Dutech Holdings FY17’s AGM

1stly, something unrelated to Dutech Holdings. $Dutech(CZ4.SI)

I drove down to BBR Holding’s project, The Wisteria to take a look today. Kinda disappointing that the project is taking so long to TOP. I was informed by sources a few months ago that it’s slated to TOP in mid April. So, obviously, they’re late, cos today it still looks like this:

Officially, the given time frame for TOP is announced as Q2, so the project is not considered delayed. (But unofficially, I know it is)
I can see the signboards of the various tenants though, so it can’t be too far away now. The Wisteria is going to provide BBR with some much needed recurring income from mall management, and that’s badly needed right now, seeing that BBR’s FY18Q1 is going to be unprofitable. They just can’t seem to execute on projects profitably. All the years of pumping money into and investing into PPVC didn’t seem to yield any tangible results.
The rental rates are probably highly confidential, so I don’t think I should reveal the exact numbers here out of respect, but they’re pretty much in line with the other malls that I’m familiar with.
The ground level where most of the footfalls are and visibility is maximal (frontage along the main road), commands rent in the low $20s psf, whereas the basement level commands rent in the upper teens psf, both together with the standard nominal few % of GTO of the tenant.
These rates are similar for all suburban malls, and have been kinda frozen in the past 4 years or so, don’t see much difference.
The last I checked, The Wisteria’s occupancy is amost 80%, but since we’re approaching TOP, perhaps the occupancy has increased further.
Having done a site visit and analyzed the surroundings, I gotta agree that this project has been rather successful. Although not directly linked to an MRT station, and facing some competition from the nearby Northpoint, which is now super massive after the asset enhancement, The Wisteria itself will command a certain captive crowd, as the numerous residentials around the area is currently under served.
There are no real retail options in the vicinity, and I can see that once The Wisteria is operational, there’s no reason for the nearby residential crowd to go that little further to Northpoint mall for their needs. The tenants in The Wisteria Mall are all familiar names too: Kopitiam and NTUC Fairprice being anchor tenants.

Being a mixed development also means that the fully sold residential units above will provide an immediate boost to the retail portion, once residents start moving in.
Anyway, this post is about Dutech Holdings. BBR’s management  needs to go take some classes on project execution and management from Dutech’s, IMO.
I attended Dutech’s FY17 AGM about 1.5 weeks ago.

I’ve received quite a few requests to write about Dutech’s AGM, and have been procrastinating. But well, here it is. I’d also add on some of my further DD at the end.
As this is not a new holding, I won’t waste time talking about the basics. They can be found here:
Dutech Holdings Investing Thesis
Dutech Holdings – What’s Next? Realize $117k Profit, Hold Or Add More? (Part I)
Massive FY16Q4 For Dutech Holdings – Digging Deep To Understand The Impact Of Metric Group Acquisition (Part II)
Dutech Holdings – What Lies Ahead? Part III
For the uninitiated, a very quick summary. Dutech made some quickfire acquisitions in the past few years and that greatly expanded their capabilities, at the expense of their otherwise, solid financials prior to the acquisitions.
DTMT was acquired in 2014, Krauth in 2015 and Metric and Almex in end 2016.
Of these, DTMT has been turned around and was profitable in FY17.
In the past year, the share price of Dutech dropped… I dunno how many %.
Certainly a lot.
As of FY17Q4, the numbers still do not show a successful integration of their most recent acquisitions: sister companies Metric UK and Almex.
Anyway, here are my notes from the AGM. For the sake of brevity, I’d cut to the chase and just put everything down in point form.
Turn around for their most recent acquisitions, Almex and Metric, is guided to be in 2018 or 2019.
Of course, I’d expect someone to ask about their M&A strategy. Dutech has very cleverly, bought out these businesses when they are failing and going into bankruptcy. Everyone wants to buy successful businesses, but nobody’s selling a successful business for cheap.
The key question when buying failing businesses for a song then, is…. “WHAT NEXT?”
I have full faith the integration is progressing nicely. Each piece of the business is complementary to the others.
Someone asked about the 7.9mil RMB impairment loss. Management’s answer is that the loss recorded is due to an impairment of Almex’s loss of a contract when they declared insolvency and Dutech bought them out. It is a valuation loss, not an actual operational loss. Management feels the impairment is reasonable and extraordinary.
“Long tail” decline in ATM business
Johnny candidly stated his view is that the traditional ATM business is in a long term secular decline, dropping a bit every year over a long period of time. When pressed, he mentioned perhaps a 10% drop every year for the next decade.
But this doesn’t mean that there’s no money to be made in this sector anymore. ATMs will likely move from the traditional money dispensing functions, into intelligent machines which can provide a variety of functions.
And this is a major reason for Dutech’s acquisitions. The acquisitions allow Dutech to move from being just involved in the assembly portion, into a player along the entire value chain, from planning to assembly to even the software management.
Still on the acquisitions….
Johnny indicated that the acquisitions are to buy the customer base of Metric and Almex, as well as their know-how and intellectual property, patents etc. It is not based on the companies’ assets. (I’d add my own DD at the end later, so more on this later)
Someone queried about Dutech’s declining margins. In FY17, Dutech’s margins for the High Security segment was affected by the drop in the USD vs SGD exchange, and the massive rise in steel prices. Dutech is trying to pass on some of these increased material costs to clients, but it takes some months for the variations in their contracts to materialize.
Administrative costs
Johnny pointed out that the spike in administrative costs is due to the acquisitions. The core business of Dutech, less the acquisitions, has no change and in fact, a drop in administrative costs.
Also, because the acquisitions were completed in FY16Q3, from a y-o-y perspective, the administrative costs seem to have spiked up because the costs of the acquisitions have had only 3months impact in FY16, but we see the full impact in FY17.
Management also guided that the administrative costs will not increase any further in FY18, and that they’re working on cutting it.
(My own DD says that they’ve cut jobs by 25% at Almex, and at the same time, reassigning personnel within the subsidiaries.)
“Of the original 400 employees, Almex still has 120 employees – another 170 jobs have been retained at the British sister company.”
This question gets asked every year. Really.
Why does Dutech NOT pay a year end dividend, but only pays 1 after Q1?
This is because Dutech’s funds are in China. After the year end closing of the books, and after auditors have gone through the accounts, they can then declare a dividend and move funds from China to SG to pay out. So it’s always just in time for an interim dividend after Q1, never after Q4. If the company is headquartered in SG and their funds are in SG, they’d be able to pay a year end dividend instead.
Cash buybacks, increase dividends
Seeing that the share price has declined substantially over the past 12 months, it’s inevitable that there’d be some disgruntled shareholders.
And there were.
1 shareholder pressed on (aggressively) about why the company doesn’t do share buybacks, giving data on it’s utilization of its cash holdings and the ROE to substantiate. Mr Graham Bell took the question, gave some background details on what the BOD deliberates about when considering capital requirements. Personally (his view, not the BOD’s), is that the company needs to hold sufficient capital when dealing with turning around companies. In this aspect, it’s better to be conservative.
The company is in a period of change, as the High Security business of manufacturing of safes is likely to be in a secular downtrend. The BOD has long identified that they need to move up the value chain, and hence, the timely acquisitions. All this would not be possible if they did not have adequate capital to capitalize on the bankruptcy of other companies.
There was a moment of awkwardness when Mr Bell took offence at a strong word the aggressive shareholder used to describe the board. Ah well, it’s all in a day’s work being on the BOD of a publicly listed company.
Someone asked a question comparing the business dynamics of the Business Solutions segment vs the High Security segment
Business Solutions has not much bigger competition, unlike in the High Security segment. Also, for smaller sized orders, their competitors are either too slow to respond, or are unable to handle sudden orders due to various limitations. Johnny gave an example based on the manpower requirements. Some companies are unable to handle sudden changes in volume, as they would have to suddenly ramp up manpower to meet the demand, but when the project is over, they’d suddenly be stuck with excessive manpower.
Dutech has its own manufacturing facilities in China and hence, more control over production. On top of that, they do hire several contract staff.
(Can’t rem if he actually said this or is it from my own deduction, but in my notes, I wrote that their European competitors have stricter labour laws that make it difficult to hire contract staff in deals that make sense for the company)
Large drop in margins in BS segment in Q4 of 2017
Quarterly, the margins in this segment range in the 20++ %. In Q4 of 2017, it dropped to 14% (or so), with the reason given as “a change in product mix”
Johnny clarified that some projects utilize middlemen. If they manage to go to the end clients directly and cut out the middlemen, the margins are higher. Longer term, they expect GPM of this segment to be 25-30% and NPM to be 8-12%, without the middlemen.
General discussion on the company’s prospects
Johnny gave some color on what they’re working on and his experience in the industry.
Dutech is no longer a hardware company, neither are they just a mere safe manufacturer. All the talk about the society going cashless is missing the whole point.
Every human transaction, even without the use of actual cash, requires recording. Dutech’s business is the business of recording these transactions.
Johnny described Almex and Metric’s products, such as the validating machines and the SmartQube machines (not a spelling error ok!)
Also, their clients require the software to analyze commuter patterns for eg, and Dutech is able to provide these services. Johnny reiterated that the acquisitions are done with the IP and knowhow in mind, and these have morphed the company into a player along the whole chain.
Alright. Those are my notes from the AGM. The important ones at least.
There are several other questions that I don’t bother to type out here, as I think they are not very useful, and in fact, some are a bit…. hmmm….. uninformed. Like for eg, 1 not-so-happy shareholder asked why can’t the company write off the entire goodwill in the acquired Almex, instead of just writing down 7.9mil RMB related to the loss of the contract. Johnny replied that the write down is dependent on accounting rules, and verified by their auditors. (But of course.)
Now for TTI’s enlightenment.
I’ve really heard many folks think of Dutech as an “S-chip”. It’s not difficult to see why ppl think of that. Superficially, they do look like an S-chip. No real operations in SG, no office even, with management hailing from China, and manufacturing operations in China too.
But if Dutech is an S-chip, then so is Capitaland.
To illustrate this, perhaps I’d have to give a history lesson of sorts.
Dutech’s most recent acquisitions: Metric and Almex, were bought at bankruptcy for a song. Prior to that, their predecessor is the famed Höft & Wessel, which is recognized as the leader in the field.
Data on wikipedia is a bit outdated though, but u get the idea.
The business solutions segment of Dutech is where the focus is right now.
This table compiles the revenue and margins of the segments over the years:

The trend is obvious.
High Security revenue will continue to trend down, with declining margins.
Business Solutions’ revenue grew in 2017, but mostly from the acquisitions.

Going forward, it’s obvious that BS will increasingly form the core of the company’s business, specifically its operations in Europe.
Johnny wasn’t kidding when he said that BS has less real competition. The only real major competitor that Dutech faces in this segment is Scheidt & Bachmann.
They’re the number 1 player in the ticketing and parking machines sector, followed closely by the integrated Dutech, in terms of market share.
Unfortunately, since they’re privately held, there’s no published financials for me to do a comparison. That’d be so nice. And in fact, I think if their financials are public, it’d immediately correct what I think is the mispricing of Dutech currently, since everyone can do a simple comparison of their financials.
The other smaller competitors include Parkeon Transportation, VIX technology and Ridango. None of which are listed. In fact, I can’t find any single player in this field that’s listed. (Anyone who knows, pls kindly let me know!)
So how large is the European market currently?
The Europe smart ticketing market revenue is estimated to be $1.74 billion in 2017 and is expected to reach $5.38 billion by 2023, growing at a CAGR of 20.69% during the forecast period 2017-2023.
In this growing market, the players are mostly still smaller, fragmented outfits, fighting for market share. By buying Almex, Dutech already has direct access to certain major clients that otherwise, would never consider Dutech.
For example, in end 2017, Dutech won a contract with the all important Deutsche Bahn (DB), to redesign DB’s software for all ticketing machines to make them more flexible in integrating with all future hardware modules:

(DB Vertrieb is a wholly owned subsidiary of DB)
This project has just begun, and is slated to last until the beginning of 2019.
But it’s just upgrading the software to provide more flexibility right? No mention of contract value too, doesn’t sound like a big project?
“The new DB machine platform will be used on all DB existing vending machines as well as on new video machines, which ALMEX GmbH will also supply to DB Vertrieb for a first project next year.”
Now, DB is a helluva important client. If Almex is winning contracts to supply new ticketing and validation machines, it’s certainly very good news, and they’re likely winning market share.
(Travellers who have used Europe’s train system will understand that in Europe, you can buy a ticket, but u need to validate it to prove that it’s being used during that certain time period. So every station has multiple validating machines along the platform)
In fact, Almex already has a long term working relationship with DB, and this relationship is set to deepen as DB continues to refresh their equipment, and ticketing solutions.
For example, currently, DB’s train attendants utilize hand held mobile devices for ticketing, and guess who supplies these devices for DB?

Hmmm look at the picture of the mobile ticketing device from DB.
Yup, that’s in Almex’s product catalog:

Aside from ticketing and car parking solutions, both the hardware and software side, Dutech also supplies inventory management solutions, through skyeye.com,  for logistics companies. (Again, both the hardware and software)
I guess this would be self explanatory:
TTI’s Thoughts
Actually, currently, I don’t think Dutech currently has any real, indisputable economic moat so it isn’t a Buffett type of company. But I do think the business is currently completely misunderstood by the markets, and hence, completely mispriced.
Reading the above, does the business still sound like a “S-chip” to you? I kinda roll my eyes a little whenever I hear someone bring up “S-chip” concerns regarding Dutech.
I increased my stake recently at $0.25, and am continuing to add to my already substantial holdings.
Going forward, there’s still many exciting things happening in the industry. Dutech, like all other companies, obviously doesn’t reveal what their R&D is about right now, but my DD tells me that every company is gravitating towards what is known as “Be in Be out” technology. The future of transportation payments will involve commuters carrying a personalized device, linked to an account.
The vehicle is able to detect such devices, and when the commuter hops on and off the vehicle, the device is detected and the appropriate fare is directly deducted. BIBO is what most research is geared towards, and is likely to be the future for the industry. It’s completely contactless, and in future, may  even be part of wearable tech.
This technology is still in its infancy though, with minimal real life testing done. Other concerns include privacy concerns, and problems with device detection when carried out on a massive scale.
When I was doing my DD, I can’t help but think that this BIBO mode of payment reminds me of NS guys doing their IPPT. You cross the sensor and it detects your device, and each time you cross the barrier, it goes “beep” again. Should be the same tech I guess.
Looks like SAF has far more advanced tech than all these MNCs combined…
Back to Dutech. I think FY18 will be very interesting. I’d be watching closely for the turnaround to be confirmed in cold hard figures. Right now, the share price is very depressed, but has risen in the past couple of weeks. (Partly due to accumulation by yours truly. Some days, I’m the sole guy accounting for the entire volume that day)
I think signs of a turnaround could come as early as 2 weeks from now, when the company releases FY18Q1 figures. I’m also expecting a slight tailwind with the recent strengthening of the USD, although that impact will only materialize is later quarters.
The company is also naturally very thinly traded, since there are only 20 shareholders/entities that hold >1million shares, and all these top 20 SHs collectively hold just over 90% of the company. Most of them are long term SHs, and this locks up the bulk of the company’s shares. I’ve never been afraid of illiquidity for my core positions anyway.
Currently, I hold (I can’t rem offhand exactly how much tbh) around 740,000 shares or so and would be happy to continue accumulating at the right price.
Alright, that’s all I have, or at least, that’s all I’m willing to write right now.
Peace out.

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Don’t bluff. You tell me you selling at 40c. I see those queue there. Lol


Reply to @ThumbTackInvestor : Wah now you say I am trying to help. Ttti one up me. Give you a like

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Reply to @marcusc : sure, you're welcome


Thanks for sharing, very detailed and useful write up!


Thanks for the great write-up(:


Reply to @ProfsX : sure, you're welcome


Thanks for sharing :)
Maybe i "blur sotong" didn't know a ticketing machine can be so advance in, I really learn something new today :)


Great writeup! Thanks!


Regarding the Q1 dividends, there is some quirks with the regulations. Annual dividends have to be voted for approval at AGM but interim dividends do not. This means Dutech never need to table this resolution during AGMs. The only stakeholders that would vote against this would be creditors, but they don't get to vote. I haven't come across shareholders voting against paying annual dividend. So why require this resolution since it can be circumvented by declaring interim dividends anyway?


Reply to @wx1985 : lol
vote no to dividends.
not gg to happen in SG la
If SHs vote no, its cos they think the dividends not enough!

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Thanks for the detailed writeup! Interesting read for me and a better understanding of how you analyse a business. Do you think this is quite a complex business? Tbh, I have a hard time understanding the technology.


Reply to @theintelligentinvestor : Maybe cos I’ve looked at the business multiple times over the past 3yrs, now, it doesn’t seem too complex to me.


Thanks for agm notes.


thanks for sharing! have you attended any other agm? i couldn't attend any as im not in sg..


Reply to @ThumbTackInvestor : I think those are good enough. Lol...

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Target Price

Enough of 1 day (1 min actually) hits:
Hardly made a dent in my proton canon.

FY17 was a game changing year for Dutech as they tried to shift operations from hardware, towards the business solutions (software and services) segments. This is what all competitors are doing: Diebold Nixdorf, NCR Corporation.
Margins were impacted from their acquisitions. Less their acquisitions, costs actually went down.
I've a fair amount of confidence that longer term, the acquisitions would prove to be astute.
Would this be in 2018? or 2019? I have no idea. (My guess is that it won't be too far away based on their previous track record of integration)
Diebold's results don't bode too well for Dutech in the short term.

I think most people talk about "holding" and being "long term investors" when the situation requires them to do so.
Read: when they bought and the share price just keeps going down and its too painful to take the loss. This turns the most ardent of traders into sudden "long term investors".

Well, TTI talks the talk and walks the walk. (For my core positions anyway)
I first initiated a position in Dutech on the 29/04/2015 with 169,000 shares at $0.275, and ended the year with 520,000 shares.
That was 3 years ago.
During that time, the share price soared to as high as $0.6 (I think. Around there. I don't really keep track that closely). That's a gain of over 100%. And in the past year, has come crashing down in rapid fashion, as the markets worry about their acquisition spree and earnings become impacted by the newly acquired businesses.
I haven't sold a share.
I think it takes a certain character to not be overly excited and start chasing illogically when things go BOOM, but equally, not be overly depressed and starting dumping illogically when things go DOOM.
(It helps if you're preoccupied with anything: family, work, career, hobby, and stop staring at the share price)

During this time, oh boy, I've received numerous emails about Dutech. Many FA practitioners have their balls shaken.
Even friends who are shareholders previously, either threw in the towel, or have constantly asked me about the business. Many have literally egged me non-stop over the past year, to buy to support the share price. I get emails, whatsapp messages when the share price was at $0.5, then $0.45, then $0.4, then $0.35, then.........
(lol, the guys who tried to be gung ho and bought at $0.45, finally gave up buying when it goes below $0.3 and cut loss)
After a year of inactivity, watching the share price drop, well, I dunno if anyone would believe this, but I am gleeful. Never thought I'd be able to do more work here in Dutech at this price.
At the current share price, trailing PE is around 8 times.
That's trailing. Based on FY17's earnings. I think FY18's earnings will come in stronger.
And even if it doesn't, I'm ok with PE 8 times, and a P/B of 0.6, with a business that's FCF +ve in 6 out of the last 8 years. And that's INCLUDING the costs of acquisitions.
I don't necessarily think Dutech is one of the rarified companies with unbeatable moat.
I just think it's incredibly cheap right now, for what it's doing.

Most people reading this should forget about investing in Dutech.
It's a nightmare for the retail investor. Most people in IN should read this with interest, but not act on it. It'd kill u.
Cos most ppl expect the share price to shoot up with "infinity upside" the next day after buying.
I see it here all the time. Which is ridiculous. But it doesn't stop ppl from trying.

Dutech has next to zero liquidity. But of course.
There are only 20 shareholders holding more than a million shares each. They form the top 20 SHs, and they collectively own just over 90% of the company.
(I think when I'm done, it'd be 21 shareholders).
As per my earlier estimates, a few weeks ago, a fortnight before the AGM, I decided to start work at $0.25.
And lo and behold, in the past few weeks, I've come to know of a fellow deep pocketed investor and shareholder who has similar ideas to myself, and yes, we've been talking and doing a "double concerto". And why not?
Makes sense to cooperate and collaborate instead of screwing each other up. Between both of us, our proton canons combined will make even Thanos run home without any infinity stones.
And btw, Dutech really does have a stone.

This estimate is an educated guess.
In reality, I've no idea what the share price would do in 7 months.
For all we know, there may be a crisis tomorrow and I can stop this estimate.

For the uninitiated, I obviously have a fairly long term view (I say fairly, but it's probably an eternity for most folks), I look at the business and am not interested in the noise, and well, there's something to be deduced about my holding power.
I treat core positions like my kids.
And as any parent would know, you don't really expect your kids to give you any returns anytime soon. Maybe, never.
But they usually do in time to come.
(Unless you got a screwed up kid, then its best to disown him)

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Target Price

Forgot to put in this estimate earlier this morning when it was at 0.285.
Sell vol shot up crazily
Wonder why.

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But of course. :) 1 day.

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Target Price
TTI’s Portfolio Updates – November 2017

October 2017 was a busy month for me, in terms of portfolio changes. I made 2 complete divestitures, and feel really good about them.
This is just a quick update, and some of my accompanying thoughts as we go into the earnings season next week.
1. LTC Corporation $LTC Corp(L17.SI)
I currently own 240,000 shares.
LTC did pretty well YTD, rising a very respectable 26.42%. (In any other year, 26.42% would’ve been a monster year, but this year, the bar has been raised considerably by STI ETF)

I wrote about my thoughts at the end of 2016 after analyzing the FY16.
That post was summarized by Leong CT and republished on NextInsight:
And here’s the full, boring, long version:
Info That I Have Gleaned From LTC Corporation’s AR 2016
Well, nothing much has changed actually. The year panned out the way I expect it to be, business wise. I guess it’s been acceptable, nothing too amazing, but there’s a certain safety margin incorporated in the wide difference between the share price and the NAV.
A long time frequent reader, mslee888, attended the recently concluded AGM and has some comments on what transpired. You can read his comments in the “Recent Comments” section.
Nothing overly optimistic, perhaps even slightly bearish.
Personally, I’d continue to monitor their FCF generation and cash utilization. All that cash generated HAS to go somewhere. The most obvious place now is their development of GEM residences, which is situated just off the island of Penang. I didn’t write much about it, but that development at least, looks favorable to me when I did my DD.
Linked to what is the largest mall within the vicinity, the site has a lot of potential going for it. Any potential rewards though, won’t be in sight, so some patience is in order.
I have a lot of that.
2. BBR Holdings $BBR(KJ5.SI)
The chart says it all:

Being the largest proportion of my portfolio at the start of 2017, a massive 44.44% gain is great. It single handedly helped me keep up with STI ETF, despite the drag by Dutech’s drop this year.
The share price was well supported by a series of share buybacks by the company, as well as by the sudden large increase by Dr Chiu, who is now a substantial shareholder.
I’m not sure what plans he has, but there’s no scenario whereby this is a bad thing.
Would I know at the start of 2017, that BBR would initiate a share buyback program? Nope. No idea.
But I do know the shares were, and still are, terribly cheap.
They don’t even have to do anything right. They just have to NOT do anything wrong, and stop bleeding money each quarter, and the share price should correct substantially.
As the loss making projects are gradually run down each quarter, their financial performance should improve.
I’m optimistic about their newer projects.
And for gods’ sake. Please stop doing all those fancy new technology for the sake of tech. Keep looking at your margins please. I rather you guys do nothing than do a lot of stuff and constantly lose money.
I’ve written about my long history with the management, the old posts can be found in the links, I shan’t repeat.
I do have to say that I’m a lot more pleased with how they chose to return capital to shareholders. A share buy back is much more preferred when the shares are undervalued, vs merely increasing dividends.
It inspires confidence, and the effects are more prolonged.
I did capitalize on the massive rise by taking some profits off the table. (Plus I consolidated my shares from the various nominee accounts in prior years, so if I don’t reduce my stake, I’d most likely end up in the Top 20 shareholder list in the AR17, and I’d like to not be so visible)
I currently still own 1,100,000 shares, having divested about 900,000 shares this year.
3. King Wan $King Wan(554.SI)
Never felt more relieved.
Just divested the remaining 100,000 shares today at $0.16. I started the year with 1,000,000 shares, and now I own no shares.
I don’t know who bought them from me. Whoever it is, he either knows something I don’t (perhaps increased dividends), or he’s screwed.
I’ve previously written about my disdain for the performance of management… and nothing’s changed.
Oh actually, something did change. CFO Francis Chew left the company “to pursue other interests” (what else? Does anyone seriously give any other reason aside from this generic one?). With the departure of CFO Chew (the one guy who tried his best to answer my queries), the last good thing going for KW is gone.
King Wan is without doubt, my biggest investing mistake thus far. Ever.
I’ve only learnt 1 lesson from this:
Keep your eyes on the game. Nobody’s going to do it for you.
I trusted in the capital allocation prowess of the management and literally just forgot about this company. “Buy and Hold” as Buffett says. Difference here is that the management is not what Buffett would’ve approved.
In my defense, it was a really busy period of my life when I had to devote 100% of my time to build up businesses in my work. Thus I thought I’d just chuck it aside and let these guys grow my capital. Imagine my surprise when I checked up on it 1 big fine day.
They got proud when things were going good, and had to eat humble pie. In recent years, when everything has just gone a single way up, KW has gone exactly the opposite direction.
I mean, just for laughs, check out these earlier articles and “analysts’ predictions”:
LOL @ “special dividend”!
Perhaps the biggest early red flag that I should’ve picked up, was the IPO of KTIS.
That was the peak of KW’s fortunes. I remember clearly that KTIS IPO was done at a PE of 30+ (I’m not checking now, this is written off the top of my head)
I remember clearly thinking that “hey that’s kinda pricey for a sugar producer right? What competitive advantage would a commodity producer have to warrant that kinda PE multiple?”
Yet KW held on to the bulk of its stake post IPO.
I would’ve dumped it all to the hungry and dumb public.
I’ve previously said I’d give my coverage to my mistakes. So there, let me open up old wounds. Go ahead and re-read these. It is a damn good read.
King Wan Corporation – Part I
King Wan Corporation – Part II
King Wan Corporation – Part III
Good riddance.
4. Boustead Singapore $Boustead(F9D.SI)

A 9.76% ROI (and it’d be higher if we include dividends), is not bad normally, but in light of this year’s monster performance by the passive indices, this doesn’t feel much like a win.
Oh oh and before I forget, all the stated ROIs above do not include dividends, so it’s probably a bit higher. I’m just lazy to do the math right now.
I currently own 40,000 shares of Boustead.
This is a small position.
FF Wong still has my vote of confidence. A genius is a genius.
The only thing that’s bugging me constantly is whether I should buy Boustead Projects directly, or own it indirectly via Boustead Singapore.
I know this opinion is contrary to the thoughts of most other retail shareholders, but I really preferred if FF Wong didn’t hive out BP. Just keep it all together as a mega conglomerate.
I suspect a major part of the reason is just succession planning. He has to elevate and promote so many lieutenants, so better to split it up so that each can become their own bosses.
This just makes it more complicated for me to assess.
Obviously Boustead is in a tough position now, with the situation with O&G.
That’s why I’m keeping it as a small position.
At the 1st sign of a sustained recovery, I’m putting my money on FF Wong again. In a big way.
5. Comfort Delgro $ComfortDelGro(C52.SI)
well, shan’t waste too much time here.
Bought at $1.98, Sold at $2.02 barely a month later.
Was hoping to build a large position, but it never really dropped much after I bought. There were only 2 trading days where it went below my entry price, and that’s about it.
Also, further DD made me more cautious about their entrenched position, and the stake was really too small to warrant wasting time monitoring.
On top of that, as I alluded to in the previous post, I’m selling some positions to reallocate capital into a new idea. And I intend for that position to be a big one.
Wealth Destruction Behaviors – TTI’s Personal Anecdotes
6. Geo Energy Resources $Geo Energy Res(RE4.SI)
Not bad at all.

30.43% YTD, add in a few more % points for the dividend, and it’s turning out to be a fine investment indeed.
Well, anything that beats the index this year, is a fine investment.
I currently hold 500,000 shares, at an average price of $0.168.
I think I’d likely double my money from $0.168 before the year end. In fact, my purchases in July is already starting to look like a stroke of genius. (But the purchases of Dutech…. not so):
TTI Bought >$100K Worth Of Equities In July… Howard Marks’ Memo Better Don’t Come True Right Now!
Q3 results look promising, but unfortunately my DD tells me that their coal production would likely disappoint again this quarter.
I’m expecting them to report total coal volumes mined to be between 1.8 – 2.2mil tonnes.
Which would be a substantial improvement from Q2, yet below that of Q1.
Full year, I find it hard to see how they’d meet their stated 10mil target.
Probably not, even if TBR mine comes online soon.
Results would still be stellar though, as coal prices continue shooting through new highs. In Q3, China’s imports have held up much much better than most analysts were expecting. (Read Philips report on how they expect coal prices to drop in Q3. To their credit, they stuck to their buy recommendation as they believed it’d be transient)
I’m watching this space tightly, it’s going to be an exciting Q3 and Q4 for Geo.
7. Dutech Holdings $Dutech(CZ4.SI)
Tough year for Dutech:

A -17.78% in a year where STI is up almost 20% (or more, not sure of the latest figures), is disastrous.
I currently own 701,000 shares at an average price of $0.287
I’m keeping faith with Dutech and Johnny Liu though.
Unfortunately, I don’t expect the business to turn around in Q3 or Q4 of 2017.
My analysis of their downstream peers (Diebold Nixdorf and NCR Corporation) tells me that globally, their High Security business is still going to be impacted heavily.
Diebold just reported earnings, and it’s not pretty. Major ATM clients are still delaying confirming orders. On the plus side, they are still expecting orders to be confirmed in the coming months.
I will be watching how Johnny Liu continues to steer the business towards the software intensive “Business Solutions” division, and how they integrate their newly acquired Metric.
It’d be a while yet, but I’m actually comfortable holding Dutech as a core, long term holding. I won’t make the same mistake as with KW though, I’m keeping my eyes on the game this time.
As mentioned in an earlier post, I’ve started accumulating a major position in a new idea. I’m pretty optimistic after doing my usual comprehensive DD, and hence, my position will reflect my optimism.
When I’m done, I hope to accumulate at least a 6 digit position.
Already, I’m slightly up, but I intend to continue to average up.
Not ready to reveal it yet, will write about it soon.
This year hasn’t been too bad ROI-wise, yet I’m still finding it tough to beat STI ETF.
Banks and Developers.
Those are the ones going ballistic this year.
Also, my US listed equities have not done as well as SG ones. I’ve made some major mistakes in the midst of tinkering and trying out ideas, particularly with options. 1 major mistake was entirely due to greed, something that I never thought I’d do. Damnit. I should’ve wrote about myself when talking about “Wealth Destruction Behaviors” in my previous post. Dumb, greedy mistake.
In fact, SG portfolio ex-US, would likely have beaten STI ETF, but that’s not how portfolio tracking works right.
We have to take in the bad with the good. Cash drags, transaction fees, even holding or margin costs etc, all has to be accounted for to give an accurate picture.
Thus far though, with the insight and the adjustments I’ve made, and the new rules that I’ve implemented, results have been good. I’m still trying it out, but it bodes well for 2018 and beyond.
I believe longer term, my options strategy would be a force to be reckoned with, ESPECIALLY so in down years.
Let’s see.
In terms of portfolio size, 2017 is likely to see a substantial gain, even though there’s been minimal capital infusion. It has been difficult to NOT make money in 2017, looking at how the markets have behaved.
I’ve instead preferred to channel whatever cashflow I have left (after the wealth destructive trail of the 2 kiddos) into my property fund.
Anyhow, I’ve always preferred to watch the ROI figures rather than the actual portfolio size. The quantum can be easily increased by channeling more funds into equities and options rather than into my property fund. The ROI is the fun and challenging part.
That’s all I have here.
Oh, and SGX has sent out emails for race pack collection for those who have received complimentary tickets for the Bull Charge 2017, so go collect them.
As always, Godspeed.
Filed under: BBR Holdings, Boustead Singapore, Companies, Dutech Holdings, General, Geo Energy Resources, King Wan Corporation, LTC Corporation

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