Founder-led SGX Listed Companies and Analysis

Many of my friends emailed me to ask what are some companies in SGX where they can start analysing. It is always ideal to invest in a company where the original founder or 2nd generation leadership is in place. Below is an interview between Tom Gardner and CEO of Whole Foods. It talks about the commitment of a founder.

My initial assessment is confirmed again, after reading The Founder’s Mentality by Chris Zook and James Allen. They are from Bain & Company. Their studies have shown a consistent trend of founder-led companies delivering more shareholder value.

(source: Positioning Systems)

When a founder is in the business, it does not make the stock an automatic buy. Some SGX companies are operating in the local market and they do not sell on a global scale. It makes compounding value difficult as growth may start to decline. Size is always the enemy of performance, for companies and fund managers.

Key questions you have to ask:

• Is the industry stable or changing rapidly? We prefer stability.
• Does the business earn sufficient profits from the sales?
• Is the industry cyclical? I’d avoid construction, real estate, oil and gas and others.
• Is the company entering a big and growing market? It decides how much it’ll grow. If McDonald’s stayed in the USA, their profits would be a lot lesser today.

Thanks to my reader, Lily, she managed to pull this list of SGX listed companies with the founder shareholdings:

The list is pretty exhaustive, let me add some comments:

For F&B: I avoid Old Chang Kee, Soup Restaurant, Japan Foods and Jumbo. They are operating in a highly competitive market and F&B can’t shy away from high rental and labour costs. Without a strong brand and pricing power, it is difficult to compound value. BreadTalk is slightly different because they have Din Tai Fung and ToastBox. Along with their brands, they are able to monetise well by securing attractive spaces that attract a huge crowd.

MindChamps is unique because it has inherently pricing power because of the nature of products (education), but valuation is high.

Straco is a tourism business which means its business model has high operational leverage. I am not sure how their Shanghai tourism asset would do because newer attractions are coming up.

Challenger Technologies does not have a strong moat because Lazada (backed by Alibaba) is competing with them aggressively. For electronics and gadgets, it is mostly seen as a commodity where the lowest prices get the customers. Cortina does not have any moat, the watch market share has been eaten away by Apple’s iWatch.

TTJ Holdings, Keong Hong, and Hock Lian Seng are affected because of the construction slowdown in Singapore. Their current business is project-based and earnings can be very lumpy. Many of them have shifted into owning properties that generate cash flow. For example, hotels, or workers’ dorm. It smoothens earnings out.

For the semiconductor front, the best stock is Micro-Mechanics. Very broad-based customers and they have a differentiation factor in their process which made customers stick.

I like Riverstone for its focus in the clean room sector while its peer, Bursa-listed Hartalega is focused on medical gloves. Best World is turning into a franchise model soon, I got in a bit at S$1.22, waiting for 3Q results. I like SUTL Enterprise too, but their development plans are taking longer to roll out. I am not vested.

Grand Bank Yachts parked their yachts at One 15 Marina for the yacht show this year. They rolled out newer models and it was a big hit at Newport boat show. The market size for yachts is not that big, I prefer to buy a business that interacts with mass consumers. It is a bigger profit pool ready to be earned.

For extra bonus, head over to my previous article “The Advantage of Founder-led Businesses“, I shared the incentives behind management. You would definitely want to receive the knowledge. It’s my gift to you.

Feel free to interact with me at my email, it is my privilege to know my readers and grow together in Kelvestor!