The Singapore Exchange (SGX: S68) has seen a rash of delistings this year as many companies opt to go private.
Fortunately, these delistings have been balanced by a few high-profile IPOs such as Info-Tech Systems (SGX: ITS) and the recent launch of NTT DC REIT’s IPO.
One of these recent delistings involves Grand Venture Technology (SGX: JLB), also known as GVT.
The group is a solutions and services provider for the manufacture of complex precision machining, sheet metal components, and mechatronics modules.
Earlier this week, GVT announced that Aalberts Advanced Mechatronics B.V. intends to take the group private through a scheme of arrangement at S$0.94 per share.
This announcement caps an interesting relationship that the Smart Investor has with the group as it prepares to part ways with this position.
The addition of GVT to our portfolio
As an introduction, the Smart Investor runs a Singapore dividend portfolio called The Smart Dividend Portfolio.
This portfolio, which was started back in 2020, contains 26 well-chosen stocks that generate steady and consistent dividends.
We selected GVT as one of the portfolio’s stocks back in 2022.
GVT had reported a strong set of earnings for 2021, with revenue soaring 89.3% year on year to S$116.3 million.
Net profit for that year shot up more than threefold year on year to S$17.6 million.
Back then, the group was focused on the semiconductor industry and forecast a favourable outlook.
It also identified new opportunities in the medical diagnostics and aerospace sectors and conducted an acquisition (J-Dragon) to develop and manufacture parts for the aerospace industry.
The portfolio purchased shares of GVT in April and May 2022 at share prices of S$1.04 and S$0.88, respectively, giving the position an average cost of S$0.992.
Headwinds and further additions
Unfortunately, results started to go downhill for GVT in 2022 and 2023 as the semiconductor sector suffered a cyclical downturn.
For 2022, although revenue rose 12.8% year on year to S$131.1 million, net profit tumbled 24.1% year on year to S$13.3 million.
2023 saw worse results with revenue falling 15.1% year on year to S$111.3 million while net profit plunged 58.4% year on year to S$5.5 million.
Unsurprisingly, GVT’s share price fell along with its results, reaching around S$0.47 back in February 2024 when it released its 2023 results.
However, the group’s performance rebounded by the middle of 2024.
Revenue for the first half of 2024 (1H 2024) jumped 26.8% year on year to S$68.3 million, while net profit climbed 26.6% year on year to S$4.3 million.
Seeing this improvement, and after reading a rousing commentary from the group on its prospects, the portfolio decided to average down by adding more shares.
In September 2024, the portfolio added more shares of GVT at S$0.56 per share.
GVT continued its strong recovery streak by posting a sterling set of results for 2024.
Revenue leapt 43.3% year on year to S$159.5 million, with net profit soaring 86% year on year to S$11.2 million.
Encouraged by the brighter outlook, the portfolio added even more shares at S$0.79.
By making these two additional purchases, the portfolio brought down its average cost of GVT to S$0.7788.
A decent overall return
With the offer price at S$0.94, the portfolio has made a decent return of 22% on GVT over the years.
This return includes a small dividend that the portfolio received as GVT declared dividends back in 2021 that were paid in 2022.
This return would not have been possible if we had not averaged down on the purchase to reduce our cost from S$0.992 to S$0.7788.
Although this position was not a large one within the portfolio, it nevertheless helped to deliver a slight boost to the portfolio’s overall return.
Improving financials and prospects
Meanwhile, GVT demonstrated good momentum for the first quarter of 2025 (1Q 2025).
Revenue surged 44.8% year on year to S$44.6 million while net profit climbed 27.7% year on year to S$2.6 million.
Management provided a sanguine outlook as the group expanded its range of services and saw opportunities for multi-year growth.
Lessons learnt
GVT’s example teaches us several important investment lessons that all investors can learn.
First, it’s important to keep a close watch on the business to see how it is performing.
When business conditions turned south for GVT, the portfolio stopped adding to it but continued to monitor the business as the semiconductor sector went through a cyclical downturn.
Eventually, the business rebounded and, through GVT’s diversification efforts, managed to report stronger financial numbers for 2024 and 1Q 2025.
Second, you need to have the conviction to average down on your position when a recovery takes place.
When we noted the better results posted by GVT, the portfolio did not hesitate to add to its position.
Because we did so, we ended up booking a nice profit when the group was taken private.
Get Smart: Always keep an eye on the business
The Smart Dividend Portfolio has 25 other stocks even after divesting GVT.
And our investment mantra is to always keep a close watch on the business to see how it is performing.
By doing so, we can make well-informed decisions based on our insights and analysis.
You can, too, if you take the time to study each business.
If you like what you see, you need to have the confidence to scoop up more shares on the cheap and the fortitude to hold on to these shares to enjoy capital gains and dividends.
We’ve found 5 SGX-listed dividend stocks with strong track records in turbulent markets. If you want consistency in an uncertain world, start here.
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Disclosure: Royston Yang owns shares of the Singapore Exchange.
