Sound Investment

My Top 3 Safe Stocks For Long Term Investment - Challenger Technologies, ISEC Healthcare & Singapore O&G.

Challenger 3Q2018 & 9M2018

Compared with previous corresponding periods, revenue increased 6% to $82.5 million and 1% to $236.3 million, while net profit jumped 45% to $4.5 million and 35% to $13.8 million for 3Q2018 and 9M2018 respectively. The strong showing came from:
- improved trade show
- corporate sales performance,
- lower operating expenses from the management’s cost control efforts.

For the third quarter ended 30 September 2018, the Group has cash of approximately $61.9m. The Group recorded an operating cash inflow of about $4.0m in 3Q2018. This has resulted mainly from the following:
- operating profit derived for 3Q2018 of $5.9m.
- increase of trade, other receivables and other assets of $3.2m.
- increase in inventory of $1.8m.
- increase of trade, other payables.
- accrued liabilities of $4.5m.
- decrease of other liabilities of $0.3m.
- income tax paid of $1.1m

Higher revenue was primarily due to higher contribution from IT products and services which increased by 6.7% to $80.9m in 3Q2018, from $75.8m in 3Q2017. This was mainly attributable to revenue growth in both corporate sales and tradeshow divisions, partially offset by lower contribution from retail and online sales.

Revenue from the electronic signage services business segment decreased to $0.4m from $1.1m mainly due to partial completion of a major project in 3Q2017.

The net cash outflow for investing activities was mainly due to increased bond investment of $2.0m and acquisitions of equipment and renovations of $0.4m. These were partially offset by proceeds arising from disposal of a bond investment of $0.2m and interest receipts from fixed deposits and bonds of $0.3m In addition, a net cash outflow of $3.8m was used to pay as dividend to shareholders. Hence, cash and cash equivalents decreased by about $1.7m for the period ended 30 September 2018.

The Group achieved revenue of $82.5m for the three months ended 30 September ("3Q2018"), an increase of 6.0% or $4.7m compared to the revenue of $77.8m registered for the three months ended 30 September 2017 ("3Q2017").

Other than the above, no significant difference was noted for other working capital, assets and liabilities, except for the increased inventory level and trade payables as a result of the new Iphone launch and to cater for higher purchases for corporate sales.

Challenger has zero debt and cash flow of $61.9 millions or 18 cents per share.
Share price @ 48 cents trading below 10x PE and yield of 7.7%. (Dividend estimates @ 3.7 cents)

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ISEC HEALTHCARE 3Q2018 & 9M3018

Net profit of the Group in 3Q2018 was S$1.83 million, a decrease of S$0.37 million compared to S$2.19 million in 3Q2017, mainly due to:
- Administrative expenses increased by 16% to S$2.15 million in 3Q2018 malnourished due to increased staff related-costs across the Group and other operating expenses attributable to the increased business activities of the Group.

- Income tax expense: The effective tax rates of the Group in 3Q2017 and 3Q2018 were 20% and 23% respectively. The statutory corporate tax rates are 17% in Singapore and 24% in Malaysia.

9M2018 profit = $6.2m increased by 7% over 9M2017.

Company has zero debt. Cash flow increased from $21.77m to $23.658m or 4.6 cents per share.
Share price @ 28.5 cents, trading above 15x PE and yield of 4.5%. (My initial dividend was estimated @ 1.5 cents was lower to 1.28 cents in regard to 3Q result.)

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SINGAPORE O&G 3Q2018 & 9M2018

Company continues to post double-digit Growth in earnings for 2018.

- Group revenue increased by S$1.4 million or 17.6% over the same period last year.
- Net profit after tax increased by S$0.5 million or 23.4% over the same period last year.
- Earnings per share increased by 0.12 cents or 24.5% over the same period last year.

The Group continues to generate a healthy net operating cash flows of S$9.8 million for YTD Sep 2018. There were no borrowings or any debt securities and instruments as at 30 September 2018.

9M2018 profit = $9.12m increased by 40.6% over 9M2017.

Company has zero debt. Cash flow increased from $17.5m to $18.1m. Share price @ 34.5 cents, trading below 15x PE and yield of 5.2% (dividend estimates @ 1.8 cents)

SURVIVING MARKET UNCERTAINTY IN 2019

* First the significant effect on the global economy was the trade war lunched by United States against China.

* Secondly was the Federal Reserve’s monetary policy, which included several rate hikes over the past year. This year will the rate continue to hike?

* The ongoing aftermath of the Brexit vote.

So far the US dollar has remained strong over the previous year.
Economic indicators in the US performed well in the second and third quarters of last year.

US recents announcement:
- The US trade gap with the rest of the world jumped to a 10-year high of US$621bn last year, dealing a blow to President Donald Trump's deficit reduction plan.
- Jobs shock as growth slows. The US economy created the lowest number of jobs for a year-and-a-half in February, well below forecasts.
All these paints a mixed picture laced with uncertainty on the direction of the stock markets.

Our economy show sign of slowing down.

One question for sure the world will always continues to be fragile and uncertain place. However wise approach to investing and close analysis of the opportunities can still be richly reward this year.

So much concern about US & China trade war going on I had updated risk management check lists below:

RISK MANAGEMENT CHECK LISTS

1) PROFIT MARGIN: Keeping track of profit margin changes.

2) BUSINES COMPETITION: Either companies gaining market shares or losing market shares.

3) DELAY Project delay, material delay, goods delay etc.

4) COST – Product costs, administration costs, marketing costs, labour costs, etc.

5) PROBLEMS: political, social, environmental, etc

6) POLITICAL: Change of Government.

7) INTEREST RATE: Changes in Interest Rate.

MANAGEMENT: Company Mismanagement Or Accounting Problems.

9) DEBT: Look at debt level, some sectors like property developers, it's common to have debt, but know the industry norm for debt level.

10) IN VENTORIES: For manufacturing or distribution or retail, check inventories and receivables turnover rate, cash cycles etc.

11) OUTLOOK OF SECTOR: If possible, the state of health of their customers and suppliers. Track expiration/ renewal of key contracts

12) RESIGNATION & FUND RAISING: Check for sudden resignation of personnels, frequent fund raising.

13) MANAGEMENT STATEMENTS: Over bullish outlooks that dun pan out frequently, hiding problems, etc. management selling large amt of shares.

14) Understand as much as possible you can about the business you are buying. If some things doesn't make sense give it a miss. Better be safe than sorry

15) Businesses or products which may be affected by US China trade war.

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INVESTMENT PITFALLS

1). Letting our egos get in our way - our emotion.

2). Over-trading.

3). Momentum Investing - chasing after penny stocks when they suddenly burst back to life. Watch out for BB in the game (Penny stocks in play)

4). Noise trading - confused between the false signals sent out by a stock's trading pattern & the overall market trend. Investors have poor timing, follow trends, over-react to good & bad news.

5). Growth Investing - buy out-of-favor stocks with low price-to-earnings and price-to-book ratios.

6). Selling the winners & keeping the losers. We should build a portfolio of winners not losers.

7) Don’t be taken in by increase in profit. Profit comes from one-off increased. Examples; Sale of assets, revaluation of assets & completion of project.

Share price low does not mean it will rise to its past high. This is because its prospects are dim.

9) Don't stir-frying fundamental sound stocks, do that in the kitchen and not in the stock market. Trading in fundamental sound stocks rather than hold for long term investment.

Reviewing My post on 17th November 2018 on my TOP 3 stocks:
Challenger Technologies, ISEC Healthcare & Singapore O&G.

CHALLENGER TECHNOLOGIES:
Exist offer price of 56 cents by major share holders in late March 2019. I am happy to sell all my share @ 56 cents and above.

In June 2019 Challenger offer was blocked by minority share holders during EGM. This resulted in exist lapsed.

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ISEC HEALTHCARE:
I had sold all my shares at the offer price of 36 cents.

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SINGAPORE O&G:
This stock price has fall by more than 10% after 3Q result.

O&G 2019 3Q/9 MONTH’S REPORT:
Singapore O&G Ltd net profit growth of 0.9% to S$2.9 million for the third quarter ended 30 September 2019 (“Q3 2019”), on the back of REVENUE INCREASING 14.9% to S$10.4 million for the same period.

The year-on-year (“YoY”) growth for the quarter was attributable to higher patient load at its Obstetrics & Gynaecology (“O&G”) and Cancer-related segments, which saw revenue growing S$0.1 million and S$0.2 million respectively. Paediatrics segment also registered S$1.0 million increase in revenue on contributions from two new Paediatrics clinics which commenced operations in November 2018 and February 2019.

With the OPENING OF 4 NEW CLINICS in 2018 and 2019, TWO PAEDIATRICIAN, ONE DERMOTOLOGY & ONE O&G, and an increase in staff headcount, the Group registered higher operating expenses in Q3 2019. Consumables and medical supplies used in Q3 2019 increased 26.3% YoY to S$1.7 million, while employee remuneration expense rose 22.3% YoY to S$4.1 million.

For the nine months ended 30 September 2019 (“9M 2019”), revenue rose 12.2% to S$29.1 million compared to S$25.9 million during the same period in 2018.

The Group continues TO MAINTAIN A HEALTHY FINANCIAL POSITION with ZERO borrowings and total cash and cash equivalents as at 30 September 2019 increased to S$22.2 million compared to S$18.1 million a year ago.

“Notwithstanding the expected start-up cost of our TWO NEW PAEDIATRICIAN CLINICS ADDED in November last year and February this year, the Group IS STARTING TO REGISTER PROFIT FOR THIS SEGMENT following TWO YEARS OF GESTATION PERIOD.

Revenue for this segment continues to SEE HEALTHY GROWTH with higher patient load. Our O&G segment also delivered 4.4% more babies during the quarter compared to a year ago. With steady demand for our healthcare services, we will continue to look at expanding our
medical specialists for our business segments,” said Dr. Ivan Lau, Chief Executive Officer of SOG.

O&G continued to register healthy revenue growth. Profit was impartial by OPENING OF 4 NEW CLINICS in 2018 and 2019, 2 PAEDIATRICIAN, ONE DERMOTOLOGY & ONE O&G. The GESTATION PERIOD will soon be over follow by profit growth again.

Now is the good time to buy Into price weakness. Yield is about 5% and trading @ about 15x PE.

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With the money from Challenger & ISEC I had bought into:

Valuetronics
Bought @ 65 cents after previously sold all my holding above 90 cents. Dividend near 6%.

Straco
Bought @ 67 cents after sold nearly all my holdings around a dollar. Dividend about 5%.

Singapore O&G
Increased share holding. Dividend about 5%. O&G revenue had been growing yearly but profit dropped because of the OPENING OF 4 NEW CLINICS in 2018 and 2019. O&G continues TO MAINTAIN
A HEALTHY FINANCIAL POSITION with ZERO borrowings and total cash and cash equivalents as at 30 September 2019 increased to S$22.2 million compared to S$18.1 million a year ago.

Challenger Technologies
Gradually buy back @ about 53 cents. Dividend more than 5.5% and possible of share exit @ about 60 cents in the near future.

My Top 2 Stocks

My latest holding in stocks & shares are now mainly in DBS Group follows by OCBC Bank.

Vivid-19 crisis had hits almost all businesses, even medical stocks are affected by this pandemic crisis. I had cut lost on most of my holding and switched over to DBS.

DBS trading at historical PE of less than 10x, and yield of 6 to 7% is very attractive. What enforce my believe in DBS is because many companies had cut dividend paid out but DBS is confidence of retaining its quarterly dividend of 33 cents.

Our local banks are the backbone of our economy and will come out of this crisis stronger. How badly most businesses are affected by this pandemic are not yet clear. Stock like Sheng Siong the beneficial of this pandemic is trading at too high PE and lower yield.

DBS close at $22.28, PE = less than 10x, yield = 5.9% is still cheap.

BANKS
DBS Group is my top holding. Price had already recovered to pre-crisis level.
DBS top among the 3 local banks.
Dividend yield drop to 2.8% due to increase in share price & cut in dividend paid out.
Reduce my holding in DBS shares.
OCBC - already sold all OCBC shares.


UNION GAS & KIMLY
Both 2 stocks are cash rich & profitable, trading at Low multiple.
Bought into these 2 stocks in early August this year. Price of both shares had suddenly increase too fast, I had bought small percentage of these 2 stocks.
Union Gas @ 50.5 cent trading at 10x PE is cheap because this year profit expected to increase.
Kimly @ 30.5 cents trading at 14x PE no longer cheap - I had sold all


PROPNEX
IPO in July 2018 @ 65 cents

FY 2018
N Profit = $21.9m
EPS = 5.72 cents
Dividend - 3.5 cents

FY 2019
N Profit = $21.1m
EPS = 5.4 cents
Dividend - 3.5 cents

3Q / 9 months
N Profit = $7.2m / $23m
EPS = 1.83 cents / 5.84 cents
Int dividend = 1.5 cents

PropNex profit in 2018 & 2019 was stable in spite of Government property measures.
For the first 9 months of 2020 profit is in the uptrend in spite of pandemic crisis. Company having healthy cash flow of $94.7m - cash per share = 25 cents & zero debt.


APAC REALITY
IPO in September 2017 @ 66 cents

FY 2017
N Profit = $25.9m
EPS = 8.03 cents
Dividend = 2 cents

FY 2018
N Profit = $24.2m
EPS = 6.83 cents
Total Dividend = 4.5 cents

FY 2019
N Profit = $13.88m
EPS = 3.94 cents
Total Dividend = 2 cents

1H 2020
N Profit = $7.7m
EPS = 2.18 cents
Int Dividend = 0.75 cents

APAC profit in 2018 & 2019 was on the downtrend. The company was badly affected by Government property measures.
1H 2020 profit = $7.7m. Company secured debt of $52.8m and free cash of $34.3m.
From the performance of these 2 stocks, I prefer PropNex more than APAC.
PropNex close @ 73.5 cents, 9x PE.
APAC close @ 44 cents trading,10x PE.
Dividend yield for both stocks is between 4.5 to 5%
My portfolio for this 2 stocks: PropNex -10% and APAC 5%.