Investing 2019 Apr ... bought Singtel, Memtech & UMS

I did a lot more work doing research on stocks this month than I did last month.

I picked up some stock tips and did my own due diligence on the stocks that I shortlisted, and eventually bought.

My third major purchase for this year was Singtel.  Singtel's overall business has come under some severe attack.  However with its strong balance sheet, excellent free cash flow (2.53 billion) and low gearing of 24.9%, I believe it will be a sleeping behemoth no more in the future.

Beyond the shores of Singapore, Singtel has a presence in India (Bharti Airtel, the number two telco in India), Indonesia (Telkomsel, the number one telco in Indonesia), Philippines (Globe), Thailand (AIS) and Australia (Optus).  Add to these the other segments within Singtel Group, the Group Enterprise and Group Digital Life, Singtel has enough stamina to fight a good fight and win a larger slice of the pie in the industry.  Nevertheless, Singel still faces stiff competition all around, and that might reduce its profit margin.  Understanding that investing is about getting rewarded for taking risks, I decided to take my chance.  The risk I took was, of course, calculated, hence just one lot of Singtel this time.

I bought Singtel shares @ $3.05, a price which was very close to its 5-year low ($2.94).  For now, Singtel promises an attractive divided yield of 5.6%, and hopefully a potentially considerable capital appreciation (as of today, it is trading @ $3.13).

My fourth and fifth stock purchase for this year were Memtech International and UMS Holdings, 2 technology stocks.

Why tech stocks?
1. I would have preferred to buy REITs to strengthen my dividend portfolio but those that I like were overvalued.  I would like to buy low to gun for capital appreciation.
2. I am not knowledgeable with other industries such as consumables and utilities.  I've done much more research on tech stocks and have also bought MicroMechanics and AEM (which I eventually sold for 30% gain).  With that understanding as a basis, I decided to stay within my circle of competence.

So I bought Memtech @ $0.955 and UMS @$0.725.  These two companies have flawless balance sheet and excellent free cash flow.  

I. Memtech
Memtech has manufacturing sites, sales and engineering offices in 3 cities in China, as well as offices in Germany, Japan, USA and Taiwan.  Memtech is basically a solution-provider-type company that meets the needs for components in automotive, industrial, medical, communication and digital device companies.  Two notable customers of Memtech are Foxconn and Amazon (a long term customer).  I like it that the business is well-diversified.

Memtech's P/B ratio was 0.81. The debt ratio was 0.33.  Cash balance was US$22,156,000 which was more than sufficient to meet its debt obligations (US$3 million).   Net income was consistent from 2015, although there was a drop in net income in 2018 (Yr 2017: US$14,125,000 to Yr 2018: US$9,601,000).  The dividend yield is 3.13%.  All in all, Memtech made it as an investment grade company for me.

UMS's business is very much semiconductor-centred.  According to the CEO, demand for processing power and storage will see exponential growth, from about 40ZB in 2018 to 50ZB in 2020, to 163ZB in 2026.  So the prospects look bright for UMS in 2019 in the manufacture of components and systems for various semiconductor equipment.

UMS's P/B ratio was 1.73 (higher than I'd like).  Since 2014, UMS has free cash flow in excess of $20 million, which speaks to the prudence of the management (2018:$23 million).  Debt ratio was 0.16 (very low!).  Net income increased from $34,299,000 in 2015 to $43.071.000 in 2018 (still a drop from $52.037,000 in 2017).  The dividend yield is 6.12% (like that very much!).

The semiconductor industry is a cyclical one, so UMS might face some turbulence in the near future.  In fact, 2019 has been reported to be an unkind year to semiconductor stocks.  However, with its flawless balance sheet and excellent free cash flow, I'm sure it will survive the storm.

As with Singtel, I calibrated my risk with my purchases of Memtech and UMS (just 2 lots of Memtech and 2.5 lots of UMS)

Hopefully next month I get to buy some REITs. :-)



Popular posts from this blog

Investing 2019 June ... bought Keppel-KBS & Fortune + Portfolio Review

Being a Sole Breadwinner and the Solo Investor in the Family