Decade-Fourbaggers In Singapore

[snowcap]

From the early 2000s, there is one 10-bagger that is very obvious to me - Dairy Farm. It was sub-$1 and grew to $10, but for the last five years was going nowhere. Growth has plateau-ed. There are more 4-baggers - look at VICOM, it was sub-$1 before the 08 GFC, now is $6.

Many multi-baggers have also been taken private because they were undervalued for prolonged periods. My assessment of the reason is that our capital markets are not mature enough. Investors wanting dividends is part of it, but another big part is that the Singapore bourse does not attract the big fund international fund managers nowadays. So many solid companies with great fundamentals taken private (Osim, Cerebos, Super Group, Pokka, etc) at low prices.

I think that the SG market is indeed too small and agree with d.o.g. that the SEA market is too diverse. Language, consumer tastes, legal systems, currency exchange, cultural differences means that there is no synergy or negative synergy for a company that does well in SG to expand outward to ASEAN. Not impossible, but just a higher hurdle to cross than with a homogenous "hinterland" to expand to. For a $50m market cap company to expand to $500mil, from SG to ASEAN, is much much harder than a $50m company to grow to $500m in USA, China or EU. Or for that matter, for a $500m company to reach $5b.

[Wildreamz]

Good point. Our local market is not mature enough, undervalued stock with great growth prospects frequently got taken private prematurely at low valuation, and there are no big funds or investor to back that up. Example (that I know of) of undervalued company with good long term growth prospect: ARA asset management.

That creates a negative feedback loop because good company will avoid listing in Singapore (poor valuation prospects, high expectation for dividends) , and those that can't get listed anywhere else, got listed on Singapore instead (S-Chips).

[chialc88]

我的未來不是夢　我認真的過每一分鐘
我的未來不是夢　我的心跟著希望在動



IT - Searching for fourbaggers In Singapore
... let SGX help you (2018)
link

Extracted specially for our passion valuebuddies:


Vested. 
Micro Mechanics is my #1 holding and I'm falling in love with it.
iFAST is at top  #3

Wish all our valuebuddies luck in hunting for your fourbaggers.
Thanks for reading.

[Wildreamz]

Micro-mechanics fundamental looks really good. I like the industry they are in as well. The only fact that give me pause, is that it is a small player/supplier of a larger industry, which exposes it to competition risk.

One recent example would be Venture corp, where competition cause profits/outlook to erode; despite being a much larger player.

Hence, their continued success is not as certain as I would like, as they are not pseudo monopolies (like Apple).

But I agree, they are one of the best-looking companies on SGX right now.

Edit: Another way to ride the chip/IOT/high-tech hardware wave, would be to invest in TSMC. Their market position and long-term dominance is more certain. But due to their size, their upside is more limited.

(ex-investor in TSMC)

[chialc88]

@W, 
Instead of worrying and focusing on MM's competitors, 
why not look at it's Moat?


MM currently had just renounced from its 52 weeks low.

If you're not vested yet,
take out $200 and buy 100 shares when you can.

I suppose you had not been spending enough time
on Micro Mechanics yet.

Start today?

Read this and summarise your thought, please.
link

高:

[Wildreamz]

@C

Do you perhaps care to share some of the strongest moat of Micro-mechanics? Are there clear barriers to entry, such as patents, or a key technical capability that is impossible for competitors to replicate? 

Over time, almost all profitable venture, will invite competition, and excess profits will be eroded away, until steady-state is achieved (http://www.ballastequity.com/wp-content/...Castle.pdf).

What is the moat of micro-mechanics? How long will the current growth cycle be sustained, given that many analyst are predicting a peak in the current chip cycle? 

---

Note: I'm not bearish on Micro-Mechanics, in fact, I think it is one of the more attractive, forward facing business in local bourse right now, in an industry that I am bullish long term (semi-conductors). But in the upper-stream of the supply chain, many times, you will be beholden to the whims of the monopolies and monopsonies, and over time, they will always try to cut cost to increase their own profitability (https://www.cultofmac.com/571625/apple-s...ion-costs/). 

Case 1: A good case scenario is that competition will ignore them for a long time, because they are in too niche a market; and their product line will stay important and relevant for a long time, despite technological advancements and shift in technological trends. 

Case 2: The better case scenario is that they will keep increasing their market share, keep developing new products and increase their product line, become indispensable to the industry, and keep expanding to adjacent industries (hence, almost unlimited upside). 

For me, I don't see Case 2 as far as I read (not too much), Case 1 I'm not sure how long that would last (they may very well be ignored for a very long time), hence I will abstain for now. Their multiple is attractive as long as their current growth rate is sustainable.

[chialc88]

Micro Mechanics Holding - a Decade-Fourbaggers In Singapore

Grab from SBF-SME-Committee Budget Recommentations 2018
link



*** Disclaimer #1:  I added Micro Mechanics logo onto the picture. 
*** Disclaimer #2: Mr Low Ming Wah is the current chairman for SPETA

---

A) To answer your questions, MM does not publish any patents or key technical capabilities that's impossible for competitors to replicate.
Likely a few vested valuebuddies gotten your point and will be checking with Micro Mechanics soon.
I suspect with help of AStar, we might see some patents (likely on Micro-structural and Nano-technology, Nanoparticles, MEMS) registered under Micro Mechanics name.
 In the past, it's very unfortunate that MM's management was wearing the SME mindset (survival instinct) and did not aware of have the urge to patent.
Now, officialy with your nudge, we shall be able to see some announcement, hopefully, soon

B) Agrees 100% that over time, excess profits will be eroded until a steady-state is achieved.
MM set a KPI of GPM 50%
So far, so good.
Thou I'm too happy to assume that GPM of 50% is a steady-state but I'm aware that it's operating in China and especially in a high tech industry.
To shift the KPI to a lower number might happen (eg. due to customer demanding a lower price in economy crisis aka not direct competition)
The good things is we know the KPI and we are given the chance to see how the needle is moving every Qtr.

C) Current chip cycle had already peak.
MM reported that growth rate is slowing down, but its still growing aka not -ve but +ve growth.
MM also reported that the consumer demands currently and in future is mobile/mobility devices and electric (driverless) car respectively.

D) Their multiple is attractive as long as their current growth rate is sustainable.
This makes my day. I felt that Micro Mechanics multiple is always very high.
Majority of my stake was vested when they were 40cents. It's multiple was already high.
At $2.40, it's multiple really rock to the skies and I wonder that might be the reason Yeo Seng Chong is out.
Anyway, at $1.80, it's currently near it's 52 weeks low, so do consider buying 100 shares and watch it's progress.

E) Really appreciate your tips.
Thank you.
We may be on the last generation to drive car.
Enjoy a good Tedx shows:

[BlueKelah]

IMHO its all about innovation. Unfortunately our education system and Asian culture is more focussed on conformity and less freedom of expression. Failure is also not well tolerated. So multiple factors stifling innovation and entrepreneurism. Things are getting better now as the thinking is changing, so likely we will see more high growth SG companies.

It is not hard to have high growth. Look at Creative, back then sound blaster expand to America and all over the world, pretty sure the growth in earnings must have been phenomenal.

[cif5000]

I was looking into Singaporean companies that had over the past decade had grown their earnings by a handsome rate of ~15% or more (a fourbagger in a decade). The point of this exercise was to try and find quality growth companies, such as those espoused so much by Fisher and Lynch. By growth companies I mean those with organic growth, i.e. companies that weren't cyclicals or turnarounds. Finding these companies is pretty much the central goal of value investors like us, so it was very troubling when I couldn't find any.

The result of having a company (and assuming therefore the share price) that grows 15% annually for 10 years (4 bagger) is substantially similar to having a 15% return on a stock and have the process repeated 10 times over a period of 10 years (~400%). The latter seems more achievable to me because the "goal" is broken down into smaller pieces. However, it is more tedious and involved more work.

If you can get 25% return on a stock, you just have to repeat it 6 times. And that's over a generous period of 10 years! I'm sure many such opportunities were / will be available.

It's like trying to get to the 4th floor in a shopping mall. The lifts are always full and you can wait for the next available one with no guarantee of getting in. If you get in, good. But...you can also take the escalators - walk a little, ride yourself up level by level, and you will still get there. Maybe even faster!!!

[thefarside]

The result of having a company (and assuming therefore the share price) that grows 15% annually for 10 years (4 bagger) is substantially similar to having a 15% return on a stock and have the process repeated 10 times over a period of 10 years (~400%). The latter seems more achievable to me because the "goal" is broken down into smaller pieces. However, it is more tedious and involved more work.

If you can get 25% return on a stock, you just have to repeat it 6 times. And that's over a generous period of 10 years! I'm sure many such opportunities were / will be available.

It's like trying to get to the 4th floor in a shopping mall. The lifts are always full and you can wait for the next available one with no guarantee of getting in. If you get in, good. But...you can also take the escalators - walk a little, ride yourself up level by level, and you will still get there. Maybe even faster!!!

Invert, always invert!