Portfolio Review September 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: -19.27%
HK Index: -7.62%
My Portfolio: -4.92%
World Index: +5.70%

Three years trailing:
STI Index: -17.92%
HK Index: -3.84%
World Index: +20.89%
My Portfolio: +12.38%

Year to date, I outperformed STI by 14.35% and HK by 2.7%, under performed the World Index by 10.62%. Three years trailing, I outperformed STI by 30.3% and HK by 16.22%, under performed the World Index by 8.51%.

Portfolio composition:

Transactions:

Bought JXR(HK:1951) 4.21% weightage
Bought more Netease(HK:9999) to 4.35% weightage
Bought Frontage(HK:1521) to 3.06%
Bought Genscript Bio(HK:1548) to 2.76%
Took profit for XD(HK:2400) 
Took profit for Pacific Century(SGX:P15)

For more in depth detail refer to my portfolio tab here

Commentary:

Global markets continues to be cautious with tech stocks taking the center stage. Especially asset light fully scale-able Saas companies. Substantial topline and user growth seen from latest interim report for Weimob and China Youzan. Sectors like hotels and retail malls are also showing signs of recovery, especially locally exposed ones and to a certain degree, Hong Kong. A potential "back to value" might be in play.

XD(HK:2400) I took profit for my XD stake after reading its interim report in depth. I feel the possibility for it to continue to rise has to be based solely on the hopes of Taptap. My initial premise for this investment was a catalytic growth in their mobiles games due to stay home effect.

I broke down the numbers of 2H2019 to compare with 1H2020. I think it provided a clearer picture to me:

Online game revenue in the second half of 2019: 1,248,842
Online game revenue in the first half of 2020: 1,111,264

Their online gaming revenue actually decreased by 11%

TapTap revenue in the second half of 2019: 248,604
TapTap revenue in the first half of 2020: 252,914
Only a slight increase of 1.73%

2019 online game monthly active accounts increased by 123.5%
2020 online games monthly active accounts increase by 65.4% 

This tells me that before Covid19, they earned more income from online games than during the covid stay home period. MAU's growth rate is much slower and TapTap's revenue increase is small. Covid stay home period should be a catalyst for mobile games. But in fact the opposite is true for them. Their online games are maturing and seems to have lost some traction.

I might be dead wrong as the market might value TapTap very differently. Company has also increased its stake in TapTap to 74%. More details on my thoughts here.

Genscript Bio(HK:1548) Genscript is gene synthesis and editing bio company. It has made significant progress in its synthetic biology research and application, which mainly materialized into its innovative chimeric antigen receptor (“CAR”) T-cell (“CAR-T”) therapy and industrial enzyme businesses. They recently spun off their cellular business LEGEND Bio on NYSE and retains a 66% stake to fund the advance of a pipeline spearheaded by Johnson & Johnson-partnered anti-BCMA therapy JNJ-4528, which is in early- to midstage trials. The successful commercialization of this will be quite huge but outcome is highly uncertain.

The valuation of GenScript seems cheap to me. 66% of LEGEND BIO's shares is 11.44 Hong Kong dollars per share. Net cash per share is HK$1.66. Their profitable CRO core business (70% of total revenue) is only worth 1.40 Hong Kong dollars? Management is known to issue options for employees so there is a certain amount of risk here. Hence took a small stake only.