PNE Industry

PNE Industry (BDA)

http://www.pne.com.sg/industries/index.html

I bought this share @1.055 for 3.1lots and 1.065 for 2.8lots. The website above is their official website, which doesn't have an investor relation page! I rarely buy this type of company but I found this one is a value stock. After I bought this share the price shoot up very fast. Heng I bought it.. Actually I was monitoring this share since it was 0.8, and due to my poor trading skill, I thought in short term it might drop around 10% so I wait for it to drop. But the fact is.. it slowly went up.. and a good result made it gap up to 1 dollar plus! Actually on the day I bought it I was quite busy in Italy Arezzo and the internet is not very fast (yes their 3G super slow and unstable which is another reason why I stop trading), and the bid ask spread was quite huge. But my girlfriend told me: you always like that always hesitate, I bet you will regret again as usual if you don't buy it! At the end of the day she is right! Anyway it is not the first time I hesitate to buy due to my "poor trading skill", or poor anticipation. So thanks to my gf now PNE is finally in my portfolio after so long.. and it closed at 1.185 on friday lol.. 

PNE Industry is listed on SGX main board since 2000, I have attached a chart from yahoo finance below: 

As we can see from the chart, the company's share was active for around 3 years before it went down to its bottom, and the share was trading around 0.3 for more than 10 years with low volume (price after consolidated). Even 2007 bull market and 2008 bear market didn't have very strong impact on the share price too. The company started to distribute its earning every year since 2007. As mentioned in the previous post, I prefer to invest in those companies which are willing to share its earning with their supporters! Their company's dividend history is as follows, I got this data from https://www.dividends.sg/view/P07 as usual so please forgive my laziness... (I manually adjusted the yield by dividing the dividend by the share price on 1 Jan of each year, the effect of consolidation is included)

Year	Yield	Amount	Ex Date	Pay Date	Particulars
2017	13.95%	SGD 0.07	2017-05-29	2017-06-09	SGD 0.07 ONE-TIER TAX
		SGD 0.02	2017-05-29	2017-06-09	SGD 0.02 ONE-TIER TAX
		SGD 0.03	2017-02-02	2017-02-20	SGD 0.03 ONE-TIER TAX
2016	12.28%	SGD 0.03	2016-06-01	2016-06-16	SGD 0.03 ONE-TIER TAX
		SGD 0.02	2016-06-01	2016-06-16	SGD 0.02 ONE-TIER TAX
		SGD 0.02	2016-02-03	2016-02-19	SGD 0.02 ONE-TIER TAX
2015	11.42%	-	2015-08-03	-	SHARE CONSOL OFFER OF 1 FOR 4
		SGD 0.005	2015-05-27	2015-06-12	SGD 0.005 ONE-TIER TAX
		SGD 0.005	2015-02-04	2015-02-16	SGD 0.005 ONE-TIER TAX
2014	32.95%	SGD 0.02	2014-07-18	2014-07-31	SGD 0.02 ONE-TIER TAX
		SGD 0.005	2014-05-14	2014-05-30	SGD 0.005 ONE-TIER TAX
		SGD 0.004	2014-02-06	2014-02-21	SGD 0.004 ONE-TIER TAX
2013	4.21%	SGD 0.004	2013-02-06	2013-02-25	SGD 0.004 ONE-TIER TAX
2012	5.88%	SGD 0.003	2012-02-01	2012-02-28	SGD 0.003 ONE-TIER TAX
2011	3.16%	SGD 0.003	2011-02-09	2011-02-28	SGD 0.003 ONE-TIER TAX
2010	3.33%	SGD 0.0025	2010-02-03	2010-02-26	SGD 0.0025 ONE-TIER TAX
2009	4%	SGD 0.002	2009-02-09	2009-02-27	SGD 0.002 ONE-TIER TAX
2008	2.35%	SGD 0.002	2008-02-05	2008-02-22	SGD 0.002 ONE-TIER TAX
2007	2.63%	SGD 0.0025	2007-01-26	2007-02-12	SGD 0.0025 LESS TAX
2002	0.00%	-	2002-08-20	-	1WT FOR 4SH OFFER OF 1 FOR 4
2001	1.23%	-	2001-08-23	-	NONRENOUNCEABLE OFFER OF 6 FOR 10 @ SGD 0.43
		SGD 0.05	2001-03-02	2001-03-27	5% LESS TAX

As we can see, the yield is on uptrend. Especially recent yield is increasing while the share price is on uptrend! So now we must consider whether the dividend is sustainable or not? Is it a value stock or value trap? 

I stated the top 20 shareholders of the company below:

Ah huh, as stated in the annual report 2016, the free float is only 16.58%. Little free float means there are little shares in the market and sometimes it might be hard for you to get the share (especially if you want to buy high quantity), and normally you need to spend more as the bid ask spread is huge. The big gap happens to me too. I spent around 5% extra money then the bid price to get my shares of PNE industry. However as most of the top 20 shareholders should came from the same family (I couldn't find any info online but since most of their names are so similar so I assumed that they are from one family) and they are also the top managers of the company, I found this little free float also means the managers are confident with the company future performance, and they have good control with the company too (sometimes even though the manager got some wonderful ideas but if most shareholders disapproved the manager can do nothing about it too). 

I also attached the remuneration of directors below: 

This is another important part to me too. As some managers are working for their self-interest, I am always quite concern with their salary and bonus. PNE Industry directors are getting paid reasonably compared to the company performance. I believed these people are getting their award from dividend of their shares. Another good thing about the management team is that most of the directors are working in the company for very long time. Stable and experienced management team is good for company growth (if the company is not doing well new managers might be more preferred). 

The company got two business segments - contract manufacturing and trading. The types of products sold under contract manufacturing segment include electronic controllers and other electrical and electronic products. The types of product sold under trading segment include emergency lighting equipment and related products. The group's income came from a wide range of country, however around 48.5% of income came from two major customers. The company closed one of their subsidiary called PNE Print Technology Co., Ltd, which manufacture and sale of printing materials and related products in China. The other subsidiary in China which manufacture electronic and electrical products are still in operation. Below is a 2 years chart of CNY to SGD. Since one of their major customer might pay them in CNY, I expect that the FX should have big impact to the company earning, since CNY to SGD drops more than 10% in 2 years, I also attached the geographical information of the company earning:

I have attached the half year result which announced on 12/5/17 below:

2017 half year result shows that the total comprehensive income for the period drops 18.7% compare with last year. However, I found this result is quite good. Why? We can see that the company got 305,000 profit from discontinued operation last year, which is 0 for 2017, but total profit for the period still up 14% if don't consider the other comprehensive loss. The company made a 1,321,000 other loss in the reporting period, and 1,160,000 came from exchange difference arising on transaction of foreign operations. The company explained in their half year result that such loss is mainly contributed to the weaker Ringgit, which resulted in a loss upon translation of the groups's operations in Malaysia. The half year earning per share is 7.4 cents and net asset value is recorded at 99.2 cents. The company got no borrowing (i love it!) and no intangible assets, so I found the quality of the balance sheet is quite good. At the current price the company is trading at PB 1.194 and PE 16 (half year earning only). Earning per share in 2016 is 10.5 cents (full year result) so half year earning accounts for 58.57% of full year result, so if such ratio is still valid this year, 2017 full year result should show that the company PE is around 9.379, which shows that the company is relatively cheap to me. However this year total dividend payout is 12 cents, so the company might pay out more than 90% of their earnings, which is not very ideal to me. 

I don't really do industry analysis as I found it is really difficult to do so because it requires alot of knowledge. As I got many different counters in my portfolio doing industry analysis is very hard for me. I will add some TA below:

It is a weekly chart from ChartNexus. Currently the counter's RSI is at 88.1%, which is at overbought region. However I noticed that previously when the counter is trading above 70% RSI, in the next few weeks there will be a correction, but usually less than 10% drop! Another thing is the company XD date is on 1 June according to their announcement on SGX (yes it's annoying that the company doesn't have an investor relation page. It is quite rare for me to buy into this kind of company but since it is listed for so long and got good history I chose to believe the company and its management team) After XD date the share should drop around 9 cents to reflect XD, which will bring RSI down too. From the chart the counter is on mid-long term up trend and it broke resistance @ 0.88 and 0.955 few weeks ago, which is a good sign indicates that the trend should continue. 

Conclusion, so the current price did not full reflect the company total value to me (good), and the company is willing to share their earnings with shareholders (good). However, the dividend payout ratio is too high to me (bad). The balance sheet quality is good to me as the company got 0 bank borrowing (good), and current ratio is 5.86 with almost 0 non-current liability (good). The cashflow is healthy (good) and the company profit is increasing if we ignore the forex changes (good). Bid-ask spread is big (bad) which made it harder to trade (good). I like boring company with boring business but can generate good cashflow and dividend! The TA is good (but take note that my TA skill is not so good lol) The company's earning came from many different countries (good) however around 50% of total revenue is contributed by 2 major customer (not so good). Current PE should below 10 (good) but PB is slightly above 1 (not so good). 

Anyway as stated above, I am vested into this company. I am planning to receive my dividend and reinvest it to grow my stakes. However trading is not recommended for this company even TA looks good to me due to big bid ask spread. so... 

Wish yall huat!

Design Studio

Design Studio (D11)

http://www.designstudio.com.sg/html/index.php

This is my first time to write this kind of review.. It might be abit long but I hope you guys can enjoy it. The purpose of writing this review is to share my opinion with potential investors of this company. I hope it can attracts some discussion (: I will write some introduction of the company which can be found in annual reports for those potential investors to have a brief idea of the company, I will write my opinion after these information.

Background:

A company specialised in the design of living space. It was incorporated in 1992 as a pure manufacturer of joinery products, and until today they developed three business segments: residential property project, hospitality and commercial project, and distribution / others. It was listed on main board of SGX in 2003 at 0.23 per share. I have attached a chart from yahoo finance below. I couldn't find the annual report before 2012, but according to the chart design studio started to issue its dividend since 2007.

Depa limited increased its stake from 24.7% to 90.5% in 2010. I have attached the link of relevant news below: 

http://www.constructionweekonline.com/article-9329-depa-ups-stake-in-singapore-design-firm/

Lets take a look at the top 20 shareholders which can be found in 2016 annual report:

As we can see above, Depa limited is still Design Studio's largest shareholder, and market float is only around 3%. Which indicated that we do not expect much trading activity during normal days. Currently the average volume (14) is around 0.12M and is still on downtrend. 

Design Studio recently appointed Mr Edgar Ramani as CEO on 22 February 2017, and two of the board members are from Depa Limited - Mr Hamish Gordon Tyrwhitt was appointed as Non-executive director on 4 August 2016 (he is the CEO and executive director of Depa), and Mr Roderick David Maciver was appointed as Non-executive director on 9 November 2015 (he is Depa limited vice chairman). Ms Tan Siok Chin is the independent director of the company since 2006 and Mr Ong Tiew Siam is the independent director since 2007. 

Financial Review:

We can find five years financial result summary in 2016 annual report. I also found their earlier results in ipo prospectus:

I will quote a paragraph from Depa Limited annual report 2016 below to summarise Design Studio's performance and activity in FY2016:

The Group’s Asian business, Design Studio had an outstanding year generating revenue of AED 482.3mn and profit of AED 57.3mn, representing a revenue increase of AED 47.2mn or 11% on 2015 (AED 435.1mn) and increase in profit by AED 12.8mn or 29% on 2015 (AED 44.5mn). The strong result was primarily due to an increased contribution from the Hospitality and Commercial sector, which offset a decline in the Residential sector. These strong results ensured Design Studio maintained its gross margin at 23%, slightly up on 2015 (21%). In Singapore, Design Studio secured the landmark JW Marriott Singapore South Beach, the Yotel Hotel at Changi International Airport, and the Botanique at Bartley and Visionaire residential project. In Malaysia, key project wins included a luxury resort in Langkawi, the Ritz Carlton Residences in Kuala Lumpur, and an integrated commercial centre in Nusajaya. Design Studio also secured projects in China, (including Shanghai Bao Shan and Hanking Peak Boulevard residential projects), the United Arab Emirates, and Thailand during the year, as it continues to seek opportunities outside its key markets of Singapore and Malaysia. Following the year end, Design Studio announced the appointment of a new Chief Executive Officer, Edgar Ramani. Edgar has a wealth of experience and will be focused on growing the business across Asia. (1AED = 0.378SGD on 23/5/17)

Opinion:

I only know about this company few months ago, when I was reading the posts on investingnote (it is a very great social media where you can find many interesting and useful information). The stable dividend payout attracted my attention so I tried to study more about the company. The company has a dividend policy to recommend and distribute not less than 25% of net profits to shareholders, but usually it will pay alot more than 25%. I have attached a list of dividend payment record of the company below (and I found that yahoo finance dividend record for this counter which shows on the chart didn't give accurate information, not sure is due to technique issue or other problems). I got the record from https://www.dividends.sg/view/D11. 

Year	Yield	Amount	Ex Date	Pay Date	Particulars
2017	9.05%	SGD 0.04	2017-04-27	2017-05-17	SGD 0.04 ONE-TIER TAX
		SGD 0.0125	2017-04-27	2017-05-17	SGD 0.0125 ONE-TIER TAX
2016	11.21%	SGD 0.0125	2016-08-18	2016-09-08	SGD 0.0125 ONE-TIER TAX
		SGD 0.04	2016-05-05	2016-05-25	SGD 0.04 ONE-TIER TAX
		SGD 0.0125	2016-05-05	2016-05-25	SGD 0.0125 ONE-TIER TAX
2015	12.50%	SGD 0.0125	2015-08-18	2015-09-08	SGD 0.0125 ONE-TIER TAX
		SGD 0.04	2015-04-27	2015-05-22	SGD 0.04 ONE-TIER TAX
		SGD 0.02	2015-04-27	2015-05-22	SGD 0.02 ONE-TIER TAX
2014	11.21%	SGD 0.005	2014-08-20	2014-09-08	SGD 0.005 ONE-TIER TAX
		SGD 0.05	2014-04-25	2014-05-22	SGD 0.05 ONE-TIER TAX
		SGD 0.01	2014-04-25	2014-05-22	SGD 0.01 ONE-TIER TAX
2013	6.47%	SGD 0.005	2013-08-20	2013-09-06	SGD 0.005 ONE-TIER TAX
		SGD 0.025	2013-04-25	2013-05-22	SGD 0.025 ONE-TIER TAX
		SGD 0.0075	2013-04-25	2013-05-22	SGD 0.0075 ONE-TIER TAX
2012	3.45%	SGD 0.0075	2012-09-04	2012-09-21	SGD 0.0075 ONE-TIER TAX
		SGD 0.0125	2012-04-26	2012-05-18	SGD 0.0125 ONE-TIER TAX
2011	4.31%	SGD 0.0125	2011-08-26	2011-09-09	SGD 0.0125 ONE-TIER TAX
		SGD 0.0125	2011-04-27	2011-05-20	SGD 0.0125 ONE-TIER TAX
2010	4.31%	SGD 0.0125	2010-08-26	2010-09-09	SGD 0.0125 ONE-TIER TAX
		SGD 0.0125	2010-04-26	2010-05-10	SGD 0.0125 ONE-TIER TAX
2009	3.88%	SGD 0.0125	2009-08-26	2009-09-08	SGD 0.0125 ONE-TIER TAX
		SGD 0.01	2009-04-24	2009-05-08	SGD 0.01 ONE-TIER TAX
2008	1.72%	SGD 0.01	2008-04-24	2008-05-09	SGD 0.01 ONE-TIER TAX
2007	0.86%	SGD 0.005	2007-08-24	2007-09-06	SGD 0.005 LESS TAX
2004	0.00%	-	2004-01-06	-	STOCK SPLIT OFFER OF 3 FOR 1

As we can see the company is distributing its net profit since 2007, which is a good sign to me. I like to allocate my capital to those companies that are willing to share their profit with their supporters. Personally I don't really believed in so called 'growth stock'. If a company keeps its earning for few years to increase its investment at the beginning or during hard time I understand, but if a company with healthy balance sheet and good record of income statement didn't recommend any payout for very long time is unacceptable for me.. Well who knows that when will the company face difficulties in the future and burned the previous earnings? So I preferred that the company distribute part of the earnings to the supporters. The company's dividend yield is more than 10% since 2013! (I used the XD-date to calculate and if we took 2013 Jan low price we got a >10% dividend yield too). The company is paying out stable dividend might because of Depa Limited - their parent company. As the largest shareholder of the company, Depa Limited got some joint ventures with design studio, and I believed that Depa limited should have a similar interest with other minority shareholders too. As a listed company stable dividend income from their investments will make Depa Limited annual report looks better, especially the cash flow part. As we have 2 directors are from Depa Limited sitting on board, I believed the dividend payout is sustainable.

The company's revenue increased 460% and profit increased 450% over 16 years (net profit in was 4,510,000 however it was 1,617,000 in 1999 and 1,617,000 in 2001). However, I found that the financial ratio has improved alot if we compare 2016 annual report to ipo prospectus. Back in 2000, the company has a CA/CL ratio of 1.15, cash with fixed deposit only accounts 6.92% of current assets, debt/equity ratio is 1.04 (I sum up all the payable to bank, shareholders and directors and divided it with equity). In 2016, the company has a CA/CL ratio of 2.048, cash accounts 36.48% of the current assets, and the company has no debts! Total liability in 2016 is only 51% of current assets and 140% of cash! The company 5 year average ROE is 15.244 and 5 year average gross profit margin is 20.43%! 

Conclusion:

Steady dividend, experienced management team (2 directors are from their parent company), healthy balance sheet, good profit margin with high ROE. But have to take note of high PB at current price (1.5). 

My Plan:

I bought 12,000 shares of Design Studio in February 2017 at 0.575, which accounts around 7% of my total portfolio. My plan with Design Studio is hold it for very long term and do FA check-up every quarter. The dividend yield is around 11.30% for my position and I planned to increase my holding up to 15% of my portfolio if the price drops more than 30%. If previous dividend payment is sustainable (and I think it is sustainable), I just have to read their reports 4 times a year and earn 11.30% which I considered it as very good return. DYODD!

New Start - 2017 (Summary of this year transaction)

This is not the first time that I want to start a blog to record down my opinion and actions as well as create a track record of my portfolio, but I am always lazy to do so.. Anyway at least I bought a small notebook to record these information down so I can review my results anytime I want. As the first post of this blog, I am going to summarize all my transactions from January 2017.

Before we start I am going to introduce myself first.. I am a student of UQ studying Accounting. I have 5 years experience in the stock market, however not much profit was made. I used to be a TA person who is looking for quick profit and focus more on the chart pattern. I understand that there are alot of information behind the chart but I always failed to make profit from those information. Currently I am a FA person who only use TA to look for entry and exit point, but I have to admit that I have a very bad trading skill so I made tons of mistakes in last five years, which generated tons of transaction cost and opportunity cost. (yeah transaction cost is really a problem for high frequency trader in singapore, even though there are many promotion for cash upfront account now but yeah it is still expensive.) I realised it is very hard for me to make sustainable profit from trading so I slowly turn myself from a trader into a value investor. I also made some estimations on investingnote which can be found in the link below.

https://www.investingnote.com/users/allenlow#/?tab=estimations&display=profile&user=allenlow

In January I made quite a number of transactions which is not very ideal from a value investor's point of view.. but well I have learned my mistakes and will slowly improve from there.. Lets take a look of my January transactions, I will combine all the transactions of each company together so it is easier to read:

1. Sapphire
a. Buy@0.31 - 30lots

2. ISDN
a. Buy@0.225 - 38lots
b. Buy@0.26 - 38lots
c. Sell@0.245 - 38lots
d. Sell 0.205 - 38lots

3. Sinostar Pec
a. Buy@0.163 - 41.1lots

4. Ascendas Reit
a. Buy@2.43 - 3.5lots

5. Asian Pay TV Trust
a. Buy@0.415 - 20lots

6. ComfortDelGro
a. Buy@2.53 - 3.8lots

In January basically I was trying to accumulate more shares as I found 2017 should be a bull year. However, part of my transactions are made based on TA (or tips) such as Sapphire, ISDN, and Sinostar Pec. I bought ISDN as it is going to list on HKEX so I was hoping for more buyers to cook the price up. Unfortunately, the price did not match with HK price. When HK shares are selling at around 0.29SGD, singapore ISDN reaches its peak at around 0.27 then free fall started.. First I bought it at 0.225 and made four digits paper profit within a short period and I was hoping to TP at around 0.29-0.3.. so I increased my stake at 0.26. ouch, I tried to sell part of my shares during free fall at 0.245 and sold all my shares after free fall at 0.205. ouch from four digits paper profit to four digits ACTUAL LOSS. These transactions show that how bad my trading skill is. So this also shows that if I want to achieve my financial freedom from stock market, perhaps value investment is a better choice..

In February I made more transactions after I read more annual reports of the companies..

1. Tai Sin
a. Buy@0.395 - 18lots

2. TTJ
a. Buy@0.38 - 18.5lots

3. Design Studio
a. Buy@0.575 - 12lots

4. YZJ Shipping
a. Sell@0.91 - 11lots (Buy@0.825 - 11lots  in December 2016)

5. Bank of China (HK)
a. Sell@3.79 - 6lots (Buy@3.3+ - 6lots in October 2015)

6. Asian Pay TV Trust
a. Sell@0.445 - 20lots (Buy@0.415 - 20lots in January 2017)

I took profit from Asian Pay TV Trust. This is a counter with super high dividend yield (around 17-20% at my buying price). However, after I learned more about value investment, I found that such dividend yield is not really sustainable, as the dividend payout per share is higher than earning per share... I bought Bank of China HK way back in 2015 October at around 3.3+HKD and it fell to 2.88HKD after few months. I decided to hold on to it as the dividend yield is still very attractive (more than 6%). I decided to sell it away as I found that the dividend payout is slowly decreasing over years, and I believed the bad debts ratio are very very high based on what I saw and what I heard from my friends in China. I also read an article shows that some banks were trying to ask people to pay their mortgage as soon as possible because the mortgage rate is even lower than 5 years fixed deposit. (few years ago I believed there is even some penalty if you want to pay your mortgage earlier) That doesn't sounds good huh, so I decided to sell away the shares with four digits capital gain (HKD) plus one year dividend (around 5% after tax?) I also bought YZJ shipping last year as I found it was undervalued. I sold it at 0.91 and planned to buy back at cheaper price but next day it went up to 0.99... the day after that it drops to 0.91 again and I was thinking that I should be able to buy back more at around 0.85.. then it went up again and it trades at around 1.2+ today.... I was able to earn more than 4k but due to my bad TRADING SKILL.. well I can't blame anyone and must learn from this huge mistake. Maybe I should hold my shares for longer period if the FA is good and dividend is sustainable. TTJ, Tai Sin, and Design Studio is three good companies with good FA (with good dividend yield too) and I planned to hold for long term.

In March I was thinking that STI should have a correction soon, so I tried to reduce my STI index counters. However STI only drops around 100pts and continue its bullishness.

1. Sinostar PEC
a. Sell@0.191 - 20lots, @0.19 - 20lots, @0.188 - 11.1lots (Buy@0.163 - 41.1lots in January 2017)

2. Keong Hong
a. Buy@0.435 - 16lots

3. Ascendas REIT
a. Sell@2.51 - 3.5lots (Buy@2.43 - 3.5lots in January 2017)

4. Tai Sin
a. Sell@0.46 - 18lots (Buy@0.395 - 18lots in February 2017)

5. Sapphire
a. Sell@0.33 - 30lots (Buy@0.31 - 30lots in January 2017)

After a big drop, I managed to sell all my Sinostar PEC with good profit.. I sold my Ascendas REIT with profit (capital gain and dividend) too due to the following reasons:

1. interest rate hike, future profit (dividend as well) might be affected
2. planned to allocate the funds to other growing companies
3. STI might have correction, so might be able to buy back at cheaper price.

I also sold my Sapphire with some capital gain, as I have changed my investment strategy and decided to sell my shares with too little or no dividends. I will discuss of my current investment strategy in another post.

I did not make any transaction in April because too busy + vacation to Japan.. I will discuss the transactions in May in other post too.

So.. after going through of my previous transactions again, I found that number one reason that my portfolio's return is much lower than STI's return is trading. I anticipated the future short term price movement as well as STI movement, and more than 90% of my anticipations failed LOL. so I did not efficiently allocate my funds due to my anticipation. On the other hand, I found that my transactions that based on FA turns out more profitable so I should put more effort into this area.