Adios 2022, a more prosperous 2023

My simple reflection on my investment performance on the last day of 2022: 2022 is generally a solid year for me as I could catch a multibagger in Excelpoint which I put in substantial amount of money. I have also accumulated few potential multibaggers --- China’s businesses listed on HK Exchange --- at relatively cheap price due to the market crash and I believe they will blossom in 2023.

I put in some cash in T-bills earning an average cut-off yields of close to 4%. Also, I put in a sizable amount of my CPF ordinary account funds in 6-month T-bills issued on 13 Dec 2022. The cut-off yield was 4.4% per annum, beating the breakeven yield of 2.92% for my CPF OA return by 148 basis points. These funds from T-bills will be my war chest in the later part of 2023.

What with the T-bills at above 4+%, and with the Fed likely to raise the Fed Funds rate by at least another 50 basis points in 2023 and thereafter maintain the rate for a protracted period till at least end of 2023, it is getting more and more difficult to find investment targets with an ROI that beats T-bills cut-off yields.

Going forward, it is likely that 4+% fixed deposit rates will be the norm for many years to come and the usual risker investment strategies that once worked well over the past decade may not be the ones that can outperform in coming years.

With their central banks’ resolve to combat the stubborn inflation through high interest rates, the US, the UK, and Europe are almost certain to face a protracted recession at the later part of 2023. Even after these central banks have raised the interest rates to a lofty level, they will still have to maintain it at the level for a protracted period for fear of fighting back of the inflation.

I reckon that recession is the inevitable corollary of the protracted lofty interest rates set by these central banks. The recession is likely to coincide with deterioration of corporate earnings and lower price-earnings ratios --- Davis double-killing effect --- and the stock markets in these countries will bear the brunt.  The likelihood for a black swan event to take place will be higher in 2023. Smart investors will patiently keep their war chests safely locked and be ready to buy the dips when a black swan event arrives.

On the contrary, China’s opening up from their zero-Covid policy will boost its GDP and its stock market performance in the beginning of 2023 and hence the start of my accumulation of some potential multibaggers.

I look forward to a more prosperous 2023.

Prescientsuperphang
http://superphang.blogspot.sg

Risk-free T-bills

From what I have estimated, it is highly likely that the Federal Reserve will hike the interest rate till about at least 5.25% and hold it till end of 2023. The interest rate hikes will inevitably plunge the US economy into a recession with high jobless rates and only then will the Fed be ready to cut rates.  

It is very challenging this time to stop the hikes in wages and the Fed has no choice but to bring in a protracted and deep recession to tame the inflation.

Where can we get some bargains at this time? Invest in T-bills if you still have some spare cash or some idling funds in your CPF ordinary account.

Imagine mortgage interest rates are currently around 4%, and you can get the cut-off yields at 4.4% from the result of the last auction of T-bills closed on 8 Dec 2022, your ROI can match, if not better than, that of the commercial banks. And MAS is the one issues the T-bills, so it is AAA rated and risk-free.

Some important points in using your CPF OA to invest in T-bills:

1. Do leave $20k behind so that you can still enjoy the 5% interest rate for this minimum amount in your CPF OA.

2. Do it in the first auction of the month as the breakeven yield is about 2.92%, about 41 basis points more than that of 3.33% if you are to apply for the T-bills in the second auction of the month.  

3. Go for competitive bid with a low-enough rate (make sure it is higher than the breakeven yield) so that you can be allotted all that you intend to invest in should there be an oversubscription for the T-bills.

4. Remember to get your CDP account number ready for filling in the form at the bank counter.

I invested the bulk of my CPF OA funds in the last auction of T-bills with the cut-off yield at 4.4%. I believe the money that will be returned to my CPF OA in mid-Jun 2023 will be ready to be reinvested at a much higher cut-off yield then.

Prescientsuperphang
http://superphang.blogspot.sg

Excelpoint and knack for catching multibaggers

Refer to my three previous posts on Excelpoint:

http://superphang.blogspot.com/2021/05/excelpoint-potential-multibagger.html of 22 May 2021

http://superphang.blogspot.com/2021/08/excelpoint-up-29609-in-day.html of 7 Aug 2021

http://superphang.blogspot.com/2022/04/acquisition-of-excelpoint-technology-by.html of 13 Apr 2022

 

I just received this evening, 15 Sep 2022, the final payment of my shareholding, at $1.93 apiece, in Excelpoint Technology Ltd by the offeror of the company and the sum was deposited into my bank following the closing date of the takeover bid by WT Semiconductor Holdings Pte Ltd and my ROI of 188% was solid within a span of 16 months. The absolute amount is equivalent to a few years of the living expenses of my family.

This success again reinforced the importance of correct strategies, knowledge, skills and patience deployed for every successful value investing venture.

I bought Excelpoint in a few tranches before I wrote the post made my estimation in InvestingNote on 12 May 2021. The reasons for buying the stock then were: a capable and hardworking management, company starting to have good growth, company has been paying good dividend, and they were operating in a booming China’s market. I gave a target price of $2.33 within a year then.  

The chart showing a few important milestones for my investment

 

 

My prescient chart reading allowed me to accumulate more shares on 25 Mar 2022

 

The company board confirmed my belief after the market close of 25 Mar 2022 

This was not the first time some of my friends and my InvestingNote’s followers suspected that I was privy to some insider information of the companies, and I jolly well know that it was my knowledge and skills that enabled me time and again to make the prescient judgements and decisions.

I could have sold all my shareholding after xd on 28 April but I held on to my shares as I calculated that if I could wait for slightly less than 5 months and my annualised extra return will be 6.38% and I need not pay brokerage commission. What a good yield not to be missed!

The current markets in the US, Europe, Japan, South Korea, Taiwan and China are all facing some problems and I strongly believe that therein lies a lot of golden opportunities for those who are armed with the correct strategies, knowledge, skills and patience to either catch some multi-baggers along the way or buy the dips when others are fearful.

  

Prescientsuperphang
http://superphang.blogspot.sg

Fasten Your Seatbelts

 A currency carry trade is a strategy that involves borrowing from a low interest rate currency and to fund purchasing a currency that provides a rate. A trader using this strategy attempts to capture the difference between the rates, which can be substantial depending on the amount of leverage used.

USD Index on 4 Feb 2022 was 95.48 and it has gone up by 8.11% in just about 3 months. The USD index measures the dollar value against the euro, Japanese yen, British pound, Canadian dollar, Swedish krona and Swiss franc. Singapore dollar has weakened against USD relatively lesser within the same period due to the MAS' stance in deliberately appreciating the Singapore currency to combat inflation.

US 10-year Treasury yield was 1.916% on 4 Feb 2022 and it is now 3.142%.

This is a double whammy to those speculators who did a USD carry trade 3 months ago. They stand to lose more from the strengthening of USD than from the surge in interest rates. And the loss will be more if there is leverage. Look at the gradient of both charts from 4 Feb till now, the speed of surge is just too fast for them and all stock markets in the world to swallow.

This also explains why USD is flowing back to the US due to the fear and this is only the start. Those countries who are slower in raising interest rates will have more exodus of funds to the US. 

Both stock markets and property markets will bear the brunt. I estimate that Nasdaq can go down to 6094 in this impending market crash. 

NASDAQ: 6094 is waiting

I estimate Singapore Property Index will be down by 30% from now to 2024. This is almost certain that it will come if history is anything to go by. Singapore Government cannot help as the whole world will suffer when the US government and the Fed raise interest rates. The Fed has to do it so as to purchase back the old bonds at a great discount to the prices they sold to sovereignty funds and rich investors. In so doing, they can reduce their debts and the money they make through this interest-rates-hike exercise can be used to support the US economy again.

What about other countries like Singapore? Too bad, they can no longer print money to prop up their economy like what they did during the initial Covid-19 pandemic stage from mid-2020 to end 2021 now that the US stops printing USD or their countries will have even higher inflation and more exodus of funds. Jacking up interest rates at a speed comparable to that of Fed's action is the way forward to prevent exodus of funds.

Fasten your seatbelts, spend less and save more to buy the dip.

Prescientsuperphang
http://superphang.blogspot.sg

Acquisition of Excelpoint Technology by WT Microelectronics

 

Refer to my two previous posts on Excelpoint:

http://superphang.blogspot.com/2021/05/excelpoint-potential-multibagger.html of 22 May 2021

http://superphang.blogspot.com/2021/08/excelpoint-up-29609-in-day.html of 7 Aug 2021

 

Excelpoint announced on 13 April 2022 that WT Microelectronics Co., Ltd. (TWSE: 3036) (“WT”), through its wholly owned subsidiary WT Semiconductor Pte Ltd and Excelpoint have entered into a definitive agreement pursuant to which WT, through the Acquiring Entity, will acquire 100% equity in Excelpoint by way of a scheme of arrangement at a cash consideration of S$1.93 per Excelpoint share. The transaction, which values 100% equity of Excelpoint at over S$232.2 million, is expected to close in the third quarter of 2022, subject to the approvals of Excelpoint shareholders and relevant regulatory authorities as well as the sanction of the Scheme by the Singapore High Court.

The Excelpoint founder and CEO, Mr. Albert Phuay, will reinvest part of the cash consideration due to him under the Scheme in 20% equity of the Acquiring Entity, with the balance 80% stake owned by WT. Mr. Albert Phuay will continue to be the CEO of Excelpoint.

With the xd date for the 8.8 cents dividend set for 28 April, the price per share will add up to $2.018. This is some gap to my original target of $2.33 set in last May. Anyway, my ROI is easily more than 188% in less than a year. Solid!

The next challenge for me is to find another multibagger to maintain my solid ROI.

Prescientsuperphang
http://superphang.blogspot.sg

Xinte Energy (HK.1799)

I believe Xinte Energy (HK.1799) will be a multibagger. The company just announced its stupendous earnings for FY2021 after market close on 25 Mar 2021.

The Group is principally engaged in polysilicon production, rendering of engineering and construction contracting (“ECC”) service for solar and wind power plants and systems and solar and wind power plants operation (“BOO”).

Solid financials

It closed on 25 Mar 2021 at $16.68. Based on the closing price, the solid financial ratios of the company for FY2021 are as follows:P/E = 3.45x

P/B = 1.114x
Dividend = HK$4.8339 based on exchange rate of 1RMB=1.23HK$
Dividend yield = 8.11%
Dividend payout ratio = 28%
ROE = 32.29%

Some important highlights according to the earnings announcement:
• For the year ended 31 December 2021, the Group’s total profit showed an increase of 608.08% over the corresponding period of last year.
• For the year ended 31 December 2021, the Group’s net profit attributable to shareholders of the listed company showed an increase of 680.88% over the corresponding period of last year.
• For the year ended 31 December 2021, the basic earnings per share amounted to RMB3.92, representing an increase of RMB3.39 over the corresponding period of last year.

Earning Capability

EPS in billion RMB
4Q2021 1.754
3Q2021 1.973
2Q2021 0.98645
1Q2021 0.24155

Strengths

R&D with lots of patents
In line with the world and China government policies
Capacity increases

My avg price is $16.02 and my my target price is $48 within a year for it to hit p/e of about 6x.

Prescientsuperphang
http://superphang.blogspot.sg