Silverlake axis - tranche 3

Why am I averaging down on SLA

1) There is continual share buyback from company. Not merely GPO is doing so, the various incoming directors as well as the new CEO is loading up on it.  People sell shares for many reasons. People buy shares because they believe it is going up. This is especially true for insiders whom have an superior insights in the industry and the company. Effectively, if SLA buyback the shares as treasury shares and proceed to cancel them, it will directly boost the ROE and EPS of the company.


2) OCBC and UOB annual report confirmed on the trend of banking sector incurring additional capex investment into their IT systems. Per my personal observations in the banking sector, with the recovery of interest rates (and earnings), banks have been investing substantial sums into upgrading their IT infrastructure,  automation of manual processes. The cyclical earnings of SLA should be on the uptrend which is reflected by the sharp increase in book orders of the company.



3) UOB (active client of SLA) in particular has been actively utilising the QR payment, one installation multiple payment platforms, and the digital experience systems. Through my scuttlebutt analysis and playing with UOB mighty, the promotions feature is also installed in the app. SLA is not pulling wool over the investor's eyes and they have designed an operational tool. It is up to the banks to realise the potential benefits from investment in such a technology.
 
Image result for uob mighty


 4) There is active change of directors, consolidation of private entities, as well as getting new CEO (Raymond Kwong) to rejuvenate the image of SLA against the stigma of the related party transactions. If the stigma of the 'Razor-sharp' short seller report is still hanging, the most effective way is probably to get in new blood to improve the corporate governance of the company.


5) Merimen client base are impressive and diversified across different regions. Regardless of how the insurance industry performs, they will still have to invest in their IT infrastructure and insure-tech to upkeep the image of a forward looking company.I will effectively have exposure to the insurance industry across SEA.

My recent purchase of insurance has demonstrated to me this point. Modern insurance records up-keeping and distribution of the contracts is now connected to e forms. Digital signatures are utilised instead of the disjointed and messy paperwork of the past.With the insurance boom in the private sector, there is no assurance which insurer will capture sufficient market shares and be the dominant market leader. With an increasingly red market, there might even be an outbreak of a price war, considering the commodity based nature of insurance contracts. Considering this, I should buy the company supporting this uptrend, and sell the fuel that drives the flame.

6) Purchase decision.
Asset play, cyclical play on the uptrend. The high P/E of a cyclical company, with incredible cash flow and low debt, should minimise the risk to a bare minimum. I have issued a buy order at 0.50 at the natural resistance. With the recent market correction and very bearish sentiment, there is exceptional margin of safety which is well supported by strong bottom up performance.


Links
https://sginvestors.io/sgx/stock/5cp-silverlake-axis/company-announcement
http://www.silverlakeaxis.com/investor-relations/newsroom/news.html 
https://itunes.apple.com/sg/app/uob-mighty-singapore/id1049286296?mt=8
https://singapore.merimen.com/claims/index.cfm

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