Letter To Shareholders (5) - Performance Review 2016Q4

Welcome to the 5th issue of ZZ Holdings Shareholders Letter.

Performance Highlights
Once again, Mr Market proves its unpredictability with the 'Trump Rally' after the US elections. After the rollcoaster ride, STI ended the year flat at 2.94, with dividends being the sole returns (about 3.5% depending on cost).

Our portfolio dipped slightly in Q4 but is still up over 18% for the year. After 2 years of investments, we are at an almost break-even point.

In the 4th quarter, we paid out dividends of nearly $400 (base on pay-date), comparable to the previous year.

Operating Highlights
Income for the quarter were roughly 30% higher compared to last year mainly due to 2 factors:
- Conversion of nearly 1 month of leave in November.
- Higher income and pro-rated bonus in December.

These retained earnings will offset the expected big drop in earnings in March (we expect around ~60% drop).

Expenses were about 25% higher compared to last year due to several major purchases:
- Wedding
- Western Digital HDD
- Braun 9 Series

Other notable expenses include farewell gifts, some pretty expensive games (civilization 6 and plague inc) and medical trips.

Acquisitions
We added Singtel at $3.68 - a value we believe is quite fair and attractive. Singtel is a very diversified company (in terms of business areas and geographically) and derive the majority of its mobile revenue from overseas. The impact of the 4th Telco would hence be much lower.

We believe it would have no problem maintaining its 1.75c yearly dividend (20+ year track record, a mere ~60% payout ratio), representing a very stable and secure 4.8% yield.

Major Structural Change Complete
We are pleased to announce that smooth transition in the handing over.

There will be a one-time impact in March earnings next year, but we estimate comparable earnings for the whole year (depending on contract renewal). The change is definitely beneficial for the long-run.

Financial Status
1-Month SIBOR Rate is once again rising and currently stands at over 0.7%. Combined with Step-up interest, Maxigain now provides a risk-free interest of around 1.4%.

For now, we will keep a lookout for any Chinese New Year fixed deposit promotions in January, failing which we might transfer more funds into Maxigain.

We eagerly anticipate the launch of Smartly in 2017 (delayed numerous times), which is now believe to be in the final phases of approval.

Outlook
Details in the Annual Report.