1Q 2018 Report Card

1st up, I’d clarify, as I’ve always done so for previous quarterly report cards, that I track returns using XIRR. So this means that the time value of cash is taken into account in the results, but it also skews the annualized XIRR figures for now, as it’d assume the exact same rate of return for the rest of the year.

For 1Q 2018, STI ETF produced a XIRR of 4.01%, inclusive of dividends.

731) STI ETF Q1 2018.jpg

TTI’s portfolio, inclusive of US holdings and options, produced a XIRR of 6.22%. 

AUM grew to $1,462,273.22, inclusive of capital injections, of which almost 35% is kept as SGD cash at the point of writing this.

TBH, I was a tad disappointed despite beating STI ETF slightly, in a period of heightened volatility. Perhaps my expectations were too high, but it felt like I was running away from STI ETF after 3 successful investments recognized in Q1:

  1. Privatization offer for LTC Corporation (“Where Art Thou, White Knight?” – LTC Corporation’s Privatization Offer.)
  2. Shinsho Corporation and Kobe Steel (Divestment Of Shinsho Corporation & Kobe Steel – TTI’s Post-Mortem)
  3. Shorting Volatility (The Big Short: TTI’s Version. But Where Are My Millions?!)

Instead, what countered the profits from these successful investments were the continued drop in Dutech Holding’s share price (down about 25% YTD), Valeant Pharmaceuticals (down about 22% YTD), as well as the weakening of the USD vs SGD, since I have a substantial portion of the portfolio in USD denominated assets.

Cash levels stands at over $350k SGD, and will likely increase further, as I’d soon have to deploy cash into a private convertible bond offering.

This will become a big drag on my portfolio returns for the next 1.5 – 2 years, as I’d receive 0 returns from what is likely to be a sizable investment. Instead, the coupons will accrue, and at IPO, I’d (hopefully) see a massive ROI at 1 go.

After meeting and discussing with my hedgie friends just last week about a potential JV, I’ve new found understanding of how the industry works, and the complexities surrounding even making a simple investment like this. Perhaps I’m too naive, but I was expecting it to be a breeze.

The terms that I conjured up are fair (IMO) to all parties involved, and it is my sincere belief that we’d all pocket a tiny sum that is fairly assured, and in a relatively short time frame. And we can further discuss, at that point in time in future, whether to show hand further and throw good money after… good money, and explode our returns together.

It was what I view, to be a win-win-win deal for everyone, as with all deals that I structure. I’d never want to win alone, if it involves my partners losing out. Reputation is a lot more important than profits. Opportunities for profits abound at every corner, but reputation? we all only have 1 each. Once it’s gone, it’s gone. You gotta protect the ppl who trusted you.

But I did not anticipate stuff like fund mandates, external investor concerns and regulatory issues placing roadblocks in my plan.

Ah well, I’d still see if we can work around stuff like that.

If not, I’d have to go it alone then.

Alright, so this is a quick breakdown of my thoughts currently on my current holdings (SG only):

Alliance Mineral Assets

Much has been written about AMAL everywhere else, esp so in NextInsight, such that I’m not sure if there’s anything of value that I can add.

The Bald Hill project has finally started production last month, and lithium exports are expected to proceed in April.

The concentrates produced are also of a higher quality than expected, containing well in excess of 6% Li2O.

Their cost is given at ard USD 500 / tonne currently, but this is expected to come down next year to just under half of their USD 800 / tonne selling price, which would give them a more than 50% operating profit margin.

Also, Tawana’s CEO has indicated that he expects to export 10k to 15k of concentrate every month, giving rise to a target of 140,000 tonnes of concentrate for the full year.

So, based on these numbers, the total profit for this year, works out to be (880-500) X 140,000, x 50% = USD 26.6mil for Alliance, which works out to be 6.27 SG cents per share (using exchange rate of 1.31)

Based on the current share price of $0.37, that gives us a forward PE of 5.9x.

These figures are taken from recent interviews:

Of course, I’m not including any other gains from Tantalum so there’s some MOS there.
And on top of that, they’d probably announce increases in their reserves soon (Current mine life is only 3.5 years), so there’d certainly be some catalysts there.

Of late, AMAL’s partners, Tawana and offtaker Burwill, have shown signs of accumulating AMAL shares further. Market chatter is for Tawana and AMAL to merge. Burwill has openly set aside a sum to possibly further acquire AMAL’s shares.

All in, it’s all good news.

I think the current share price represents a steal for AMAL.

LTC Corporation

The privatization offer is underway.

As of the most recent news, the Chengs collectively own and have acceptances that give them just over 80% of the company. The Chengs are also continuing to accumulate from the open market.

Yet, this means that they need to convince shareholders to accept to give them another 9% or so of the outstanding shares, within the next 2 weeks (until the deadline). This seems like a tall order.

9% can’t be just minority shareholders. Certainly, it means that there are some large shareholders who are holding out. Yet, I don’t forsee a counter offer coming. Someone’s just unhappy with the offer, but is unwilling to counter offer.

If the Chengs fail to garner the required 9% within these 2 weeks, they would have failed to privatize the company, but would’ve the option of still proceeding to buy the shares that have been tendered, or to call off the whole deal altogether.

Any scenario may materialize right now, TTI’s view is that the Chengs will fail to privatize, but proceed to accept tendered shares. (Launching a privatization is costly, I don’t think they want to walk away without any results to show for it)

SGX rules state that they’d also not be allowed to make a new offer if this lapses and fails, for a period of 1 year.

Now… we all know the Chengs want to privatize this. It makes no sense for them to own 80% of a listed company with next to zero liquidity. Especially since they already had control of the company to begin with. Yet, whoever is holding out wants a higher offer.

So my best guess is that the Chengs will come back after a year with a higher offer and succeed with the buy out.

Again, any scenario may play out, I’m just postulating here, based on my past experiences with privatizations (and I’ve had quite a few)

BBR Holdings

The financial results have improved dramatically in 2017, compared to the prior year.

At least they stemmed the losses from their loss making projects.

Yet, going forward, there’s nothing exciting on the order books. Order books are getting depleted, with no new projects announced.

I won’t be too critical though, cos the last time they went all out for projects, they ended up not taking care of their margins, and when there’s even some variation, the projects sunk into losses.

Thus far, the company is not getting much results to show for their heavy investments into PPVC and all that new DfMA technologies. This is a major disappointment for me.

Somehow, this company just seems to like to have a lot of activities, do a lot of stuff, without bothering about their bottomline. Activities over results.

I’ve spoken to a few privately owned developers, and none are too optimistic about DfMA. All have indicated that they’re happy to let the listed companies go ahead and experiment, run up losses, while they sit back and watch how it proceeds. This is 1 fine example of why it’s not always best to be the first to try out new stuff.

By the end of 2018 though, almost all of BBR Holding’s projects are slated to be completed, so it’d be unthinkable that they do not win any new projects from now till then.

I’m watching the gov tenders closely… come on BBR, there are 34 PPVC tenders up for grabs. BBR is the pioneer in PPVC, and has invested heavily in PPVC technologies and projects, and is still investing in a yard for their modular units for PPVC.

732) BCA PPVC pipeline.jpg

Surely, as pioneers and leaders, they should be able to win some of these projects, and with a certain margin too. If they are not, then why the heck get involved?!

I’ve said this a gadzillion times: many public listed companies’ management just want to show activity. So that shareholders think they are actually doing work. We really want the bottomline, not activities. I don’t care if u sit in the office and smoke crack the whole day, if the bottomline keeps increasing!

Having said that, I’m at least a bit more optimistic with their latest mixed development project, the en bloc of Goh & Goh Building.

The site is situated just opposite an MRT station, right at the start of Bukit Timah Road, with a wide and long frontage that’s along the main road, and if done well, a mixed development there has massive potential.

Their previous mixed development, The Wisteria, in Yishun, is slated to TOP in Q2 2018 (which is essentially right now)

The residential part is already fully sold. The commercial part has 2 floors, and is currently 75% occupied. (I know the occupancy rates and the rental numbers because my company was looking at taking up a space there, but it didn’t materialize.) I don’t think it’s appropriate to make public, the exact numbers, so I shan’t.

The Wisteria will at least, provide BBR and their partners, with a steady cashflow from management of the mall.

Geo Energy Resources

I can’t believe the share price is as low as it is right now.

Probably the markets are discounting the share price heavily over fears of China’s potential coal import restrictions. On the contrary, China’s crackdown on coal is likely to IMPROVE Geo’s fortunes further, as they close local mines and opt for low ash, high calorific value coal, which Geo sells under Geo Coal.

Also, Q4 2017 has several extraordinary expenses arising from royalty payments and write offs.

Of all my holdings, I’m pretty much the most optimistic on Geo Energy in the short to mid term.

Dutech Holdings

The 1 bug bear that dragged down, what would otherwise be stellar returns not just this past quarter, but the past several quarters in fact.

The usual story applies.

The integration of Metric continues. Johnny has still not been able to cut costs as quickly as he’d like. The company continues to face headwinds in the High Security segment, from previously high steel prices (it has come down a bit of late), lowered demand for safes, and correspondingly, the markets have punished the company with a rapidly declining share price.

I have spent a couple of weeks digging deep into Dutech Holdings, and my view has not changed.

I’d wait till after the AGM to make my move, but if it stays as pessimistic as it is currently…. it’s gonna be really hard for me to sit on my hands and not do anything.

Q&M Dental Group

Enuff said.

I think a buy out of sorts is in the works, but I have no idea when it’d happen, if it’d happen.

My relatively small holdings of 60,000 shares at $0.608 reflects my uncertainty.

My view is that in the near term, the uncertainty and volatility in global markets that we have seen in the past week will subside. Markets will be more green for the next week or so.

But then, what do I know about global macro stuff.

As always, good luck to all, and godspeed.



    1. Hi desmondchiew
      It’s not the CEO, it’s the ex-CEO.
      I wouldn’t read too much into that, he left on an acrimonious note, so it could be just his ego talking there.
      There can be many reasons for selling out.
      I think there’s also a chance that he and his wife are intending to sue the company (whether it’s merited or not is another matter altogether)
      In short, as of now, I don’t really put any weightage to this piece of news.
      I will say that I am rather disappointed that the company had to cancel the previous EGM and set up a new EGM because they missed out on 1 important resolution. It’s a bit comical and it tells me this management is in disarray.
      It’d get better with the merger and a proper CEO comes on board.

      Liked by 1 person

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