After a good start, things seem to be have slowed down quite a bit – at least in terms of deals that I deem to be attractive. Almost all the newer loans seem to be quite risky for me. As always, I do my homework with credit analysis first, before thinking whether is the potential return is attractive or not. If a loan does not pass the first test, I will not consider it, regardless of whether it gives me a 24% or 48% annualized return. Risk management is important, especially when Singapore may slip into recession in the coming quarters — and SMEs can be the hardest hit.
Lincoln (MoolahSense) is a distributor/retailer of lifestyle product. My concerns: Retailing in Singapore is difficult due to rental pressures and e-Commerce trends; inventory risks; young company that just broke even.
Wholesaler of electric products (CapitalMatch). I typically don’t like companies that are related with construction industry as they tend to be vulnerable when recession comes. Falling income is also a concern.
Parallel importer of cars (Funding Societies). Purchase cars from Japan and UK and sell in other regions. What keeps me away from this is the fx risk. With net margin only at 0.5-1%, there isn’t much room for error.
Distributor of processed and non-process meat (Funding Societies). Marine sector customer base is a risk (the sector is in a bad shape now), long loan period and high debt levels.
Furniture and fittings on vessels (Funding Societies). Similar to above, marine sector is in cyclical downturn now – demand for its services will fall. Long loan period and high debt levels.
E&I service provider (Funding Societies). Dislike the construction exposure and high debt levels.
MKM (MoolahSense) is what I find intriguing. Despite the high debt levels, leasing can be a stable profitable business if you manage your risks well. In this case, MKM will need to get purchase the vehicles at a reasonable price and leased out at a decent rate. Unfortunately, there is little information available to do any analysis, thus one simply needs to make a guess on this one. Annualized return of 16% p.a. is decent, though not fantastic.