This certainly did not age well. Previously, I wrote about Potential 50% Gain Boring Company: SBS S61. I had full optimism that this overlooked company would recover back to it’s usual level by finishing 2020 with a good 2H results. I was wrong.
Below are my learning lessons and the reasons why I have sold.
I remain ground on my principle of Wealth Management and will explain the reasons of doing so.
What Happened In Oct 2020?
I read about the 1H results for SBS (S61). I felt that during 1H of the financial reporting, bus ridership was heavily. This is due to the circuit breaker which started on 7 April 2020 and ended on 1 June 2020. The circuit breaker lasted for 1 month and 3 weeks. I believed that close to 30% of the revenue was “lost” because of that circuit breaker (1 months and 3 weeks out of 6 months).
As we continue to progress after Oct 2020, more and more people are starting to leave their house to work and explore. This can be felt as I personally took the public transport. The crowd was back and it did not slow. I was somewhat excited to see the improvement of revenue in the 2H.
I believed there would be revenue recovery, share price recovery and also a short term opportunistic play.
SBS Full 2020 Financial Report
When the day finally arrived, I was terribly mistaken. Revenue for 1H is $603,225. Full year 2020 revenue is $1,230,947. This means that revenue for 2H is $627,722. Revenue for 1H and 2H is roughly the same. This would mean that even with the circuit breaker, 1H ridership for the first 4 months is roughly equals to the entire ridership for 2H. I cannot imagine how pack the MRT or buses were before the circuit breaker.
Looking at the top line only, it will take sometime for “normality” to happen again. I have underestimated the WFH culture. (I can’t explain the packed MRT/Buses though. Does this mean it used to be worse?).
SBS is also issuing dividends for shareholders. This will happen if the motion is approved by the Shareholders at the Twenty-Eighth Annual General Meeting of the Company to be held on 29 April 2021 and will be payable on 19 May 2021. I have my questions on the dividends. Currently, SBS is “profitable” after the JSS grant. I felt that the dividend was just a transfer of grant from the government to the shareholders (no matter how low the dividends are).
Why I Sold SBS S61
I sold SBS S61 with a slight profit. I entered the position with a short term opportunistic play mindset. However, as it didn’t turn out as per expected, I exited the position.
I’m also not looking for a dividend play counter. At the current level, it is giving around 2% dividend yield which is not attractive.
There is limited growth play to this industry. With new players coming in, the position of SBS might be shaken in future.
“Normality” may happen in 2021 as more and more people start to go back to work. However, I’m not willing to wait for that to happen as I believe there are better investment opportunities out there.
Final thoughts by Wealthdojo
I think I learn is that the investment mindset. “Buy on fundamentals, sell on fundamentals”. “Buy on momentum, sell on momentum”. The problem comes when you “Buy on momentum, but then hold on fundamentals” when you start making a lost. I can never further emphases on the investment mindset that one should adopt when approaching the market.
Lastly, it is understood that this should not be taken as a buy/sell recommendation. Please do your own due diligence in your investment.
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Chengkok, Sensei of Wealthdojo.