Tariff Tantrums and the SPX Bear Run

This post is also on substack.

Thanks to Trump, April 2025 might go down in history as the first President-inflicted bear market of the 21st Century. Veteran market participants (like this blogger) would remember the past bear markets well. There was the dotcom bust which lasted almost three years. There was the March 2020 pandemic scare which was a 29% drop in just one month. More recently, in 2022, the market dropped more gradually and the whole ordeal lasted 9 months. 

Then there was the mother of all bear markets, the GFC, which was a whopping 55% drop over 17 months back in 2007-2009. Scary, would be an under-statement. The global financial system as we knew it could collapse. We were days from the Second Great Depression. It was hard to believe, and still is, but both God of Fortune and Lady Luck smiled on us all. So we can just talk about it rather than experience it.

S&P Bear Runs since the 1950s

For the story today, the S&P500 peaked in Feb 2025 slightly above 6,000 and then things fell apart, as they do when markets peaked. Only this time, we shot ourselves in the foot. Or rather Trump did. We are now almost 20% below the peak, which by definition, means we are entering bear market territory. In the last two weeks, the drop was drastic enough that Trump himself got nervous and backtracked his tariffs by postponing it for 90 days. 

The markets heaved a sigh of relief, stock prices stabilized and some hoped that the good old days will come back. By that, I mean Nvidia leading the Magnificent Seven to higher highs. Bitcoin and A.I. names rallying again. S&P500 revisiting 6,000 and surpass that, with major global indices (except China) following behind. And more euphorias, kumbayas and what not. Alas, the probability of that happening seemed pretty low now.

Change in world order

What we are seeing could be a generational change in the world order which started when Trump became President back in 2016. That coincided with Xi's rise in China amongst many global events (Brexit etc) which culminated to Russia's invasion of Ukraine. The world, led by US to cooperate, globalize, trade and prosper since WWII changed to one that is about self-interest. We are talking about protectionism. De-globalization. Every country for herself. Friend-shoring, onshoring, you know the rest. 

The markets ignored these seismic geo-political shifts because there were exciting stories. It started with the FAANGs (Facebook, Amazon, Apple, Netflix and Google) which then morphed into the Magnificent Seven (Tesla, Nvidia, Microsoft, Meta, Amazon, Alphabet and Apple). There was the whole Bitcoin mania and then the A.I. mania. If we dig deeper, there were also other sub-plots like shareholder activism, Novo Nordisk and some big pharma with their gamechanging obesity drugs. There was also Japan, with Nikkei breaking its 1989 high after 34 years. Even in Singapore, we had DBS having its market cap exceeding USD100bn and taking over Singtel as Singapore's proxy stock. 

https://companiesmarketcap.com/sgd/banks/largest-banks-by-market-cap/

Today, DBS' market cap exceeded SMFG's (Japan's second largest bank) market cap and also UBS' momentarily when it had to rescue Credit Suisse. This is quite unthinkable. Japan has a population twenty times bigger than ours. And UBS is the pre-eminent wealth manager and now Switzerland's only big bank. What did we do so right? If you scrutinize the table above (courtesy of companiesmarketcap.com), we are on our way to surpass more G7 banks like BNP and Citigroup. Citigroup! The Citi that never sleeps!

Anyways, back to the story, so, the markets were busy. Who cares if Russia and Ukraine started a war. Or if China threatened to invade Taiwan. Market participants were enjoying the bull market and making money left, right, centre. But Trump slapped the markets in the face and everyone woke up. So the question now is would he double down or would he backtrack? Extrapolating from these two simple actions, there are two possible scenarios:

Slight return to normalcy

This is the bull scenario that everyone hopes for. Trump, worried about his own finances, or simply focuses to whip China differently, backs down. The markets think its business-as-usual and we avert that 50% drop we saw with the GFC and the dotcom bust. But still, it is hard to imagine that we go back to the previous world order of global cooperation, more trade, less bitching. Even if this scenario pans out, it will not be Mag7 leading the markets. It is hard to say who are the new leaders, I would focus on what I have preached - strong FCF companies which are now featured on substack.

All hell breaks loose

This is the doomsday scenario where Trump loses it (which is highly possible) and we have full-blown trade wars, not just with China but with allies, neutral countries. Basically, total collapse of the world order since WWII. This bear market could become a combination of the dotcom bust and GFC, lasting into years and dropping 50% at the end. The only safe assets to hold would be cash and gold. Ironically, property as well. The end game here is WWIII.

This is not impossible. And if WWIII happens, cash is worthless. Only gold can preserve wealth.

Of course, predicting the future is never so simple. The future is a set of probabilities and the two scenarios above probably lies on a spectrum with normalcy at one end and hell at the other. So we might avert WWIII like how we averted the Second Great Depression back in 2009. Regardless, it would be a very uncertain 12-18 months ahead. Hold more cash and be less courageous.

2025 FCF and Dividend List

This post first appeared on 8percentpa.substack.com

This year's first batch of dividend lists are out!

Instead of using Poems, we will try out a new platform - Finchat.io. This is one of the most powerful toolkit for publicly listed stock research and I would encourage all readers to give it a try. It's a freemium model, so anyone can use the free ones, which is already very powderful!

For this year's lists I have similarly used FCF as the main filter, but added dividend and net cash and excluded certain industries. Here's the list for Singapore:

Venture (Market cap c.SGD 3.6bn) is the stand out here, with 35% of its market cap in cash and generating a whopping 12.7% free cashflow yield. This stock used to be a darling with share price hitting >$25 a couple of times since its IPO (today's share price is $12.5). It competes in a very good niche today, making hardware for the leading players in life sciences and networking equipment the growth segments of today, having successfully transitioned from PC and printers eons ago.

However, such hardware manufacturing business is inherently cyclical and share price had gone through  many boom and bust cycles. Today, it is trading near trough valuations but without studying closer, it is hard to say when things would recover. It is also worth noting that the founder still runs the company and Venture's success over the last 40 years is largely attributable to him. Should he retire, it is unclear if the company can continue to grow and compound as it had.

US FCF and dividend list for 2025

This second list churns out the US names of which Acuity and Dolby are the largest. Acuity makes lighting and Dolby makes sound systems. In our substack, we have covered IMAX, which is in the same space as Dolby - cinemas. Both names look interesting but again, without doing the work, it is hard to say if they are good buys are not. The other issue with US stocks for us is also that dividends get taxed. 20% would be withheld and taxed so it makes more sense to buy stocks with little dividend if we really want to optimize returns. Almost all the stocks on this lists all have very high dividends. Dolby has a whopping 9% dividend! 

Japan's list

Given the craze on Japan in 2024 and hopefully we see more buzz in 2025, this last list is on Japanese names. For those of us who don't look closely at the land of the rising sun, Japan has been undergoing a stealth transformation for many years after the burst of its bubble, banking crisis and corporate governance overhaul. The stock market finally exceeded its high in 1989 and a huge wave of shareholder activism is under way. We might see Nikkei successfully breaking through at hit 45,000, if not 50,000.

This is not a number plugged out of thin air. The math around it is as follows:

• Next year's Topix EPS (2026) is c.220 yen (and growing) and multiplying that by PER of 16x (one turn higher than its historical average to reflect Japan's transformation discussed above), we can explain Topix at 3,520 (vs only 2,800) today.
• The Nikkei / Topix ratio has a historical average of 14x and using that (i.e. 3520 x 14), we have Nikkei at 49,280.
• With that, 50,000 is not too far away. 

Although we do need the yen to remain weak and the activism momentum to continue. Japan has had so many false starts over the decades it is hard to believe whether the country could really embrace capital markets transformation. I think Japan can change and will change because this provides part of the solution to solve its aging issue (e.g. more capital to attract workers into Japan) and Japanese themselves are frustrated that countries that were behind are now richer. This is a strong impetus to push the country to progress.

With that, we shall discuss two names on the list briefly. Both have what Japan is most famous for - animation:

Bandai Namco (Mkt cap USD22bn, net cash at c.USD2.5bn, dividend yield 4.5%, FCF yield 5.7%): this is the ultimately anime IP play with its strong library of the most famous IP and manga titles like Dragonball, Naruto, Gundam and One Piece. Its businesses span toys, games, amusement centres but as with most sleepy Japanese management, financial metrics such as OPMs and ROEs are not optimized and hence we see the stock trading cheaply. Activists need to come in to shake things up.

Nippon TV (Mkt cap USD4.8bn, net cash USD1bn, dividend yield 1.1%, FCF yield 5.5%): broadcasters are right in the middle of shareholder activism with Fuji TV being targeted. The other four broadcasters including Nippon TV. They all face similar issues with Fuji TV: traditional management who knows nothing about capital markets and doesn't give a shit about shareholders. Hence, they all trade below book despite owning the most valuable real estate on prime land in Tokyo. Nippon TV also owns the crown jewel of Japanese animation - Studio Ghibli. As such, there a lot of hidden value beneath the PBR <1x apparent cheapness. 

So, hope these ideas help. Please conduct your own deep dive research. Our substack will also write these out should they qualify to be in the portfolio.

Huat Ah!

Past lists:

2024 Dividend List - Tokyo!

2024 Dividend List - UK!

2024 Dividend List

2023 Dividend List

2022 Dividend List - Australia!

2022 Dividend List

2021 Dividend List - HK!

2021 Dividend List

2020 Dividend List

2019 Dividend List

2018 Dividend List - Part 4

2018 Dividend List - Part 3

2018 Dividend List - Part 2

2018 Dividend List - Part 1

2017 Oct Dividend List - Part 2

2017 Oct Dividend List - Part 1

2017 Mar Dividend List

2016 Dividend List - Part 2

2016 Dividend List - Part 1

2015 Dividend List - Part 2

2015 Dividend List - Part 1

2014 Dividend List

2013 Dividend List - Part 2

2013 Dividend List - Part 1

2012 Dividend List

2011 Dividend List

2010 Dividend List

2009 Dividend List

Inspection Update on Vicom

This post first appeared on substack. 

Vicom has done almost nothing over the past 18 months and hence I believe it is time to do a quick update and see if this is worth adding. For the uninitiated, here’s the original writeup about Vicom, the largest vehicle and industrial inspection company in Singapore:

https://8percentpa.substack.com/p/investment-idea-4

Vicom, while it is a decent SGD460m market cap company, has no analyst coverage and its published materials for analysis is atrociously lacking. The company only has its annual report and bi-annual earnings update. Meanwhile, the annual report has no Management Discussion & Analysis (MD&A), the most important section of any annual report.

That said, financials are solid:

Simple Financials (Dec 2025 estimate, SGD)

• Sales: 120m
• Operating Profit (OP): 35m
• Net income:30m
• FCF: 30m
• Debt: -55m, Mkt Cap: 500m

Financial Ratios 

• ROE: 21% ROIC: 21%
• EV/EBITDA: 10.7x (Dec 25)
• PER: 16.9x (Dec 25)
• Past Margins: OPM 30%
• FCF yield 7%

The stock has completely underperformed in 2024. With global stock markets rallying 20-30% and the STI itself going up mid teens, Vicom’s share price has actually gone down since our last review. This post serves to provide an update, redo valuation and decide if we should add.

1. Review

Vicom share price has stagnated primarily because revenue has not grown much since COVID-19 because Singapore’s vehicle population has not grown at all. Thanks to the exorbitant cost of car ownership here. Before the announcement of 20,000 new Certificate of Entitlements (COEs) last week (see video link below), there was no prospect of significantly revenue growth.

To add on the above point, c.50% of Vicom’s revenue comes from vehicle inspection and since the number of vehicles in Singapore is capped by the number of COEs (the certificate that allows for vehicle ownership), there has been no volume growth over the last few years, as mentioned.

For the un-initiated, the price of the COE in Singapore (essentially a piece of paper that the government issues to vehicle owners) is six figures. That’s household’s annual salaries. While goods vehicle like vans, light trucks and lorries have cheaper COEs, they are still crazily expensive which explained the lack of volume growth for vehicles and hence lack of revenue growth for Vicom.

With no volume growth, investors then want price increase. Sadly, Vicom has not raised inspection fees, due to potential far-reaching repercussions. Singaporeans require our vehicles, both passenger cars and goods transport trucks / lorries, for their livelihoods. With COE prices higher than the sky, should Vicom raise inspection fees during election years (i.e. 2025), it would become a major issue for the government in power. And that is a big no-no.

Vicom's inspection fees as per Vicom's website

As such, prices have more or less stayed the same for many years as shown above. The basic inspection fee is SGD68.67, which is cheaper than dinner at Macdonald’s for a large family. This is quite a rarity in Singapore where prices of everything has gone through the roof in recent years.

Electric Vehicles (EVs)

The other risk not discussed in the initial analysis was EVs. While the basic price for inspecting EVs is the same, there are no additional tests required (e.g. emission related) and hence should the number of EVs grow significantly, Vicom’s future revenue growth might be impacted.

Investors' mind are on this issue because many believed Elon Musk and Tesla will take over the world. This is now supercharged with nitro boost with Donald Trump coming back into power. That said, this author believes that EV should not change the picture for Vicom. The main reason that EV penetration will take years, if not decades to play out. Vicom is a steady compounder with strong FCF generation. EV or not, stock price should compound at single digit over time.

Growth Angles

Future single digit growth might be supported by the release of 20,000 new COEs and the remaining non-vehicle testing business in SETSCO, Vicom’s subsidiary doing testing for food, manufacturing and construction materials. The balance between vehicle and non-vehicle testing revenue has underpinned part of Vicom’s steady growth story. This business is featured prominently in its annual report.

Management

Vicom is currently helmed by Mr Sim Wing Yew who has led the firm since 2011. He is supported by a strong and experienced team with varied backgrounds. As expected, a significant number of managers come from the Comfort Delgro Group while others are recruited within Singapore Inc.

The following is an excerpt of the profile of Chairman Dr Tan Kim Siew, who has had a distinguished career spanning the Ministry of Finance, Defence and National Development. Dr Tan undoubtedly provides the oversight for Vicom to continue to perform to shareholders’ expectations.

Dr Tan Kim Siew is the Chairman and Independent Non-Executive Director of VICOM Ltd. He is the Chairman of Nominating and Remuneration Committee and a member of both the Technology Committee and the Sustainability Committee. He is also an Independent Non-Executive Director of SBS Transit Ltd.

Dr Tan is presently a Senior Consultant in the Ministry of Finance. From 2012 to 2014, Dr Tan served as Commissioner of Inland Revenue. Prior to this appointment, Dr Tan was the Permanent Secretary (Defence Development) of the Ministry of Defence from 2003 to 2012. He had also held other appointments in the public service, including Chief Executive Officer of the Urban Redevelopment Authority, Deputy Secretary in the Ministry of Finance and in the Ministry of National Development, Chairman of the Defence Science and Technology Agency, and Chairman of the DSO National Laboratories.

2. Valuation

As Vicom’s business is simply so stable and predictable, there isn’t really much reason the change the numbers in the previous analysis. With FCF and Net Income at SGD30m and applying the same multiples, we get to an average intrinsic value (IV) of c.SGD1.7 which gives c.30% upside if we take the average for the three metrics below. This is lower than the original SGD2.2 IV because we used 25x multiple which on hindsight was probably too high for a single digit compounder.

Vicom has also continued to distribute good dividends as its parentco - Comfort Delgro probably relies on that for its own earnings growth. As such, we should expect Vicom to continue its c.4% dividend yield, which is a good spread vs Singapore’s T-bills at 3% today.

The rest of the post is on substack. Thanks!

Huat Ah!

This post does not constitute investment advice and should not be deemed to be an offer to buy or sell or a solicitation of an offer to buy or sell any securities or other financial instruments.