Portfolio Review July 2020



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Bench marking myself against STI and World Index:

For last month's portfolio review click here 

Year to date:
STI Index: -14.86%
World Index: -2.17%
My Portfolio: -5.19%

Three years trailing:
STI Index: -13.51%
World Index: +13.02
My Portfolio: +12.11%

Year to date, I outperformed STI by 9.67% and under performed the World Index by 3.02%. Three years trailing, I outperformed STI by 25.62% and under performed the World Index by 0.91%.

Portfolio composition:


Transactions:

Sold 33% of my Oriental Watch(HK:398) for 35% gain
Sold half of my Wharf Reic(HK:1997) for 10% gain 
Sold all of my ABC(HK:1288) for 3.64% gain
Bought ChanJet(HK:1588) 5.09% weightage
Bought Inspur Intl(HK:596) 5.66% weightage

Commentary:

Took some profit off sectors perceived to likely under perform during Covid19 period. Increased and added cloud and SaaS related companies. More of a swap of value for growth. 

The crazy run up recently of SaaS(Software as service) companies like Weimob and Duiba, Cloud/ERP(Enterprise Resource Planning) companies like Kingdee and Yonyou tells us that China Saas and cloud services are at a critical point of growth. The proliferation of cloud services in the midst of 5G build up coupled with China government tax incentive to push businesses into the cloud are a few reasons for this.

US counterparts like Salesforce, Shopify and Trade desk have ran up to all time high despite many of them still loss making. The valuation discrepancy between the US and China's SaaS/ERP/Cloud companies are getting further apart. 

ChanJet(HK:1588) is a spin off from the largest management software and cloud service provider in China Yonyou(SHA: 600588). I believe it will become a leading SaaS provider for micro and small enterprises (MSEs) thanks to the cloud migration trend. Their cloud service business top line is growing at a rate of 289% year on year. The company’s products support Alibaba Cloud, Tencent Cloud, Huawei Cloud, and CT Cloud. Chanjet embeds its SaaS products into platforms of partners such as Alibaba and Tencent, and can take advantage of these platforms to market its products. 

In traditional industries, Chanjet cooperates with China Unicom and China UnionPay to broaden sales channels. Since 2019, the company has expanded its strategic cooperation with internet giants such as Alibaba and JD.

This company is also flooded with cash after they sold a stake of their payment business back to the parent. 

Inspur Intl(HK:596) is a competitor to KingDee and Yonyou but its severely underestimated based on valuation. Its a profitable fcf churner, third in terms of SaaS revenue(one third of Kingdee), but yet its market value is only a fraction of the first and the second, Yonyou 143 billion rmb, Kingdee 60 billion, Inspur 3 billion. 

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