Monday, 1 February 2016

Portfolio update- Investing in TTJ and BBR

I have made additions to both TTJ and BBR. The investment thesis is simple: to invest in companies which will benefit from the Singapore government's infrastructural plan. Given the gloomy outlook of our economy, it is likely our government will commence on some form of expansionary fiscal policy to sustain growth. The most evident way is through infrastructural projects. From BCA's outlook, 2016 construction industry is likely to be about 27 to 32 Billion (2015 was 27.2 Billion). BUT with about 65% driven by the public sector.

We have a few underground MRT lines and depot which will start construction. Hence companies like TTJ and Yongnam are likely to benefit. TTJ was chosen over Yongnam because of my view that TTJ has a better management as evident by the business's strong cash flow generation and little leverage. For the lastest FY, TTJ was able to generate approx 8 cents per share in free cash flow, giving it a P/FCF of 3.25 times.

Similarly, I too am interested in companies that does general construction work for the public sector. Two names stood out - BBR and KSH. Both companies does a significant amount of government projects and have exposure to both the construction and property development. BBR was chosen in the end for its less exposure to the property development business which I am not sanguine about. 

It is likely for both companies I will attempt to add more stakes at current prices. However, given their low liquidity, it will be a slow process. I too am monitoring OKP which does road and drainage infrastructural projects, however, its current price is a tad too high for me. Lastly, I have added a few more lots in FSL trust.

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