How To Invest In Cyclical Stocks – Goh Tee Leng from Heritage Global Capital Fund

We held our “Ask Us Anything” session on Facebook Live
on the 6th July 2018 (Friday)

Time: 12.00pm – 12.30pm Singapore Time

Topic: How To Profit From Cyclical Stocks

We were very excited to have Mr. Goh Tee Leng, Fund Manager of Heritage Global Capital Fund.

Tee Leng is a fund manager of Heritage Global Capital Fund, a long-only equities fund. He has over five years of experience in the financial markets. He is the Director of Tat Hwa Group, a privately-held, family-owned investment holding, and management company, serving as the foundation of the Group’s umbrella of companies and subsidiaries. He is a frequent speaker at investment conferences held by SGX, RHB, and CIMB, and his investment-related articles have been published internationally. He graduated with a BSc (Hons.) Economics degree from University College London (UCL).

He also shared his thoughts on his blog:

Below is the transcript of our conversation. Enjoy. To keep up-to-date with our future Facebook Live event, remember to register for our mailing list here.

Stanley Lim: Hi! guys. Welcome to Value Invest Asia. This is our Facebook Live again, our July edition. I am very honored today to have Mr. Goh Tee Leng, Fund Manager from Heritage Global Capital Fund, to speak to here on how do we actually go about profiting from cyclical stocks. So Tee is actually specialist in finding deep value stocks there that focus cyclical cycle and I’m sure if you have read the Edge recently, he has a piece talking about the luxury watch industry in Greater China. We’re going to discuss that with him as well, but let’s welcome Tee.

Goh Tee Leng: Hi! Stanley.

Stanley: How are you?

Goh Tee Leng: Good, good. What’s up?

Stanley: Good, very good. And if — I just want to set the back drop because previously we already send out some of our registration forms for you guys to send in your question. I think we have a good number of questions, close to 100 now. But of course we can’t go through all of them. So, I appreciate you guys sending in the questions. We’re trying to go through as many as possible. And on top of that, this is Facebook Live. So, if you have any question straight away, you know, drop us a comment, say hi to Tee and ask away your questions.

So, maybe give us a little bit of background Tee like, how you got into investing in the first place?

Goh Tee Leng: So, I actually investing in around 2011 but what actually got me interested in investing actually started in around 2008/2009, which if you actually remember that was during the global financial crisis. Back then I was still in Junior College and I was studying Economics and I thought that – Well, I was actually studying back in school in the classroom and I occasionally seen how Singapore government was actually applying into the Singapore economy. So, that actually got me interested in the whole Finance, Economics and all, and because of my family influence in business and finance for the last three generations. So there was some influence there which actually got me interested to actually start investing and all. So that actually started my whole investment journey, yeah.

Stanley: Right, right! Interesting. And how do you — of course when you first started investing, how — I would say, how long does it take you to slowly morph into what you have, your strategy right now?

Goh Tee Leng: So, I think at the very beginning we started out reading Intelligent Investor by Benjamin Graham. We started out finding Net-Net companies in Singapore and slowly we started finding the AUMs that were growing. You cannot actually invest into your typical Net-Net Companies because the problem is that, it’s just all that really, really small cap stocks in Singapore, so that actually has liquidity issues. So, we started changing our investment strategy to what it is actually today, which we still find that we’re actually still deep value investors, but we have a more capital cycles plan to it, where we actually invest into companies at the tail end of the capital cycle, the companies which are what we consider deep value.

Stanley: Right, okay. So, let’s talk a little bit about that. When you talk about the tail end of their business cycle, another word what investors like to use are these are cyclical companies or business with cyclicality and how do you define a cyclical company per say, do you have examples or some of the industry that you frequently look at that you consider as cyclical?

Goh Tee Leng: So more often than not, most companies are actually affected by business cycles. Let’s talk about home ground in Singapore. The easiest one is actually the property cycle. It has its [inaudible 00:04:10], it has its past. Back in 2009 all the way to 2013, it was definitely a property boom for Singapore. And come 2014 when the government actually started implementing ABSD, TDSR. Suddenly nobody actually wants to invest in property and come 2017/2018, we started seeing this hype again and I don’t know how many of you actually had read the news yesterday how the ABSD has increased once more, and suddenly we have all our property counters dropping 60 [inaudible 00:04:37] percent, today, early morning. Yeah, so this is one great example of cyclical [inaudible 00:04:43] industry and naturally you have other industries actually affected by it, like let’s say the banking industry, the construction industry, these are all cyclical companies, yeah.

Stanley: Right, okay. So you give a good example, the property market, especially with the new cooling measures. I just I think the stamp duty got increased to 12 percent, you know, and that’s quite crazy. Is this kind of — so when this happens, is this the starting point where you look at stocks or where you talk about the tail end of the business cycle. What are the factors you look at to kind of determine whether this is the tail end of the business cycle?

Goh Tee Leng: So we find that in investment analysis, one thing we actually notice is that analysts always like to focus on demand. You always see analysts’ report, [inaudible 00:05:39] reports talking about how demand is going to be growing five, six percent [inaudible 00:05:45], we extrapolate and we come up with a fair valuation for the company. But with the capital cycle approach, we find that trying to focus where demand is going to be, is something very, very difficult. Because trees don’t grow to the sky. Demand just can’t keep on growing. Whereas, we actually look at supply numbers. Supply numbers are actually very easy to actually forecast. So we actually look where the supply numbers will because there’s actually a timeline. So you think about it, let’s say probably developers. Say I’m going to increase supply but I cannot actually increase supply immediately. At the same time I can cut supply immediately because it takes time. So we actually look at the supply numbers to actually determine whether we’re actually at the tail end of the capital cycle. So if you’re actually asking me, let’s say the property — the property — the property industry in Singapore, is it the tail end yet? I’ll tell you it’s not, because we only started the initial boom just that it got cut short by the government slightly.

Stanley: Right, yeah. Okay, interesting, interesting because I would say from an individual investor point of view, a lot of us would start looking at cyclical company for them to turn around when the stock price drop. But what you are saying is, your stock price can drop but we shouldn’t see that as an indication of when to invest, but rather go back to the data of the industry or the company itself. Would you agree?

Goh Tee Leng: So maybe let me use an example and that’s the easiest way. Sometime in 2016 when everyone was actually avoiding [inaudible 00:07:21] property counters, if you actually look at the supply numbers of residential housing in Singapore, it started increasing from 2015, 2016, 2017, but from 2017 onwards, we can actually see the supply numbers coming down. And come 2018, 2019, 2020, supply was cut by 50 percent. So that’s how we actually determined whether we are actually at the tail end of the capital cycle so, that’s just saying that we actually have — Spring may not be here but Winter is definitely over. So we were actually investing into all the property counters, the bank stocks in 2017 actually, 2016 sorry.

Stanley: Okay, okay. So you cut one cycle of it. And once you know that, do you still relate back to the supply numbers when you talk about when you should sell, or how do you do that?

Goh Tee Leng: At the end of the day, one hand is the capital cycle, but within the capital cycle, let’s say we do agree that it’s in down cycle and all, we go back to valuations again. So it so happened back in 2016, there was a down cycle for the property market and at the same time, all your property counters were actually traded at the very cheap valuations compared to its historical price [inaudible 00:08:39] show. So, for us that’s an indicator for us to actually invest into these companies and when they actually fair value, we started selling out all these property counters, the bank stocks and all, simply because it hit fair valuation. I mean you can continue going up because of all these movement and all, but you don’t know when you actually turn. So maybe on hindsight it is a good thing because as you can actually see it actually turned today.

Stanley: Okay, yeah. Just starting to see more people joining in. Michelle, Ian hey. Thanks for joining us. From our question list from the audience, maybe I’ll just pick one that is quite interesting. We are always concerned, how can we you know, you as a fund manager, you have a strategy. But we as an individual investor, how can we sort of duplicate some of that? One is asked by let me see, so John is basically saying, how do we identify and screen our [inaudible 00:09:49] stock. Do you have screener or, how do we even find this company in the first place?

Goh Tee Leng: So we always go back — we first adopt a “top-down” approach before we adopt a “bottom-up” approach. So a “top-down” approach is something like I won’t be investing into industries which are — it is down to start-up capital and these are industries that you definitely should know. Like off-hand I can tell you in Singapore the down-cycle is probably oil and gas cycle. So then I actually start going into the oil and gas industry looking for companies which fit my criteria and I actually — before I actually consider investing into these companies. So that’s our general process.

Stanley: Right. Okay and when, let’s talk a little bit about that in the oil-gas sector yes. We know that it’s in the down-cycle and when you say you find companies within it that meet your criteria, what kind of criteria are you actually talking about?

Goh Tee Leng: So the thing about the capital cycle or business cycle is that we all know that business cycle has its ups and downs. In every down it actually prepares for the next up. But the problem is, how many of these companies can actually survive to actually see the up cycle. So interesting the oil and gas industry, we find that a lot of these companies have a lot of debt. And the chances are they may not actually see survive — to actually see the up-cycle. So the key thing is actually risk management. We actually look at companies with very, very little debt, so that they can actually survive to actually benefit from the recovering sector, so yeah, it’s leveraged essentially debt to equity, net debt to equity, total debt to equity, whatever you have it.

Stanley: Right. Okay. That’s interesting so you wanted to at least have a safe buffer that the company wouldn’t go out of business throughout this low cycle. But you know, for the oil and gas sector, I would say the down-turn sort of started 2014/15, I can’t remember. But when you look at this down-cycle, how long are you prepared to invest in the market, because you know, how — the oil cycle has been down for quite some, for many years. How long do you reach a point where you say, maybe my thesis is wrong, how do you re-evaluate that?

Goh Tee Leng: So I mean, in 2014 we didn’t actually start investing into the oil and gas companies. So I mean, there’s a downturn, you want to actually wait for the point which I taught [inaudible 00:12:27] the capital cycle, which is when there’s a consolidation in the industry and that’s where we actually see in oil and gas industry in Singapore today, we actually do see a consolidation where we stuff like Penguin International and a group of investors actually investing into Marco Polo. I think Sam Green actually invested into Rock [inaudible 00:12:48], recently [inaudible 00:12:53] also managed to do his restructuring. So, this is what I call the consolidation phase and it’s only after the consolidation phase do we actually see the recovery in the sector again. Generally we find that it takes about three to five years, so we are prepared to wait about three to five years. But we didn’t actually start investing when the [inaudible 00:13:12] was actually dropping from 2014 all the way to maybe around 2016, yeah.

Stanley: Ah, okay. So maybe a word of caution for individual investors is when the thing starts to fall you know, don’t rush into buy first. Wait to see how it develops. So, are you invested in any of the oil and gas companies right now, or?

Goh Tee Leng: We are invested into some of the oil and gas companies in — based in Hong Kong, Singapore, yeah. In Singapore, some examples would probably be Bigo Tech, Penguin International. There are more cash rich, not much that — most likely to actually survive this whole saga here.

Stanley: Right, okay, okay. And do you sort of restrict your exposure to one industry in particular or how do you manage that as a portfolio?

Goh Tee Leng:  We don’t actually restrict ourselves in terms of a percentage for the industry, but we restrict the percentage for each company that we actually invest in. So we roughly [inaudible 00:14:20] about 30 other companies, of the 30 companies about 20 percent — 20 of these companies actually constitute call holdings, holdings which we actually understand quite well such as in other words the retail and all. So that would probably take about four percent, each of these companies. So that’s how we actually are looking our cash — our investments.

Stanley: All right. That’s interesting. I think — oh okay we have a question from Jenson from Facebook live. Basically he’s asking, do you look at the Semicon industry, or how do you think about it? Which cycle of business are we at for the Semicon Industry?

 Goh Tee Leng: For the Semicon I think, not that [inaudible 00:15:03] I should tell. I actually talked to some of the industry people, what I hear is that, it seems to be at the tail end of the cap — of this whole cycle already. Things should actually be recovering. I am not too sure on this. Don’t take my word for this. I prefer to actually invest into industries which are actually more clear-cut. Ultimately investing into really, really cheap companies which — you know you want to be reading in the news everyday and every new stock buy — you know this industry is cheap. And so in 2016/2015, I remember reading on Business Times where the Singapore economy was actually compared to that of Greece, because of the whole property cycle was being down. That was a clear cut down cycle to me, oil and gas you know — I want to be reading it on the news every day. I don’t feel actually investing into companies where it’s really neither here nor there, which I called it like it’s in limbo, it is not cheap nor expensive, but I rather just stay clear of these oil companies.

Stanley: Right, okay. So sort of the indications of when you should start the hunting ground that you [inaudible 00:16:06] is actually the worst news is — it has, the more excited you get. Okay, that’s interesting. Okay, we have another question also on our list. Maybe we can talk a little bit about the — even the property market in China, I think Tom is asking, how are we able to see the property sector, how do we know that it is in either a bubble or it’s in a down cycle right now? How do you view that?

Goh Tee Leng: I mean, the China market, I can’t really give you much insights on that. Because you — to be actually be able to tell which point in the cycle you are in, you actually have to first look at the supply numbers. But China is so big, you ask maybe [inaudible 00:16:55] and Beijing, [inaudible 00:16:57] and each of these small cities actually follow its own supply numbers. So you actually have to track the local numbers and not base it off the whole of China. Singapore it’s unique because we’re so small, it’s much easier to actually track, because Singapore is just Singapore. We are not going to track you know like, supply numbers in [inaudible 00:17:17] compared to the supply numbers in [inaudible 00:17:17]. Hong Kong isn’t so much easier to track, so these are two markets that we actually focus on. We goo actually into the China-Asian market.

Stanley: Right, okay. That’s interesting. Cool. I think we can maybe talk a little bit more about some of your — maybe you give us an example of some of your previous successful investments. How you derive at that thesis and you know, walk us through the investment process. Maybe you can give an example.

Goh Tee Leng: Well I think my experience in investing has been definitely quite a number of successes and mistakes. I will talk maybe a bit more earlier successes, it’s probably in the luxury watch retailer industry in Hong Kong. So some of the examples are like Emperor Watch and Jewelry, Oriental Holdings, Oriental Watch Holdings, [inaudible 00:18:09] Lee Holdings. These are three companies that we actually own even in Hong Kong in the luxury watch space. So for Emperor Watch and Oriental Watches, we have actually had quite good success, we had evaluations this year run quite a bit because of the turning around in the luxury watch industry in Hong Kong, yeah.

Stanley: Right, so this one, when did that happen? Or this one?

Goh Tee Leng: The turnaround actually started happening in early 2017, but the share price re-evaluation only started in about late 2017 to early 2018.

Stanley: Okay. So are you still holding on to the companies, right?

Goh Tee Leng: Yeah, we’re still holding, yeah.

Stanley: But when did you start investing in —

Goh Tee Leng: We started investing in early 2017.

Stanley: Okay, okay. So that’s actually pretty fast turnaround, like for your case. I think you have a fan here, Nicholas. Nicholas has been following you, I think he knows that you invested in a company BTL —

Goh Tee Leng:  Or rather BTL [inaudible 00:19:12]

Stanley: Yeah I have no idea as well. He says, could you tell us more about your investment thesis in BTL? Maybe Nicholas you can explain a little bit about what the company is and we will come back to that question. But anyway, cool. When — okay let’s talk about the property market in more details. Yes, it’s in the down cycle, but property is — Singapore is also a very strong Reeds market. Would you see the Reeds market as the same as the property developers? Do Reeds go through business cycle as well?

Goh Tee Leng: So, it really depends — when I actually talk about the property cycle, I am actually referring to residential housing. Reeds, you have many different kind of Reeds. You have not just stakes, you have office space and all. So you actually have to be very careful which supply numbers you’re actually looking at. I mean in terms of residential, I can’t actually think of any Reed which has residential exposure. Most of the Reeds are actually in office space, logistics — those are actually much harder because — let’s say in terms of office. Office have different concretes, you know Grade A, Grade B. So Grade A is probably like your CPD area which is actually is able to actually co-op the rental rates much better as compared to maybe Grade B or Grade C kind of office space. So to really first, you have to actually dig much deeper into the portfolio of these Reeds to actually understand which part of the cycle you’re actually in, yeah.

Stanley: Cool, yeah. Okay, okay. But have you ever invested in Reeds before?

Goh Tee Leng: No, not really.

Stanley: And maybe why is that the case? Because; the gap in valuations is not actually very defined. We don’t actually see a sufficient enough margin of safe people who have actually invested in the Reeds industry. And I think in Singapore, a lot of Singaporeans like to chase from the dividend yield from these Reeds. So naturally these companies won’t actually be trading in very, very low valuations. Maybe one industry which I was actually recently looking at, which I actually thought was quite interesting, is the hospitality sector in Singapore. So you can actually look at the hospitality Reeds. It may actually have something — have some interesting attractive evaluations that are not so much all that fun, because I mean, we have to actually — we want to actually develop and entire Reed, so we won’t actually be investing in the industry but — so the hospitality sector in Singapore, their supply numbers are actually coming down. Singapore government is not actually releasing that much land for new hotels. And I do think that tourism in Singapore will actually pick up. I mean we’re actually building our T5 now. So I mean, if demand increase, supply is not going to increase as fast, it just means that revenue power room is going to increase.

Stanley: Right, okay! That’s interesting because– So what you’re saying is, when you look at the cyclical companies, you want them to you know, go through a wide enough business cycles so that the price disparity will be bigger for you, right. That’s interesting, okay. I think Nicholas got back to us. He said, Baker Technology actually. Have you invested in this company before?

Goh Tee Leng: We are actually still invested in the Baker Tech in the offshore Marine sector in Singapore.

Stanley: Okay!

Goh Tee Leng: Our investment thesis is really very simple. We actually find that the oil and gas sector should be buckling up at this current point in time and maybe over the next two or three years from what we actually hear, things should actually start recovering. I mean, we actually do see the recovery happening in the upstream cycle, exploration companies like let’s say the [inaudible 00:23:04], those are the upstream companies. But it will actually take time before this — the earnings will actually trickle down to the downstream sector. So, that’s why we haven’t actually seen a revaluation in the downstream sector like Baker Tech. So for Baker Tech, I mean it has practically no debt, cash rich, cheap valuations. I can’t actually say much about it because it’s just cheap you know, what more [inaudible 00:23:30].

Stanley: Okay, yeah. Definitely Baker Tech has one of the best Balance Sheet out there in the oil/gas sector. That’s interesting. Okay. When you talk about — I think Victor has a very good question. It’s not so much about just finding investment, but he want to understand you know, how can we — maybe not how can we, but how do you make yourself a successful fund manager. Do you have like three guiding principles, or what do you think a good fund manager’s characteristics should be?

Goh Tee Leng: So I think maybe the first factor should be, we should have the country in our mindset. I mean if we are investing like 99 percent of the population essentially is just not thinking and I mean, you know, money is a zero [inaudible 00:24:24]. You can’t actually just create money and everyone just gets rich together, let’s be honest. So you have to actually be investing differently from the rest of the population, but o course don’t be different for the sake of being different. You have to actually be mindful and understand, do you actually see something differently from other people, and see some value there.

So, I think having a country in our mindset is definitely a very, very important point. The second point would probably be to actually remain calm. I find that we are actually really living in very volatile times. I mean 2017 was unnaturally calm period of a year. And 2018 is actually more of a normal kind of volatility that we actually see. So, during such volatility as investors, we actually have to be a bit more cautious, a bit more calm and essentially be able to hold our ground, you know, and not be when you actually see the stock price running up, you want to chase it down, or when it’s actually coming down you start panicking and wanting to actually sell with everyone else. It always goes back to the fundamentals, we asking ourselves is our investment thesis actually still sound? Does it actually still make sense to actually hold the company, or sell or, to actually sell the company. So, I think that’s actually very important.

And the last point will probably be about being having humility. I find that in investing, you may have some good runs, but it’s always wise to actually not be arrogant and always our thesis. Ask yourself, did you actually go wrong anywhere? And I find that the best example is actually Bill Eichman. He had quite a good run but, as you can actually see from the past one year or two years, his investments actually blew up. You know [inaudible 00:26:06], you have Herbalife and he actually came out to say sorry and all that. And the reason was because he was over-confident that his investment thesis couldn’t be wrong; that he was invincible and no one never [inaudible 00:26:18] always definitely be wrong. So I think that’s actually a very important point, having humility.

Stanley: Yep, okay. Yeah, you’ve brought up a very good point. Maybe just give some back story for those who might not know who Bill Eichman is. He’s basically one of the — I guess most famous fund managers in the US. And he famously shot at Herbalife and bought into this stock called Valeant Pharmaceutical and Herbalife went up, Valeant went down. So that’s basically it. Okay. We have a — oh wow, we have a very long question from Cecilia Tan. Thank you for the question.  She wants to — maybe pick your brain a little bit about what you think of the trade war between the US and China. Do you see that as an opportunity and if you do, how should and investor take opportunity of this?

Goh Tee Leng: So, I think this whole trade war between the US and China has definitely affected some industries. Maybe the soya bean industry which actually affects the [inaudible 00:27:22] industry. .There’s also the threats of terrorists now on the car manufacturers now. You see that BMW, the share prices are down. It may actually be an opportunity but to us, we actually find that things political issues, we rather not touch. We don’t actually know how long this thing will actually last. So I mean Trump is only in his second year, we don’t know whether he’ll actually win the second elections again the next term. So you don’t know how long more this whole trade war will actually last. So we tend to actually stay clear, steer clear with all these political issue companies, yeah, that’s all.

Stanley: Okay interesting. And maybe on that because, when you say prefer to look in companies or industry with good business cycle, with White Radiance, we talk about property, we talk about oil and gas. Of course the banks are affected as well. What other industry do you actively look at, as well?

Goh Tee Leng: What other industry is the luxury sector as I mentioned, the luxury watches and all. I guess these are your main few sectors. Of course the poppy, especially in Singapore are cheap because the core industries in Singapore are actually the banks, the properties and construction. So it’s all fundamentally based on the property sector. So I mean, why the banks are actually affected by the poppy sector, is because most of the loans that local banks actually give out is for property. Singapore is buying property, and the construction sector would naturally be affected by the property sector as well. So you have those three sectors, you have the oil and gas sector, you have the luxury sector. And when I say luxury, have to actually focus more on the luxury watches and luxury jewelers, rather than luxury fashion. Because if fashion’s high volume, don’t know what’s actually much higher. So, I tend to actually not invest into those companies as well. So, probably these few sectors…

Stanley: Okay that’s interesting. Okay. And maybe on geographical sector as well, we do have a quite a large number of audience from Malaysia. They are quite interested to know what you think of the market. Because given that you know, the property sector in Malaysia is not doing as well you know, as well. But with the new government, we saw a lot of foreign investor actually exiting the market but a lot of local investors actually more and more optimistic so, how do you view that market?

Goh Tee Leng: We are actually not investing in the Malaysian market, no specific reason why. I think because we don’t actually have much insight into Malaysian market as well. We actually focus more on Singapore and Hong Kong because we find that we actually have more insights into these two countries. We have friends in Hong Kong. We actually get to understand what’s actually happening on the ground, hear news of what people are actually thinking on the ground. And we don’t actually have this kind of insights in Malaysia and I think in investing at the end of the day, it’s always about having an edge. You have to have an edge over other people. That actually helps you gain a few extra percentage points in terms of investment returns. So I don’t actually have much insight to share on the Malaysian market, yeah.

Stanley: Okay, okay. So, it seems then your investment process is to not just relying on public information, but rather going down to the ground to do the work, to understand what is really happening within the industry. But for an individual investor would you say that so it’s quite hot for us to replicate this kind of strategy or would you say for retail investors, we should you know — don’t look at cyclical and all, and leave it to the professionals?

Goh Tee Leng: I won’t actually say that, we don’t actually rely that much on our investment process based on the ground knowledge, it’s just that sometimes we actually want to check our information so that’s say for example, we were investing into the luxury watch retailers in Hong Kong, it was all over the news review that retails rates were actually coming down and Chinese shoppers were actually beginning to actually start shopping again in Hong Kong. So we just actually want to check with the local people, is it actually really true, does it — do we actually see retail ranks coming down, that sort of stuff is we actually double check our work. But it’s not that the news that we actually got from — the news we got was from the South China morning polls from Bloomberg. And these are all actually available to the public. It’s just that we just want to actually double check our work, yeah, that’s about it.

Stanley: Oh! okay interesting. And for this luxury watch industry, when you talk about the three, Emperor, Oriental and also [inaudible 00:32:31], and when you look to invest in them, so can I — is it fair to say that you don’t really choose between them as long as each of them pass your own criteria of investment, you don’t mind investing in multiple companies within the industry?

Goh Tee Leng: Yeah! Because; I think the problem is, while we were looking at the luxury watch retailer industry in Hong Kong, all three were actually cheap. And we don t actually know which one we’re actually value first, so it actually make sense to actually just buy all three, which after actually revaluing stock, their value first, we can just sort that out and we [inaudible 00:33:11] into the remaining two, yeah. So that’s how we actually do it.

Stanley: Okay, fair enough. Since you are already looking at the luxury watch industry in Hong Kong, can that be translated to the luxury watch industry in Singapore as well, do you look at that? And — I don’t know if you invested Hour glass or Cortina, if not, why not?

Goh Tee Leng: We did actually look, so we didn’t actually limit our luxury watch pieces into Hong Kong, just Hong Kong, we actually broadened it out, all the way to Switzerland, all the way Singapore. We actually did look at the luxury watch market as well. In Singapore we did look, but the problem is Hour Glass is cheap. But the problem is, there is actually a price arbitrage between Hong Kong and Singapore of about maybe 20 percent, simply because the luxury watches in Hong Kong just 20 percent cheaper than Singapore probably because of the taxes. And terms of Chinese buyers, they tend to actually go to Hong Kong first to actually buy and Macao versus Singapore. I mean probably Singapore — the Singapore luxury watch retailers will actually benefit a bit but, I mean we’re actually investing into Hour Glass as well, but we actually size our positions and we actually allocate them more money into the three luxury watch retailers in Hong Kong and in Singapore.

Stanley: Okay. I didn’t know that there’s a price difference of 20 percent. So not just on the investing part, if you want to buy watches you know, go to Hong Kong. So I think that was a great question from Grace. So I hope Tee answered your question Grace. Okay interesting. Would you mind sharing before we go, do you mind sharing maybe one of the stock that you most recently bought or one of the stocks that you’re currently looking at, at this moment?

Goh Tee Leng: So, we are actually looking at the construction sector in Singapore, because I mean of the whole — I mean regardless of whether what actually happened last night, today, the unblock is real. All these property developers have actually got pieces of land and they have to actually build property on the piece of land. So the next industry that will actually benefit from the property boom or the property recovery will actually be the construction industry, you know, companies which supply power cranes, companies which do main [inaudible 00:35:39], these are companies that will actually benefit from the whole recovery in the property sector. So that’s one industry that we’re actually looking at here.

Stanley: Oh wow. Okay. That’s interesting. Okay, I think you have given us a lot of ideas to work on, especially if any of you are interested in investing in cyclical companies, I am sure, thank you Tee for all his wonderful ideas that he shared with us. Before we go I just want to you know let you guys know again, Tee is actually the Fund Manager of Heritage Global Capital Fund. You can Google and find out more about his fund. And also he runs a website called ValueH, I’ll show it up here, where he shares some more of — some more of his thinking beside — and part of his research. So do check that out as well. I’ll provide the link for you guys later. Thank you ever so much Tee. I hope we can have you back again soon.

Goh Tee Leng: Sure, thank you for your time.

Stanley: Cheers.

Goh Tee Leng: Bye!


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