How to "spend you way" to be the richest man in Singapore

I am sure you have seen the latest Shopee advertisements by Jackie Chan, the old mega super star from Asia who made it to Hollywood. 

What used to be a mega online sale started by Ali Baba and Taobao has now turned into a monthly online sale from Shopee. 

How can there be a sale every month from 1.1, 2.2, 3.3, 4.4, 5.5. 6.6 7.7 8.8. 9.9 10.10 11.11. 12.12 ?

According to an article by Fool, every $1,000 you invested during the IPO will return you $20,000 today. Looking at the share price below, it is no wonder that the 3 founders of SEA are among the richest men in Singapore with Forrest Li topping the list.  

SEA (parent company of Shopee) needed these advertisements to fund the high valuation as investors are valuing it as a high growth tech company. They are lucky to be listed in NYSE where investors have seen how many companies (such as Amazon) have done it before and they are willing to put their bets on SEA, especially after it has also won a digital bank license.

SEA recently announced that it is going to raise $6.3b and is one of the largest equity raises this year. I spoke to someone who has previously worked in SEA before and she said the pressure to deliver on the quarterly sales numbers is very high and this is no surprise as investors are paying it for growth. SEA will be "punished" if investors see any sign of growth slowing. 

To impress readers on the scale of SEA, its market cap last Friday was US$126b and that is almost the same as buying DBS Bank US$58b + OCBC US$39b + UOB US$32b. 

Can you imagine a company that has been awarded the digital banking license has the same market cap as our 3 banks combined and it is nowhere near the profitability of any of the banks. For the financial year ended Dec 2020, it lost more than US$1.6b while the profits of the 3 banks combined is US$8.4b (DBS US$3.5b, OCBC US$2.7b, UOB US$2.2b). 

Maybe SEA should just buy the 3 banks to solve its profitability problem and fund its on-going expansion. 

The 3 banks have been setting up innovation units within themselves to see how someone could one day eat their cheese and replace them and the threat is real. It can be SEA, it can be GRAB or it can be another fintech company.  

It defies logic but this is the new world. Global investors are flushed with cash and if you can tell a story that captures their imagination, they will back you! So here you go, spending your way to become the richest man in Singapore. Perhaps my SRS portfolio should invest in "growth" rather than value!

SRS Portfolio 12 Sep 2021

No change to my SRS portfolio and the cash balance is $234,958.

I was having an intellectual debate with myself whether we should be buying a REIT with a price to book of below one. When the price to book is below one, it offers great value as you can theoretically sell the physical properties at par and has a nice margin of safety.  However, the downside is that the REIT is unable to finance new accretive acquisitions (e.g. Suntec and Starhill) with shares without severely diluting its existing unitholders. 

On the other hand, REITs such as Mapletree Industrial, Keppel DC REIT and Parkway Life REIT that are trading above their book value, are able to keep acquiring new properties through share placement and investors keep 'rewarding' them with a higher share price and lower yields as they are perceived to be "growing"! 

Isn't this the same conundrum some REITs are facing? You want to make accretive acquisitions but you can't tell a good story that allows your price to book to go above 1 and you can't use your shares as a currency. In other words, you can't spend your way to success while some other REITs that are more favoured by the market can. 😂

Perhaps the price to book, similar to profitability, is an outdated metric to be used for REITs? 

I will leave that thought with you to mull over the weekend. Happy SRSing