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SingHaiyi: The next big thing?

Monday, July 8, 2013

I received a message from a 25 year old reader, asking for my opinion on SingHaiyi. I thought it would be interesting to share his message here (with his permission) to see if we could gather the opinions of readers on the matter. Here is his message:


I have read your website on fundamental analysis some time ago. I must say I am still quite a newbie in stock markets and have less than a year of experience

I did learn a few things from your website which I am thankful for, like how to determine the health of a company judging from the balance sheet. I managed to pull off a few positive short-term investments (Interra Res) all thanks to your clear and precise explanation of the ratios.

I did make a few bad investments too, such as in Noble Group. But by the time I realised, the only choice was to 'average down' or eventually cut losses.

The purpose of sending you this message is to seek your opinion on SingHaiyi. I have thoroughly looked through this company's financials. The unaudited statistics seem promising, except for the Debt/Equity ratio, which is > 1. I understand that this company is another penny stock, and undergone major restructuring in recent times. Then again, I have used much effort in researching the history of the key directors in this company (Gordon Tang, Chan, Neil Bush) and they do have impressive records of running their businesses. The only thing I am concerned about, is whether they will be able to pull SingHaiyi off as the 'next big thing'.

All comments are appreciated.

Related post:
The Balance Sheet.

Read:
SingHaiyi Group in final negotiations on US real estate projects.
This will be for the purchase of an existing office building and a residential development site.

18 comments:

Solace said...

I would be cautious in approaching this stock. It seems that the stock swing up on the news that Neil Bush has joined the board. I consider it as speculative trading.

I would like to look at the fundamentals, sales and revenue has yet to be increased, ROE, ROA has to be reasonable. Most importantly, I would to see a healthy cash flow. In my humble opinion, these factors are still missing in SingHaiYi.

I can always be wrong, this stock might just turn out to the next big thing, but I am picky about valuation and it helps to limits the odds of a real blow-up damaging my portfolio.

AK71 said...

Hi Solace,

Thanks for sharing your view on SingHaiyi.

You seem rather thorough and cautious in stock picking. So, I would like to pick your brain and ask if you have any views on Marco Polo Marine, SPH and NeraTel, the 3 stocks I recently increased exposure to? :)

Solace said...

Hi AK,

I am a fellow stockholder of Marco Polo Marine. Brought at $0.41 at first, brought some more when value is at $0.38 because this stock looks undervalued to me. Looking at the past 5 years, revenue has been growing, debt level is manageable, ROE and ROA has been consistent. Relatively Good profit margin

I still find value at current P/E, trading below P/B of 1. I like the business model, I expect it to be still profitable in the future

SPH, a very good defensive stock. Spinning the property as REITS might unlock some more value, like the fact it is still retains a huge stake in the REIT. Would enter if stock price is between $3.90 to $4.00.

NeraTel, congrats that you are vested in it. I notice the bull run of this stock. Dividends is extremely attractive for this one. I would not chase this stock now, I would research on its intrinsic value and follow clues on technical chart to wait for a pull back before making decision.

Btw, I am vested in Dukang ($0.42) and King Wan ($0.29), I like what I see in the fundamentals of both stock. Give me some feed back if u free ok?  thanks thanks


AK71 said...

Hi Solace,

Thank you very much for obliging. :)

Marco Polo Marine's book value, I believe is 44c/share now. So, P/B is less than 1 now. Like you, I believe it is undervalued and not by using this metric alone.

SPH is a fortress and there is much value to be unlocked in its real estate holdings. However, with its REIT IPO now on hold, it is hard to say when it will happen now. Having said this, if its share price should go under $4.00 to test stronger supports, I would probably buy more.

NeraTel's run up in price has been too fast. I believe that a pull back could take place. First support is at 69c. A stronger support is at 65c. I might add more then.

I am not familiar with DuKang and KingWan, so I cannot comment much on their fundamentals. Techically, however, I can share my thoughts.

With DuKang, the longer term uptrend is intact and if we look at the weekly chart, the current weakness could see a reversion to the 20wMA which is currently at 44c. I read before that it is a high growth company. My concern would be whether it is able to maintain the growth rate.

With KingWan, there could also be a retest of the 20wMA for support which approximates 29.5c. As for its business, I know it has a JV with Hock Lian Seng (which I am vested in) to develop a condominium project in Singapore. Could they be somewhat late to the party?

You are in the money for both counters which have clear uptrends in their share prices. Congratulations. :)

Solace said...

Hi AK,

Thank you very much for valued Feedback! :)

I very much enjoyed yr blogs and insight and will participate in constructive discussion whenever time allows.

I am in my late twenties and there are still many things i can learn from seasoned investors like you :)

AK71 said...

Hi Solace,

Late 20s? Wow! You definitely have time on your side, a distinct advantage. :)

What do you think of the article about having $100k by age 30?

I hope that readers will more readily share their research and ideas here. I suspect that there is much I can learn from all of you. :)

Solace said...

Hi Ak,

From the article, it seems possible to achieve 100k by age 30 if one consistently saves 50% of take home salary every month.

But I also realize that population in this age grp (25-30) may have certain financial commitments e.g paying back study loans, planning for wedding, setting aside money for new housing renovation and such. Situation is very different for each individual.

I would say mastery in personal finance is very important to achieve 100k by age 30. I have seen friends splurging on branded items once they started working, some like to spend on alcohol and excessively party. Others might even try to buy a car within 1 – 2 yrs of working. Some people also spend money on lots of excessive insurance (ILP, endowment) when they do not need it.

Perhaps the topic on managing personal finance for young people might be an interesting post for you to touch on in future post? Haha :)


AK71 said...

Hi Solace,

Like you said, each person's circumstances are different. So, I believe that as long as every person really tries his best to do the right things, he has succeeded. :)

Newspaper articles like this one are good in that they show what is possible but we should not be discouraged if we have less favourable circumstances and might not be able to achieve that $100k by age 30. A few years slower than others? Sure, there is nothing wrong with that.

Some people might believe that it is important to make lots of money first while some people might not believe that. We each probably have different priorities.

If I can think of a new angle to blog about the topic, I will but I think I might have run out of ideas since I have blogged about it quite a bit by now. :)

JD said...

May I ask why did you think Noble group was a bad investment?

As Peter Lynch mentioned, classifying stocks into categories can help you assess your returns and expectations as well as monitoring your progress. These categories include blue chips, asset plays, fast growers etc.

After a quick scan through the annual report 2012, here are some of my thoughts

The company is in the business of property development, leasing and investment in Singapore as well as overseas (HK,USA).

The company is relatively new in property development, only developing a few projects with gross margins ~20%. Most of its profits come from fair value investments which are leasehold. At this stage without a thorough understanding of the value of these investment properties, it would be hard to value your investment/returns. Based on its earnings, I would not classify it as a growth company. It does have a lot of debt repayable within 5 to 10 years(majority bank borrowings, some bonds) and interest rates may rise.

Despite making recognizing revenue from projects and being profitable in 2013, its overall cash flow is only positive because of bank borrowings.

It would be unable to pay out dividends and based on past history, it might provide more rights issue or bonds to strengthen its balance sheet.

Maybe it would be an asset play if the investment properties are located in prime locations in HK/USA or if they make prudent investments. Might be worth it to let the company produce consistent earnings before making a decision.

Maybe someone more knowledgeable can chip or pick up mistakes that i made

AK71 said...

Hi JD,

I don't have a position in Noble and never had one. I suppose I will have to leave it to the writer of the message to answer your question if that is his inclination.

As for SingHaiyi, you have raised very pertinent points for consideration. My main concern is also the weakness in its balance sheet and we cannot rule out the possibility of future fund raising exercises.

I am not against fund raising per se. As long as it is able to generate higher EPS, I am quite happy. However, if the fund raising effort is used to strengthen balance sheet, then, it is a downer.

I like investing in growth stories too but I like to be paid while waiting. NeraTel and Marco Polo Marine are two examples. So, SingHaiyi's lack of dividend payouts is a negative.

Cory said...

I like Marco Polo except i keep having the impression it has high debt level. The last report has exceptions earnings which mask it's perforamnce. How comfortable are you in rising rate environment ?

AK71 said...

Hi Cory,

Marco Polo Marine's management is savvy. They took on short term debts as they are cheaper.

Liquidity remains ample and short term interest rates remain low and will remain low at least until 2015.

Marco Polo Marine is set to benefit from higher margins and higher turnover which will translate to higher earnings. Its debts are manageable.

JD said...

Hi AK,

Thanks for the insight! My knowledge on commodities is severely lacking so I've decided to stay away from Noble.

Been following your blog for half a year and I'm enjoying the regular updates and insights!

What are your thoughts on keeping a concentrated portfolio of a select few stocks (1-6)? Keep the best performers and cut the worse performing counters.

AK71 said...

Hi JD,

My own knowledge is quite limited and only because I was a shareholder of Golden Agriculture for quite a while. Now, I am a shareholder of Wilmar's which is less of an upstream player in CPO.

I blog about anything that interests me. So, I always tell people not to think of my blog as an investment or finance blog per se. It is very much a personal blog and I hope you are not annoyed by the eclectic nature. :)

As for having a portfolio of only 1 to 6 stocks, you will be exposing yourself to concentration risks, obviously. However, I don't have a problem with that as long as we understand and find the risks manageable. The biggest advantage is, of course, the relative ease of monitoring a smaller number of stocks.

Personally, I have:

1. a portfolio of S-REITs,

2. a portfolio of non-REITs (income),

3. a portfolio of non-REITs (growth)
and

4. a frozen portfolio of mistakes.

Of these 4 portfolios, the one that probably needs the most attention is portfolio number 3. So, although it might look like I have many counters to look at, I don't. ;p

JD said...

I enjoy the random thoughts and videos/pictures too. I'm quite similar in a way too. Yea i was thinking of restructuring my portfolio too. I've just finished "Beating the Street" by Peter Lynch and its an enjoyable read. I'm still trying to work on my trading discipline. I tend to be overactive in the market sometimes =).

AK71 said...

Hi JD,

Glad you enjoy the rest of the stuff in my blog too. I know I do. ;p

I don't trade very much. Lazy. LOL.

Ben said...

AK, what do you make of the fact that Marco Polo Marine's current assets are less than its current liabilities? Does that raise alarm bells for you?

AK71 said...

Hi Ben,

I believe cheaper short term debt forms more than half of Marco Polo Marine's current liabilities. Its high interest coverage ratio means it should have no problem servicing the debt or refinance when the time comes. :)

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