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