Thursday, 4 November 2021

My Portfolio Oct21


Summary for October 2021

Portfolio @ End of Oct21

October 2021 was a good month for KLCI which advanced 1.6%. My portfolio has done quite well too with a gain of 6.6%, lifting year-to-date gain to 15%.

Major event in October should be Budget 2022 which was announced on 29 Oct21. Again, it's a budget of distributing money which does not benefit me directly.

The government has increased the stamp duty of share trading from 0.1% to 0.15%. If a trader or investor buy RM10,000 worth of shares, he/she has to pay RM15 stamp duty instead of RM10.

Luckily there was no capital gain tax on profit from stock market trading.

"Prosperity Tax" or "Cukai Makmur" is introduced in which listed companies who earn in excess of RM100mil in year 2022 has to pay 33% tax for profit above RM100mil. Profit below RM100mil will be taxed as usual at 24%.

In my current portfolio, I think only Hibiscus, Jaks, MFCB, Scientex & Supermax fall into this category. It's an one-off tax anyway.

Meanwhile, SST exemption of new vehicles has been extended to the end of June 2022 but House Ownership Campaign (HOC) was not extended beyond 2021.

This is rather a bad news to property sector. Could we see a rush in property purchase before the end of this year? I guess so.

Anyway, RPGT was abolished for the sale of property after 5 years of ownership.

These are the items that are more relevant to me in Budget 2022.

Finally I have gotten rid of one of the bad apples in my portfolio which is Daya. My initial plan was just to hold until it was either delisted or lifted out of PN17.

Now Daya's regularization plan has been approved by Bursa and it might have a good chance to be lifted out of PN17 status. Its share price might jump due to speculation if this is the case.

However, somehow I decided not to wait for that moment as the regularization plan does not seem to be a good one to me.

Besides, I have also sold all DKSH shares at RM5.40 even though it did not reach my target price of RM6. 

Its share price went all the way above RM6 after I have sold them and looks good there. It's another one which I've sold too early.

Coastal's share price limited up once in October and it seems to have some leg to continue its uptrend. I decided to sell half of its shares.

My plan is to hold longer until its gas sweetening plant project takes off or it receives new OSV orders. That's the reason I did not sell all.

There is no official Bursa announcement on the progress of its gas sweetening plant in Mexico but in its latest annual report FY2021 released last week, it mentions that the construction of the onshore gas sweetening plant has started since FY21Q3 (Jan21-Mac21). It has been completed within schedule and first gas was achieved in FY22Q1 (Jul21-Sep21).

To recap, Coastal forms a 50:50 JV with Mexican partner to undertake the engineering, procurement, construction, operation and maintenance of an onshore gas sweetening plant.

The tenure of the contract shall be 32 months (excluding plant construction period) with a maximum contract value of approximately RM258.7mil subject to further extension in tenure.

The construction of the plant has started in the first half of year 2021, but I didn't see any EPCC revenue reported in Coastal's quarter reports during this period of time.

RM258.7mil in 32 months (or average RM24mil per quarter) is not a very huge amount, given that Coastal has 50% stake.

Anyway, I wonder how much profit (or loss) this joint venture can bring to Coastal. Its FY22Q1 financial result is very much anticipated.

Its recently acquired liftboat chartering business seems to do quite well as well.

Nevertheless, I don't hold a lot of Coastal's shares since its core profit is not easily predicted, with many exceptional gains and losses.

Apart from Coastal, the share price of Hibiscus gained 28% in October as Brent oil price surged past USD86.

I was tempted to realize some profit but later decided to wait until the completion of Repsol asset acquisition and its profit being consolidated into Hibiscus's income statement. 

After one has gone, there are still 2 recently added bad apples in my portfolio, which are Fast Energy and Supermax.

Since I invested in Fast in April this year, its share price has already fallen more than 50%. I have to admit that it was a mistake but I'm still hopeful that it will turnaround.

The only reason I bought Fast was because of the potential growth in profit from new business diversification into oil bunkering and its billions ringgit worth of contracts secured.

I'm not familiar with oil bunkering business and I view it like petrol station on the sea. It should be profitable even though profit margin might be thin, especially at this time when marine transportation seems robust.

I didn't expect so many corporate exercises after that. Perhaps I should have sold early at minimal loss once those corporate exercises were announced.

Its 2 right shares with one free warrant to one existing share exercise has been approved and the right share price has been fixed at 12sen. 

I'm still undecided whether to subscribe to the right issue. I hope that it can release a convincing quarter result before I make my decision. 

However, the ex-date has been fixed quite fast on 17 Nov21, and the commencement and cessation of rights trading fall on 19 Nov21 and 26 Nov21 respectively.

Can Fast release its quarter report before 26 Nov21? If it's a positive financial results, then I think it should do so. Otherwise it's probably not good.

In mid October, Supermax's gloves were banned from entering US due to forced labour issue. This comes as a shock since Supermax should have done corrective measures since TopGlove was charged with similar "offence" more than a year ago.

It is not a small matter as US contributes about 20% to its sales. It takes about 14 months for TopGlove to get the ban lifted. 

Can Supermax quickly sell to other customers? How long will it suffer?

My Supermax shares are in deep loss until mother also can't recognize. Luckily I did not hold a lot of its shares and I have recognized a bit profit earlier.

Currently I hold quite a lot of cash but could not find a very good company to invest in.

I'm even thinking of putting the money "temporarily" in REITs, as I think CLMT has good chance for capital appreciation and KIPREIT has good dividend yield at ~8%.

The 5-year 12th Malaysia Plan from 2021-2015 allocated a record high RM400bil as development expenditure, compared to RM248.5bil in the 11th Malaysia Plan.

In Budget 2022, development expenditure is at RM75.6bil which if not mistaken, is a record high as well.

Recent development expenditures are as below:

  • 2022: RM75.6 bil
  • 2021: RM69 bil
  • 2020: RM56 bil
  • 2019: RM53 bil
  • 2018: RM46 bil
  • 2017: RM46 bil
  • 2016: RM52 bil

Even though I read that there were no mega projects announced in Budget 2022 speech, the record high development expenditure should cater for the construction industry.

However, even with high development expenditure in year 2021, there seems to be lack of contracts for most listed construction companies, perhaps due to the resurgence of Covid-19 cases.

I think year 2021 is a good year for most property developers, thanks to the HOC. The sales generated this year will support the companies' profits for the next 2-3 years at least.

Since the HOC is not extended beyond 2021, new property sales in 2022 might not be as good as 2021 in general.

Can property sector become a hot investment theme next year? I think there might be some profit growth but if the market is willing to give it a "fairer" PE of 10x, then most property stocks can still give good returns.

Currently crude palm oil price is still hovering around historical high of RM5,000/T. Budget 2022 has increased the threshold for its windfall tax by RM500 to RM3,000/T in peninsular Malaysia and RM3,500/T in East Malaysia.

This is a good news to plantation stocks but if the CPO price really falls below RM3,000/T next year, planters have no reason to celebrate despite no need to pay windfall tax.

However, the windfall tax for East Malaysia has been increased to 3% from previous 1.5% to make it similar to peninsular Malaysia. This will hurt those with more estates in Sabah and Sarawak.

The most steady sector in 2021 is still technology sector. Will this trend continue into 2022?

As for the Serba Dinamik saga, its stock trading has been suspended until the release of independent review (IR) report.

Initially I thought it can be released before October. The longer it takes, the more anxious shareholders will be.

Serbak has already provided the detailed explanation to KPMG's queries. Why does E&Y take so long to justify them?

Bursa literally "forced" Serbak to announce the "preliminary findings" of the IR in which Bursa's staff were also said to be present in the meeting. That's why its shares are suspended.

Why did Bursa act so swiftly even though the IR is not final? What is Bursa trying so desperately to tell investors? Do you think it will be a positive or negative development?

Most retailers will not know but Datuk Karim still purchased 1 million Serbak shares just before it's been suspended. This might reduce some anxiety of current shareholders.

Besides, SCIB's share trading will also be suspended on 9 Nov21 as Bursa does not grant extension of time for the release of its annual report.

SCIB's annual audited financial statement is not ready because of the change in auditor just in September.

I'm a bit surprised that SCIB's application for time extension was rejected, because in my experience Bursa is like a yes-man.

As a result, SCIB's share price is just 19.5sen now which is a massive fall from RM2.50 post ex-ed bonus issue in Feb21.

Serbak used to be a darling stock. It just shows how quickly things can change in the stock market.


  1. "Serbak has already provided the detailed explanation to KPMG's queries. Why does E&Y take so long to justify them?"

    The above is exactly what has been in my mind when studying Serbak's issue, which has dragged down KPower's stock price by a lot. Well, I am kind of regretted to put faith on is true that if Serbak has done nothing wrong, EY's SIR would not take so long. If the SIR cannot be concluded till now, that shows the issues are much more complicated than I thought. I do believe now that there are hanky-panky in Serbak's account book...
    Having said that, I also don't think Serbak's situation is very bad till the extent that it has made loss in past several years and tried to cover-up. I think the earnings was being inflated, and the balance sheet was kind of "beautified". Maybe the management needs that to get loan easier and attract people to subscribe its PP and etc.

  2. I think Kxrim is trying very hard to cover-up and make Serbak looks totally innocent. Since I hold KPower and not willing to sell at current low level, I have to hope Kxrim can succeed doing so :p Otherwise, we would see some impairments on Serbak and worse thing is its reputation would be badly impacted.
    All in, I learn one lesson from this Serba saga - I should not, in future, take any risk on stock or related stock which are having potential audit discrepancy issue.
    Well, we win some and we lose some in stock market.

    1. IF, (only just if) Serbadk is found guilty, I also don't think it's so serious until the company has to be declared bankrupt or delisted. However, it will be difficult for the company to do business since the credibility has been lost, until the culprits are kicked out. Will the company still be the same without previous key personnel? Surely the company's valuation will suffer for a while.

  3. "Currently I hold quite a lot of cash but could not find a very good company to invest in."

    Me too as I disposed some O&G and steel stocks lately.
    Just to share, my recent buy is Perak Transit (PTrans). I think Ptrans has growth in short and long terms :
    Short-term growth strategies include earnings recognition (construction revenue) from the new Bidor Sentral terminal, increase in Kampar Putra Sentral's occupancy rate after MCO, and additional 3rd party terminal management contracts.
    The long-term growth is the Group's plan to expand further 2 new bus terminals in Perak-Bidor Sentral (commence construction in FY21 and complete in FY23) and Tronoh (commence construction in FY23).

    1. Thanks for your recommendation. I've just studied PTrans a bit. I agree that it has a good potential for growth and everything looks good after MCO being lifted, in which rental rate and occupancy rate are sure to improve compared to MCO period when it gave free rental. Its business model is resilient with no competitors. More terminals in the future translate into profit growth. Furthermore, at 69.5sen per share now, it looks relatively inexpensive too.

      However I'm not sure whether PTrans constructs its own terminal (whether it recognizes the construction revenue of previous Kampar or upcoming Bidor Terminal). Two other areas of concern to me are, first, the high revenue contribution from project facilitation fee that sounds non-recurrent. This fee comprises 55% of FY20 IPTT revenue and has grown by 35% compared to FY19 compared to ~20% growth in rental income. The pace of such growth seems to continue into the first half of FY21.

      Second is the persistent negative FCF due to the continuous investment in PPE, but this is not too big a concern as I think may be after the Bidor Terminal FCF might turn positive since its operating cashflow is always good. If the contribution from project facilitation can continue to grow, or at least stay at current level every year, then I think PTrans is a good undervalued stock to consider at the moment.

    2. On project facilitation fee, PTrans charges a rate of ~2.5% of projects' total gross development costs for consulting services on bus terminal development and operations. Your doubt is if the income from this fee is sustainable? I do see this fee income has been there since PTrans was listed in 2016/17. Such fees are one-off in nature, and it has 2-3 projects per annum in different states. In Jan'20, the boss told Equity Tracker that the project facilitation fee will continue to contribute in next 3 to 5 years bcos there are many bus terminal operator not doing well in Malaysia and needs PTrans' expertise to consult them in the development and operation of of bus terminal. If it is 3-5 years from 2020, I suppose the fee income will continue to contribute till 2023-2025; there is no guidance if the fee income is sustainable after that period. But, I do learn that when new Terminal Kampar's A&P revenue increases, the contribution % for project facilitation fee for IPTT segment will reduce. And, the new TK's gross leasable area is approximately 8x that of Terminal Amanjaya.

    3. "However I'm not sure whether PTrans constructs its own terminal (whether it recognizes the construction revenue of previous Kampar or upcoming Bidor Terminal)."

      I don't think Ptrans construct its own terminal since they do not have construction division. My idea of PTrans recognising the construction revenue for Terminal Bidor came from TheStar article dated 20th Aug 2021 when it says "On its growth strategies, Perak Transit said in a filing with Bursa Malaysia, that they included earnings recognition from the new terminal (Bidor Sentral), increase in...."
      I suppose the "earnings recognition" would be like when Jaks constructed it's Vietnam power plant; there was no actual cash flow as income to Jaks, but the "earnings" was recognised when the construction is progressing. Well, I have to confess that I am not certain on this matter.

    4. PTrans' business model is very much like Airport, but it is not as popular and as well known as Airport. I think PTrans is considered an undervalued growth stock based on its FY21 YTD earnings and its expansion plan. But, it may stay unpopular for long time till I lose my patience to hold it :p
      Tech stocks have been popular since year 2017 (or earlier), and I foresee this industry will remain popular in many years to come. I only own JHM in my technology portfolio now; I dare not buy more tech stocks bcos their PE are too high. Having said that, I recognize that their high PE has became a "norm" to Malaysia market; and if I cannot accept this norm, I may lose opportunity to make profit from tech stocks..
      I think I may have to use "relative PE" to measure tech stocks from now onwards. This means, for example, if MPI's PE is 38x now, and if it can fall to, for instance, ~30x in future, that would be considered "relatively" cheap, and I should then pick up some? I am waiting for the correction in tech stocks, I think it may come together with the correction in Nasdaq, probably when people worry about interest rate hike next year.
      I would like to know What do you think about this matter? Any tech stocks in your "to-buy" list now? Are u okay to buy tech stock at high PE?

    5. Actually I have already decided to invest in PTrans until I found out that its project facilitation fee in FY20 was one third of its overall revenue. I wonder how on earth can consultation service fetch such good amount of money. To me it doesn't seem to require great expertise, only good relationship with politicians and local authorities needed :) BTW, besides this, everything is good and exciting in PTrans. Judging from the trend, I think it should report very good results in the next few quarters. So I won't rule out investing in it short to mid term.

      At the moment I'm still quite reluctant to invest in high PE tech stocks. Right business, right people but the price isn't right... I'm waiting for their price to correct too. JHM is not "cheap" too but I bet on its high growth potential. So others with good growth might still be considered. I'm still eyeing opportunity in FPGroup, KESM, Gtronic which are not so popular ones. Not that they will have good growth, just hope they can get back to their usual selves.

    6. I owned KESM, Gtronics before, and I recently bought back some FPGroup. My view on them are as follows :
      KESM has been facing low loading problem due to shortage of wafer and automotive chips. The concern is the same problem has persisted for many years liao and seems like no end..It's outstanding number of shares is low, thus if and when the loading recovers, it's EPS can shoot up very high. The question is when...?

      Gtronics' revenue and earnings do not show growth.. I read the analyst report published in Jun'21, saying Gtronics is planning to expand its production floor space by 30%; I hope it can really grow its business, which seems like stagnant to me.

      FPGroup's FY21 earnings has deteriorated in FY21 (July'20-Jun'21) if compared against FY20. I noticed it was partly due to lower earnings from stencil segment. The management didn't explain this matter in detail; in FY21 annual report, the management explained the sales from Asian customers has reduced..I guess maybe the stencil business mainly came from Asian region (?)
      Anyway, I bought back some after seeing it has acquired the equity stakes of several companies/subsidiaries. In addition, the management guided that they see recovery in sales order since the beginning of 2021. Another reason is I want to increase the weightage of tech stocks in my portfolio; I currently has merely 15% weightage, I used to have ~30% weightage of tech stocks in 2019/2020.

  4. In general, the performance of Bursa in 2021 is disappointing. I also think it is difficult to make money in stock market this year. I was thinking 2020 was hard to make money and 2021 should be a recovery year. The fact it is just the opposite for both years.
    Bursa is still stuck at 1,531 whereas US index has been breaking new record high. I am thinking what will happen to Bursa when US index comes down..
    I foresee FED's interest rate hike to start in mid 2022. I personally think it is still okay to hold Bursa stocks till Feb'22. After that, I will want to reduce most of my capital from stock market liao.

  5. When I see SCIB's stock price keeps coming down, my hand starts to itchy :p
    One part of me is thinking the situation for SCIB cannot be this bad, I should pick up some before end of next Monday (before its suspension). Another part of me keep reminding myself the lesson I just learned from KPower and I should not do so again in SCIB..
    Maybe I can set 15sen per share as the target buy price..
    What do u think about SCIB at such a low price now?

    1. Before the Serbadk saga, I think that SCIB was at least worth RM1, and might be up to RM2. Now it's only 18.5sen with no major change in its fundamental. It looks attractive but since there are many unknowns, personally I won't touch it until things become clearer. Those who take high risk might be rewarded handsomely. It's about our own decision and risk appetite. People might have a false impression that SCIB is involved in suspicious accounting fraud like Serbadk but it's not the case. As the new auditor is only appointed in Sep21, I think SCIB should be allowed to delay its annual audited account since it involves 18 months from Jan20 to Jun21.

      We can foresee that SCIB will be suspended until may be mid to end of December. Many events can happen during this time which either gives shareholders happy days or sleepless nights.

      First, SIR of Serbadk will be out by end Nov. If Serbadk is innocent, then it's unlikely that SCIB cook its book and its share price will probably fly after trading resumes. However if Serbadk is found guilty, then I don't think SCIB's share price will do well until the person involved exit the company. Will SCIB be the same after the exit of such key personnel?

      SCIB might release its own QR in Nov but it might be delayed to Dec (not sure whether still allowed by Bursa). From previous QR, I think its upcoming QR won't be that good, esp with MCO and increasing project cost. There is a possibility that it might still register loss... After that, it will finally release its FY20 audited account in Dec. It will be good if there is no major discrepancy with the unaudited one. The worst scenario is the new auditor suddenly raise a red flag.

      I can foresee that if Serbadk is clear of any wrongdoing, its share price will limit up for may be 3 consecutive days. This might happen to SCIB too. If SCIB falls to 15 sen before being suspended, limit up 3 times means RM1.05. It's a 600% gain in 3 days! Anyway, the opposite also can happen. For me, I just want to avoid possible sleepless nights.

    2. Thanks for sharing your view on SCIB.