Monday, June 16, 2014

Casa Holdings

This post is about Casa Holdings.

Casa Holdings is not likely to be a short term trade or a medium term buy.

One will have to hold for at least ten years for this value to be realized.

From what is stated, Casa has a 28 odd % stake in Fiamma.

Fiamma is listed in Bursa Malaysia.

Fiamma shares have shot up by nearly 80% in the last one year.

Casa prices have stagnated at the same levels in Singapore.

The investment thesis is that at 25% of Fiamma, Casa is worth 18.6 cents Singapore Dollars.

This means that the rest of the business is free, if you are buying Casa at 19 cents.

The bear thesis is that

1) Everybody knows this and possibly, Casa cannot liquidate Fiamma stake.

2) On a stand-alone basis, Casa makes less than 0.5 cents / share as profit, so, it is valued at 3-4 cents for Singapore operations.

3) Hence, the value is actually 22 cents and a margin of safety of 15-20% is what you have when you buy at 19 cents.

Possibly, investors have examined this in the past, got in, waited, got no action and have decided to get out or are still waiting.

I believe that if one enters at around 19 cents and is prepared to hold for 15 years, one is likely to realize a five times return, which is a 11% compounded annual rate of return.

This is likely to be juiced by an extra 4% which would be the dividend yield.

I am not currently long Casa.

I am likely to try and establish a position within the next month or so to test this hypothesis.

Thursday, June 5, 2014

SIA Engineering

This is a post about a dividend stripping trading idea.

I entered SIA Engineering on May 6th 2014.

ENtry price was 4.83

The logic was that at the stated dividend of 18 cents a share, there was a comfort that it would draw a floor under the price.

I exited yesterday at a price of 5.03.

The idea is that I have obtained the dividend I wanted, after taking into account the trading friction.

You can argue that I should have held on for reaping better returns in the long run, which is quite possibly true.

Having said that, I believe that one should have a clear goal when entering and once the goal is achieved, one should execute i.e. never let a trade become an investment and vice versa.