Thursday, July 2, 2015

[SGX Portfolio] SATS-isfied

Thanks SATS for making my joy, your purpose.

I bought SATS on 19 Jan 2015 along with a slew of other names since it was the first trading day that SGX lots dropped from 1,000 to 100!

I did not blog about my thesis behind it because it was just one of the few counters I had bought and it was just a nibble. At $2.92, I remember that it was not cheap (at least not the kind of "cheap" that I am used to) based on earning valuations, but I do recognize that this is a good and stable company so I didn't mind to venture out of my comfort zone for a little adventure. Dividend yield was a decent 4.5%.

I've been watching SATS steadily creep up since then.

I have been looking at it for a while now and thinking if I should add more on dips or realize the capital gains. While it was still splashing around under $3.2, SATS was growing within my expectations for it, so there was no need for me to be concerned about it's gains. Only recently price shot up from $3.2 to touch $3.7 and now capital gains in quite big and that got me thinking if this is enough for me.

PE is 21 and EV/EBITDA is in the upper 15s. P/B is 2.8, but I don't think that it is very meaningful to a service business like this. From a "value" point of view, SATS is not a cheap company. Add in growth and maybe it is, but I don't like to look at it from that POV. I'm a horrible investor like that.

At $3.69, capital gains from this investment would be a decent 26.4% excluding transaction costs. Including buy and sell costs, net returns would be 25.8%. This is because there was no dividends collected during the holding period of the last 6 months.

At $3.69 and based on my forecasted DPU of 0.14c, dividend yield of SATS would be 3.8%. Of course with a run up in stock price, it is only natural for the dividend yield to compress. 26% stock price increase is met with a 26% compression of the dividend yield from 4.5% to 3.8%. The math checks out.

I like SATS as a company and business, but I think that I will be able to return to SATS again as an investor at a better valuation some point later in the future. I am happy to take some profits off the table now. I sold it earlier today at $3.69.

Buying is the easy part IMO, selling is the hard part. I just hope that I'm right about this. Even if I'm wrong, at least I'm still pocketing a gain from this investment!

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