Wednesday, June 24, 2020

A Speculative Story of Three Potential "Multi-Bagger" Positions

In the past recent days, I've taken three small speculative positions and have kept them relatively small as an overall percentage of the portfolio.

These are positions which I've taken without doing too much due diligence and reading too much of its fundamentals due to the nature of the companies (but yes I've weighed in the risk reward probability) and both have announced big news in the past week.

Wirecard

I've written an article recently about the company (Link Here) after its scandal news were splattered all across the Internet.

After 5 consecutive days of the stock dropping from $100 to $14, my itchy hands decided to buy in a little at 200 shares @ $16.7 and I added another 80 shares @ $13.2.

My average price is now at around $15.8, and I am close to 20% down.


My thesis for buying was mainly betting on the company's solvency, hoping that a white knight might come in to restart the company all over again. They had done so by removing their incumbent CEO and installing hard man Dr James Freis into the helm. They have also began talking to investment banks to start convincing them on extending the credit facility under the new management guidance though it is likely a tough fight until the forensic audit is concluded.

Nevertheless, I believe their business model remains intact and relevant and it is poor corporate governance that is dragging the whole system down.

At the moment, it doesn't appear that the selling has not abated so like many other investors out there, we are all screwed in it for now.

Singapore Edevelopment Limited (SED) and Document Security Systems INC (DSS)

This was another company which I managed to slip in to buy by joining in the crowd.

I was having my lunch at 12.55pm while browsing through the sgx website announcement (this has been my habit since I started WFH) and chanced upon the Press Release that was released during lunch time. 

Based on the news that were announced, (the previous week they came up with another press release that involves some research study with the Harvard lab house), it was announced that Impact Biomedical has achieved some further success with Equivir and 3F Biofragrance on reducing the impact of Covid-19.

You can read that Press Release link here.

I bought a small position of 150,000 shares at about 1pm-ish at market price, but only to see it shot up to over 6.9 cents by the time I get mine.

I was pretty surprised to be honest to see it close at 9.2 cents at closing, which translates into market cap of 112m after today's run.


I took the time to do further reading after that and realize that the company will host an EGM this Friday on the 26th Jun to conclude the $50m shares swap deal agreement with Document Security Systems Inc (listed in Nasdaq).

What was interesting was to find out that Impact Biomedical was a 100% owned subsidiary of SED whose CEO and largest shareholder Chan Heng Fai holds a 72% stake in the company, and he happens to also be the Chairman board and largest shareholder of DSS.

Based on the proposed term sheet and closing conditions, the intention after the deal is to give a dividend of IMPACT shares to the shareholders of DSS, with the proposed bonus being for every one DSS share held, the shareholder will be entitled to a bonus of  two IMPACT shares, following which IMPACT is expected to pursue listing in the US.

Now, DSS is currently listed in the US with a market cap of only 24m but what catches the eye is the expected valuation of Impact Biomedical should they decide to list this in the market post-deal.

Based on the Independent Valuers completed recently by Destum Partners, Impact Biomedical is currently valued at $382m which is almost 15x the current market cap of DSS on the market. Should DSS be able to list this successfully at such a valuation, it is likely that it will send DSS and SED price flying.

Because of this reason, I have also put in a small order of 1000 shares when the market opened at $8.33.

Do note though that this is a speculative timeline with a probability look of risk reward so there's a lot of variables at play which could happen.


Let's revisit how all these positions are doing in a few weeks / months time.

Thanks for reading.

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13 comments:

  1. I hope u already exited wirecard

    ReplyDelete
  2. I have been a fan for a long time, i noticed a change in the way you invest compared to the past. I'm not sure why or was it due to any recent events. But hope you remember that investing is a long term journey and we should not speculate as losses are harder to recover compared to gains. Remember warren buffets rule number one and if not, refer then to rule number two. All the best!

    ReplyDelete
    Replies
    1. Hmm, it's the other part of the strategy. I don't think it's as bad as what you think because I have weighed in a lot of thinking into everything that I've put in. Try not to look into one single losses but I tried to look at it from an overall portfolio point of view.

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  3. i noticed the big change too. it is almost like im seeing a different person investing now..😏

    ReplyDelete
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  5. Hi B, what is your take regarding that DSS announced the pricing of an underwritten public offering of 1,028,800 shares of its common stock at a price of $6.25 per share.

    Causing the share price to plunge 24% today. Perhaps an insider move..? looking forward to your take on this.

    ReplyDelete
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  7. CEO Chan had on 1st July disposed off 35 million shares in the open amrket and reduced his direct interests in SeD to almost nil. That's a negative. Coy also appointed a young chap (Danny Lim, son of SVP)as ED, hardly an experienced hand, though coy says otherwise. Gd luck on that. DSS may need to raise more cash looking at things. Look at their disclosures under their fund raising managed by Aegis Capital, scary. Doubtful about future wonderful listing plans for Impact Biomed. Also, look at any Covid-19 Drug /Vaccine Candidate tracker, Equivir and LineBacker are listed as "Too Soon To Tell" and there are scores of other front runners with more than 10 vaccines under clinical trials currently. Gd luck on that too.

    ReplyDelete
    Replies
    1. Oh, and Coy has another 2.175 billion outstanding warrants to be converted at 4 to 5 cents each, vs share price of 12.6 cents and 1.375 billion shares now. Double gd luck on that, lol

      Delete
    2. Yup, why play up the share price and allow Chan Hengfai from converting warrants cheap cheap 4.8c and selling shares for very good profit in open market. Easy money and shows he totally no confidence in the company LOLLOL

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