[AGM]: 5 things I learnt from Nordic’s 2018 AGM

Hello everyone, sorry for the delayed posting of Nordic’s AGM report as I fell sick. Nordic AGM was held at the auditors’ office. I would say about 20 shareholders turned up for the AGM. Here’s what I learnt from Nordic’s AGM.


1) On management

The management are experts in their own field of work that they do. From the way the Chairman replied to shareholder’s questions and from my 1 to 1 conversation with Ms Teo one of the executive director, they are all very clear about the Nordic’s business. Chairman also mentioned that he is very focus on generating cash then keeping assets in the company. The independent directors also shared that Chairman have been very forthcoming and would not hide any important decisions from the board. One of the ID said that this is reflected in the successful M&A track record that Nordic has.

2) On their businesses

Chairman shared that the upstream activities in the O&G sector still remains weak but there are more opportunities in the downstream where Nordic have been building up their capabilities in through all the different acquisitions.

Nordic’s business started with providing services in the upstream of the O&G sector before they realise the more lucrative downstream sector. Ms Teo shared that this shift have been pivotal to Nordic’s business and how they manage to stay competitive despite the downturn in the whole industry.

One example that Ms Teo mentioned is how Nordic came in to provide services for major oil refiners like Exxon Mobil and Shell in Jurong Island. She shared how the tight security in Jurong Island meant that these big companies could only source for local companies that are already operating within the island which Nordic was in. This also meant that there are high barriers to entry for any other companies who want to come in to eat their lunch. Due to the high expenditure involved in running their oil refinery business, these big companies cannot afford to have any down time and hence will definitely sought for good services that companies like Nordic provides to ensure safety of their workplace and machineries.

3) On business outlook

Chairman shared that he will continue to strive for efficiencies and synergy between all their acquisitions so that he can continue to bring down the cost. One example he mentioned is how there used to be HR department in every subsidiaries whereas now there is only one HR taking charge of all the different subsidiaries.

For businesses that are not doing well, especially those serving in the upstream, Chairman said that he will continue to right size the company so that they are not making any losses.

Chairman also shared that they continue to pursue the cross-selling strategy to their clients. By bundling up various services in their subsidiaries they are able to provide whole solutions to their clients. Ms Teo also mentioned that many of their clients appreciate the bundling packages as a lot of them would rather not engage you if you are “just doing scaffolding”. Hence, bigger companies engage them to provide whole solutions.

4) On properties & cash

Chairman shared that they have sold 2 out of the 4 properties they have put on sale. One shareholder asked him why he is selling it now when the property prices are not that good. He went on to reply that he rather keep money in cash then in assets.

Nordic’s war chest remains big at about $40 million, and Chairman believes that give them a good buffer to acquire any company that fits into Nordic’s game plan. As of now, the Chairman do not see any potential acquisition after Ensure.

5) On share buyback

I asked the management on what grounds does the management deemed that they should buy back shares. The Chairman said that they will buy back shares, either via the company or in their own capacity when “they feel that the share price does not reflect the true value” of the share. They do so in a systematic way and Chairman stressed that he will not use the company’s money to pursue aggressive buyback such that their cash needed for their core businesses gets affected.

Perhaps that’s why Nordic seldom conducts share buybacks but we could see their Chairman and Ms Teo scooping up shares in the open market. The last price that one of the management bought from the market is around $0.57. That could mean that given the current price the management still feel that the share price is below the intrinsic value.

In conclusion,

Nordic continues to live up to the reputation of a well-run company who defied the odds being in the O&G sector. Unlike their counterparts who have posed losses and some even going bankrupt, Nordic have been able to steer clear of these challenges. I believe this will only make Nordic stronger going forward. To share something I heard, the management is very excited about Ensure as there are strong demand for Ensure’s services by their customers. They have never seen such a good acquisition before, the margins are good and there is relatively few competitors. I will leave it at that and you can go decipher what that means. Haha!

PS 1Q results to be out in 9 May as shared by Chairman



[AGM]: 6 things I learnt from AEM’s 2018 AGM

Hello everyone, this is the report for AEM Holdings. The AGM was held at the Serangoon Gardens Country Club. I would say there are at least 50 shareholders who turned up. The ballroom was filled. The AGM began with the Chairman sharing his presentation slides on AEM, before questions were asked. Here’s some takeaways from the AGM.


On management

Chairman stated that AEM is “Build to last and not build to flip.” This can be seen from the pipelines put in place to grow the company further with the recent acquisitions and upcoming new product. I would say that the management are experts in their respective domains and Chairman Loke is like the conductor directing the whole band.


The HDMT is the flagship product sold to their key customer Intel. Chairman used the analogy of selling a car to someone but if he or she requires the car for other purpose like sports, they can choose to change the wheels and certain parts of the car to function like a sports car. The HDMT works the same way, it supports the testing of many chips that Intel produces except memory chips and for them to use the HDMT for different purpose they have to buy different kits to fit onto the HDMT. Furthermore, as the customer uses the HDMT, they would require to purchase consumables for the HDMT (think of it like changing your Gilead shaving blade after multiple usage) that again is a recurring revenue from the HDMT. All these consumables, kits are of high margins to AEM and are recurring products that Intel would have to buy in order for the HDMT to work.

The ramp up of the HDMT continues but Intel is giving them shorter lead time. When AEM was much smaller, Intel use to give them much more time from order to delivery. Now, seeing that AEM have become more established the lead time have fallen to about 4 months. Hence it was stated that they do not have visibility of the Q4 sales orders. If we were to work backwards Intel would place the order earliest June for it to be delivered in Q4.

Chairman also shared how the HDMT have kicked out other competitors test handlers and 2019 their key customers will be replacing all the other competitors’ machines with AEM’s. This means that sale of HDMT will continue into 2019 albeit at a slower pace compared to 2018. The consumables and kits segment will be expected to pick up nearing the end of the year as more HDMT are being set up in Intel.

On customer risk and diversification

One shareholder asked if Intel can engineer their own “HDMT” and get rid of AEM. In response to that Chairman said that AEM working relationship with Intel have spanned over 15 years, Intel sticked with AEM handlers even when it was in a rough patch back in 2011. Chairman also said that the HDMT is hard to be copied as many of the processes within the HDMT are protected by intellectual property (IP). Chairman expects this “sticky” relationship to continue into the future.

One shareholder asked if AEM can sell the HDMT to another customer besides Intel. To that the Chairman said that they can’t sell the current product to competitors as its like shooting their own foot. However, AEM can use their know hows and rebuild another test handler suited to the needs of the other customer.

The Chairman describe that Intel will become like their cash cow even if they do not use a new test handler, as the consumables still needs to be replaced. With the strong track record working with Intel, this can open up new doors when they approach other customers with the services their other subsidiaries (like Afore, Inspirain) provide. Diversifying into other areas of testing requires time as shared by the Chairman.

On Afore, Inspirain and Smartflex

Afore is a MEMS test equipment company that offers test handling solution mainly for automotive, industrial and consumer application. They are the industry pioneer and global leader in wafer level MEMS testing (wafer level is one of the smallest component in any product that is manufacture)

They have about 50% market share in the field they are in due to them being the lowest cost provider in the market. To put it in layman terms, Afore is good at testing things that are super small imagine a motion sensor in your Fitbit or in your car. And to be able to test something this small is not an easy feat which requires a lot of expertise. Afore claims to be the pioneer in offering such service.

Afore’s product offerings include selling of the MEMS test handlers and test cells to customers, testing services for other clients, tailored equipment and R&D services for the MEMS industry. For example, their Kronos test handler is the only wafer level test in the world for motion sensors with real stimulus.

For Afore they are pushing to offer testing at wafer level and at system level which means testing the product after it have been assembled. They are also exploring testing using cryogenic prober for application in quantum computing.

For Inspirain is into network infrastructure testing and measurement, they produce testers to test radio frequency in cables. The key in this industry is to provide the testing at the lowest cost and at the fastest speed. Their new product the TestPro100 is a handheld tester which is good for manufacturing testing. It is currently undergoing mass production and have received very positive response from big clients in manufacturing. AEM aims to leverage on their network and distribution to make this product a success.

For Smartflex, Chairman shared that this remains as an investment and he does not actively build this segment of the business. Nonetheless he believes that their know hows in the smart cards and SIM cards will reap benefits soon.

On new product AMPS

AMPS which is going to be another product apart from their HDMT, this product is going to be modular and configurable. This means that AMPS is a simple platform that can be modified to fit whatever needs their customer may have. It is believed to be easily scaleable as well. Currently they are at the marketing stage and intends to work with customers from planning to pilot and eventually adoption of the AMPS. This will be an interesting development to watch.

Screen Shot 2018-04-27 at 3.00.52 AM.png

On Industry trend

Chairman believes that despite the cyclical nature of the semiconductor industry, our demand for semiconductors in areas like IOT, Big Data etc will continue to drive their demand in the future. All these are mission critical as more technology comes into our daily lives. For instance, chips used in autonomous driving cars should not be allowed to fail as safety is paramount. All these mean that testing of chips becomes something all manufacturers have to do and they would have to abide to a high standard of testing to ensure the product is good & safe. This represents opportunities for AEM to scale and position themselves.

In conclusion,

I would say AEM have an exciting future ahead for them. It will take time for their acquisition to build synergy and grow to be a major revenue contributor in AEM. Nonetheless, the next 1-3 years will be interesting to see how they can continue to surprise us with what they can do.

[AGM]: 6 things I learn from Tiong Seng’s AGM

Hi everyone, this is my report for Tiong Seng AGM, held today at SAFRA Jurong. There was only a handful of investors there. I would say less than 20 of them turned up. They started by sharing with us the FY 2017 financial results and the outlook for Tiong Seng before going into the resolutions and Q&A. Here’s my take on what transpired during the AGM.


1) On management

Management believes that profits is more important than revenue. This is in response to my question on their declining order book and the lack of contract wins in their construction sector. CEO said that they would rather not be aggressively submitting tenders that Tiong Seng finds it hard to make money from. On that front, management remains cautious and careful in their bidding attempts. The Chairman shared that they do bid for projects but they do their best not to push down the prices too much such that it puts a tight pressure on their margins.


2) On Construction segment

Order book of about $500 million as of 31 Dec 2017 which includes of 8 ongoing projects lasting till 2020. CEO believes that Tiong Seng’s technology focus have position them well to ride on the government continued push towards adoption of technology in the construction sector. CEO highlighted that government have been very happy with the past 5 years whereby there have been a productivity increase of 2% in the construction sector with minimal labour growth. The government will continue to push for technology adoption in this sector with the aims of increasing productivity and reducing labour needed in this sector.

CEO believes that they are well poised to take advantage of this as they have amass a suite of technology that will give them an edge compared to others. Recent announcement on how they have reduce the building time needed for the social housing project in Myanmar is a strong demonstration of their capabilities. CEO is positioning Tiong Seng to become an integrated project deliverer.

“Integrated project delivery (IPD) is a collaborative alliance of people, systems, business structures and practices into a process that harnesses the talents and insights of all participants to optimize project results, increase value to the owner, reduce waste, and maximize efficiency through all phases of design, fabrication, and construction.”

By moving upstream to help their clients from conceptualisation and designing of their buildings. They are able to help their customers reduce waste and improve efficiency during the whole process. Also by moving upstream, from helping them with conceptualisation to designing, that could translate into contract wins for other business segment as well due to the high switching cost.

3) On new business segment

After amassing a suite of technology in their arsenal, Tiong Seng have come out with a new business segment to consolidate all their technology and offer it as a service to their clients. Their technology like PPVC, PBU and Cobiax just to name a few are being repackaged into this new business segment. Tiong Seng plan to sell this services to clients, or even to expand overseas just like how they did in Myanmar. CEO also mentioned that there have been some clients coming to them to ask for their advices before bidding for any land in Singapore.

As for their PPVC facilities in Singapore, Malaysia and Myanmar, the Singapore factory just finished the JTC project. Whereas, the  Malaysia facilities are at 60% capacity for precast and 50-60% for the tunnelling project for Malaysia. For Myanmar, they are still waiting for new project after recently concluding the social housing project in Yangon.

This Engineering solutions business segment will be a new leg of growth for Tiong Seng.

4) On recent partnership with ARCStone

The recent announcement of their partnership with ARCStone to collaborate and come out with a IOT platform to further systemise their PPVC factory through creation of TSConnect. TSConnect will be a manufacturing platform for construction to be used in their PPVC facilities.

CEO was speaking on how if we can envision PPVC factory just like any manufacturing facilities, by incorporating IOT and certain systems they will be able to further reduce their cost of production and reap efficiencies. Furthermore, CEO hopes to bring this down to the construction site as well. If the construction site can resembles that of a assembly site in a factory, a lot of these processes can be further improve to make the whole construction process much more efficient. That’s the direction they are heading with the partnership with ARCStone.

5) On property development

CEO shared that property development remains challenging in China in response to a shareholder question on why the China property development have not been bringing in good profits. Regulations placed by Chinese government for instance capping the selling price per unit, puts a strong cap on profitability. Hence, they had not been buying more land there since 2014, and have since move their focus to Singapore with the purchase of 2 sites recently.

The two sites are expected to launch in 2H2018 and 2019 respectively.

6) On share price undervaluation

CEO continues to believe that share price for Tiong Seng remains undervalued. CEO said that their book value is at $0.605 which is very undervalued compared to their current share price. An example given by the CEO is that most of their assets have been fully depreciated and are still serving them well. Furthermore their properties are valued at book cost and not market price which further adds on to the current book value.

It seems that share buyback should be continuing with the renewal of share buyback mandate in this AGM.

In conclusion,

Tiong Seng is entering into an exciting phase of development by introducing a new business segment to pivot away from their usual business segments of construction and property development, Nonetheless that also presents a lot of challenges ahead in building up this new business segment.  As of now, industry trends are still favours Tiong Seng. CEO expresses that contractors are predicting a slew of new projects (from recent enbloc activities and government projects) coming and hence are not aggressively bidding down the price. The increase in private property prices continues to be sustained and in favour of Tiong Seng property development business in Singapore.

PS I am vested, DYODD

PPS Buffet was Stamford Catering


My previous posts on Tiong Seng:

  1. What has happen to Tiong Seng so far?
  2. Tiong Seng, a sleeping giant?

[AGM]: 6 Things I learn from GSS Energy 2018’s AGM

Hello everyone so this is the much anticipated report on GSS Energy’s 2018 AGM. It was held in their office at Ang Mo Kio. I would say about 20 over shareholders turned up and packed in the small meeting room in their office. The meeting started with addresses by both the Chairman and then the CEO before we started asking questions to the management. So here’s my takeaways from attending their AGMs!


1) On management

Management continuously pledge that they are conservative in nature and do not intend to take on heavy debt to grow their business. They are very cautious in their finances and always seek ways to grow the business in unconventional ways. Quoting what Chairman and Independent Director said, “Anything we invest into we will think carefully.”

2) On dividend and FX policies

Management guided that although the dividend policy is not confirmed they are intending to give out dividends once the oil business gets into shape and that could be as early as the end of FY2018. For the sake of transparency, GSS felt that they should declare their intention to adopt a dividend policy to the shareholders.

On FX, the management have acknowledge that foreign exchange loss is a concern to them. But as of now, they have yet to be able to justify the financial costs required to adopt a hedging policy just to hedge their currency risks. They would rather be focus to build on the twin business at hand. Management also said that they are looking at a FX policy should they find one that is reasonable or if their exposure to a currency gets really big.

3) On their oil business

GSS CEO explained that he is very confident that monetising of the oil will be carried out in this FY. To give a rough estimation, he is looking towards the second HY that oil will be monetise. CEO is also careful to tell investors that he refrain from giving a firm timeline as to when the monetisation will occur as he explained that the oil business can be very unpredictable.

CEO also highlighted their game plan for their oil business. After the sharing from CEO and speaking to the key personnel after the voting, I have gathered that GSS changed their game plan to enter a workover well P1 because of their close proximity to SGT-01 which they are postulating that it will yield roughly the same oil profiles. (If you are unclear about SGT-01 and P1 read my write up on GSS here)

One of the key personnel I spoke to told me that they all know that the oil is there, just that further analysis still needs to be carried out. The KP also spoke about how close their relationship with Pertamina is, being one of the few companies that are committed to co-develop oil fields together with Pertamina. He highlighted how many companies took a very long time to go from the awarding of concession contract to production, whereas GSS only took 1 year to do that. On that note, Pertamina is very happy that GSS is committed and deliver their ends of the deal. That could possibly culminates into future opportunities for collaboration.

But as of now, the oil wells are currently still not producing oil. CEO also guided that in the oil business nothing can be set in stone, they will have to modify their game plan according to what kind of results they yield from their analysis.

For now, they are looking to monetise the sweet gas in SGT-01 and enter well P1 that is near SGT-01. Overall the technical team in Indonesia are optimistic about the situation over in the Trembul oilfield.

An interesting comment I caught was that they are looking to invite potential partners to help drill the well on a success basis. Meaning theses drilling partners will only get paid for their services if there are oil in that particular well they are working on.

4) On their PE Business

The management is also very optimistic about their PE business. They are running at almost full capacity now and they are having more orders coming in for them to fulfil. In the first 4 months of business, which are the dull months for their business, they are doing much better. Hence they are expecting their PE side to grow substantially this year. Their recent work trip to North Asia also brought out many positives for them.

With that the company is looking to expand their capacity by building a new factory in Batam, where payment will be made in instalments over 5 years and the asset will be owned by GSS. Many of their clients are asking them to commit to the long term and hence they are looking at capacity expansion.

The management is also looking to create more synergy between all 3 factories they have to deliver a whole solutions to their clients. My talks with the management also highlighted that the Indonesia’s Law on local content has been a unique value proposition they have for companies hoping to bring their products into Indonesia. GSS is also seeking to diversify their product offerings so as to diversify away from the Consumer Electronics division which takes up the bulk of their orders. (60% CE, 20% Automotive and 7-8% medical)

CFO also revealed that on an annualised basis for this year they are looking at 30 – 40% of new customers tapping on their PE business offerings. (New customers is defined as new orders for a different product by an existing customer or from completely new clients)

5) On spin off of PE business

CEO said that spin off of the PE business is another kind of possibility they are considering as currently the twin model approach have been serving them well (which means cash flow from the PE business is used to support the oil business)

However, CEO mentioned that “Ultimately, we should be separated, in order to restructure the business.” He did say that SGX requires that the oil and gas business to be sustainable and have some form of stability before allowing a spin-off to take place. CEO also hinted that the discussion with SGX on the possibility to spin off the PE business could be as early as next year when there are some track record from the oil business.

6) On Q1 results

CEO, CFO and one of the KP I spoke to told us to expect a fairly good and reasonable Q1 results from their PE business. By gathering their optimism shown in the first 4 months of the business I am expecting their PE business to record about 15% to 20% growth in revenue. Perhaps if we were to take it in totality, I am guessing their oil business will continue to pull down the overall net profit due to the fact that the oil business is still not cash making. But I am expecting 2018 Q1 results to be better than 2017 Q1 results.


In conclusion,

what I feel is that the management know what they are doing and the direction they want to head towards. They have done tremendous work in developing strong relationships with their clients and partners which I believe will only work towards their advantage. I continue to be highly optimistic on the outlook of GSS Energy given the strong short term catalyst of monetisation of their oil business backed by a strong management team who knows what they are doing.

[Eye Candy]: What’s next for GSS Energy?

In the recent announcement by GSS, it have announced the long waited results of their oil and gas venture. I mentioned in my previous post on GSS that this catalyst is the most important for GSS in 2017 as it determines whether a not their O&G business arm will be successful. I also previously shared on IN that the most uncertain part of any O&G business is the exploration phase as a company can spend millions on setting up the place for drilling but if they can’t find substantial oil in the area, its a failed effort.

GSS logoAnd yes! They did it. The management’s postulation on the Trembul area seems to be right.

Screen Shot 2017-12-28 at 10.40.09 AM.png

In this post, I shall made a new set of possible postulations of what might happen from now on for GSS after reading the various articles and reports about GSS after they have found oil.

Summary of Announcement

According to the announcement released, there are 8 columns of hydrocarbon found under SGT-01, the well that they drilled. The first 2 being gas and the next 6 is oil.

Screen Shot 2017-12-28 at 10.56.32 AM

And according to in-house estimates, the 1P (proven) recoverable resources in SGT-01 is 2.83 million barrels of oil from the 6 oil zones and 8.49 BCF (billion cubic feet) of sweet gas (equivalent to 1.5 million standard cubic feet per day (MMSCFD) of sweet gas for the period of 14 years).

I believe that the management was very wise in choosing that location to conduct SGT-01 well exploration as it is near several other old abandoned wells which allow them to also be able to deduce the oil profile of those older wells. Because of this discovery, they were able to estimate more accurately, the oil profile in well P1 that was drilled by Pertamina back in 2005. (Well P1 have more than 3 potential oil pay zones).

Also, GSS have shelved asides plan to drill SGT-02 which was supposed to be done after SGT-01 to drill the surrounding wells near SGT-01 so that revenue can be recognised from this discovery. Another wise move.

GSS will look to monetise the sweet gas zones in SGT-01, start oil production for well P1, TRB03 and TRB06. (I am assuming right here that all these wells are chosen because they are of close proximity to SGT-01 which allow them to have a better understanding of the oil profile in those wells). All these works aim to yield 200 barrels of oil per day by 3Q18 and monetise the sweet gas in SGT-01 before the year ends.

What does all these mean?

All these will mean that GSS will finally recognise their maiden revenue from their oil and gas venture. I shall attempt to do a brief calculation of how big this is for GSS.

For SGT-01,


8.49 BCF of gas is equivalent to 8617350 MMBTU of gas. As of current natural gas price, 1MMBTU cost USD$2.65 (but let’s discount it to USD$2.50)

Total gas revenue = USD$21,543,375 = SGD$ 28,006,387.50

Share of revenue for GSS = 31.4% of total gas revenue then 89% of PT SGT = SGD$7,826,664.45

Can’t assume the net profit as we are unsure of the cost required to produce the natural gas. But one noteworthy fact is that the gas found is sweet which is of high quality and can be sold for a higher price.

For oil,

Total oil revenue = 2.83 million barrels of oil x USD$50 per barrel = USD$141.5 million = SGD$183.95 million

Share of revenue for GSS = 23.5% of oil revenue and then 89% of PT SGT = SGD$ 38.5 million.

Net profit for oil (assuming cost of production per barrel is USD$15) = $SGD 26.9 million

For SGT-01 alone, total revenue (oil and natural gas) they can get out of this = SGD$46.3 million

For Well P1,

There are more than 3 potential pay zones according to their announcement.

Screen Shot 2017-12-28 at 11.43.32 AM.png For simplicity sake, let’s just assume that in Well P1 there is only 3 oil pay zone, and that the oil profile is similar to SGT-01. Meaning for that 3 pay zones, it yields 1.41 million barrels of oil (2.83 barrels divided by 2).

Total oil revenue from P1 (assuming USD$ 50 per barrel) = USD$70.5 million = SGD$91.65 million

Share of revenue for GSS = 23.5% of total oil revenue and then 89% of PT SGT = SGD$18.76 million.

Net profit for GSS (assuming USD$15 per barrel COP) = SGD$13.41 million

For well TRB 03 and TRB 06,

Firstly we have to assume that TRB03 and TRB 06 are of close proximity to SGT-01 and they share rather similar oil profile. Because out of all the 24 abandoned oil wells that GSS could pick to work on, they have chosen these two, which I believe is after due consideration.

As we do not have much information on TRB03 and TRB06, we shall assume that both only had 2 oil pay zones. Total oil resources = 1.88 million barrels of oil

Total oil revenue from these 2 wells (assuming USD$50 per barrel) =  USD$94 million = SGD$ 122 million

Share of oil revenue for GSS = 23.5% of total oil revenue and then 89% of PT SGT = SGD$25.5 million

Net profit for GSS (assuming USD$15 COP) = SGD$13.7 million




Assumptions Made,

  1. All wells have similar oil profiles as SGT-01, but to be conservative, I have assumed P1 only had 3 oil zones when there are more and also only assigning 2 oil zones each for TRB03 and TRB06 which should be much lesser than it could possibly be.
  2. I also assumed a lower oil price of USD$50 per barrel
  3. Cost of production is said to be USD$10 – $15 per barrel but I took the high end to calculate for all.
  4. Exchange rate used is USD/SGD = 1.3


What could go wrong?

Despite all the rosy picture about them striking oil, I would also like to analyse what can possibly go wrong. They may meet with some execution problem, where they are unable to successfully withdraw the oil or the gas.

SGT-01 is the very first exploration well that they drill. Supposedly, SGT-02 will be the next exploratory well and when they go there, the risk of not finding substantial amount of oil to commercialise will remain. The risk remains that when they drill in other areas of the Trembul operation area they might not find enough oil to commercialise it. So you can think of SGT-01 as the first battle won out of the many other battles that have yet to be fought.

Potential Catalysts

Their PE business have been doing rather well. The CEO have been talking about seeking to unlock value in the PE side of the business for sometime now. That could come in the form of a strategic divestment of partial ownership of the business or seeking a spin off of the PE side.

After all, the name GSS Energy is a clear indication that CEO Sydney wants to grow the oil business into a full fledge business to stand on its own. So I am looking forward to the oil business gaining some stability before CEO spins off the PE side of the business in 1-2 years time.

Of course, a clear catalyst for the oil business would be the discovery of more oil reserves in the area, which I think is very possible. If they continue with the strategy of digging exploratory wells near old abandoned wells, its very likely that oil can be found there.

In conclusion,

the total value of the 4 wells they are working on is worth SGD$90.56 million. At the price of $0.175 which is the price the CEO last bought from the open market, the market capitalisation is only SGD$ 86.8 million. Which is undervalued as they still have a functioning PE business delivering about SGD$75.61 million in revenue for FY 2016. Furthermore, this is only phase 1 of the oil business for GSS, they can still strike oil in other areas of Trembul with the 22 untapped abandoned old wells.

I would say that GSS is a long term play as the initial period of oil production is usually the hardest. Holding it for 2-3 years should see the real value being uncovered should everything goes according to plan.

PS I am vested.

Links where I took my information from:




[Eye Candy]: What has happen to Tiong Seng so far?

It’s been about 6 months since my last post on Tiong Seng. What has happen so far? In this post I will share some catalysts that have happen and whether there are any more upcoming catalysts we can look forward to.

Screen Shot 2017-10-23 at 4.50.25 PM

Screen Shot 2017-10-23 at 4.48.57 PM

1) Share buyback continues…

As we can see share buybacks have dominated most of the company announcements. The last time the company bought back their own shares was at 23 Oct 2017, at $0.37 – $0.375 per share.

2) Interesting acquisitions

Tiong Seng have made 3 acquisitions to increase their land bank way before the recent enbloc fever. The 3 acquisitions are:

  1. Sloane Court Hotel at 17 Balmoral Road at $80 million
  2. Two freehold sites in Jervois Road at $21 million

All 3 sites are to be redeveloped into residential properties.

Sloane Court Hotel 14380663.jpg

With the recent positive developments in the private residential market, it seems like Tiong Seng’s move to acquire these sites came at the right time. Give it another 2-3 years of development, property prices may have recovered and Tiong Seng could market the buildings at a profitable price.

Also all 3 of these sites are situated in District 10 area which is highly attractive. Their current property development project Goodwood Grand also had rather good response in the District 10 area.

3) Risks

– Dwindling order book –

After their recent Q2 financial results, it seems that their order book have dwindled to about $700 million. Each quarter recognises about $100-300 million so if Tiong Seng is unable to win anymore construction tenders, it will affect its revenue going forward.

Of course with the government pushing forward with more construction projects, hopefully it will only be a matter of time that Tiong Seng will grab some of these projects given their strong record in using technology for construction.

4) Catalysts ahead

– TOP of Goodwood Grand –

One of Tiong Seng’s property development project have achieved TOP in June 2017. With only 7 units left in the 73 units for sale, these seems to be a rather popular project. Tiong Seng owns 30% of the project. So far there have not been any revenue recognition from these project.

Maiden contributions from this project should give a boost to the upcoming Q3 and Q4 results.

– Expect fantastic results this FY-

This FY will be the best results that Tiong Seng have posted for the past 5 years!

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Its 1H2017 results are already very close to that of their FY2016’s results. With 2 quarters left to go, Tiong Seng is on track to crush their previous FY’s results.

– Positive industry outlook –

The construction sector is deem to pick up with the government introducing more projects to save this dying industry. Also, recent rebound of private property prices, coupled with the enbloc fever could see more private construction demands in the years ahead. This should benefit Tiong Seng positively given their strong record as I mentioned above.

In conclusion,

Screen Shot 2017-10-13 at 12.54.38 PM

some may be wondering if there is still value in entering Tiong Seng now after the recent run up in their prices. Like I mentioned in my previous post on the construction sector, the pick up in construction demand is almost certain, what is not certain is whether Tiong Seng can clinch any of these projects.

In my opinion, Tiong Seng’s ability to achieve such magnificent financial results in Q2 is partially because it was able to clinch a slew of contracts back in the earlier years. They have been able to keep their order book at around $1 billion dollars almost every year. Whether Tiong Seng can be a justifiable buy at this price really depends on whether they can ride the positive industry wind going forward in the form of more contract wins.

Tiong Seng have always been a share buyback play. Their aggressive buybacks have cause some investors to buy and ride on the buybacks. As of now, one thing for sure is that the management still feel that the current share price is undervalued, as they have bought back their shares on the date of this post, at $0.37 – $0.375 per share. Before the most recent buyback, there have been a massive buy up with more than usual volume, could this be a signal that smart money has entered and today’s buyback acts as a support for the current price? If that’s the case, it seems that more upside is likely. Thank you and always dyodd! 🙂


[Eye Candy]: Signs of possible recovery in the construction sector?

Some posts ago, I remember talking about how I was fishing for stocks that are out of favour and one place I looked into was the construction sector. This is because construction have been contracting QoQ due to a slow down in construction demand  especially in the private property segment. Hence, many construction stocks were trading below valuation and I thought that might be a good place to look for some gems if any. You can read about my post here. So after doing some research I decided to put money into Tiong Seng as a share buyback and undervalued play as company have be aggressively buying back shares and top management pretty much owned about 50% of the entire company.

Recently, due to a slew of positive developments like the enbloc fever, first upturn in private property prices, government’s pledge to bring forward construction projects etc. Property developers and construction stocks have seem to be quietly on the move. Even Tiong Seng a construction company stock that do not usually have much liquidity other than their own management buying back their own shares on certain occasions have started to move.

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Tiong Seng’s chart

Especially in the month of October, most company that engage in property development and construction have been quietly creeping up.
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Could this be a signal that smart money is coming into this sector in light of an improved outlook on this sector? Do bear in mind that in 2017, the main sector that led the way was the semiconductor industry and this is what happened to them.

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Many companies in the semiconductor industry reported great earnings which led to an upward surge in their stock prices. Could this be an indication that the same is about to come for the property development and construction sector? After all, they say that the stock market cycle is always ahead of the economic cycle. Some of these companies have been announcing more tender wins from the government and some of them are snapping up land sites for development.

In conclusion,

I think we will have to take a closer look in the months ahead to see if these companies start to garner even more contract wins and property development projects which should boost earnings. At the end of the day, it is strong and improved earnings that usually sustain the upward surge in their stock price. A lousy company that cannot translate positive industry sentiments into improved earnings will not benefit much anyway. This is just my own humble observations. 🙂

[Eye Candy]: Raffles Medical Group’s growth story continues…

There’s only one word to describe Raffles Medical Group (RMG)’s share price in 2017 which is DOWN.


Which is what interests me. One man’s trash is another man’s treasure. The continued decline of the share price prompted me to look deeper into RMG. RMG was once the star of the healthcare scene in Singapore and my analysis today will highlight that it will continue to be in the years to come.

RMG logo

RMG have a long listing history since 1997, it has since grown from strength to strength from a network of clinics in Singapore to owning a hospital, network of clinics overseas and even a mall in Holland V. It owns many clinics in Singapore and abroad, 1 hospital in Singapore and 1 mall in Holland V. In recent years, growth have been slowly tapered down compared to its high growth days in the past. RMG’s growth throughout the years hinged on opening of new clinics, hospital either in Singapore or abroad.

1) Fundamentals

— Balance Sheet —

RMG always have kept a very strong balance sheet over the past few years.

balance sheet

Assets easily covers all the liabilities they have and cash in RMG is around $100 million which easily covers its debt obligations.

— Cash Flow —

RMG’s cash flow have also been very healthy throughout the years.

cash flow

It has managed to record positive cash flow from ops for the past 5 years. In certain years, cash flow from investing is high as they spent quite a bit on building new hospitals in China and the Holland V mall which I will go into more details later. But overall this seems to be a rather good set of cash flow with their current operations bringing in a healthy amount of cash every year.

— Income Statement —

RMG’s income statement have also been rather impressive. I have taken figures from their Annual Report from 2008 to 2016.

income statement 2008 to 2012

Revenue and EPS steadily increasing from 2008 to 2012

income statement 2012 to 2016

From 2012 to 2016, revenue continues to increase while you can see there is growth rate for EPS have been slowing down and in 2016 fell marginally below 2015. These shows that RMG’s growth have been slowing down and the group requires further growth catalysts in place to continue growing the top line.

2) Prospects

Management in RMG understood the slowing growth rate and did put in place plans for expansion as early as 2014. Below are some prospects which I feel will drive growth for the group in the future.

— Two new hospitals in China —

RMG have announced that it is venturing into China by setting up 2 hospitals, 1 in Shanghai and the other in ChongQing. These 2 hospitals are modeled closely to the one in Singapore which was open in 2001. Raffles Hospital in Singapore have been a strong growth driver for RMG since its inception.

Hospital Services segment of RMG growth rate:

  • 2003: 10%
  • 2004: 23.5%
  • 2005: 50%
  • 2006: 22.4%
  • 2014: 8.4%
  • 2015: 7.0%
  • 2016: 6.3%

So we can see that RMG have been rather strong in managing the hospital in Singapore which saw it to grow continuously for 15 years despite the slower rate of growth recently. Thus, these 2 hospitals will be the one to watch which should play a significant role in propelling RMG’s next phase of growth.

— Raffles Hospital Extension to open in Q4 2017 —

Locally, plans to expand the current Raffles Hospital was drafted as early in 2014. The completion of it should see an increase in capacity that Raffles Hospital can take in. This should also play a role in driving growth as Raffles Hospital’s growth rate have tapered down since its inception.

— Raffles Holland V —

RMG’s first ever investment property open just last year in 2016. It houses a Raffles Medical clinic on top level and the other places are rented out to different companies. The investment property have already broke even within 7 months and looks set to provide a steady stream of rental income in the future.

With ageing population an emerging trend throughout the world, the need for healthcare is definitely a necessity. Capacity expansion for RMG will definitely drive RMG’s next phase of growth.

3) Risks

— Higher cost —

When RMG started the Raffles Hospital project in 2001, it recorded a loss for that year because of higher staffing cost and operating expenses incurred in getting the hospital up to shape. This time round with 2 hospitals and 1 extension to be fulfilled in 2019, 2018 and 2017 respectively, a surge in operating costs is a given. However, its worthy to note that RMG’s cashflow from ops have been rather healthy from its current operations. $70 to $90 million of cash flow is generated from its existing operations which should help it to pay off some of these costs.

— Execution risk —

Having 2 new hospitals in China at around the same time will be a challenge for the management in attracting talents and ensure quality service at the same time. However the management have also had many years of experience under their belt in running healthcare services in Singapore which should be valuable.

In conclusion,

RMG’s growth story hinges on the upcoming hospitals to be opened. However, RMG’s financial performance could stagnate or even drop during this period when the hospitals are getting prepared due to higher costs needed to start the hospital. With RMG’s strong ability shown by their execution of the Raffles Hospital in Singapore, the other 2 hospital projects should similarly fuel RMG’s next phase of growth.

RMG chart

The drop in RMG’s share price this year could have priced in the coming tougher years ahead in managing costs of these new projects and could provide a good opportunity to enter for long term investors. Executive Chairman and Co-Founder Dr Loo owns 51% of RMG which have his interests aligned with shareholders. Aberdeen Asset Management Fund also bought shares of RMG at $1.21. Hence, there should be some value if the share price are below those levels. Regardless, like I always say please DYODD! 🙂

[Eye Candy]: What’s in store for Sapphire?

Sapphire Corporation Limited is one of the few companies listed in the SGX that have railway business in China hence exposing it to the potential opportunities in the One Belt One Road initiative (OBOR).

sapphire logo.png

It’s 100% owned subsidiary Ranken is the company that are in the railway infrastructure business in China.


Sapphire is a turnaround story after the new management turned it from a mining company into a railway infrastructure company.

There have been some good analysis on Sapphire online (you can read one of them here ) hence I shall not delve deeper into them. But today I want to focus more on the future for Sapphire and postulating what could be in store for Sapphire.

What actually caught my eyes was this:

Strategic partnership

This was announced in May 2017, where Ranken have entered into a strategic partnership with BeiJing Enterprises Water Group and China Railway Investment Group. After doing some research, there are some reasons to believe that this partnership may morph into projects in China Sponge Cities programme.


1) What is the China Sponge Cities programme?

As China becomes more urbanised, the problem of flooding has become a major issue in China. Also, China is also one of  few countries with the least water per capita. Water conservation and management have become a pressing issue.

Sponge City 1.png

The Sponge Cities programme was rolled out in 2015 where a few cities in China were pilot tested for the programme, which will eventually be rolled out to all cities. For instance, China hopes to have 80% of the cities constructed to be of Sponge Cities standard by 2030.

In the 13th Five Year Plan, the Chinese Government also set out some important objectives for water conservation.

13th FYP

13th FYP 2

These all show the urgency and importance that the Chinese government places on water conservation and management hence the importance of the Sponge Cities programme.

So how will this development benefit Sapphire?

2) Potential benefits for Sapphire

To understand the potential benefits to Sapphire, we first need to take a look at what the management of Sapphire are looking to do in 2017.

Sapphire commentary.png

Yup the management is trying to partner up with bigger companies in China to secure projects together under the Public-Private Partnership (PPP). That was found in the 1Q17 report released on 12 May 2017.

And in 16 May 2017, they announced the strategic partnership with Beijing Enterprise Water Group (BEWG) and China Railway Investment Group (CRIG).

PPP policy in China have been quite problematic. Due to the fact that many state owned enterprises are better positioned to win the PPP contracts as they are better financed by China banks compared to private firms.

China SOE in PPP

Hence Sapphire partnership with SOE will definitely positioned it well to grab a piece of the pie although in PPP profits margin are usually much lesser compared to going at it alone.

Furthermore, this partnership pushes Ranken out of their usual railway infrastructure business by allowing them to build expertise in new areas of infrastructure.

In my opinion, this partnership could be a signal for them to take on projects under the Sponge City programme. Just like how in May 23, 2017 , an Australian Consortium announced their participation in China Sponge City programme.

australian consortium.png

They could be doing the same with the partnership between the three. BEWG have expertise in building water treatment plants and systems, and Ranken have expertise in tunneling which could be of help to creating a good drainage system for the Sponge Cities. Quite frankly, I can’t find much information on CRIG as their website is really hard to interpret haha!

Taking a deeper look into BEWG, which has a much better investor relations website. In an announcement dated 27 June 2017

BEWG projects.png

Hmmm could Ranken be part of any of these 10 projects? Out of 10 projects, 7 projects are PPP of nature! And some projects requires works like ecological restoration which Ranken have some form of experience with.


This will be an exciting development to watch!

In conclusion,

Sapphire lack of contracts wins have led to many investors pushing down the stock price. But upon digging further it seems that there might be a silver lining. However, all these are just possible developments in my opinion which could be beneficial to the company. Please always dyodd! 🙂


[Eye Candy]: An in depth look into GSS Energy

Hello all! Today I will be doing a deeper analysis of GSS Energy. I am personally vested in this company hence, I would advise readers to exercise their own discretion when reading this post. Recently, GSS’s stock price have been going on a rollercoaster ride and many people including myself were thinking of cutting loss. But I held on because the prospects of the company are bright and the business fundamentals are sound. In the coming paragraphs I will bring you through GSS’s business and the outlook.

GSS logo

GSS Energy mainly operates in two business segments. 1) The precision engineering business and 2) the Oil and Gas segment. To let you understand a fuller picture I did a timeline of GSS transformation from 2013.

GSS timeline 1.png

GSS timeline 2.png

If you realised I never really talked about their PE business in the timeline above because during the period of 2013 to 2017, GSS took a huge plunge by venturing into the O&G sector which caused the main bulk of the movement in share prices. But since you got a fuller picture of what happened within this critical time span for the company, I will now analyse the respective business segments and their prospects.

1) Precision Engineering

GSS’s core business has always been precision engineering. In fact, they were a pure play PE firm before the new management decided to bring them into the O&G sector. Many people don’t realise that GSS Energy have a functional and profitable PE business. Come on the company’s name itself is misleading enough haha! So let’s take a look at how the PE business have done so far since 2014.

PE business.png

Both revenue and gross profit have been growing. That’s a good sign. Also, in 2017 they are shifting to a larger facility in China which will allow them to accept larger and more sophisticated orders as they capitalise on the chance to improve the new facility.

And for 1Q 2017, their PE business continued to grow at about 28% Q over Q.


That is kinda impressive. With so many competitors in the PE industry, it is sometimes hard to grow one’s business. However GSS PE business have been able to consistently grow their PE’s business revenue and gross profit for the past 3 years. This shows that the management are able to position the company’s services such that it attracts larger sales order from existing customers or obtain new customers to the company and at the same time reduce cost of production.

The thriving semiconductor industry in 2017 have become a favourable tailwind to GSS’s PE business. With a strong record of building up the PE business, and demand for electronics set to grow this year, this could be a record year for the PE business for GSS. In fact, the CEO have also considered plans to further grow the PE business through strategic acquisitions or collaboration, spinning off the PE business have also been considered by the CEO. That shows the confidence he have in the PE business.

2) Oil and Gas exploration

I think this is the main segment that is important to many investors. Since this business is new to GSS and there have been a case of their failure in this new business segment. The CEO’s concept in the O&G is not ordinary. He wants to ensure that there are certainty of oil in the ground and that it must be low cost so that they will not be badly affected by changing oil prices.

CEO Sydney’s way to achieve those objectives was to acquire old abandoned wells in Indonesia and drill them. The rationale for that is simple. Back in the old days, the colonialists have created many oil wells for their own needs. But in WW2, the colonialists destroy these oil wells so that the Japanese could not get access to these resources. So by acquiring these old oil wells, the cost of production of drilling for oil in that area becomes low. (About US $12 per barrel estimated)

Of course, not every old oil well contains oil reserves. Extensive studies have been done by GSS before committing to any sites. The current one that they are working on the Trembul Operation Area is in the same basin as the one Exxon Mobil use to draw oil, so certainty of obtaining oil seems to be quite high. And if the Trembul Operation is a success, the CEO have in mind to expand around the area in order to grow their O&G business to be a full fledge player in the industry.

Also, the type of agreement that GSS signed with PT Pertamina, Indonesia national oil company is different from the one they signed in the 2014 debacle. For this arrangement, money earned in the sale of oil is first used to pay off the cost of production of the oil before profit sharing is done. And since, the oil is bought by the government there are some forms of certainty in the buyer.


Yup the risks of not obtaining oil, execution risk and low oil prices are definitely there. But in my opinion, these scheme of arrangement with Pertamina puts GSS in a better position to reap profits from the venture. Unless oil price falls below US$20 per barrel which is rather unlikely, this remains profitable for GSS. Also, as a show of confidence, CEO have been buying shares in Jan 2017.

 3) Fundamentals

Balance sheet

GSS balance sheet looks fine. I am more concern about debt since O&G companies around the world have been going bust because of debt issues.

balance sheet.png

Debt free company! And the group have a rather strong cash reserves of about $11 million.

Cash Flow

gss cash flow.png

Cash flow is improving. Free cash flow have been rising ever since 2014. That is definitely a good sign. Haha credits to Investingnote for doing the calculations! 🙂

Insider ownership

The CEO holds 17.99% stake in the company and a non-independent, non-executive director Glenn Fung holds a 13.44% stake in the company.


That’s a combine 31.43% stake in the company from 2 members of the board in GSS. The management definitely have their interests aligned with the shareholders. Furthermore, the CEO have been buying up shares in 2017 as well.

4) Outlook

I feel GSS have more legs to run. Backed by a profitable PE business and with the oil business coming online in 2017, this could be a good year to watch for GSS. I think some of us are concern because FY 2016’s results are backed mainly by a once off income gain by the government.

once off income.png

If you realise without the once off income, they would only have about $3 million in profit for FY 2016. That translate to about PE 28x at current price. To see if the current price is considered undervalued after factoring some future catalysts, I shall try to do a conservative estimation based off some assumptions.

  1. No growth in PE business
  2. Company manage to retrieve oil from the ground
  3. Price of oil remains in USD$40 to USD$50 per barrel

Assuming there is no growth in the PE business, we are looking at a revenue of $70 million and an EPS of SGD 0.6 cents.

Now according to a QPR by GSS, there is said to be 24 million stock tank barrel of oil reserves in the Trembul area up to 800m deep. GSS subsidiary PT SGT a 49:51 JV is entitled to about 23% of the oil reserves there. So GSS is entitled to 49% of the 23% of total oil there are.

gss QPR trembul.png

GSS’s contract with Pertamina is for 15 years, that would entitle GSS to have

49% of the 23% of 24 million barrel of oil = 2.70 million barrel of oil and after 3 years GSS’s stake will increase to 89% of the 23%.

Assuming a more conservative figure — GSS are entitled to only 2.16 million barrel of oil

So 1 year = 144 000 barrels of oil

Assuming GSS cost price per barrel is USD $20 (actual estimated is USD $12) and price of oil ranges from USD$40-50 (Let’s take USD $40 to calculate)

Net profit for GSS oil business per year (first 3 years) = USD 2.88 million = SGD 3.75 million (USD/SGD of 1.3) = EPS of SGD 0.755 cents

Total EPS when O&G comes online = 0.755 + 0.6 = 1.355 cents

Which translate to a PE ratio of 13 at share price of $0.175 (the price which CEO last bought his shares from the open market). Also note that my calculation is only valid for the first 3 years as after that GSS’s stake will increase to 89% as per the agreement signed.

If we were to consider oil profits from the 3rd year onwards**:

89% of 23% of oil reserves = 4.97 million barrels a year (from 3rd year onwards)

To be conservative let’s take around 4.5 million barrels.

Net profit for GSS’s oil business per year (from 3rd year onwards) = USD $90 million = SGD 117 million (USD/SGD =1.3x) = EPS of  SGD 23.5 cents

Still assuming no growth in PE business from 3rd year onwards, total EPS = 23.5 + 0.6 = 24.1 cents.

Which translate to a PE of 0.7 at price of $0.175.

This is could be why CEO’s Sydney emphasize that GSS is undervalued.

The above is taking into consideration that there is no growth in the PE business and that oil prices ranges from USD$40 to USD$50 per barrel.

**However, its good to note that my type of calculating is not the most accurate as company will not be able to drill the exact amount every year. Hence, I hope my calculation help to shed light on how lucrative the potential of the oil business can be to GSS which is why in my opinion, many investors are waiting to see if the oil business will become successful.

 In conclusion,

one should monitor FY2017 closely to see the rate of change of pure earnings Q over Q. Supported by positive tailwinds from the semiconductor boom and with oil prices stabilising out, it is definitely a growth company at an inflection point. FY 2017 result may not be higher than FY2016 but one should always look at the real growth rate of earnings to determine if there is growth potential in the company. With that, I shall end my analysis, rmb to DYODD!