Category Archives: IPC

Sell in May and go away strategy: Why not a contrarian view?

The old saying sell in May and go away strategy seemed to have taken its toll this year when STI was sharply sold down from 2960.78 on 21st April to 2730.8 on 6th May 2016, a drop of 230 points, representing about 5.8% decrease on the ST index. After that, there appeared to be an increase in volatility as the bull and the bear tussled to tip over each other. By the end of today, after approximately 3 weeks of trading or so, the ST index ended at 2791.06, a mere increase of 60 points from 6th May.

According to The Straits Times (ST, 30 May 2016), it happened four out of five times in the last five years. If that view still holds true, then would it not be interesting for us to take a contrarian view and buy into the market when we bade farewell to the last ship that left us. And, of course, if they do return going forward, we can slowly sell back to the market.

Slide28

Frankly, taking advantage of this apparently universal ‘market theory’, I was actually a net buyer in the month of May. After all, isn’t it important that to gain from stocks, we should either be ahead of the market or, if we are courageous enough, even to act against the market movement. Otherwise, we are just a market follower moving up and down with the market. When market tanks, we lose; and when the market roars, we win. That said, I bought back some of the stocks that I had sold in April such as Jardine C&C and IPC to pocket the difference and yet maintain my original exposure in these stocks. In other words, I ‘squared off’ my position.

Hopefully, I am well-positioned when there is a big buy to propel the market. There could, however, be a stumbling block this year as the spectre of higher interest rate can derail this strategy. Big investors and fund managers may not return any time soon as they go in search of better yield elsewhere especially when local economic outlook still looks uncertain. Should such an event happens, it would affect the market liquidity. Accordingly, we should expect the spread between lending and saving to widen, thereby benefiting the bank stocks. With the cash return from OSIM, following the privatization plan by its chairman and CEO, Mr Ron Sim, I had also increased my stake in the bank stocks. However, one has to be careful about over-exposures in bank stocks in an increasing interest rate environment as non-performance loans (NPL) will also increase as well. If the interest rate continues to perk up, it will come to a time when the deteriorating asset quality will overwhelm the benefits of higher interest margin.

Happy investing!

Disclaimer:

This article is not a recommendation or an advice to buy/sell the mentioned stocks. It is a sharing of his opinions with the readers.

Brennen has been investing in the stock market for 26 years. He trains occasionally and is a managing partner for BP Wealth Learning Centre. He is also the author of the book – “Building Wealth Together Through Stocks” which is available in both soft and hardcopy.

IPC – Moving at last!

On March 19, I had written about IPC and had made a comparison against other property counters. At that time, the share price had just broken its $0.40 cents barrier and ended at $0.405 the previous day. Before 19 March, it had been trading between $0.30 and $0.37 after netting off $1.60 per share as a result of its capital reduction. Today, its share price is trading at $0.55, an increase of close to 40% after 15 trading days or so. Frankly, I had made a prediction that share price should hit $2.20 and $2.40 (before the capital reduction) or about $0.40-$0.60 per share after the return of $1.60 per share to its shareholders. Unfortunately, my prediction had been too early and I missed my target because the market seemed not ready and, also, that it was a bad time for stocks in general around January 2016. Well, I decided to practice what I preach and I still hold my shares to date. I rather missed my target but gained financially than to listen to the market and sell my shares. At the end of the day, it is always important to make our own analysis and get into a first-mover advantage position and wait for the others to catch up.

I wish you luck.

Disclaimer : The above does not constitute an advice for readers to buy (or sell) the said stock. The contents are the personal opinion of the author who has been in the market for more than 25 years. It is just means of sharing his observation on the stock. The contents are purely for private consumption only as he has no interest in readers’ stock investments. In other words, invest at your own risks!

(1) Investors are advised to do their homework to ensure that the value of the remaining assets are at least not impaired, or better still appreciating.

(2) The market may continue not to recognize the value of underlying assets, and therefore the share price continues to languish even though it had appreciated $0.03 cents or advanced 8% on Friday, 18 March 2016.

Brennen has been investing in the stock market for 26 years. He trains occasionally and is a managing partner for BP Wealth Learning Centre. He is also the author of the book – “Building Wealth Together Through Stocks” which is available in both soft and hardcopy.

IPC – Did investors missed out this value stock?

It appears that investors start to realize that IPC stock has been undervalued. It jumped 3 cents yesterday from $0.375 to $0.405 per share. For the last 2 months. It has been trading between $0.30 and $0.37, after netting off $1.60 per share following the capital reduction announcement in mid-December 2015.

Slide10

In the circular sent by IPC, it was mentioned based on 2014 annual report numbers that the NTA after capital reduction exercise would have been $1.21. This would mean that IPC was trading between 25% and 30% of NTA. With better financial results in 2015, the ratio should have reduced further. Unfortunately, investors seemed to ignore this. Of course, evaluation is a very subjective thing and even professional evaluators can get very wrong with their evaluation, but the market’s trading price at more than 50% discount would make it grossly undervalue.  Even at this state of the economy and the poor sentiment, property stocks such as Wing Tai and Capitaland were trading at 44% and 75% against their NTA, but still comparatively higher than the same matrix for IPC. However, the properties that it owns outside Singapore may make it difficult for us to compare on apple-to-apple basis.

Based on this argument, I have decided to hold my IPC shares even after XD for the capital reduction distribution to shareholders. With the return of $1.60 per share, it would mean that I have not paid anything for the IPC that I own while waiting for more investors to discover the value of the shares currently priced at about $0.405. Unless the market is extremely pessimistic, personally, I think there is still some way to go up as the trading price has been too low for too long.

Disclaimer : The above does not constitute an advice for readers to buy (or sell) the said stock. The contents are the personal opinion of the author who has been in the market for more than 25 years. It is just means of sharing his observation on the stock. The contents are purely for private consumption only as he has no interest in readers’ stock investments. In other words, invest at your own risks!

(1) Investors are advised to do their homework to ensure that the value of the remaining assets are at least not impaired, or better still appreciating.

(2) The market may continue not to recognize the value of underlying assets, and therefore the share price continues to languish even though it had appreciated $0.03 cents or advanced 8% on Friday, 18 March 2016.

Brennen has been investing in the stock market for 26 years. He trains occasionally and is a managing partner for BP Wealth Learning Centre. He is also the author of the book – “Building Wealth Together Through Stocks” which is available in both soft and hardcopy.

 

IPC – Capital reduction

Just 2 days ago, IPC announced a capital reduction exercise. This exercise is to return $1.60 for every share owned following the recent consolidation of 10 IPC shares into one share.  With a total shares issued of 85,291,885 shares and no shares in the treasury, it would mean that IPC will be paying out a total sum of $136.48m. With a ‘windfall’ of $1.60 per share for the shareholders against the yesterday’s close price of $1.99, it is likely that this proposed exercise be accepted in the EGM.

However, up until recently, IPC’s development has not been plain sailing. It started off as a PC maker in the 90s, and made its debut on the SGX in 1993. (If I have not mistaken, the IPO share price was $0.76 per share). Following the dot-com bubble bust, the share price of IPC plummeted to around 2.5 cents in early March 2003. (IPC might have raised some rights at that time to shore up its capital base) It was even thought that IPC might not survive the onslaught following the dot-com bubble burst. Even the share consolidation of 4 shares into one in February 2005 did not help either. It continue to sink from about 13.5 cents after consolidation to about 7.1 cents in late April that year. Honestly, after all these years, many investors would have lost a lot of money and would have given up hope on this company.

Meanwhile, IPC transformed itself from a technology company into a real estate developer. With some help from Lady Luck, IPC was able to transform itself buying into the Japanese real estate at historical low prices after years of recession. However, real estate development normally takes years to bear fruit, and IPC would have slide into a forgotten stock if not for Oei Hong Leong effect that had caused the share price to blip each time he made a general offer. Even up until September this year before the share consolidation of 10 shares into one, he still made a general offer to pay 17 cents per share.

Fundamentally, the company was getting better although it appeared that not many people discovered it. Perhaps it was due to the bruises that it had caused during the initial years, causing many people to give up this stock. The share price  has been holding above 10 cents (or $1 based on the recent consolidation of 10:1) after the global financial crisis in 2008/2009. Frankly the relatively range bound share price and Oei Hong Leong effect, which caused occasional blips in the share price had enabled me to sell above 19cents and then buying back at 13 cents helping to bring down my average price. (my first board lot was purchased during IPO at a whopping price of 76 cents a piece!).

Based on annual report of 2014, Mr Oei Hong Leong has a total shareholding of 254,332,000 or 25.4332 million shares after consolidation. This made him the biggest shareholder with a shareholding of 29.82% as of March 2015. With the capital reduction exercise, he would be able to get almost $407m from this exercise. Certainly, being a substantial holder, it is likely that he would agree to this exercise, barring unforeseen circumstance. Also, thanks to him, the exercise would also help me cash out several times over my average purchase price without losing control of my shareholding. Certainly, I would be more than just happy to say yes to this proposal for it would mean that I have invested in the company with no money down. Not only would I not lost control of my shareholding, I would have recovered several times of what I have paid for the stock during these years, not including dividends that have been received over the past 10 years. (That’s why I am in stocks!)

Slide21

Finally, the justice is done.

Brennen has been investing in the stock market for 26 years. He trains occasionally and is a managing partner for BP Wealth Learning Centre. He is also the author of the book – “Building Wealth Together Through Stocks” which is available in both soft and hardcopy.

IPC: Oei Hong Leong’s offer is unlikely to be successful

Once again, Oei Hong Leong made a mandatory conditional offer to buy up IPC after acquiring more than 30% of the company shares. Following the offer, the price of IPC was bid up to 3 year high to $0.205 before dropping back to a current price of $0.175. Personally, I had taken advantage of the drastic price advance to sell some of my holdings and had bought back a partial tranche. (The purpose of buying a partial tranche is to serve as an insurance in case the share price suddenly turn upwards again.) Perhaps, I will probably trigger buying up another tranche when the offer lapsed after 15 May 2015 or when the stock goes XD.

With the PE at 5.05 and a net asset value of 24.4 cents, the offer is certainly too low to garner sufficient interest. The offeror probably made this offer to satisfy acquisition requirement. After all, once after the failed bid, the offerer cannot make a bid for the next 12 months. With the property price expecting to be gain better valuation, and the prospects of better earnings ahead, I personally think that the offer lacks conviction.

Slide21 Slide20

(Brennen Pak has been a stock investor for more than 25 years. He is the Principal Trainer of BP Wealth Learning Centre LLP. He is the author of the book “Building Wealth Together Through Stocks.”)