The 1 Singapore stock I would #WallStreetBets on

WallStreetBets (WSB) has seen phenomenal success over the past two weeks. In its wake, many have latched onto the movement – creating their own versions of WSB in other assets classes (SatoshiBets) and other stock exchanges (BursaBets).

I have been wondering if such a movement would even arrive on our shores. How will our local investors take to a WSB style movement? Will our largely placid Singapore stock market see a revival of sorts? Will we even experience a fraction of the fervour of American investors? Finally, how does BoonTatStreetBets #BSB sound like?

However, there are some fundamental differences between the US and Singapore markets. First up, there is very little short interest in general. We are also unable to purchase options on Singapore stocks. Without these two elements, it would be hard pressed to replicate what is happening over in the US. We cannot blindly follow and we have to adapt to our situation.

Many years ago way before WSB was a thing, I had toyed with the idea of targeting small market capitalisation companies with little insider ownership. With the right amount of resources, it would not be difficult to take control of such companies and to unlock their value in the process.

With WSB, I found it even more meaningful. I personally like the spirit of the movement. Do not get me wrong. I am not out to inject malice or bring down the system.

Rather, I prefer to see things more positively. There are many companies who are doing good work, work that is often not reflected in the value of the company and their share price. There is a gamut of reasons for that, and with WSB and now BSB, these companies are being bought to the forefront. That alone is reason to cheer.

There is a company (and an individual) that has been on my radar for the longest time. I believe it would be a worthy contender for the BSB movement.

Creative Technology

I was 15 years old when I first come to know about the Creative brand. My classmate has bought a Creative sound blaster PC and he went from outcast to cool kid overnight. We played many games on it and marvelled at the graphics, sound and speed.

In the 1990s, Creative Technologies (SGX:C76) was the pride of Singapore and founder Sim Wong Hoo was the poster boy for Entrepreneurship (not that we knew what the word meant then). The company was known for its standalone sound card and commanded a majority market share. In 1995, according to Next Magazine, Creative was responsible for 7 out of every 10 sound cards sold worldwide that year.

Creative was also listed on NASDAQ in 1992. Due to low trading volume, it was eventually delisted in 2007. The Singapore listing on SGX is maintained till today.

Unfortunately, the Creative Technologies of today is a pale shadow of its former self. The company has been in decline for the past couple of decades and there has been no breakthrough on the tech front. In FY20, sales was US$61m but Creative ended the year with a loss of US$18m.

Financials

As of today, their share price closed at $2.59, which is a mere fraction of the all time high of $69.50 achieved in 2000. Their current market cap is about US$150m and that is a P/S of 2.5x. This is considered low among tech stock valuations.

The saving grace is, the company is sitting on US$97 million worth of cash in its kitty. With the actual cash burn about US$8.5m per annum, it can afford to continue pumping money into R and D in the search for the next success story and eventually seeing it through to traction.

During the company’s heyday, Sim was widely reported to be a polytechnic diploma holder who was able to achieve success in both the business and technological field. His net worth used to be more than one billion USD.

In recent times, he would be worth ‘merely’ tens of millions. He owns 33% of the company and he has not sold a single share over the years.

It is not easy to be running a company, must less a listed one and much less for more than three decades. I have recently written about highest paid CEOs on SGX recently. Sim puts them all to shame with his $1 salary. As an entrepreneur myself, I can empathise with his journey. I think it is highly admirable.

The potential catalyst

Recent years we have also seen new products and the SXFI series seem promising. It is a product that promises to deliver 3D sound and it has won 15 Best of CES Awards in CES 2019.

In the interview last year, Sim Wong Hoo showed his enthusiasm for the product (his drive and belief in Creative have not diminished a bit):

This thing is really very, very new. It’s just like switching from black and white TV to color TV. You don’t want to come back to black and white TV again. I’m far more excited than having the Sound blaster, many times, hundred times.

Sim had wanted to enter China as it was a huge and homogenous market. A Shenzhen office was set up for the push. Unfortunately, Covid-19 struck and the plans were delayed.

Support Creative

We lament about not having enough entrepreneurs or people willing to take risks.

We keep complaining about rote learning in our education system and how the system is biased against scholars and early bloomers.

We complain about government linked companies taking away most of the businesses.

Few of us are even aware that we have a Creative Technologies fighting the good fight for the past three decades. Sim Wong Hoo has dedicated his life’s work to making the company great again.

With WallStreetBets strikethrough BoonTatStreetBets, I am certain that more and more of these stories will emerge.

Disclaimer – we hold a position in Creative Technologies.