Saturday, August 21, 2021

2021 Singapore Dividend List using Poems Stock Screen

When we first starting discussing screens more than 10 years ago, there were no good screens out there for retail investors. But technology advances, today we can easily screen for stuff. Just google "stock screener" and you get tonnes of screens. Even screens for ETFs! It is true that most would be made for the US and other big markets. But still, you can get good stuff.

I have been using poems as described in last year's post. This year, I would also be showing the poems screen. Singapore has been hit badly by the pandemic and we do get a lot of interesting results. So, this year's screen will be the first time in a long while we discuss Singapore stocks.

Here's the criteria I used for this year's screen.

I have focused on ROE and ROA (which are proxies for ROIC or return on invested capital) for this year to as these two metrics are really key in assessing both the quality of the business and the quality of the management. ROA of 10% means for every $100 I invested into the asset base of the business, I will get back $10. This is a decent return for most businesses when it's sustainable. 

As such, I would say that ROE and ROA drive the screen, while Operating Margin, Dividend Yield are really just cherries on the pudding. Remember, while we are looking for good dividends, it is what makes good company capable of paying good dividends that is important. Lastly, I have the market cap cut off at SGD100m.

These are the names ranked by market cap: Thai Beverage at SGD17.5bn, ST Engineering at SGD12.2bn and Keppel and so on and so forth. Nothing really stands out in this first part. Some of the names are repeated from last year as well while some others dropped off (Jardine Cycle and Carriage and SIA Engineering) mainly due to their inability to maintain paying 3% dividend. I continue to own Vicom which was discussed a couple of years back. 

First part of Singapore's 2021 Dividend List

The second part of this year's Singapore screen have a few interesting names: Boustead, Silverlake and Propnex. All three names generate extremely high ROEs without using too much leverage. We know this because ROA is also good at high teens. Most importantly, valuations are not stretched. Silverlake Axis trades at 4.6x PER!

That said, Silverlake Axis was issued with a short seller report back in 2015 which caused the stock to crash after that. It never recovered. It has been 6 years now but nothing was ever brought to light. So, did they really commit accounting fraud? If so, then the regulators should have clamped down and got the company delisted. If not, why is the stock price so weak after so many years? Inexplicable. In such cases, perhaps it is easier to just stay away. 

If anyone have any insights, would love to hear more in the comments section.

Second part of Singapore's 2021 Dividend List

I do not own any of these names. So Silverlake is not so great but I have been told many times that Boustead and Propnex are good companies. Boustead was built by a legendary entrepreneur called FF Wong. It was a darling midcap until 2014 when it's share price was almost two dollars. It has since derated quite a bit. I have not looked at it recently, but if its core engineering services business is not being disrupted, it should do okay.

Propnex is just the right business in the right place. Singapore's national pastime is to buy and sell properties. This stock IPO at 50c and is now at 1.5. How I wished I took my friend's advice to look at it seriously back then. It is after all the largest property agent in Singapore. It is not shown here but this is a highly FCF generative business making SGD30-40m against its market cap of SGD500+m. What's more: it has SGD100+m in cash and no debt. If it corrects 20%, I think this is a buy.

As usual, here's the past lists:

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

Huat Ah!

Sunday, August 08, 2021

The Future of Education in China, Singapore and the ROW

Last week, the Chinese government decided to overhaul its USD100bn tuition industry by declaring that education and tuition companies should be strictly non-profit and will not be allowed to use the now infamous VIE structure to raise capital from foreign investors in foreign markets. Tuition stocks subsequently crashed as exemplified by New Oriental Education crashing 70%. There is no money to be made here. It is unclear if these companies can stay listed. If they do, great, maybe you might be able to make 100-300%. But if not, then you will never see your money again.

New Oriental Education from >USD50 to USD 17

There have always been qualms about how capitalism should not encroach certain sectors like healthcare/hospitals, public services such as waste management and, needless to say, education. If these institutions are run for profits, then they could just go full throttle to make money and fail to provide the necessary public services. In China's education landscape, this has happened. Or rather, it was structured to happen because the rich can always pay up and get their kids onto the best platforms or employ the best tuition teachers for their children. 

Hence the Chinese government decided to do something - by clamping down on education (and also property and internet giants). In this way, you can level the playing field if not the current generation, then for the next generation. The next step is to get the nation's kids off "spiritual opium" - additive mobile games that has glued all our children's eyeballs to those screens. As such, Tencent is also falling like a brick. 

Actually, Singapore and the rest of the world are not that different. Our tuition industry runs into billions of dollars despite our population and economy being only a fraction of China's. Kids from lower income families are losing out in our highly competitive, elitist education system. And mobile games, that's every Singaporean parents' nightmare. We are all smoking "spiritual opium".

Spiritual opium

Addiction is as old as civilization. Our brains are wired to respond to incentives and it requires a lot of willpower to abstain. Think prostitution, tobacco, alcohol, gambling which has caused so much problems despite everyone knowing their harmfulness. What are our odds now to beat addiction when the lures are now right in our palms. It is a huge social problem as with our global education system.

Yes, (*sigh*) the global education system.

It is well-known that our education system is very outdated. When we look at our lives across various aspects, it is really hard to think of system that has not changed. The way we communicate across distances have changed so many times that we don't even know where to start counting. Broadly, maybe it started with human messengers, then letters, then telegrams, phones, emails, whatsapp and now zoom but in between we also had pigeons, pagers, car phones and SMSes. It is a similar story the way we work, the way we consume music, the way we commute and run our governments and so on and so forth. Everything has evolved. It is amazing how the classroom has not changed. 

Classrooms have not changed for 100 years!

Is this really to best way to learn? I have written a lot about Singapore's education system. But as I learnt about other education systems across the globe, the bigger picture remains bleak. Not only has learning not changed much since humans rode horses, it is totally inadequate in preparing our children for the connected future. What is the point of memorizing Shakespeare when you can always just google it? The other day, my kid just asked me did I ever use the solution to the quadratic equation in my adult life. I did not answer him.

Learning has to be made fun, multi-faceted and more about harnessing creativity. It is no longer about memory work and brute force. How do we incentivise our kids to learn when screens, games and Netflix are competing for the same eyeballs? There are no easy answers. It doesn't help when the best brains have also gravitated to work for Facebook and Google to write algorithms that will capture those eyeballs rather than staying in schools to teach.

It's at uphill battle. We desperately need better teachers. We also need to better use media to teach in fun ways and ensure knowledge is retained. Parents have to play even bigger roles. We also need to make sure our kids can learn to relearn, because knowledge keeps getting updated. I remember my periodic table was much simpler!

Today's periodic table

Learning is also about discipline. It takes effort to force the brain to rewire itself as it learns new knowledge so that it gets stronger. Games, Tiktok and Netflix do none of that. It is a different state of mind. It's inducing artificial dopamine kicks after dopamine kicks without the effort needed. As such, Our kids are increasingly addicted, getting used to the effortless lazy mode. In future, they might find it way much harder to get in the "flow zone" of focused studying or training. 

The joy of learning is being taken away.

Learning is for life. It doesn't stop after we graduate. I learnt what's most important in life way after school: human psychology, value investing and valuable lessons from best selling books such as The Selfish Gene and Bill Gate's How To Avoid a Climate Disaster. We are not teaching these in schools. At least not yet. It is pertinent that our schools emphasize that learning never stops. The twelve to thirteen years of core education simply prepared us for the important tertiary learning and then ultimately the University of Life. If kids are taught that learning is about brute mugging and exams and they have to find dopamine kicks from "spiritual opium", then all is lost. 

As parents, perhaps we have to step up and encourage holistic education, induce a home environment of learning, replace spiritual opium with physical stimulus (more sports and physical activities, it's the Olympics fever after all) and enforce the mindset of learning to relearn, discipline and help our kids discover the joy of learning. 

If China is doing something, Singapore should follow.

Happy National Day! Huat Ah!

Sunday, August 01, 2021

Books #14: Daniel Pink's When

I have read two books written by Daniel Pink. Both were simple and good. The recent book was simply title When. This is a book telling us to be mindful of time and think a bit more how we should use it when. There were many gold nuggets. I shall list a few that were quite meaningful to me.

1. Every day, every project and every venture has a peak, trough and a rebound. We should be mindful of our own cycles and try not to make important decisions during the trough.

2. In the context of a venture or a project, the middle is a crucial moment where teams break or breakthrough. It is important to know this and garner all resources to make sure we handle the middle trough well. Daniel has the following four strategies to help us move towards breakthrough:

i) Go for small wins - if the task is too big and overwhelming, break it down and go for small wins.

ii) Moving beats stationery - walk around, exercise, do something. Not doing anything will mean falling down the slippery slope.

iii) Social beats solo - as retail investors, we tend to think alone, it is important to ask friends, seek help and advice. The wisdom of crowds beat solo thinking. This works in life, not just for investing.

iv) Outside beats inside - Daniel advocates that we should always connect with nature. It could be as simple as having plants around us. But nothing beats going to the park for a stroll to clear the mind.

3.  Here's the last bit about timing. There are times when we should go first and times we should not. We should go first when there are few competitors and we can make strong impressions. We should not go first when we are the default choice, or when there are too many competitors and when we are in an unknown environment.

Overall, I really like his style of writing. Simple and clear and hence worth the effort to jot this down for future reference.