Construction Industry

KSH Holdings, a player in the construction sector, recently released their financial results, demonstrating a notable 25% increase in revenues. Despite a slight decline in profits by approximately 10%, the company maintained their dividend payout at one cent per share; giving a full year yield of 6% (total 2 cents, plus interim). The positive revenue growth can be attributed to the construction business's resurgence following a challenging period.

Foreign exchange fluctuations had an impact on KSH Holdings, resulting in a forex loss of about $6 million (SGD strengthened against foreign currency eg RMB). However, the company's cash flows remained robust, allowing them to maintain a payout ratio of 50% and distribute two cents per share to shareholders (EPS 4 cents). This healthy cash position also supports their efforts to rebuild their property development pipelines.

Looking ahead, KSH Holdings anticipates continued growth as the construction industry steadily recovers. While they face the task of rebuilding their project portfolio (orderbook is at 240 mil, down from 300 mil a year ago)- which will take some time, the company is well-positioned to capitalize on emerging opportunities. With a 8x PE, yield of approximately 6% (as mentioned above) and a price-to-book ratio of 0.5 times, the company's valuations remain attractive. Recent privatization of Chip Eng Seng and Lian Beng might provide some tailwind in terms of sentiment and market’s positive stance.

Despite the need for patience in witnessing the recovery of KSH Holdings order book and development pipeline, industry analysts are optimistic about the construction sector's prospects in the coming years. Investors with a long-term outlook can consider accumulating shares during potential market dips. As KSH Holdings rebuilds its project pipeline and leverages the sector's improving conditions (to be monitored closely), patient investors may be rewarded over mid-to-long term.

In conclusion, KSH Holdings' financial results showcase their resilience in the face of challenges. With steady revenue growth, a solid cash position, and a focus on rebuilding their project portfolio, the company is well-equipped to navigate the evolving construction industry.

Trading Holidays for the Month of Jun 2023

Trading Holidays for the Month of Jun 2023

Market this Week: 15th May 2023

Potential impacts on the markets : 

* U.S. debt ceiling debate

* Possible recession, and 

* High interest rates

Upcoming macro data releases : 

* China: Industrial output and retail sales numbers from China (Tuesday)

* United States: U.S. Retail Sales (Tuesday)

Peter Lynch's Investment Strategy: Investing in Companies You Understand

 About Peter Lynch

Peter Lynch (age 79 born on January 19, 1944), managed the Fidelity Magellan Fund from 1977 to 1990, delivering an average annual return of 29%. Under his leadership, the fund grew from $18 million to $14 billion in assets. Lynch's investment strategy was based on research, investing in companies he understood, with a portfolio weighted towards consumer goods, tech, and healthcare. Successful investments included Dunkin' Donuts, Ford, and Walmart, inspiring many to invest in strong fundamentals and long-term growth potential.

source: youtube

Legendary investor Peter Lynch on stock picking: 'The sucker's going up' is not a good reason 

Summary: (25th Apr 2023) Legendary investor Peter Lynch discuss the economy, markets, and his work with the Catholic Schools Foundation. Lynch is known for managing the Magellan Fund from 1977 to 1990, growing it from $20 million to $14 billion. He emphasizes the importance of doing research and knowing a company's balance sheet before investing, cautioning against impulsive investing. Lynch advises investors to look for new companies, particularly those with a good story, such as turnaround companies or those poised for growth.

OCBC's Price-to-Book Ratio Suggests Defensiveness Amid Key Risks and Downgrades

chart created using trading view

Chart 1: OCBC Weekly Chart

OCBC reported a 39% YoY growth in profits to $1.88 billion, beating consensus estimates, with net interest income up 56% (y-o-y) and non-interest income down 11%. 

Non-performing loan ratio improved to 1.1%, but loan growth targets were revised downward due to recent cooling measures. The net interest margin outlook was revised upward to 2.2%, but there is limited upside for OCBC's NIMs as the Fed rate cycle nears its peak, with pressure from funding costs. 

Asset quality remains benign, but management will top up general provisions in a more uncertain environment. The analysts downgraded OCBC to HOLD with a target price of S$13.00, citing limited catalysts for share price growth and downside risks arising from NIM, loan growth, and rising asset quality risks. 

chart created using trading view

Chart 2: OCBC Monthly Chart with Historical Price-to-Book Ratio

While key risks include deteriorating asset quality, larger-than-expected NPLs, high inflationary pressure, and recessionary risks; the price-to-book is close to 1 which is reasonable, with dividend yield at about 6% - and these 2 matrix suggest OCBC is possibly more defensive than UOB and DBS. 

SIA Engineering Snippet

chart created using trading view

Chart 1: SIA Engineering Weekly Chart (10 years)

SIA Engineering's revenue increased by 25-30% in H2 due to flight activity recovery, resuming dividend payments with a proposed final dividend of S$0.055, and analysts predict a dividend of S$0.07 for 2024.

Analysts recommend observing operating profit turnaround and a stronger MRO volume recovery and easing staff costs to consider investment. Despite lower revenue growth forecast for FY24, revenue reached 78% of pre-COVID levels, and the company faces internal challenges due to rising staff costs. 

SIA Engineering needs to address staffing costs and capitalize on flight activity recovery for profitability. 

Overall, analysts recommend cautious optimism for SIA Engineering's post-pandemic recovery - with key catalysts beingr ecovery in MRO volumes and easing staff cost pressures.

Riverstone Results: Snippet

source: trading view

Chart 1: Riverstone Weekly Chart

The financial results of Riverstone for 1Q23 showed a decrease in revenue and gross profit margin compared to 1Q22 due to various macroeconomic factors. However, the balance sheet remains strong with a significant net cash position (Cash In Hand SGD0.2011 per share - source: shareinvestor com). 

Riverstone plans to focus on customized products (cleanroom gloves and specialty healthcare gloves) to maintain its market position. From a fundamental perspective, there is a neutral outlook for Riverstone, but there may be opportunities for technical rebounds. Potential support at the 0.560 level.

Bull and Bear Case of Alibaba

source: lim and tan

Chart 1: Alibaba Weekly Chart

Alibaba (NYSE: BABA) is a Chinese e-commerce company that is listed on both the Hong Kong and US exchanges. 

Bull case for Alibaba is that it has a leading e-commerce marketplace business in China, a strong cloud infrastructure business, and other subsidiaries involved in logistics and digital media. Bulls also argue that Alibaba is poised to benefit from the economic reopening of China.

Bear case: On the other hand, the bear case for Alibaba is that it faces regulatory risks due to the Chinese government's crackdown on the business, which began in late 2020. The bearish argument is that Alibaba's competitive advantages may be eroded by regulatory actions, and that the stock may be a value trap.

SGX Trading Halt and Suspension

Trading Halt

The SGX trading halt is a temporary pause in trading of a specific security that can be initiated either by the issuer or by SGX-ST in certain situations. The primary objective of a trading halt is to allow investors to receive material information about the security before they decide on any further trades, which could potentially be influenced by the undisclosed information.

During a trading halt, unmatched orders within the trading system may be considered lapsed by SGX-ST, and the status of such orders will be communicated to trading members before the lifting of the market suspension. While a trading halt typically lasts for a minimum of 30 minutes and a maximum of three market days, the duration can be extended beyond three market days at the request of the issuer.

Upon the lifting of a trading halt, the stock will re-enter the phase of the market at that time. It is important to differentiate between a trading halt and a suspension, which is often a more extended period of time.

Stan Weinstein Stage Analysis

 

image source: nextbigtrade .com

Stan Weinstein Stage Analysis

Stan Weinstein's stage analysis is a method for analyzing stock price movements that can be used to identify changes in a stock's trend and to make buy or sell decisions based on those changes. The method divides the price action of a stock into four stages. The first stage is the basing stage, where the stock is forming a bottom and consolidating its gains. The second stage is the advancing stage, where the stock is in an uptrend and making higher highs and higher lows. The third stage is the top stage, where the stock is forming a top and consolidating its losses. The fourth and final stage is the declining stage, where the stock is in a downtrend and making lower highs and lower lows.

The idea behind the stage analysis is to identify the current stage of a stock and to determine when it is transitioning from one stage to another. For example, if a stock is in the basing stage and then starts to move above its 30-week moving average, it may be transitioning to the advancing stage. By identifying these transitions, investors can make buy or sell decisions based on the strength or weakness of the stock's trend.

Stan Weinstein's stage analysis can be applied to different time frames, from short-term to long-term, and is useful for both technical traders and fundamental investor

Chart Updates

 

source: cnn

Chart 1: Fear and Greed Index

sign of U-turning if below level 60

May 2023 Market Holidays

 May 2023 Market Holidays

Singapore Market Holidays 2023

 Singapore Market Holidays 2023

source: calendarlabs .com / SGX

KIT Plans to Raise $240 Million Through Equity Fundraising: An Overview

source: SGX announcement

For existing shareholders, 5 for 100 held

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Indicative Time Table

souce: SGX announcement

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KIT announced equity fund raising morning. Details are as follows:

Total: S$125mln (private placement) + $115mln (non-renounceable preferential offering) = S$240mln

Placement offering size: S$125.0m
Offer price range: S$0.464 - S$0.477 representing:
•7.4% - 9.9% discount to last close
•7.4% - 9.9% discount to VWAP
•5.1% - 7.7% discount to adjusted VWAP

Preferential Offering size: S$115.0mln
Offer price range: S$0.464 – S$0.467 representing:
•9.3% and 9.9% discount to VWAP
•7.1% and 7.7% to Adjusted VWAP

Forecast FY23 yield: ~8.4% - 8.6%
Use of Proceeds: Partial repayment of the bridge facilities which were used to initially fund the acquisition of 3 assets in 2H2022
Sponsor: Sponsor undertakes to subscribe for its 18.21% prorata share of the placement

Important Dates:
Launch of Placement: 18th April 23
First date of ex-trading of Placement Units: 25th April 23
Expected date of issue of Placement Units: 27th April 23
Expected date of issue of Preferential Units: 18th May 23

~ source: Lim and Tan Telegram

DBS Historical P/B (and its relation to Fed Funds Rate)

 

source: Lim and Tan

Chart 1 - DBS historical P/B 

* Accordingly, every 100 basis point hike expected to add S$1 billion to S$2 billion to banking sector profits

Singtel's Strategic Expansion into Indonesia and Thailand's Data Centre Markets

 

chart created using trading view

Chart 1 : Singtel monthly chart

RHB Bank analysts have suggested that Singapore Telecommunications (Singtel) should be bought by investors because the Asean data centre market is about to experience “hyper-growth”. The analysts added that the positive outlook resonates well with their preference for fixed-line plays, as Singapore’s calibrated data centre growth is squeezing inventory, resulting in overflow to neighbouring hubs. Singtel is expected to be a leader in data centre services regionally with the best interconnectivity in Southeast Asia by 2026. The group already owns and operates seven data centres in Singapore with a rated capacity of over 70 MW, but it plans to expand to over 170 MW regionally within three to five years through joint ventures with Indonesia and Thailand. ~ source: thedge

S-REITs

Chart 1 : FTSE REITs Index (chart created using C2 - Shareinvestor)

JP Morgan analysts are concerned about the rental portion of some S-REITs, citing vacancy risks as a key focus for 1Q2023. They point out specific concerns regarding non-renewals or partial renewals from tenants such as AT&T, Atos, Seiko, and NTT, as well as litigation with DXC. However, S-REITs with office and hospitality assets are expected to report improved rental reversions. JP Morgan prefers to err on the side of caution and sees downside to street DPUs post-results, with its top picks being laggards such as CDL Hospitality Trusts, CICT, CapitaLand Ascendas REIT, KDC REIT, and Mapletree Logistics Trust. ~ theedge

Unlocking Value: The Role of Company Share Buybacks

Understanding Company Share Buybacks: A Powerful Tool for Investors

Company share buybacks, also known as stock repurchases, have become increasingly popular as a financial strategy employed by companies to repurchase their own outstanding shares from the market. This article aims to shed light on the concept of share buybacks and their significance in the realm of investment.

Motivation: Unveiling the Reasons behind Share Buybacks

Companies embark on share buybacks for various reasons. One common motivation is to convey the belief that their stock is undervalued. By reducing the number of shares in circulation, the company strives to enhance the value of the remaining shares.

Capital Allocation: Maximizing Value through Share Repurchases

When companies find themselves with excess cash or lacking attractive investment opportunities, they may opt for share buybacks instead of dividends or acquisitions. This enables them to allocate their capital in a manner that creates value for shareholders.

Earnings per Share (EPS) Impact: Amplifying Profitability

Share buybacks can have a positive impact on a company's earnings per share. As the number of outstanding shares diminishes, the same earnings are distributed among fewer shares, leading to an increase in the EPS. Consequently, the company's stock may become more appealing to investors, potentially driving its price upwards.

Tax Efficiency: A Favorable Approach for Shareholders

In some countries - share buybacks offer greater tax efficiency for shareholders compared to dividends. While dividends are typically subject to immediate dividend taxes, shareholders who sell their repurchased shares at a later date may incur capital gains taxes instead.

Investor Implications: Interpreting the Message

Share buybacks can have varying effects on individual investors, contingent upon the context. If a buyback signifies the company's confidence in its future prospects, it can bolster investor confidence and potentially elevate stock prices. Conversely, if buybacks are used excessively to artificially inflate stock prices without improving underlying fundamentals, it may raise concerns among investors.

Conclusion:

While share buybacks can generate value for shareholders, they should be approached with caution. Excessive debt or inflated prices can undermine a company's financial health in the long run. Therefore, investors must thoroughly evaluate a company's financial position, strategy, and motivations behind share buybacks before making informed investment decisions.

By comprehending the intricacies of company share buybacks, investors can harness this powerful tool to analyze investment opportunities and navigate the dynamic world of finance.

HK Market Matching Procedures

Applicable CAS Securities 

Closing Auction Session (CAS) is applicable to all equities (including depositary receipts, investment companies, preference shares and stapled securities), as well as funds (including exchange traded funds (ETFs) and real estate investment trusts)

The first period

(Reference Price Fixing Period, 4:00-4:01pm)

- A reference price, which sets the allowable price limit of the CAS, is calculated for each CAS security.

The second period

(Order Input Period, 4:01-4:06pm)

- At-auction orders and at-auction limit orders within ± 5% percent price limit can be entered, amended or cancelled.

The third period

(No-Cancellation Period: 4:06-4:08pm)

- At-auction orders and at-auction limit orders can be entered. However, the prices of new at-auction limit orders must be between the lowest ask and highest bid of the order book, and no orders can be amended or cancelled.

The fourth period

(Random Closing Period: 4:08-4:10 pm)

- The market closes randomly within two minutes.

~ source: aastocks website

ST Engineering

chart created using trading view

Chart 1: ST Engineering Daily Chart from Jun 2022 till date

ST Engineering Marine Ltd, a subsidiary of ST Engineering, has been awarded a contract by the Ministry of Defence to design and build six Multi-Role Combat Vessels (MRCVs) for the Republic of Singapore Navy. The vessels are designed to function as a mothership and can operate a range of manned and unmanned systems in a flexible, intuitive, and integrated manner, allowing them to support a wide spectrum of missions with maximum combat effectiveness. The contract is a testament to ST Engineering's capabilities in designing and building large and complex naval vessels, as well as its commitment to supporting MINDEF in various areas. 

The company has also won a S$430 million contract to lead systems integration and project management for the new Kaohsiung MRT Red Line South Extension in Taiwan. ST Engineering's Urban Solutions will begin working on the project in mid-2023 over a period of nine years. 

At $3.63, market cap of ST Engineering is S$11,307.1mln, FY23F P/E is 19.50, current P/B is 4.70, dividend yield is 4.4% and its net debt of S$5.93b1n (as of end-4022) equates to net gearing of 247%

Bloomberg consensus indicates that there are eleven buys, one hold and one sell recommendations on the stock while the target price on ST Engineering is S$4.12, representing a potential upside of 13.5%.

Lim and Tan research team has an “Accumulate" rating for the stock and are expecting FY23 net profit of ST Engineering to grow by 8.3% yoy to hit S$579.5m1n. 

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Update: ST Engineering : (S63) GlobalData estimated ST Engineering’s new contract for the Singapore Navy will bring in US$1.2 billion in revenue for the company. The data analytics and consulting company on Wednesday projected a value of US$200 million for each of the six vessels. Shares of ST Engineering closed at S$3.65 on Wednesday, up 0.8 per cent or S$0.03, after the report was released. (source: business times)

State of the Market 9th Mar 2023

13th Mar 2023 Update:

VIX spiking in past 2 trading sessions (chart created using trading view)

Fear and Greed - source cnn.com

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11 March 2023 update: US market corrected 500 over points last night, as investors are preparing for a critical payroll report that is set to be released on Friday, which could have an effect on the trajectory of interest rates:

Greed and Fear ratings (source : CNN):

As compared to two days ago, the needle on the Fear and Greed Index has shifted from neutral to the fear region.

Tradingview chart

Vix Spike from around 19 level to about 22.5

Reaction of STI ETF in response to US negative sentiment last night

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charts created using trading view

Chart 1 : STI ETF (Heiken Ashi)

STI ETF down about 6.3% in 19 trading sessions - downward movements slowed down from 2nd to 7th Mar - till Fed Chair Powell cautioned that interest rates are likely to head higher than central bank policymakers had expected on Tuesday, which did not sit well with the market.

Chart 2 : STI ETF (Candlestick)

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Chart 3 : MMFI 

MMFI: "Percent of Stocks Above 50-Day Average" - technical indicator used to track the percentage of stocks that are trading above their 50-day moving average. The very patience investor may choose for it to come between about 11 to 32 - if ever gets there, that is.

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current Greed and Fear ratings (source : CNN):

Interpretation: Usually, the market starts to present opportunities when the needle of the meter is pointing within the 'Fear' and 'Extreme Fear' regions, caveat being in prolonged negative market conditionsns. In such cases, one's risk management and trade plan come into play to control and mitigate risk.

Venture Corportion: A Closer Look at Venture Corporation's FY22 Performance and Future Prospects

Venture Corporation - with FY22 ended on a positive note

Venture Corporation Limited (SGX:V03) recently reported its FY22 results, with net profit of $369.6 million, which was in line with expectations and slightly beat consensus forecasts of $368 million. 

The growth in healthcare and wellness, high sciences, and test and measurement divisions, along with a healthy balance sheet, contributed to Venture Corporation's overall performance. Despite supply chain constraints and inflationary pressures, these divisions were significant contributors to the company's performance.

chart created using trading view

Chart 1: Venture plotted against PE Ratio (Monthly)

Although the technology sector's outlook is not as bullish as it was early last year, Venture Corporation's fundamental recommendation is maintained. The company's valuation is twice market cap, with a dividend yield of 4.4% and a price-to-book of 1.8 times. Despite the forward PE ratio being below its five-year historical average of around 16 times, the company is expected to register modest growth in FY23.

In 4Q22, Venture Corporation's revenue growth was across all domains. According to some esitmates, the company's expansion in Penang is expected to be completed by the end of 2023, and it plans to tap into the new influx of companies setting up plants in Penang to gain more customers, especially those with factories near its plants. Venture Corporation aims to enhance its competitive edge in the market by developing more unique and specialized capabilities than its peers. By doing so, the company hopes to establish a long-term relationship with its customers and achieve greater control over specific product modules or sections that it manufactures.

Venture Corporation's declared a FY22 dividend of S$0.75, which aligned with the projected amount. Despite anticipating macroeconomic headwinds that may make FY23 a challenging year, the company's management remains optimistic about its long-term outlook.

In Conclusion

Despite the challenging supply chain and inflationary conditions, Venture Corporation Limited has maintained its excellent performance. The growth in the company's healthcare and wellness, high sciences, and test and measurement divisions, combined with its strong financial position, have played a crucial role in its overall success. Although the macroeconomic environment poses challenges, Venture Corporation's management is optimistic about the company's long-term future, and it is anticipated to experience moderate growth in FY23.

Note: Venture Corporation Limited, listed on the Singapore Stock Exchange, is a leading global provider of technology services, products, and solutions with established capabilities in design and development, supply chain management, and product engineering, and was IPO in 1992