Portfolio news this week(ending 11 July)

This week’s news includes Singapore’s election results, TripAdvisor’s bond issuance and increased competition for iFAST.

Singapore elections, HRNet and Singapore O&G: Singapore’s ruling party, the People Action Party (PAP) returned to power (83 out of 93 seats) but had one of the lowest share of the popular vote (61%) in its history. From Bloomberg:

The result could potentially disrupt Prime Minister Lee Hsien Loong’s succession plan. It may also spur the government to adopt more reactive policies as it did in the wake of the 2011 election, when the opposition tripled its seats to six.

These election results would have the largest effect on Singapore-focused companies in my portfolio such as HRNet and Singapore O&G. The main opposition party, Worker’s Party has been pushing for pro-worker and pro-family policies. The Worker’s Party manifesto proposes policies such as unemployment insurance, a SGD1300 minimum wage, 24 weeks of shared parental leave,greater childcare subsidies and enhanced fertility support. I don’t think we’ll get any dramatic policy changes this year because of the COVID-19 crisis. but expect some changes from 2021 onwards.Moving government policy towards a minimum wage and tighter foreign hiring could hurt HRNet which is dependent on job creation and investor confidence. Meanwhile, pro-family policies could improve Singapore’s total fertility rate while encouraging Singaporean couples to start a family earlier. That would be great for Singapore O&G which derives more than 65% of revenue from its gynecology and pediatric clinicsLink

Tripadvisor issues bonds: TripAdvisor issued USD500 million of bonds due in 2025 at a 7% interest rate. The bonds will be due in 2025 which will give the company a long repayment runway. TripAdvisor’s annual burn rate assuming zero sales is around USD650 million. With USD693 million cash as of May 2020 and the USD500 million bond,  TripAdvisor should have enough cash to survive zero sales until end-2021. Link

GreenWood Investors and TripAdvisor: GreenWood Investors uploaded a deep dive on how TripAdvisor’s hotel and dining segments are improving quickly: 

We’re getting increasingly encouraged at the pace of recovery in the segments that TripAdvisor
participates, with the possible exception of Experiences, which will likely stage a lagged recovery, largely due to
supply-side constraints. Demand side indicators point to a strong impulse for vacations and dining.

You can download the report from their website but you’ll have to register your email first. Link

iFAST vs Interactive Brokers: Interactive Brokers has opened a Singapore office and has launched a stockbroking service which offers a minimum SGD2.50 commission or 0.08%. Their stockbroking minimum commission is lower than iFAST (SGD10 minimum) but the 0.08% commission is the same as iFAST. Interactive Brokers will be a tough competitor because of their product offering and experience in working with financial advisors. They also offer a wider variety of products which includes unit trusts, options and futures. However, competition isn’t new for iFAST who has has been competing against larger financial giants throughout its history by focusing on clients and emphasizing transparency and low costs. Their recent Bond Express product which allows clients to trade bonds in smaller portions at low prices with transparent pricing is a perfect example. Besides, Singapore is a major wealth management hub so the pie should be enough for everyone.  Link

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