Stock Sniper's Portfolio For January 2018

 

Read about Stock Sniper's Portfolio HERE

 

 

The opening month of 2018 saw quite a bit of activities in this portfolio, with two new stocks added, increased exposure in one current holding and partial profit taking in another. 
Higher cash amount had been deployed and the cash position fell to below 40% of total portfolio.

 

Transactions done in Jan 18:

1. CapitaLand Limited

 

Initiated new position.

 

CapitaLand Limited is one of the Asia's largest real estate companies based in Singapore. Quick analysis of the company can be found HERE.

 

With the expected pick up in the economies around Asia, property sector may be one of the beneficiaries. Singapore private property market which has been subject to Government's cooling measures has also shown signs of improving sentiments. While China residential property market has also been under Government's control measures, share prices of property stocks have rallied strongly recently on sales optimism and expectation on relaxation of cooling measures.

 

 

CapitaLand, having strong presence in both markets (83% of total assets), has been trading near multi-year low valuation in terms of PE and Price over book value. Moreover, CapitaLand has been growing its recurring income from investment properties (85% of total assets are contributing to recurring income as at Sept 17) and have recently increased its dividend payout which appears to be sustainable.

With improving outlook and sentiment, CapitaLand could trade closer its historical mean of 1 to 1.1x its book value which is currently at $4.29 as at Sep 17, i.e. fair value of $4.29 to $4.70. 

At the purchased price, dividend yield of 2.7% is pretty decent.

Risks:
1. Property business, especially residential property development can be quite cyclical, subject to the health of the economy as well as Government's policies.
2. Rising interest rates might increase the financial burdens of property companies with high gearings, adversely affect capitalization rates used for property valuations and dampen buyers' appetite for properties.

 

 

2. Hongkong Land Limited

Initiated new position.

Founded in 1889, Hongkong Land is a listed leading property investment, management and development group.  The Group owns and manages almost 800,000 sq. m. of prime office and luxury retail property in key Asian cities, principally in Hong Kong and Singapore.

Its Hong Kong Central portfolio represents some 450,000 sq. m. of prime property. It has a further 165,000 sq. m. of prime office space in Singapore mainly held through joint ventures, and a 50% interest in a leading office complex in Central Jakarta. The Group also has a number of high quality residential and mixed-use projects under development in cities across Greater China and Southeast Asia, including a luxury retail centre at Wangfujing in Beijing. In Singapore, its subsidiary, MCL Land, is a well-established residential developer. Majority of its assets are investment properties producing recurring income.

The investment thesis for Hongkong Land is almost the same as CapitaLand, at current price, HK Land is trading at huge discount to its book value of more than 50%, dividend yield of about 2.7%. 

Based on its half year announcement, Hongkong Land is expecting a "solid" full year performance.
 

3. Fufeng Group 

Increased position.

The share price had experienced quite a bit of volatility at the beginning of Jan, which may be due to the raise in corn prices in China since last quarter. There were reports that the China state grains stockpiler had started to sell corns from its stockpiles to meet demands and also China imports from USA and Ukraine, and this could moderate the price increase.

As corn is the major cost component in Fufeng's business, it is worthwhile to keep a close tab on its market outlook.

3. Hopefluent 

 

Taken partial profits.

In late Jan, Hopefluent announced a Framework agreement with another large SSE listed property co, Poly Real Estate Group (RMB201B mrk cap) with both companies transferring their the primary & secondary real estate agency business to a new JV. Under the Framework, Hopefluent shall hold 55 - 65% of the JV and Hopefluent shall issue 5% new shares to this partner at HK$4.20 to strengthen the cooperation. This agreement is still subject to the completion of due diligence expected by May 18.

My initial thoughts
1. There is potentially more primary business from new property launches from this big property developer
2. Removed direct competition in the primary and secondary real estate agencies with Poly Real Estate Group upon completion of the deal
3. Hopefluent will be flooded with even more cash from this new share issuance!

The market got excited on this news in the next trading day and the share price jumped more than 12% to as high as HK$4.60 before closing at HK$4.16.

While the ex-cash valuation of Hopefluent at current price is still not demanding, the exposure to property sector in this portfolio has increased substantially after adding CapitaLand and Hongkong Land and I deemed an adjustment was necessary. Therefore, I took the opportunity of share price spike to realize some profits on this investment made in Aug-Sep 17, netting an average gain of more 30% (or than more than 60% gain on an annualized basis), not counting the dividend received.

 

(Refer to previous postings on this company HERE)

 

News Review for the rest of Portfolio companies during the month:

Goldpac:

Readers might recall that I had written about Goldpac being hit by exchange losses due to  currency translation of its huge USD balance as RMB strengthened against USD during the half year period end Jun 2017.

In the previous financial year, it was reported that approximately 49% of Goldpac's huge cash hoards were in USD & HKD.

If its currency exposure remained the same without hedging done, with continue weakening of USD (note that HKD is also pegged to the USD) since Jun 17, it should not be a surprise that Goldpac would suffer greater exchange losses in the 2nd half period as USD continued to weaken against CNY

In Jan 18, Goldpac was honored with "Best Value TMT Company” for Golden HK Stock Award, 2017.
 

(Refer to previous postings on this company HERE)

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TA Investment Portfolio For January 2018

Read about TA Investment Portfolio HERE

Open Positions

The new year started with a bang with many stocks breaking out during the first few weeks of Jan 18. This portfolio has opened more than 10 new positions as entry points were identified and also closed out partially or completely on 9 positions during the month .

Closed Positions

Some of the positions, e.g. TravelSky, PingAn Insurance, HKEx, Agriculture Bank of China (ABC), also moved rapidly into new highs with 20% - 30% gains within a relatively short span of time. While these stocks are still in very strong uptrends, such near exuberant moves may not be sustainable in the short term and in order to protect the profits, limit orders and trailing stops of 5% from last high were set for some of those stocks. Inevitably, some of these stops were triggered and profits recorded. I will still continue to look out for re-entry opportunities in these stocks in the future.

Towards the end of Jan 18, the momentum of some stocks slowed down considerably and some of the stops were triggered. Volatility is expected ahead, probable risk management is the key to ride it through. 

As of 2nd Feb 18 (weekly close), this portfolio recorded a realized profits of $2.6K and unrealized profits of $6K since the initiation in 1st Dec 17. During the same period, it gained a total of 8.7% compared to 4.5% gain on the MSCI World Index.          


Featured Stocks:

SGX (Resistance Breakout)

Entered on the first breakout at 6.60 (adjusted for dividend). The up move was very fast and had missed the second entry opportunity at 6.71. The stock is now consolidating and let see if there is another opportunity to enter at around the window gap.


Tencent (Uptrend)

As shared in the Facebook Group, finally found a suitable entry point on 2nd Jan 18.

This famous stock has been on a super up move for long period of time.

 

Have raised the stop to just below the pivot support for risk management purpose.
 

China Shenhua Energy (Resistance Breakout)

From Wikipedia, China Shenhua Energy Company Limited is the largest coal mining state-owned enterprise in Mainland China, and the largest coal mining enterprise in the world. It operates coal mines as well as an integrated railway network and a seaport that are primarily used to transport its coal. It also operates power plants in the PRC which are engaged in the generation and sales of coal-based power to provincial and regional electric companies.

This stock has moved up more than 200% since hitting a low of HK$8.15 in Jan 2016, is there still room to run? We shall see.

 

TravelSky Technology (Trailing Stop Triggered)

As shared in the December 17 TA Portfolio Review, this stock has been on an uptrend move for several years and indeed it has broken out of its all time high in Jan 18.

Had shared on 11 Jan 18 during TA Portfolio interim review with the Facebook Group that due to a mini exuberance in this stock, I may set a trailing stop to protect the huge gain. The trailing stop did not take long to trigger, half of the position was closed with a profit of 20% on the next trading day.

At the last weekly close, it's TA score has also weakened considerably. To watch if the HK$24 or 50MA area can hold out. 

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