Keppel Corp....... The Pheonix rising. Thank you, Temasek.

Making an investment usually take a lot of efforts and time to research a stock before I take the plunge. I have a long checklist that I use as benchmark to grade the company (What to buy) and to determine the right entry price (when to buy). This is to ensure the reward is always outweigh the risk I take. If you followed my blog closely, you should be very familiar with my stock pick's criteria.

Keppel Corp need no introduction, one of the biggest conglomerate listed in Singapore. Since last year, its facing multiple headwinds from bribery scandals to falling oil price. Since then, Keppel had make multiple restructuring to move away from oil rig and ship building into properties and data center business. However, the share price continue to depressed as investors doesn't like the short term volatility.

What I like about Keppel Corp:

1. Market leader - holding top position many of its key business in SG including O&G, properties and DC business.
2. Right market trend - Data Centre is the core infrastructure that enable cloud computing, AI, machine learning and industry 4.0. 
3. Good sponsor - Temasek is the biggest shareholder with 21% ownership.
4. Transformation mode - many initiatives taken by Keppel transforming its business to achieve high ROE. However, it takes time and patience to see the returns which many investors doesn't have. 
5. Crisis mode - with so much negative news surrounding this stock, the price had reached rock bottom. This is what make me even more excited to invest.        

I see this a great opportunity to buy a great company at a fire sales pricing. This is the "cigar butts investing" analogy popularized by Ben Graham. I am a big fan of his investment technique. Keppel hitting the right tune and the right price for me to take actions.

I started buying Keppel shares right before the Q3 2019 earning announcement. As usual, they announced poor results with 30% dropped in profit. Market panic with another 15cents dropped after announcements. While others running away from Keppel, I saw this as "once-in-a-lifetime" opportunity to accumulate more.

On Oct-21, Temasek announced to buy 30% of Keppel at $7.35. The last traded price for Keppel was $5.84. The deal will boost Temasek’s stake in Keppel from 20.45% to 51% and also imply a premium of approximately 26% over lasted traded price $5.84.

Last Friday closing price was $6.91 and I'm still holding on to my stock with a paper gain of 20%. I plan to hold this for longer term to enjoy the benefit of the on-going restructuring happened at Keppel. I can really see the "Phoenix is rising with second tail wind" from Temasek.

-William Cheng

Stock Investing Performance Matrix (SIP Matrix):

Stock name: Keppel Corp
Country listing: Singapore
Research periods: 6 weeks
Stock accumulation/holding periods : 3 days
Return on investment (ROI) : 20% in 5 days 
2019 Stock ROI ranking: 6th (biggest gains)




     

Jardine Group ......... Dark force raising

To make an investment, you need to make 2 very important decisions. What to invest and when to invest? If you invest in the right stock but wrong timing or right timing but a wrong counter, the outcome can be disaster. But the former is much better as you can wait out the storm. I always think the best stock to invest are those with right market trend, positive cash flow and market leader with strong moat. The best time to invest is when the company hit the speed bumps or in crisis mode.

What to invest?
1. Company with right market trend
2. Positive cash flow (not only profit/loss statement)
3. Market leader with strong moat

When to invest?
company in crisis mode

Recently, the companies in Jardine Group caught my attention. Most of the Jardine components are in hitting year low as the Hong Kong protest gaining momentum. Their business exposure to Hong Kong is quite significant especially HongKong Land with 80% asset located in Hong Kong. The Jardine Group are quite complex and most of its subsidiaries as part of the 30 companies that formed STI index components. Here is the chart that show the complex companies web in Jardine Group.

Listed companies of Jardine Group in Singapore:
1. Jardine Matheson
2. Jardine Strategic
3. Jardine C&C
4. HongKong Land
5. Dairy Farm
6. Mandarin Oriental

The focus will be the top 4 companies above. 52 weeks charts below showing all 4 companies hitting rock bottoms.

Remember, it is hard to get a good companies reasonable price due to supply and demand equations. You can only find valuation at reasonable level when the crisis hit. The opportunity is rare but it can present potential in huge capital gains when the dark cloud finally lifted. I viewed the situation in Hong Kong just a temporally setback, it will be resolved soon with time.  I have said enough and it up to you to make the best out of the opportunity out there. Good luck!

- WILLIAM CHENG

Disclaimer: All investment come with great risk and should proceed with cautious. This is not an advice to buy or sell any stock. It is important to do your own research and analysis before making any investments.