Global Investment

Global Investments Limited is a mutual fund company incorporated in Bermuda and listed on the Main Board of Singapore Exchange Securities Trading Limited. The Company’s investment policy is to make investments in a portfolio of assets in different sectors through different means which include but not limited to direct asset ownership, swaps, credit default swaps, debts, warrants, options, convertibles, preference shares, equity, guarantees of assets and performance, securities lending and participating loan agreements provided that it will not make any direct investments in real estate and commodities. The Company’s strategy is to actively manage and grow its assets with the focus to protect and grow value. It aims to grow its assets and seek investment in assets that will generate steady income and potential appreciation in capital to deliver regular dividends and achieve capital growth. The board of directors is responsible for the Company’s strategic goals and corporate governance, and making investment and divestment decisions based on recommendation of ST Asset Management Ltd. The majority of the Board comprises independent directors. The Company is managed by STAM, a Singapore incorporated company which holds a capital markets services licence for fund management issued by the Monetary Authority of Singapore.

I was attracted by the high yield offered by Global Investment. The dividend pay share from FY 2011 to FY 2015 was 1.5 cents per year with 075 cents declared in first half and another 0.75 cents declared at year end. At the last transacted price of 12.9 cent, the yield is a whopping 11.63%. The profit and cash flow generated from the business is actually not sufficient to sustain the dividend payout but the controlling shareholders and perhaps many other shareholders have been opting for script dividend, which is usually offered as a discount to the daily volume weighted average price of the shares over a number of trading days. The discount used to be quite substantial; however, due to the recent depressed share price, the discount is marginal now.

Total number of issued shares as at 31 December 2015 was 1,446,434,000 and as at 30 June 2015 was 1,390,855,000. If no script dividend is offered or opted, the total dividend payout would have been $21.28m. As the script dividend was priced as 12.8 cents for the 1H 2015 dividend payout, it can be shown that the actual dividend payout in cash was $3.32m instead of $10.43m if there is no script dividend.

Even with a net gain on sales of investment of $14.42m, the net profit was only $16.90m for FY 2015. Clearly this is insufficient to cover the total dividend payout if there is no script dividend. In addition, net cash flow from operating activities was only $2.26m for FY 2015 while net cash flow from investing activities yield $2.68m of cash flow. Again, the cash flow would not be sufficient to cover the dividend payout if there is no script dividend.

While the net asset value (NAV) of 20.20 cents means that the share price is traded at 63.86% of NAV, its realizable net asset value is difficult to analyze.
 
The key financial ratios of Global Investment are as follow:
Share price – 12.9 cents
DPU – 1.5 cents
Yield – 11.63%
PER – 13.17%
P/B – 0.64
Gearing – 0.4% (yes, no typo, < 1.0%)

In consideration that the business is hard to analyze and the dividend payout is not sustainable, I disposed of my small stake in Global Investment today. My purchase price was 12.9 cents and my sale price was also 12.9 cents. As the stock is traded as ex-dividend now, I did make a small gain from the 0.75 cents of dividend after deducting the transaction cost.