Sunday 29 June 2014

The Multi-Baggers of SGX

The concept of multi-baggers was first made popular by the legendary Peter Lynch in his book "One Up on Wall Street". A multi-bagger means that a share has multiplied several times over in price. Do multi-baggers exist on the Singapore Exchange (SGX), or are they confined to US shares which have a lot of geography to grow their businesses compared to Singapore shares? Here is a list of all multi-baggers listed on the SGX that retained their original stock codes between May 2006 and May 2014. In total, there are 442 shares out of 709 shares in May 2006 that retained their original stock codes. Shares that have changed their stock codes due to corporate actions such as bonus issues and share splits have not been included in this analysis.

Name May-06 May-14 % Gain
RH Petrogas Ltd 0.060 0.660 1000%
Design Studio Group Ltd 0.045 0.480 967%
Yongnam Holdings Ltd 0.025 0.240 860%
Breadtalk Group Ltd 0.195 1.450 644%
Ramba Energy Ltd 0.085 0.490 477%
Super Group Ltd 0.600 3.390 465%
Vicom Ltd 1.040 5.830 461%
Swissco Holdings Ltd 0.075 0.415 453%
Chinavision Media Group Ltd 0.033 0.177 439%
MTQ Corporation Ltd 0.380 1.975 420%
Straco Corporation Ltd 0.125 0.645 416%
Lian Beng Group Ltd 0.155 0.705 355%
Casa Holdings Ltd 0.045 0.200 344%
Raffles Medical Group Ltd 0.800 3.500 338%
Transit-Mixed Concrete Ltd 0.095 0.415 337%
Rowsley Ltd 0.065 0.280 331%
Loyz Energy Ltd 0.075 0.315 320%
ABR Holdings Ltd 0.215 0.880 309%
Jardine Cycle & Carriage Ltd 10.800 43.530 303%
Progen Holdings Ltd 0.040 0.160 300%
King Wan Corporation Ltd 0.075 0.295 293%
Genting Singapore PLC 0.360 1.330 269%
Nobel Design Holdings Ltd 0.155 0.560 261%
Poh Tiong Choon Logistics Ltd 0.170 0.605 256%
OKP Holdings Ltd 0.085 0.300 253%
Lee Metal Group Ltd 0.120 0.410 242%
Superbowl Holdings Ltd 0.220 0.750 241%
Challenger Technologies Ltd 0.160 0.530 231%
LHT Holdings Ltd 0.040 0.131 228%
Tye Soon Ltd 0.060 0.195 225%
Tuan Sing Holdings Ltd 0.105 0.340 224%
Jardine Matheson Hldgs Ltd 24.031 76.723 219%
United Envirotech Ltd 0.395 1.250 217%
Chip Eng Seng Corporation Ltd 0.235 0.735 213%
Jardine Strategic Hldgs Ltd 14.519 43.919 203%
Giken Sakata (S) Ltd 0.100 0.295 195%
Heeton Holdings Ltd 0.230 0.670 191%
Dairy Farm Int'l Holdings Ltd 4.506 13.067 190%
Koh Brothers Group Ltd 0.110 0.310 182%
Spindex Industries Ltd 0.180 0.490 172%
Tianjin Zhong Xin Pharm Group 0.501 1.352 170%
Far East Orchard Ltd 0.710 1.885 166%
Ho Bee Land Ltd 0.875 2.200 151%
Lee Kim Tah Hldgs Ltd 0.360 0.900 150%
Tai Sin Electric Ltd 0.140 0.350 150%
Etika International Hldgs Ltd 0.165 0.410 149%
Petra Foods Ltd 1.470 3.530 140%
Silverlake Axis Ltd 0.375 0.900 140%
Lion Teck Chiang Ltd 0.315 0.755 140%
Cortina Holdings Ltd 0.360 0.855 138%
Noel Gifts International Ltd 0.115 0.265 130%
Falcon Energy Group Ltd 0.150 0.345 130%
United Industrial Corp Ltd 1.480 3.330 125%
BRC Asia Ltd 0.090 0.200 122%
Sarine Technologies Ltd 1.080 2.400 122%
Select Group Ltd 0.160 0.350 119%
See Hup Seng Ltd 0.135 0.295 119%
Sim Lian Group Ltd 0.405 0.875 116%
Pollux Properties Ltd 0.040 0.085 113%
Karin Technology Hldgs Ltd 0.145 0.305 110%
Powermatic Data Systems Ltd 0.070 0.146 109%
Ying Li Intl Real Estate Ltd 0.130 0.270 108%
Teckwah Industrial Corp Ltd 0.195 0.400 105%
UOL Group Ltd 3.260 6.630 103%
Addvalue Technologies Ltd 0.065 0.132 103%
Sakae Holdings Ltd 0.265 0.530 100%

Collectively, how have all the shares listed on SGX performed over the 8-year period from May 2006 till May 2014? Figure 1 below shows the distribution of multi-baggers. A positive value indicates that the price has multiplied while a negative value indicates that the price has reduced. For example, a (+2)-bagger means that the share price has doubled, while a (-2)-bagger means that the share price has halved.

Figure 1: Distribution of Multi-Baggers on SGX

On average, about half of the shares have neither doubled nor halved in price. 2-baggers form 7% (equivalent to 1 in 14) of the shares, while 3-baggers form 3.4% (1 in 29) of the shares. In total, positive multi-baggers form 14.9% of the shares. In other words, 1 in 7 shares have multiplied in price from May 2006 till May 2014.

On the converse side, 10.6% (1 in 9) of the shares have seen their prices halved, while another 5.2% (1 in 19) have their prices divided by 3 times or more. In total, negative multi-baggers form 36.9% of the shares. In other words, 1 in 3 shares have their prices at least halved from May 2006 till May 2014.

It is interesting to note that the no. of negative multi-baggers exceed that of positive multi-baggers for the same multiple, i.e. (-2)-baggers exceed (+2)-baggers, (-3)-baggers exceed (+3)-baggers, etc. At the extreme ends, a significant 8.4% (1 in 12) of the shares actually have their prices divided by 10 times or more! In contrast, only 2 shares have their prices multiplied by 10 times or more.

Figure 2 below shows the distribution of multi-baggers based on their prices in May 2006 while Figure 3 shows the same distribution in percentage terms.

Figure 2: Distribution of Multi-Baggers Based on May 2006 Share Price

Figure 2: Percentage Distribution of Multi-Baggers Based on May 2006 Share Price

Are your shares part of the multi-baggers that beat the Straits Time Index and the majority of investors hands-down? If so, you are on your way to becoming the Peter Lynch of Singapore!

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Sunday 22 June 2014

Size of Fish Matters!

In my last blog post, I mentioned that while the size of the Singapore Exchange (SGX) pond (i.e. no. of shares listed on it) has became slightly larger over the last 8 years, the size of fish (i.e. average price of each share) in the pond has became smaller. Does the size of fish matters? Here, I tracked the performance of shares that retained their original stock codes over the 8-year period from May 2006 till May 2014 and measured whether they have performed worse (posting more than 10% loss), the same (posting between 10% loss and 10% gain), or better (posting more than 10% gain). The results are shown in Figure 1 below. In total, there are 442 shares out of 709 shares in May 2006 that retained the original stock code. Shares that changed their stock codes due to corporate actions such as bonus issues and share splits have not been included in this analysis.

Figure 1: Price Change of Each Price Category of Shares

From Figure 1 above, it can be seen that for practically all categories of shares priced below $5, more shares have performed worse compared to better from 2006 till 2014. The percentage of shares performing worse hovered around 55% for shares priced $1 or less, and decreasing steadily as the average price of shares increases. Conversely, the percentage of shares performing better hovered around 33% for shares priced $5 and lower, and increasing as the share price increases (except for the 1 share priced above $50). This shows that on average, higher-priced shares tend to perform better than lower-priced shares. 

Having said the above, there are always a few exceptional shares that perform much better or much worse than the average share in its price category. Figure 2 below shows the "price mobility" of shares in each price category from 2006 till 2014. As an example, there were 30 shares priced between $0.01 and $0.05 in May 2006. In May 2014, 14 of these trade at less than $0.01, while 1 of these have increased by 6 to 10 folds and trade between $0.30 and $0.50.

Figure 2: Price Mobility of Each Price Category of Shares

A plot of the price mobility in Figure 3 below shows similar trends as the price changes in Figure 1.

Figure 3: Price Mobility of Each Price Category of Shares

To conclude, higher-priced shares tend to perform better than lower-priced shares on average. Hence, besides the size of pond, the size of fish in the pond also matters! Something to ponder the next time a stock is up for privatisation ;)

P.S. The disclaimer in previous blog post applies.

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Sunday 15 June 2014

The SGX City

Due to home bias, most of us invest only in the local stock market. The state of the local stock market is thus of significant importance to us. Have you ever wondered how the Singapore Exchange (SGX) would look like if it were a city? Assuming that each stock listed on the SGX is a building, and using the price of the stock as the height of that building, I plotted the view of SGX City in May 2014. 

View of SGX City in May 2014
For comparison, I also plotted the view of it in May 2006. 

View of SGX City in May 2006

In comparison, there are several more skyscrapers (namely, Lonza and the 3 Jardine stocks) in May 2014 compared to the solitary one (British & Malayan Trustees) in May 2006. The size of the city also got bigger, from 709 "square metres" (i.e. no. of stocks) to 763 square metres. (Note: The no. of stocks exclude foreign stocks, bonds, Extended Settlement counters, Exchange Traded Funds, odd lots, rights and warrants). While SGX City has grown from May 2006 to May 2014, the heights of buildings in SGX City have not really grown (Note: this analysis does not take into account corporate actions such as bonus issues and dividends, which may reduce the price of the stocks).

Price Distribution in May 2006 and May 2014

Between May 2006 and May 2014, there have been a significant increase in the no. of stocks priced less than $0.10. This has grown at the expense of stocks priced between $0.10 and $0.20 and between $1 and $2. In essence, the average height of buildings in SGX City has got shorter even as there are more skyscrapers. The average height of buildings has grown slightly from 109.7 "metres" (i.e. cents) to 112.0 metres, while the median height has reduced from 28.5 metres to 24.0 metres. In the same period, the Straits Times Index has increased from 2,620 points to 3,250 points, an increase of 24%. The increase in STI reflects the increase in price of the big capitalisation stocks. 

To use a different analogy, the size of the SGX pond has got bigger, by about 8%, but the size of the fish became smaller. While there may be more whales, these are generally beyond the catch of retail investors. Some of the reasons why the average size of fish has got smaller are privatisation and poor corporate governance among some China stocks. Some of the well-known fish that have left the pond includes Asia-Pacific Breweries, Cerebos Pacific, Datacraft Asia, Robinson and Want Want. For a list of the fish that have left the pond since 2009, you can refer to this blog post.

Hence, the next time a stock is up for privatisation, do consider what is left of the pond ;)

P.S. I accepted the privatisation offer for CapitaMalls Asia (partially) and the takeover offer for ASJ Holdings. I will also be accepting the delisting offer for China Powerplus. Please refer to The Last Stand on CapitaMalls Asia for the reasons for these actions. You may wish to refer to Investors' Guide to Privatisation Deals on whether to accept or reject different types of privatisation offers.

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Wednesday 11 June 2014

Stock Market Performance During World Cups

In another 2 days' time, the world's most eagerly awaited event would take centrestage. This event is the World Cup, which happens once every 4 years. A lot of people would stay up late in the night to watch their favourite teams in action. Everything else would take backstage, including wives, girlfriends, and for some, stock trading. How does the local stock market perform during the World Cup? Here, I compare the performance of the Straits Times Index (STI) during the years when World Cup is staged and during other years. 

The World Cup usually starts in mid-Jun and ends in mid-Jul. The group stage, which has the most no. of matches and thus the most no. of fans watching, ends around end-Jun. After which, as more and more countries drop out of the World Cup, there will be less and less matches, which are also spaced more widely apart. Thus, the performance of STI in Jun reflects the height of the World Cup fever while the performance in Jul reflects the progressive end of World Cup. Below are the statistics for the performance of STI in Jun, Jul, for the year without Jun & Jul, and for the whole year including Jun & Jul. Statistics in bold reflect the years when the World Cup is staged.

Year Jun Jul NoJunJul Year
1988 9.4% 4.6% 0.1% 1.2%
1989 2.2% 4.9% 3.0% 3.1%
1990 -1.7% 1.8% -2.1% -1.8%
1991 -4.1% -0.5% 3.1% 2.2%
1992 -2.9% -2.0% 0.9% 0.3%
1993 -4.8% 0.3% 5.3% 4.1%
1994 -2.5% -0.8% -0.3% -0.5%
1995 -3.9% 3.0% 0.3% 0.2%
1996 -1.6% -8.0% 0.8% -0.1%
1997 -3.8% -1.1% -2.9% -2.8%
1998 -15.0% -0.2% 2.1% 0.5%
1999 13.9% -1.0% 5.0% 5.2%
2000 13.5% 0.6% -3.6% -1.8%
2001 4.2% -3.5% -1.4% -1.1%
2002 -7.1% -2.9% -0.7% -1.4%
2003 7.3% 7.7% 1.3% 2.4%
2004 2.8% 2.9% 1.0% 1.3%
2005 2.4% 6.3% 0.5% 1.1%
2006 2.2% 0.4% 2.3% 2.1%
2007 1.1% 0.0% 1.6% 1.4%
2008 -7.7% -0.6% -5.3% -5.1%
2009 0.2% 14.0% 4.0% 4.5%
2010 3.0% 5.4% 0.2% 0.9%
2011 -1.2% 2.2% -1.8% -1.4%
2012 3.8% 5.5% 1.0% 1.6%
2013 -4.9% 2.3% 0.3% 0.0%
Average (WC) -3.5% 0.6% 0.2% 0.0%
Median (WC) -2.1% 0.1% 0.0% 0.0%
Average (Others) 1.3% 1.9% 0.7% 0.8%
Median (Others) 0.6% 1.4% 0.9% 1.2%

On average, in the years when there is World Cup, the performance of STI during Jun is -3.5%. This is lower than the performance in other years when there is no World Cup (1.3%). It is also lower than the average performance for the whole year (0.0%) and reflects the fact that people stay away from the stock market to watch football. In Jul, as people return to their normal activities, the STI stages a recovery of 0.6%, which is also higher than the average performance for the whole year.

Thus, based on the above statistics, it may be advantageous to stay away from the stock market when the World Cup is in action and re-enters the stock market when the World Cup is about to end.

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Sunday 8 June 2014

The Last Stand on CapitaMalls Asia

Perhaps by 8am Monday morning, this blog post would have been overtaken by events. Nevertheless, I still wish to share my actions and rationale on the privatisation of CapitaMalls Asia (CMA) by Capitaland.

As mentioned in my blog post 3 weeks ago on Playing Poker With Capitaland Over CapitaMalls Asia, I would accept Capitaland's privatisation offer if it manages to own more than 90% of the shares so as not to be caught in the no-man's land where Capitaland has acquired sufficient shares to delist CMA but insufficient to compulsorily acquire all the shares. On the morning of 5 Jun 2014, Capitaland announced that it has acquired more than 90% of the shares, allowing it to delist CMA after the close of the offer on Monday 5.30pm (unless the offer is extended).

On the morning of 6 Jun 2014, I sent in the acceptance form for the privatisation offer, but only for 6 out of the 10 lots that I owned. I calculated that the sales proceeds from the 6 lots is about sufficient to cover the cost of the 10 lots, allowing me to own 4 lots at no cost in the soon-to-be-delisted CMA. Why wasn't I gracious enough to concede defeat and accept the offer for all 10 lots?

While the battle against privatisation of CMA has been lost, the war against privatisation in general is not over yet. Over the years, many companies have been delisted. You may refer to this post for a list of the 129 companies that have been delisted since 2009. Some of these companies are not small unknown companies; they are on the Who's Who list of Singapore's biggest companies. A sample of these companies are:
  • Allgreen Properties, developer of the Queens condominium, the highest condominium in Singapore;
  • Asia-Pacific Breweries, manufacturer of Singapore's Tiger Beer;
  • Cerebos Pacific, manufacturer of Brand's Essence of Chicken;
  • Chartered Semiconductor, the world's second largest integrated chip foundry; and
  • Robinson's, the departmental store that made famous the phrase "the sale worth waiting for".

Added to this list will be CMA, Singapore Land and possibly Hotel Properties Ltd and Goodpack. At the rate that we are going, there would not be many good companies left to invest in on the Singapore Exchange (SGX). So, one reason why I kept holding on to 4 remaining lots is to do my part in slowing the pace of privatisation, until minority shareholders realise that we are actually shortchanging ourselves by killing the goose for the golden egg in most privatisation deals. The ideal state is that Capitaland can only delist but not compulsorily acquire all the shares and fully privatise CMA. While it may be a no-man's land for minority shareholders if Capitaland's share ownership ends up between the levels for delisting and compulsory acquisition, it is also a no-man's land for Capitaland as well. Capitaland also would not want to be struck in this no-man's land, where it cannot integrate CMA into itself and CMA's Annual General Meetings (AGMs) still need to be held. Hence, a privatisation deal ending in limbo would serve as a precaution for companies wishing to privatise other companies listed on the SGX.

As for the other privatisation deals ongoing currently, I cannot advise minority shareholders to reject the offers, since I do not share their losses if the privatisations were to become unsuccessful. But for CMA, I have a stake in it and I have acted in accordance to what I feel.

The other reason why I kept onto the 4 lots is to experience life as a shareholder in an unlisted company. Generally, regular dividends cannot be expected in an unlisted company, but when the majority shareholder wishes to transfer money from the company to itself, it will have to do it via dividends and/or capital reduction. Minority shareholders will get their rightful share. And CMA would have to continue holding AGMs. It is ironic that I seldom attend AGMs of listed companies, but if CMA were to become a public unlisted company, I believe I will be attending their AGMs quite regularly.

I half suspect that if some company were to offer to privatise KeppelCorp at $20, the privatisation would really go through. However, let us take a step backwards and consider which is more valuable: $20 in the pocket or KeppelCorp as a listed entity? There are things that money cannot buy, and unlisted companies are one of them. No matter how much you like Tiger Beer and Brand's Essence of Chicken, you can never buy the shares of companies that produce them.

P.S. On the same day that I accepted partially the privatisation offer for CMA, I also accepted the takeover offer for ASJ Holdings. I will also be accepting the delisting offer for China Powerplus. Both these companies have been making losses for years and there is no point in continuing to hold on to these stocks. You may wish to refer to Investors' Guide to Privatisation Deals on whether to accept or reject different types of privatisation offers.

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