Tuesday, May 5, 2015

Looking For Some Ugly Ducklings


As per my usual modus operandi, I am constantly on the search for shitty looking stocks. I love to buy when people love to sell. I love to sell it people want to buy it. I'm a psychopath that way.

Apsial and Fragrance look pretty darn ugly as a property plays. Unlike it's peers like Wing Tai and Ho Bee which have recently shot up about 15%, they have been hovering at recent lows.

All 3 oil palm planters that I look at, Bumitama, Golden Agri and First Resources are looking decently ugly enough to consider. Indofoods has too low of a dividend yield to entice me, while Wilmar seems a bit too pricey for me.

Food Empire is looking more and more tantalizing, especially with the Ruble recovering so much from it's previous panic attack. From SGD/RUB of 25-30 before the Ukraine incident, it shot up to 50, but is now down to 40. Are things really improving in Eastern Europe? It would be an excellent play if it is.

HPH Trust has shed about 10% recent it's recent highs. This dip looks very tempting given it's high dividend yield and it's "blue chip" name, but I'd approach this with much caution. Jardine C&C is another "blue chip" that looks to be struggling with some price weakness now. Isn't everyone saying that car (replacement) demand is going to surge over the next few years?

Second Change is falling off a cliff ever since their REIT spin-off plans failed. Personally, I don't really like their other businesses of apparel and jewellery, but I am extremely fond of their strata-titled commercial property. It isn't easy to get exposure into a niche like that.

Keppel, SembCorp Industries and Marine are the preferred O&G plays, but many other names in the industry are looking the same. It's interesting to me that many of them started to decline this bounce earlier than the decline in oil itself. I am tempted to try and catch this at a bottom, but if my gut feeling is right, we are going to see oil falter and that could throw out the bottom nicely and signal that it is THE time to go in finally, guns ablazin'.

Sing Inv & Fin is now yielding a pretty tasty 4.5%, which is 1% higher than OCBC and almost 2% higher than DBS. 35% discount to book value? Boy, does Mr. Market know how to tempt me!

Tai Sin Electric and Zagro are 2 names that a bit more under the radar. Both are fundamentally strong companies that have been paying out consistent dividends. Tai Sin is a bit more yield friendly, but share price has also doubled in the past 2 years. Watch out below.

CapitaCom Trust looks a lot a less ridiculous to buy than previously. However, I am aware that there is a lot of shuffling around in the commercial space with new buildings in the near future, like DUO and Guoco Tower (looks amazing!) that is going to steal away tenants. But considering it's brand name and it is trading at around NAV... I must admit that it looks extremely tempting to me.

Sabana REIT is looking uglier and uglier and uglier to me. I can't tell you how extremely tempted I am to jump in right now and go for that 8.4% yield. It is trading almost at a 20% discount to NAV. I think many investors are just quite disappointed with its recent performance. Can you imagine that it was once trading at $1.385? Now it is trading 40% below that price.

Suntec REIT is a bit of a mystery to me. It is trading at 15% discount to NAV, yet it's yield is only a paltry 5.1%. Sure, I understand that they have an Australian property, but on the books it isn't worth such a big chunk. Although it has recently come off and looks like a buying opportunity, the bigger picture shows that there is plenty of room to fall. However, just how much more of a discount to NAV can it go? I find Suntec REIT very puzzling. Their occupancy is very high, so why aren't they able to collect more? Any Suntec REIT experts out there?

To give a sweeping statement to say that there isn't value in the market is to paint with too broad strokes. I've given quite a few examples of value, but the question at hand is: Value trap or value buy?

If any of you are looking at any of these counters, please do comment and share your views with me!

4 comments:

  1. Hi GMGH

    I guess the thing with "cheap" is how relative you benchmark it to. And whether they are a cause for being so low at that point in time.

    Second chance is one example I have previously blogged on. Even as their share price languishing at the 52 week low, reverse engineering would show that the company needs to grow above 10% annually to justify its current low price hanging.

    I guess what I was trying to say is buying low may seem a good strategy but difficult to execute because there are only so much gems amongst the many poorly hidden fruits lying on the floor. The role of the investor is to analyse and pick them up fruitfully.

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    1. Hi B,

      That is true, since if there are other things cheaper, it would be more attractive if cheapness is the main criteria. If I understand your analogy correctly, the cheaper looking fruits on the ground might throw me off scent from finding the gems, if I only look at "cheap". I'm perpetually worrying about picking up bad fruit :/

      To adapt to that, I am trying to open my mind to the notion that things need not be so cheap to be a safe or good investments. Some of those good companies will never reach those basement bargain prices I am looking for. I've been slowly easing myself into bigger names, but with bigger valuations like SATS and GLP.

      Someone who owned Second Chance before! I remember that post you did in January. It gave me second thoughts about plowing more into Second Chance actually. What would be the price that would pique your interest again to be a shareholder?

      Thanks for the comment and heads up B!

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    2. Hi GMGH

      You're very welcome.

      I guess with the price languishing weaker and weaker, one thing we can probably ascertain is that the warrants will probably expiry out of the money, so existing investors do not need to worry about the potential heavy dilution which we are worrying some 6 months ago.

      I guess they are doing fine with all their business with exception to the apparel business which seems like they are in declining phase due to competitive reasons. But other than that, I guess they are almost similar to where they belong to when investors are willing to pay a price when it was at the high 45 cents and above. I probably will take a relook if the price is going to 32 cents and below and with such a price weakness, we may be well seeing it pretty soon I guess.

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    3. Ah yes, those warrants. I don't think that warrants are a financial instrument that I ever plan to get my hands dirty with, it's way too binary for me.

      Mmm, I'm hoping for more price weakness too, we shall see! Thanks B!

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