Portfolio Review October 2020



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Bench marking myself against STI, HKSE and World Index:

For last month's portfolio review click here 

Year to date:

STI Index: -17.53%
HK Index: -5.81%
My Portfolio: -5.35%
World Index: +6.86%

Three years trailing:
STI Index: -16.18%
HK Index: -2.03%
World Index: +22.05%
My Portfolio: +12%

 
Year to date, I outperformed STI by 12.18% and HK by 0.46%, under performed the World Index by 12.21%. Three years trailing, I outperformed STI by 28.18% and HK by 14.03%, under performed the World Index by 10%.

TWR(Time weighted return) is based on previous close of all my stocks daily, instead of my actual buy and sell price. A deeper understanding of my own portfolio is the XIRR which is money weighted and shows the true profit/lost I have incurred from all my investments till date:

Made a net profit of only S$2,277.72 for 2020. Made S$89,558.05 from my portfolio till date.



Portfolio composition(4 index etfs and 23 stocks):

Transactions:

Bought back XD.inc(HK:2400) 
Bought China Motor Bus(HK:26)
Bought more Netease(HK:9999) 
Bought Hopfluent(HK:733) 
Bought Emperor E(HK:296)
Bought CC New Life(HK:9983)
Took profit for China Youzan(HK:8083) 
Took profit for Chanjet(HK:1588)
Took profit for Sunevision(HK:1686)

Commentary:

CC New Life(HK:9983): On October 29th 14 departments including the Development and Reform Commission Work plan to expand domestic demand and promote consumption for China in the near future, Program covering Medical, Education, Property Management, Tourism and other industries, The core purpose is to promote the expansion of domestic demand.

In those plans, two are directly related to property management. That is also why there is a flurry of property management companies spun off from Chinese developers recently.

But since August, the property sector with strong stock price performance in the first half of the year suddenly pulled back(cooled down). Valuation down, but the property management company is highly certain. The essence of high growth rate has not changed.

Among them for example is CC New Life(9983.HK). The stock price even pulled back to near the offer price. Base on current growth rate, The company's EPS in 2020 and 2021 will be RMB 0.32 and RMB 0.45 respectively. The valuation in 2021 is about 13 times. Its current 40% annual profit dividend payout, is already a decent return.  It has a 4 years revenue CAGR of 45.3% and a net earnings CAGR of 89%. This means this company is a high growth company that is very profitable. It has close to 3bil HKD of net cash.

The reason this company stand out among the rest is due to it being the first mover in adopting technology to bridge offline to online. It is the first domestic property management company to open up the consumption scene on an online platform. Since the launch of Jianye New Life's Jianye+ APP, there have been more than 3 million registered users. 

Behind the life system of Jianye+,It is a rich and powerful business resource built by Jianye Group over the years. Jianye+ has cooperated with well-known domestic platforms such as JD, Netease, SF Express and other strong alliances, Strategic cooperation in resource integration and supply chain. 


Why is this important? It increases stickiness and improve the purchasing power and repurchase ratio of new and old users. Jianye+'s own products are very powerful. Users who have a good experience on Jianye+ will strengthen repurchase. At the same time, building reputation is conducive to the continued expansion of Jianye's new life, Flywheel effect.

On the recent hot community group buying, Jianye+ has already deployed ahead of schedule. Utilize the high-density layout of Jianye New Life in the province (covering 94 of the 18 prefecture-level cities and 104 county-level cities in Henan Province). 

According to the forecast of the National Bureau of Statistics, the residential area under management in Henan Province will be 1.23 billion square meters in 2021, Jianye New Life’s current area under management is only 80 million square meters, Even with only 20% market share. The performance of Jianye New Life will be a huge improvement.

Jianye New Life in terms of area is not really the first echelon. In 2019, the reserve area of CCRE real estate was only 50 million square meters, not too much. Its ratio between land provided by parent and third parties is 50-50. It is clear that they rely on brand and technology verticals to standout and that is why Hillhouse is the largest shareholder of this company. Jianye New Life mentioned in a roadshow when communicating with investors that part of the extension project is to pay brand fees to Jianye New Life and CCRE house prices are 25% higher than the average house price in Henan.

Hopefluent(HK:733) & Emperor E(HK:296): Both are net net companies that pays out generously. Emperor E has been buying back shares and cancelling aggressively recently. It will still be a net net stock after a 400mil cash burn(I am assuming Macau casino will continue to burn cash for the rest of next year). Both companies have negative points though. Emperor founder do not have a good reputation and Hopefluent has high interest borrowing even though the quantum is being reduced every quarter. Wonder why companies with tons of cash would want to have high interest borrowings. Property agency(Propnex of China) should be a good track in China though. Will try to keep my exposure small.

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