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.