Sound Investment

Stock market world wide had been going into 'tail-spin' since the begining of 2016. Our 3 local banks are now attractively price.
DBS yield = 3.97% & PE= 8.6x
OCBC yield = 4.53% & PE = 8.75x
UOB yield = 4.26% PE = 9.1x

DBS GROUP HOLDING
2012 dividend: 56 cts
2013 dividend: 58 cts
2014 dividend: 28 + 30 = 58 cts
Yield @ $14.60 = 3.97%
PE = 8.6

OVERSEA-CHINESE BANKING
2012 dividend: 33 cts
2013 dividend: 34 cts
2014 dividend: 18 + 18 = 36 cts
Yield @ $7.95 = 4.5%
PE = 8.75

UNITED OVERSEA BANK
2012 dividend: 70 cts
2013 dividend: 75 cts
2014 dividend: 20 + 55 = 75 cts
Yield @ $17.60 = 4.26%
PE = 9.1

All 3 banks are blue chips shares, good value at this price in term of dividend yield & PE. Of all 3 bank I like OCBC Bank. Reasons; best yield among the 3 banks. OCBC Bank have been ranked among the world's 5 strongest bank FOR 5 YEARS. OCBC Bank will most likely top in profit in the coming financial year among the 3 banks. It good time for me to start accumulating OCBC Bank shares now as no one can predict accurately when it's reach bottom. If the sell-down continue then it will be cheaper.

The 4 stocks in my radar during the recent market sell-off:

OCBC BANK
In term of yield, valuation & PE OCBC Bank looks attractive. It seem that banks are facing headwind worldwild I'm now cautious on bank stocks. The tougher operating enviroment also saw OCBC Bank set aside higher allowances for bad loans and other assets. Cautious on OCBC Bank for the time been.

VALUETRONICS
Valuetronics strong cash generative business and solid balance sheet with cash of HK$682 million (S32.5 cents) and debt free. Valuetronics is definately a great bargain. Dividend last year is HK20 cents and trading below 10x PE. (Ex cash 1.0x PE)

The fall in the CE segment is the main concern of this stock. Since Valuetronics had already exit the CE segment and the ICE segment had been growing by double digit will soon make-up for the lost in revenue. The latest in Q3 result ICE contributed 67.5% of the total revenue. As market does not like uncertainty and since Valuetronics BOTTOM IS IN SIGHT without CE contribution. The sebsequence growth in ICE segment and the improve margin will propel the growth of Valuetronics future business.

Valuetronics strong cash generative business and solid balance sheet, Valuetronics is an attractive target for M & A.

I am buying up Valuetronics at this depressed price few months ahead of its profit turnaround. At this level the down-side is limited. Yield is above 7%.

M1
M1 share price had fall from high of $3.96 in Febuary 2015 to as low as $2.24 due to fear of entry of 4th telco company. M1 is the most attractive among the 3 telco stocks in term of yield and valuation. I will go slow on M1 and only buy below $2.50. M1 yield @ $2.54; 6.5% and 13x PE.

TRENDLINES
Trendlines is one of 18 licensed incubators which the Israeli government hands out grants to their qualifying start-ups.

Focusing on the medical and agricultural industries in order to "improve the human condition,"

From evaluating about 500 possibilities a year, and doing due diligence on a shortlist, currently Trendlines is incubating 48 start-ups.

They have qualified for cash grants from the Israeli government of, typically, about US$543,000 for agri-tech start-ups, and US$652,000 each for medical start-ups.

Trendlines, for its part, injects about US$96,000 and US$115,000 cash, respectively, into the start-ups.

The start-ups -- typically 50-50 owned by the entrepreneur and Trendlines -- are ready for the first round of funding in Year 2 and Trendlines will be on the way to an exit anytime after that.

To investors of Trendlines, a key catalyst for the stock price would be exits and the resulting dividend payouts. Exits will pick up pace given that within Trendlines' expanding portfolio of companies, more start-ups will reach higher levels of business development.

Currently, 17 of the start-ups are generating revenue -- which raises the odds of them being acquired by third parties.

Trendlines, in fact, has announced that three of them (including Tel Aviv-listed ET View) have signed engagement letters with investment banks for possible M&A actions.

Some potential incubating start-up:
1. Stimatix was awarded "Best Start-Up 2011" by Israel’s Office of the Chief Scientist of the Ministry of Economy. Stimatix has developed a "cap" that sits over the opening in the abdominal wall. "If you see someone wearing it, you'd think it's a bandage as it's skin color and flat." With CE and FDA approval already secured, the device can now be sold in Europe and the US. This year, Stimatix will build up its capability for mass-production and targets to deliver the device to the market in early 2017.

2. ApiFix, which was named “Best Start-Up 2012” by the Office of the Chief Scientist in Israel. ApiFix has developed a game-changer solution for remedying idiopathic scoliosis, a condition where the spine is severely curved. It mainly afflicts adolescent girls.

3. IonMed in Israel has developed a technique for closing wounds that has been proven to be superior to suturing and stapling.

4. TTGL is considered the best incubator in the Medtech space and is the only government franchised incubator in Agtech space

5. Tandem Technologies, which is in the gastroenterology space, is developing a device for more efficient removal and retrieval of polyps in the colon, with the goal of a near 100% retrieval rate.

6. Zeev Implants, which is in the dental market, is developing a modular dental implant to solve the most common sources of dental implant problems and diseases, including peri-implant disease, without the need to remove or replace the implant.

I had bought Trendlines share below 20 cents.

On 16th January 2016 I had hightlighted 'Stock market world wide had been going into 'tail-spin' since the begining of 2016. Our 3 local banks are now attractively price.'
Those who have the courage to buy any of our 3 local banks will be richly rewarded. See below:

DBS
Closed on 16/1/2016 = $14.60
Lowest closing price on 11/2/2016 = $13.02
Closed this week = $16.02

OCBC
Closed on 16/1/2016 = $7.95
Lowest closing price on 11/2/2016 = $7.45
Closed this week = $9.27

UOB
Closed on 16/1/2016 = $17.60
Lowest closing price on 11/2/2016 = $16.81
Closed this week = $19.60

Some of the stocks I'm holding inspite of 2016 choppy share market:

STRACO
Straco cash generated yearly from operation is one of the best. It's maintenance capex has been very low. Straco is debt free untill it bought over The Singapore Flyer in 2015 for $140 million with a 10% JV partner.
The Singapore Flyer from day one already contributing lots of cash to the group. As a result in 2015, Straco's net operating cashflow soared to $65 million compared to $37 million the year before. According to Straco Q1 2016 result latest cash flow growth to $139.9 million.


VALUETRONIC
Valuetronic Q4/FY 2016 result will be on 25th May 2016. Valuetronic ICE segmental revenue over the this financial year had been growing by double digit every quarterly. As the company had completed its last order from mass market LED, the last quarter revenue contrbution will come mainly from ICE only. Therfore the coming 4Q profit without contribution from CE segment profit will be the lowest. Going forward Valuetronic subsequnce year profit will be back on the growth path. This is because of its healthy growth from ICE revenue. ICE segment gross profit margin is higher than CE segment. Valuetronic future looks promising.
Given Valuetronic strong cash generative business and solid balance sheet with cash of HK$682 million (S32.5 cents) and debt free. Given its strong cash generative business and solid balance sheet, Valuetronics is an attractive target for M & A.


OCBC
In Febuarary 2016 Swiss billionaire Zulauf speaking at the annual Barron's roundtables warned that Singapore's largest banks are at risk of massive capital outflows if the Chinese economy experiences a hard landing, which he expects will happen this year.
At the recent DBS AGM insight d by Mr Gupta reponse to the above issue whether Singapore might be headed for a banking crisis because of China economic woes.
Mr Gupta reply:
"True, he agreed that Singapore's loan books had grown sharpely in the past 5 years, but the biggest growth had come from offshore lending because of the trade finance deals booked in Singapore. But these deals were not funded by Singapore money but financed by the sale of financial papers and raising money offshore, so they posed no risks to the Singapore banking system'.
He said that where the hedge fund manager is concerned "IF YOU WANT TO BE POLITE, HE IS MISINFORMED, BUT IF YOU DON'T WANT TO BE POLITE, HE OBVIOUSLY HAS AN AGENDA".


TRENDLINES
Trendlines currently has a portfolio of 47 companies, of which 17 are in commercialisation stage. Three of Trendlines medtech companies have engaged investment bankers to find potential buyers. Any exit will resulted in share price to spite upward.
Trendlines revenue from M&A tends to be lumpy but Trendlines is seaching for ways to generate stable streams of revenue through the use of royalties post-exit.

The stormy stock market have passed since January 2016. But the way ahead is not without headwinds. The stock market will remind volatile. Several events may still cloud the stock market:

* The Fed interest policies, rate hike is temporary kept on hold.
* The Brexit referendum in Britain on 23rd June just 2 days away. Uncertainties of Brexit had already push up gold price further.
* The hardline stance of Mr Trump Republican presidential nominee, on issue like free trade is worrying.
* Crude oil had recover to above US$50 but had since fall back below US$50 awaiting the outcome of Brexit outcome.

Many SGX stocks are already trading below book and price-to-earnings which are at the historical Low end.
US economy continue to recover.
China economy soft landing my soon be over.
Singapore property market price seem stabilizing.

Bargain opportunties may come along. It is important to review and rebalance our financial portfolio to ensure that our portfolio continues to deliver the returns we expect to meet our long-term financial needs and objectives. Watch our cash flow and do not be caught by being over-leverage.

THE DIVIDEND MISTAKE WE MUST AVOID

The result in favour off Brexit on 23rd June had spark-off the recent market sell-off. Soon after the market sell-off investors are buying up dividend stocks. The dividend mistake we must avoid; Cut Dividend.

CUT DIVIDEND
The worst stocks are those that had to cut their dividend. Stocks paying huge yields are very often the ones with the least ability to continue increasing their dividends. Often, their dividend payouts are already so high, the only move left is to cut them. And when their dividend gets cut, income-focused investors flee the stocks driving its share price south.

Successful dividend investing requires a much wider focus than just pure yield. Loading up on higher-quality companies set to grow their dividends for years to come while also generating stellar stock returns. These are perpetual growth dividend stocks.

PERPETUAL GROWTH DIVIDEND STOCKS:
These are companies that able to increase its profit and its dividend over times. Companies that consistently grew their dividend over time generated growth returns for investors. If you look at their track record, perpetual growth dividend stocks have been truly exceptional across time in term off dividend received and capital appriciation. The most successful style of dividend investing is buying extremely high-quality companies that can combine years of dividend growth with the kicker of phenomenal share price growth.