Saturday, May 27, 2023

STI Analysis -- the next peak and trough ? (117)

Continued from STI Analysis -- the next peak and trough ? (116)

 FTSE STI closed at 3,207.39 on 26th May 2023, practically unchanged for the whole week.

Magenta -- STI Positive

Despite look like a rebound is coming, the EW count for this positive scenario still largely remain the same.  For case 1 in which STI is in Intermediate ((c)) of Primary wave 2, the trajectory remain on course for further downside before Primary wave 2 ends.  However, for case 2 in which STI could still be in Intermediate wave ((v)) of Primary wave 1 is still possible (lower possibility than case 1).  This case is true if the rebound for the next couple of weeks allow STI to move above peak of Intermediate wave ((iii))) -- 3,466.23 so as to complete the Primary wave 1.  Regardless which case, STI still yet to hit the bottom of Primary wave 2.

Green -- STI Negative

Largely expected, there shouldn't be any major movement in this scenario in term of EW count.  For this scenario, STI is in Primary wave A of Cycle wave (C) of SuperCycle wave ((C)).  Looking the perspective from time duration, the downward bias or bottom of SuperCycle wave ((C)) could drag for another 1 to 3 years.

Above is the overall picture for STI EW count for both the positive and negative scenario from 1994 till now.

Final Thought

On 25th May 2023 according to data, Germany has entered into recession after 2 consecutive quarters of GDP contraction.  2022 Q4 was hit with a 0.5% contraction and 2023 Q1 was 0.3% contraction.  Though what it looks like was a shallow recession, Germany probably became the first nation in the world to enter recession now.  Other nations include US are not spared too going forward.  Majority of the policy makers and economists are just solely focusing on whether will or will not enter recession but forgetting the bigger picture.  The elevated inflation couples with high interest rate is a big shark in the waiting to swallow the world economic situation.  It is not a question of recession any more, it is a question of stagflation should inflation remains at a elevated level and high interest rate for a prolong period of time.  To avoid that, Central Bankers should not miss the window of opportunity to curb the inflation down to an acceptable level with tightening rather than trying the avoid recession and either halt or slow down in tightening.  If stagflation does occur, this can easily develop into decades long or even a century long of problem for the world.

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Saturday, May 13, 2023

Nordic Group Part 1.5 -- Another Objective Achieved

Nordic Group went XD on 8th May 2023 with a dividend distribution of 0.906 cents/share.  With that dividend, the total dividend collected since 2014 (year of first investment) has breached the 100% mark.  That is to say, the amount of dividend collected for all these years has surpassed the total capital being injected initially.  Another perspective to look at it is mathematically this investment is impossible to make a loss even if divested.

While delighted with this achievement, realized that a strategic action was being taken in 2021 in which 30.12% of the holding was being locked in at $0.355/share (refer here). That portion unfortunately didn't contribute to any dividend distribution since then.  Now, want to consider that portion as being divested away.   This movement has some major implication to the overall holding and rate of return nevertheless.  To make adjustment for that, the capital of that 30.12% was removed and whatever dividend collected since 2014 till 2021 for that portion also being chalked off from the total amount of dividend as recorded.  However, one thing remained unchanged is the overall holding price, still being at $0.0902/share.   To my shock, after rectifying those figure, the 100% dividend return mark was actually being achieved in the previous distribution in 17th Aug 2022 with a distribution of 1.162 cents/share.  That is to say, the objective and mathematically impossible to make a loss was being achieved in 2022 instead now.  That was like a 8 year period to achieve that.

So, what so special that it takes 8 years to achieve that ?  Well, prior to this, the fastest was First Reit which took me 10 years (refer here).  The next fastest was CapitaMall Trust (now known as CICT) 11 years (refer here).  MapletreeInd Trust was another that took me 11 years to achieve that but unfortunately, soon after achieving that due to a subsequent subscription of preferential offering, the dividend return fell back below 100%.  For those that have done the 100% dividend return were all Reits and Reits are renowned for higher dividend rate compared to normal stocks.  For Nordic Group, a normal stock, to be able to outperform a Reit in a knockdown fashion is something extraordinary !!!

As of now, after considering the strategic action in 2021 as divestment, at current price of $0.46/share (as of 12th May 2023), the dividend return stood at 115.76%, an unrealized profit of 407.64% with a holding price of $0.0902/share.  This translate to an annual return  w/o dividend of +19.78% and with dividend +22.55%.  If you think this statistic is very impressive, this is not the overall picture yet.  Backtracking all those actions (strategic) that were being carried out since 2014, there is more to it.

In 2017, 48.39% of the initial holding was divested at $0.32/share netting a capital gain of 207.60% and a dividend return of 19.95%, translating to a total gain of 227.45%.  As a result of this divestment, the amount of profit is already more than the initial capital being injected, making the stock already mathematically impossible to lose money (refer here).  That was the first objective being achieved and took 3 years only.  As such, now this dividend return hitting the 100% mark is just another increased in realized profit technically speaking.  In additional, since 2014, strategic actions were carried out to increase the holding at $0 cost.  As of now, the amount of holding being increased at $0 cost is 11.33% with reference to the initial holding.  Due to this, the holding price also went down from the initial of $0.1072/share to $0.0902/share as of now without additional capital being injected.  It is perhaps due to this strategic action that managed to hit the 100% dividend return mark just 8 years after first investment.

Now, consider the perspective that since first investment in 2014 and nothing was done (divestment, increasing holding at $0 cost, etc) is it possible to hit the 100% mark dividend return all these years.  Below are the list of dividend distribution since first investment in late 2014 (year 2014 didn't collect a single distribution as investment was done after 2014 dividend distribution)

Year 2015  --  dividend of 0.65 cents/share

Year 2016  --  dividend of 1.1872 cents/share

Year 2017  --  dividend of 1.384 cents/share

Year 2018  --  dividend of 1.652 cents/share

Year 2019  --  dividend of 0.782 cents/share

Year 2020  --  dividend of 0.606 cents/share

Year 2021  --  dividend of 0.562 cents/share

Year 2022  --  dividend of 1.314 cents/share

Year 2023  --  dividend of 0.906 cents/share (as of now)

The sum of dividend being added up all those years is 9.0432 cents/share.  This is till below the initial holding price of 10.72 cents/share.  It is still short of 1.6768 cents/share of dividend to hit the 100% mark and given the dividend record of the company, this might be able to achieve in 2024 fastest (10 years) and very highly likely in 2025 (11 years).  Even if it is able to achieve in 2024, that is just get back the initial capital being injected (a mathematically impossible to lose money scenario).  On the performance, as of now, at price $0.46/share, this will translate to approximately +329% return and add in another +84.38% from dividend all with reference to the initial capital cost.  This is what plain buy and hold can achieve.

Now factoring in all those strategic actions that were being carried out since 2014 (partial divestment and increasing holding strategically at $0 cost, etc), the followings are achieved :-

-- mathematically impossible to lose money achieved in just 3 years after first investing

-- dividend return hit 100% mark in 8 years compared with 10 years (fastest) on existing holding

-- realized profit from partial divestment in 2017 and 2021 translating to +203.18% with reference to initial capital cost

-- dividend return of those partial divestment in 2017 and 2021 translating to +19.76% with reference to initial capital cost

-- dividend return of existing holding since 2014 translating to +43.51% with reference to initial capital cost

-- Total realized (divestment + dividend) since 2014 translating to +266.46% with reference to initial capital cost

-- Unrealized profit at $0.46/share translating to +190.80% with reference to initial capital cost

Should I divest the whole investment now at $0.46/share, with the plain buy and hold method, I could register a return of approximately +413% from both capital and dividend.  On the other hand, for the one with strategic actions, this return would be +457.26% from both capital and dividend.  It might look very little difference and one might argue if continue holding for another few years, the plain buy and hold method might be better (if price moves higher up).  Well nobody can assure share price going forward will be higher or drop lower.  Whereas for the strategic action method, one thing can be assured of is continue to increase holding at $0 cost going forward which will contribute to both dividend and capital return.  Another key difference is as of now, the plain buy and hold method has yet to achieve mathematically impossible to lose money status whereas the later has already achieved that in 2017.

All those strategic actions are what being adopted from years of research on using Sun Tzu's The Art of War (孙子兵法) as a system for investment.