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Keppel Corp..... Update 2.0

 It is not easy to have an opportunity to acquire a great company at below intrinsic value. It's almost non existence during normal times, will be over rated due to market efficiency. Demands for great investment ideas exceeding what the market can supply. Only when the crisis come, the opportunity to buy great company at cheap valuation will appear. This COVID-19 had created that windows of opportunity now, so what are you waiting for? 



Today, I would like to provide an update on Keppel Corp which listed in Singapore Stock Exchange. Back in Oct 2019 last year, I have given my view on this stock why it is a good company to own, you can refer to the link below. Similar to my Facebook holding, I intended to hold this stock for longer horizon. However, I did changed my plan and sold it in Jan 2020 this year due to unfavorable world events unfolding. 

 Keppel. Bought at $5.84 lowest, sold at $6.80. (Recap from my Jan 2020 posting)



Previous posting links on Keppel:




Latest Results
Keppel reported a net profit of S$160 million for the first three months of 2020, 21% below the S$203 million for 1Q 2019, mainly due to an absence of gain from the divestment from a year ago. The revenue of S$1,857 million for 1Q 2020, which was 21% higher than that of 1Q 2019, due mainly to higher revenues from offshore & marine projects, property trading projects in Singapore, the power and gas business, and with the consolidation of M1. The latest result wasn't that great and the business transformation is still on-going. 



Temasek Support
On Oct-21, Temasek announced to buy 30% of Keppel at $7.35. The deal will boost Temasek’s stake in Keppel from 20.45% to 51% which also imply a premium of approximately 21.6% over lasted traded price $6.04 on last Friday May-8. The offer is still  valid pending acquisition approval from other countries. Temasek have to complete this deal within a year from announcement and it's only left 5 months from now to do so. I believe Temasek will make the offer announcement as soon as next month based on the strong stock price movements recently. The share price will continue go higher and higher in anticipation of good news release. 



COVID-19 crisis update
As the COVID-19 virus spread to more countries in March, Keppel share price fallen from $6.86 in Jan-13 to lowest $4.83 on March-24. Who would refuse for such a good deal from Mr. Market and taking advantage of it? I took this crisis as an opportunity to acquire a great company at great price and Keppel had become my target. I make a total of 6 buy transactions on Keppel Corp as the stock start to rebound from march low. With the lowest buying price at $4.83 and highest most recent bought at $5.91. It had become one of my biggest SG stock holding in my portfolio now with 7% in total. 



My trading Plan
Dig in and relax. I believe the "Armageddon" case for this company already over. Now with the COVID-19 crisis at the peak and oil price at the lowest, what could be worst than this scenario? With the annual dividends and imminent Temasek's offer in the horizon, I just have to keep it in the "safe box" and enjoy the sunrise. As no one can predict the top and the bottom of any share movement, I could only guess that the share might be trading between $6.40 to $6.80 post offering. This is just my own opinions and I'm not encouraging you to buy at this price today.   
    
  
My thought
This crisis is a "once-a-decade" opportunity to acquire great companies at cheap valuation and we shouldn't let this go to waste! We shouldn't wait until the crisis resolved or the vaccine is ready before start investing. I know it is not easy to invest during crisis when everyone is panic selling. You may have doubt whether you doing the right thing when others going for the opposite. There is nothing wrong to be contrarian in investing. I had been contrarian in trading for last 5 years and I can tell you it had produced some the best returns in my entire investing career. 



-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.



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FACEBOOK - COVID-19 Playbook 2020

What was the first Apps that you watched on your phone when you woke up in the morning? What was the last thing you did on your phone before you went to bed at night? Is it reading messages on WhatsApps, watching video on Facebook or checking out the latest photo of your favorite celebrities on Instagram? Or maybe doing all these at the same time everyday? That is the magic of social networking which Facebook pioneered and it's still the King of the Jungle today! 



I have wrote several articles about Facebook why it should be in everyone's investment playbook. I will not repeat that again here today. If you interested to know, you can refer to those articles using the link below:



Today, I would like to provide an update on the latest developments happening at FB and how much it actually worth (valuation) in my opinion if all the initiatives become fruitful.       

1. Libra

Libra is a Facebook's block chain digital currency which managed and entrusted by Libra Association partnerships with multiple organizations and companies. Although the actual launched date is unknown at this moment due to some of the high profile members like Visa had left the group and objections from world's authorities, Facebook is remain committed to this projects. I expect it to launch by end of this year. Taking Ant financial as reference, the valuations of this project should worth at least $100 billions and more.  



2. Marketplace

FB make a big push into online shopping space in direct competition with Amazon, Taobao, Carousell and Ebay. Recent pandemic which forcing many to stay at home and shop online could helps Marketplace to gains popularity. It should help create new stream of advertising revenue for FB and as a launching pad for its most anticipated digital payments. With 2 Billions users under its ecosystem, the adoption rate will be swift. Maybe a little too crowded for the Marketplace!  


3. Jio Platform

Facebook's $5.7 Billions investment in India's biggest telecom platform Jio marked a major push to monetize its WhatsApp's platform which has more than 400 millions users in India. Combined with Jio's network, FB will certainly move into digital economy which include digital payments. Unlike China's digital payment platform where it dominated by duopoly AliPay and WePay, the rest of the world still very fragmented with no clear leadership. Facebook will soon launch its digital payment through WhatsApp's leveraging Jia platform, the adoption rate will be explosive. 



The Valuation.....

Putting a price tags to a business is not so simple as it depend of future perceptions on its business growth. There is no fixed formula but this is how I value the business in my own opinion. According to Yahoo Finance, the current net profit (TTM) is about $22 billions. Giving a conservative PE of 25 for growth stock, the current valuations of FB+WhatAps+Instagram is about $550 billions without factoring discounted cash flow and profit growth rate. What is the price tag for all the other new initiatives? So, if you add Ant Financial+Ebay+Zoom+Jio into its valuation book, what would the numbers be? I would put Facebook the same league as Microsoft and Apple. The share price target would be ranging from $300-$350 per share with 2.8 billions outstanding shares. Not convinced? Well, It will be up to you to imagine.   



The Playbook.....2020

Fast forward to this year 2020, I have another opportunity to trade Facebook stock. My initial objective is to invest for long term. However the COVID-19 had force me to liquidate my position in FB, turning an investment into a short trade. Placing my chips at average cost of $190 per share in November 2019. I have much bigger conviction in this company this time compare to previous trade, so I double down on the amount. Dig deep into the sand dunes, I'm prepare for long hold for 1-2 years with a target price of at least $280 in mind.



Unfortunately, as the world events unfold, I start to doubt my game plan. The COVID-19 lockdown in Wuhan was a final blow to my confidents in the market. So, I decided to dump all my holding for FB at $215 per share in early Feb 2020. Far from my target of $280 but a net profit of $14,856 was a small consolation to me.



Personal Notes.....

Making a good investment required a lot of discipline and self conviction. And even if the Sun and moon aligned with your lucky star, you thought you have a perfect playbook, there are many events that not within our control will jeopardized it.

With half of the world populations under COVID-19 lock-down, this crisis situations provide a great opportunity to rethink your investment strategy. This type of "crisis opportunity" only come once a decade and we should really take advantage of it to the fullness. But I could see that this window of opportunity is closing fast especially if you missed taking positions during the March corrections this year.



Since then, US index had recovered most of the steep 36% dropped but STI index still remain low from the base of correction. If you have cash on hands, this is the best time to take some positions in some Singapore blue chips and REITs. Holding it for longer horizons, you will be richly rewarded when the economy recovered in 1-2 years time. The risk of major corrections had passed as  Governments step in with huge stimulus spending, the risk of another major corrections is unlikely. Now is the time to put your long term investments strategy in motions. But remember the window is closing fast, so don't hesitate for too long.

Thanks for reading my blog posting. Ciao!



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Keppel Corp..... Update 2.0

  It is not easy to have an opportunity to acquire a great company at below intrinsic value. It's almost non existence during normal ti...