Monday, December 24, 2007

Ezra - Annual General Meeting News and Updates

I attended Ezra's AGM today at 10:00 a.m. and it was held at Raffles City Convention Centre Function Room "Bras Basah". The turnout was pretty good and there were about 30-40 shareholders. The directors and chairman were also on time except for Mr. Ngo Get Ping (Indepedent Director) who was conspicuously absent from the meeting. The Chairman Mr. Lee Kian Soo mentioned that he would turn up "in a while" but in the end he did not arrive and no further explanation was given.

The meeting proper went as scheduled and all resolutions (including those under special business) were proposed, seconded and passed. I managed to catch up with Mr. Tan Tat Ming and also Mr. Tay Chin Kwang (Finance Director) after the AGM to clarify my questions and discuss the prospects of the Group moving forward. Below is an excerpt of the topics covered:-

1) US$888 million sub-sea installation project - Mr. Tan has confirmed that this project will be under EOCL and thus only 48.9% of revenues will be recognized by the Ezra Group. It is slated to start in 1Q 2008 and Lewek Champion has already begun the intial phase for the project. Note that the value of the project is not US$888 million, but only part of this.

2) Stake in Ezion Holdings Limited - This has been diluted from 21.83% to 18% due toEzion's share placement to raise capital for expansion, and as a result of the 1:2 share split in Ezion's capital, Ezra now owns a total of 10 million shares of Ezion. Ezra is making use of Ezion to charter 2 self-propelled jack-up rigs to augment their well engineering services division. Recall that Ezra previously had joint ventures with KS Energy for oil rigs in 2003 and 2004 (these have since been divested) but are only now taking up the mantle again to expand this area of business. They have the hardware and the software for making this work and currently they also have funds to invest in this area, thus this may become a growth area for Ezra Group in time to come. Mr. Tan was also kind enough to explain the salient aspects of oilfield and well engineering services, and how the equipment needed to be loaded onto the rig in order to be cleaned and how this was part of the extraction process for oil majors. Ezra is, of course, playing a pivotal supporting role in this.

3) Vung Tau Yard - Ezra has leased a piece of land with GFA of 88,726 square metres in Dong Xuyen Industrial Zone in Vung Tau Province, Vietnam. The main function of this future yard is to develop it into a ship building and ship repair yard, so that the Ezra Group can be less reliant on third parties for their shipping repairs and hence reducing costs (and hence improving margins) for the Group. Currently, the piece of land is only a greenfield and Mr. Tay had mentioned that it would take at least a year to year and a half (1.5) to develop it. Construction will commence in 1Q CY 2008.

4) Orders of 4 Multi-Functional Support Vessels (MFSV) - The MFSV, as explained by Mr. Tay, are specialized vessels which are ROV-enabled such that they can operate in difficult deep sea conditions, and Mr. Tan has also mentioned that vessels of higher bhp (e.g. 14,000 and 18,000) have seen very good charter rates and that the industry is sorely lacking in newbuilds for such vessels. All these culminate into better, stronger demand for such vessels and Management is confident of good charter rates moving forward. Recall that Ezra will NOT order a vessel unless there is confirmation of demand from an oil major or a customer, thus the 4 MFSV currently on order are confirmed to be chartered out once they are completed. Financing should take place via financiers or through bank loans and using the funds from the listing of EOC Limited. Mr. Tay said that the Group is watching their cash flows on a weekly basis and I have confidence that they are closely monitoring their cash to avoid sudden cash crunches which may occur should payment be delayed by their customers. Cash Management is integral to any company and I have confidence that the Management can handle this aspect well, as they have done so since 2005.

5) Training Base in Vietnam - Mr. Tan has confirmed that Ezra has plans to set up an in-house training base in Ho Chi Minh City, Vietnam in order to train personnel for sailing and handling of the larger and more complex vessels which are coming on board. Scholarships will also be given out to entice good talent to apply for jobs in the maritime business, and this training base will be used to upgrade and enhance the skills of current technicians and sailors in Ezra's employ. There are also plans for a mentoring system whereby industry veterans will coach the new recruits on how to handle the larger bhp AHTS and MFSV, and personnel from Rolls Royce may also be engaged to give technical updates on the new engines/technical specifications which come with increasingly sophisticated vessel technology. All-in-all, it will be an on-the-job training centre for personnel to be equipped with the right skills set to enable the Company to have sufficient manpower at a time when the industry is facing a growing acute shortage. I see this as a positive move from the company to prevent a skills shortage and also retain talent through appropriate incentives.

6) EOC Award of AIS Status - Mr. Tay has confirmed that Ezra has already been awarded the AIS status some time back, but now it is EOC which was granted the status. This would mean that all income derived from Singapore-flagged vessels operating in overseas waters would be exempted from tax. Furthermore, Mr. Tan had also mentioned that Section 13A of the Singapore Income Tax Act exempts the Group from a certain amount of tax derived from activities of some of their vessels, and my impression is that this award to EOC will further reduce the future tax liabilities of the Ezra Group, as it covers even revenue from the FPSO.

7) Bidding for FPSO Contracts - Ezra is currently bidding for another FPSO deal after they announced their maiden FPSO contract in October 2006. As I understand from Mr. Tay and Mr. Tan, the process to bid for an FPSO contract is long drawn out and tedious as many suppliers of various parts of the FPSO have to be consulted with regards to delivery schedules and parts availability before the contracted can be formally awarded. Even then, there is te question of whether the FPSO can be customized to the customer's specifications. It is good that the Company takes a step by step approach to bidding for the FPSO contract to ensure that all conditions are fulfilled, so as to not rush into it. Such a contract will take up valuable resources and manpower and proper planning has to be undertaken, thus I am sure the Group will not wish to rush headlong into another contract without doing the requisite cash flow planning. I remain cautiously optimistic about Ezra's chances to clinch another FPSO contract, as they are up against industry giants like Prosafe and Solstad.

8) Delivery of FPSO - This has been confirmed to be around June to July 2008 (hence it is the 4Q FY 2008, not 4Q CY 2008). Thus, FY 2008 will see the recognition of about 3 to 4 months of revenue from the chartering of the FPSO.

9) Charter Rates and Demand for Vessels - Charter rates have been on an upward trend and are expected to be sustainble as more oil and gas E&P activities shift to deeper waters. Mr. Tan did mention that India was already drilling to 3,000 metres (which the new vessels will be able to handle) while there was news that a driller in the Middle East had hit 10,000 metres ! Apparently, more oil deposits can be found at such depths than intially anticipated due to the tendency for oil to run to lower and deeper areas (due in part to its viscosity). Thus, shallow oilfields are expected to run dry by about 2030 to 2050, and more E&P will thus shift to deeper waters where more oil deposits are expected to be uncovered. This will bode well for the Group as they have already secured their orders for such vessels which will be delivered in FY 2009 and FY 2010. Moving forward, Mr. Tay did hint that Ezra will continue to order more vessels in time to come, to augment their present fleet. With such buoyant conditions, demand should remain high for such sophisticated vessels and charter rates should remain high.

10) Sale and Leaseback Mechanism - For sale and leaseback, the Group has to sell its vessels to the financier who will then receive monthly regular payments or operating lease payments from Ezra. Ezra will, in turn, charter out the vessel to a customer for charter revenue. Thus, the difference between charter revenue rate (per day) and the per day operating lease requirements forms the basis for gross margin for each vessel (less personnel costs in operating each vessel). Mr. Tan acknowledged that this is the case and assured me that the charter rates are usually about twice the operating lease payments, thus ensuring a very healthy margin. This margin if sustainable because part of the costs and taxes which have to be paid by Ezra in operating the vessels can be passed on to the customers, as is customary in the industry; and oil majors should have no problems in acceding to such requests due to their need for these high-end vessels to support their deep sea E&P activities in future.

The overall feel I got while chatting with Management was that there was still room to go for Ezra's expansion, and they are still in the midst of growth even though they had already shown 5 consistent years of growth. Since most of their larger vessels will only be delivered from FY 2008 onwards, there should still be significan upside to earnings. I will be keeping track of the progress of the company as the months go by, and I am confident that Ezra will continue to pleasantly surprise on its path of growing its revenue and earnings base.

28 comments:

ROBERTAY said...

Mr Tay also mentioned that the cancelled shares buyback was due to some provision no covered in the mandate. As a result, the company had to resell the shares back into the market. As a first timer to AGM, I was appalled to see old men/women rushing for food and wondered whether they can finish their food piled high on the plates. They even stock piled sugars sachets and sweeteners into their bags.

hakfong said...

Hi MW

Thank you for updating us on the AGM. Hats off to you for being so hard-working! Where do you find the time? :-)

I'm vested in Ezra too but I couldnt make it to the AGM. Perhaps next year..

musicwhiz said...

Hello Robertay,

Yes share buyback of 3 million shares did not receive approval from shareholders so that transaction will have to be cancelled. It's in one of the notes if I am not wrong (I think it's treasury shares note in the notes to the accounts).

If you've been to more AGM, you will see the same kind of behaviour for the folks there, which is putting eating as the one and only priority. The kiasu-ism of Singaporeans knows no bounds and it is quite shameful to know that people pocket food in ziploc bags to bring home.

My main purpose is to engage Management in a meaningful conversation, and I feel that my objective was achieved during this AGM.

Regards, Musicwhiz

musicwhiz said...

Hi hakfong,

It is my pleasure. To me, going to AGM is part of my investing philosophy which is to get regular updates on various aspects of the business so that I am in the loop about what's going on. This is to avoid nasty surprises should things go wrong for the company, though of course there are still factors which are beyond my control. Still, I treat investing as a very serious business and I intend to invest considerable time and effort in order to understand my companies better; and what better way than to talk to the Management themselves ? :)

Hope to be able to see you next year at the FY 2008 AGM !

Regards, Musicwhiz

ROBERTAY said...

Hello musicwhiz,

I bought 25 lots of Ezra at $3.36 during the bonus shares issue. Fearing the share price may go up, I took a bank loan to finance half the purchase. However, Ezra share price dropped to $3.20 instead. My current shares portfolio is about $300,000 including 7 lots of Kepcorp bought at $12.70. This porfolio was built from my savings. To average downward, I plan to buy another 5 lots of Ezra. For the new purchase, I have to liquidate other shares which would result in losses in the current market. Is it wise to take another bank loan for the new purchase until the market recovers to sell my other shares?

musicwhiz said...

Hi Robertay,

From the info you provided, it seems that you borrowed a total of S$42,000 to purchase Ezra shares, the rest being your own cash. What I would like to advise you in future is NOT to take up loans in order to purchase shares. This is a very risky method you are using as a substantial short-term decline in the market price of your securities may force you into a corner as the interest payments have to be continually made. By the way, what interest rate is the bank charging you ? You need to be able to exceed this rate on your investment to justify even borrowing the cash in the first place !

I have to ask you if you purchased part-ownership in Ezra on a purely price-driven motive or for fundamental reasons. If based on valuations, then the current price is not too cheap and does not offer much margin of safety. I do not advise borrowing more in order to average down as this will sink you more heavily into debt and increase your interest payment commitments (which are a cash outflow and a drain on your gains).

You also mentioned liquidating non-performing companies; but were these purchased for the long-term potential in the first place ? You must ask yourself the rationale for wanting to average down Ezra in the first place, before you make any drastic moves to trim your portfolio. Is it due to the fundamentals, future prospects or attractive valuation, or purely to make a quick punt ?

I think the answers to those questions will give you a clearer idea of what you should do and how you should go about doing it.

All the best for your investments !

Regards, Musicwhiz

ROBERTAY said...

Hello Musicwhiz,

Thanks for your advice. I am a long term investor and my investment is based purely on fundamental. Previously, I bought many non-performing stocks mainly based on friends' advice until I came across your forum. From your forum, Ezra appeared to be one of your gem find where the price shot up about 400% from the date of your purchase. Further, from the AGM, Ezra seemed to have good prospect and the share price should go further up. Therefore, I decided to make Ezra as my main portfolio for long term. What made me take up the loan of $42,000 (3.88% pa) was the fear that the price may be beyond my reach by the time I have funds to accumulate sufficient quantities of Ezra shares. Although the present price of Ezra does not offer much margin of safely, I believe the rate at which this counter goes up is sufficient to compensate the interest payment. I am in the process of selling my non-performing counters except that the current market prices are far too low. Therefore, I am thinking of taking another loan to fund Ezra purchase as its price came down. Once the market sentiments improve and Ezra share price sky high, I can pay back my loan from the non-performing stocks. This is my investment strategy.

ROBERTAY said...

Hello Musicwhiz,

I would also like to add that since most of Ezra's larger vessels are coming in 2008, the company's revenue will increase further. With such high growth prospect, this will lead to higher share price later. If I don't make use of the opportunity in the present poor market to accumulate more Ezra shares, I may not be able to do so later. Therefore, the bank loan is actually a bridging loan from the future sale of non-performing shares. I will not sell my Ezra shares in the near future.

equity said...

Hello Musicwhiz,

Thank you for your updated info on your blog. Since August 2007, I always read your blog to learn about value investing.

May I know what is the valuation method that you use to determine the fair value and what is the fair value for Ezra. I am not vested yet in Ezra, but have decided to invest in Ezra and waiting for enough safety margin.

Best regards,
equity

musicwhiz said...

Hi Robertay,

Thank you for explaining your investment strategy and providing details of the rationale for investing. First of all, let me start off with a disclaimer that all my comments, updates and research on the companies I own are not totally objective (as I am a shareholder), thus it will still be good for the reader to do his own research and come up with his own conclusion about valuations and margin of safety. The thing about value investing is that it is not an exact science when it comes to estimating intrinsic value, thus different people can get values that are pretty far apart, depending on each person's assessment of the business.

That said, I will still not encourage borrowing money in order to buy shares of companies, as this is a form of leverage which can be very expensive should the stock market take a nosedive and "trap" your money for 3-5 years. The market can stay irrational longer than you can stay solvent; thus I would strongly recommend using just CASH to invest and also to have 4-6 months of spare cash on hand to tide over emergencies. Your loan interest rate of 3.88% is still reasonable as many REITS offer yields which are higher than that, but just keep a close watch on cash flows to be sure nothing goes awry. Good luck !

As for whether earnings will rise materially in FY 2008, I cannot say for certain as their interest in EOC has been diluted to 48.9% as a result of the IPO in Oslo. I think the 1Q 2008 numbers will be very telling in that we can see the impact of the divestment in EOC on Ezra Group's earnings. Expect the earnings report on January 9, 2008.

Regards, Musicwhiz

musicwhiz said...

Hi equity,

I do not use any specific method to value the business of Ezra. I just use a simple PER and project this into the future based on their projected earnings and margins; but this is not certain due to their divestment of EOC. Valuations are a tricky thing and are changing all the time.

I would personally feel that a price below S$2.50 is a reasonable price to pay as their core net profit is around S$50 million for FY 2007, thus their EPS is about 8.62 Singapore cents per share. Assuming EPS growth of 20%, their EPS will be about 10.34 Singapore cents for FY 2008, barring exceptional gains. This means forward PER will be about 24.2 times at $2.50, but I am using a conservative estimate for their earnings cos remember the FPSO will come on board in 4Q FY 2008.

These are just my views, I did not do a detailed computation.

Regards, Musicwhiz

equity said...

Hello Musicwhiz,

Thank you for your comment. I really appreciate it.

Wishing you a Happy New Year 2008..

Best regards,
equity

musicwhiz said...

Hi equity,

You are most welcome, I should thank you too for visiting and reading my blog since August 2007. :)

By the way, just a note, I used 580 million shares outstanding for Ezra for computing the EPS as they bought back about 5 million, thus you have to deduct from their original 585 million (292.9 X 2 after the 1:1 bonus issue).

Cheers, Musicwhiz

ROBERTAY said...

Hello Musicwhiz,

Thanks for your insight. The price of Ezra has now surged to $3.32 (without dividend) from my intended entry price of $3.20 (with dividend). I have again missed the boat and therefore will not be taking a further loan to fund the purchase. However, to wait for the price to drop below $2.50 as a margin of safely is almost impossible unless something disastrous happened to the company. In this case, we will be forever waiting for Ezra share price to drop.

Regards

musicwhiz said...

Hi Robertay,

Well, I guess there will be other companies out there to study and there will always be a chance to invest in good companies at a fair price.

For Ezra, the price had actually fallen to $4.42 pre-bonus ($2.21 post bonus) during the August correction. That would have been a good time to buy if you were waiting for an opportunity.

Perhaps another opportunity will come along soon, you never know. :)

Regards, Musicwhiz

ROBERTAY said...

Hello Musicwhiz,

I have learnt something valuable from you. Not to be kiasu and chase after price. If Ezra price continued to surge, I should not regret buying more earlier. I will also stop dreaming of my Ezra shares multiplying many folds as seen in your portfolio. My immediate task is to clear my debt as soon as possible and hope that the market continue to improve so that my non-performing counters can be sold.
Thanks for your advice and wish you a happy new year.

musicwhiz said...

Dear Robertay,

You are most welcome ! I also learnt not to chase after price through reading up books on value investing and understanding "the temperament of a true investor". True investors need to be calm, patient and rational which is easily said, but hard to do. Patience means being able to wait for the right investment opportunity to come along, then investing large amounts of money based on your conviction.

As Warren Buffett mentioned, the ability to say "No" is a tremendous advantage for a retail investor, as this means you can sit and wait and reject all lousy investment opportunities and just go for the jugular !

Wishing you all the best for the new year and hope you can clear off your debt soonest possible. :)

Kind Regards, Musicwhiz

Simon said...

hey musicwhiz,

do you know how many of their vessels are on a sale-and-leaseback mechanism and how many of it are do Ezra actually owns?

thanks.

musicwhiz said...

Hi Simon,

Ezra had a sale and leaseback of 4 vessels back in early 2006, and another 9 vessels went through sale and leasebacks in July 2006 as well. That makes it 13 in total. The rest of the fleet are owned by Ezra, though some have been spun off through EOC. I suspect Ezra may yet employ sale and leaseback again for their upcoming MFSV, but let's wait and see. Problem is they do not give presentation slides for their current fleet status and delivery date(s).

Regards, Musicwhiz

ROBERTAY said...

Hi Musicwhiz,

I am very grateful that I have listened to your advice. The good news is I did not take further loan earlier to finance more Ezra shares purchases as the price had now dropped to $2.52. Imagine paying above $3 for Ezra shares to be funded by the future sale of non-performing shares when the stock market is dropping. The bad new is I bought a few lots of another promising shipping counter at $3.23 using the sale proceeds of the non-performing counter. The reason is to recover the $800 loss incurred from sale of the non-performing counter. However, after the day of purchase, this promising counter plunged to as low as $2.28. I am now sitting on unrealised loss of about $2,000. Another mistake made?

musicwhiz said...

Hello Robertay,

As I mentioned before, there will be chances to buy into companies at good prices because Mr. Market has mood swings; thus you could see that Ezra was being offered much cheaper today, and maybe even cheaper in the days to come ? This is something value investors have to look out for, which is margin of safety. At $3, Ezra is expensively priced at current valuations and I think a more reasonable price would be around S$2 to S$2.25 (personal opinion, usual disclaimers apply).

I think what you did was to buy into that counter when it was high, and before the sharp correction. All I can say is that it is a mistake if you purchase without a decent margin of safety. If you plan to invest, you need a long term view AND margin of safety. If you plan to trade, I suggest having a very strict cut-loss strategy.

Good luck !

Regards, Musicwhiz

ROBERTAY said...

Hello Musicwhiz,

The promising counter which I bought was STX PO which had a secondary listing in Korea where it was trading above $4. Recently, the company had obtained approval for the shares to be traded in both countries. This caused the Singapore's counter to surge as high as $3.71. Therefore, at $3.23, it offered a reasonable margin of safety as it will eventually match its counterpart's higher price trading at a higher price. I believe my mistake lies in the failure to see from the Korea's side on why they should pay a higher price when they can buy at a lower price in Singapore. Presently, STX PO is trading at about $2 and $3 in Singapore and Korea respectively. For your comments, please.

Presently, I am sitting on an unrealised loss of about $20,000 on Ezra shares and have to worry about repaying bank loan from the later sale of non-performing shares (all suffering from paper losses).

It is a very expensive lesson learnt. Next time, I promise myself not to be intoxicated by any blog praising and anticipating the potential growth of any high flying counter.

musicwhiz said...

Hi Robertay,

Yes, I know about the case of STX Pan Ocean where their shares are supposed to have fungibility (ability to trade between 2 exchanges). This means that there is the potential for arbitrage, so the prices for both countries should stabilize at a certain level of "equilibrium" after a time. Meanwhile, one should still do the necessary objective research and fact-finding about the company and its strategies in order to put a valuation to the company. It is not enough to just think of intrinsic value in terms of the price equilibrium between 2 countries, because after all it is still a price measure and not a valuation metric.

I think the recent market correction may have shown that it is always possible to wait patiently for a company's shares to fall to a level indicating margin of safety before purchasing. If this does not happen, simple move on. A missed opportunity is much better than buying at high valuations and losing money, IMHO.

Yes, never trust "promotional" blogs. I myself do not even promote the companies I own as I feel some of them have very high valuations. I would rather tell a person how to fish than to catch fish for them, because in the end people out there still have to think for themselves and make their own decisions about buying or selling cos it's their money after all.

Good luck !

Regards, Musicwhiz

ROBERTAY said...

Hi Musicwhiz,

One more thing I learnt is never to fall in love with a stock. I started stalking Erza after noticing their fanastic price growth year after year after reading all the blogs. After the bonus share issue was announced, its price shot up to above $7 for which I was unwilling to pay. I also noticed whenever there was a price drop, it quickly recovered within minutes. Therefore, I naively believed that Erza was resilient to price drop as it was a damn good stock.

For the non-performing counters, I will sell even with losses when my loan is due in Apr 2008. However, I will stop trading them to recover losses as I will incur more losses especially in this falling market.

Nevertheless, I really appreciate your advice, if not, I will be in deeper shit. I remember reading one blog on good debt and bad debt. My debt is foolishly a bad debt.

Thank you.
Regards

musicwhiz said...

Hi Robertay,

Ezra is a company which was growing very quickly, and there has to be a time when their growth tapers off. I expect this to be around FY 2009 to FY 2010, which is why I am monitoring the company closely. Of course, anything they do before then may still help to accelerate their growth, and they are definitely trying to branch out into fabrication works and also FPSO. I have met shareholders at the AGM who have heled Ezra since IPO, and their cost is only close to S$0.30. This means that at today's closing price of S$2.20+, they are still earning about 700% returns ! Such is the reward for staying vested in a company which manages to grow steadily over time. One must remember never to pay too much for a company, otherwise value will take a long time to catch up with price.

I think there is no such thing as a "resilient counter". In a rising tide, it will lift all boats. Similarly, when the tide moves out, everything will start to sink. As investors, we must wait for the times when price goes below value significantly, such that we can scoop up shares in good companies.

Sorry to hear your loan is due in April 2008. The market will not be able to perform well (i.e. rise) until at least 2009 I feel, as a result of the global economic fallout from the sub-prime crisis. If possible, approach family members for financial assistance to tide you through this difficult period. Hopefully, once you clear this period, you will be more wary of borrowing to pay for shares as it entails a very high risk especially in the short-term when markets can correct strongly and sharply.

I think Panzer's blog (Five Cents Ten Cents) has something on good debt and bad debt. Just remember that if you sink any more money in the market, it should be done with

1) margin of safety and
2) a long-term view

Regards, Musicwhiz

ROBERTAY said...

Good evening Musicwhiz,

The blog on good debt vs bad debt was posted by you in Nov 2007. In that blog, you mentioned that you used your cash to invest in equities as it offered higher returns than repaying your HDB housing loan at 2.6% pa. This is how I understood your definition of "good debt".

Sadly, I misinterpreted it and incurred "good debt" ie borrowing from bank at 3.88% pa for shares investment.

I have one final advice to ask of you. I had spoken to DBS who was willing to renew my loan at the same rate for every 6 months.

Presently, all my counters are suffering huge paper loss due to lack of margin of safely. I will keep my performing counters ie Ezra, Kepcorp, Cosco etc for long term.

As for my non-performing counters ie Creative (cost $10.50), should I cut loss or wait for the market to improve before selling them?

Regards

musicwhiz said...

Hello Robertay,

Haha I guess I must have forgotten. I actually was influenced by Dennis Ng from Wallstraits.com forum who regularly posts on bad debt vs good debt. It will be insightful to go read his comments on this.

I think borrowing money is a risky way of investing because in the short-term, you incur interest charges and the market may turn suddenly (as it did now), so you get stuck with losses + interest + repayment of principal. This is why I strongly recommend against leverage or loans in order to invest.

If you ask me, I would advise cutting losses only when you feel comfortable doing so. It is a mental exercise actually, since it can rebound immediately after you cut or go further down. The question which is more important is to ask yourself if it represents an opportunity cost if your funds are "tied up" in a non-performing company for long periods of time (not earning interest or dividends). When I think of that, I usually hurriedly sell my hopeless counters without hesitation.

Opportunity cost can be the most insidious form of "losses" as it not only prevents you from taking advantage of bear markets to buy, but it is also a "hidden cost", meaning no one usually highlights it to you. People either talk about realized or unrealized losses, but seldom losses from opportunity costs. As it is, by deploying my funds into FSL Trust I have also exposed myself to opportunity cost in case an even better investment comes along. Thus, we have to juggle our funds in the best way to maximise our returns. There is no right or wrong though, just make sure you are comfortable with your final decisions and that you have thought the entire situation through thoroughly.

Wish you best of luck for your investments !

Regards, Musicwhiz

ROBERTAY said...

Hi Musicwhiz,

Thanks again for your advice. I think I will hold onto my non-performing counters until market improves or when the bank demands repayment.

If I were to sell them now at a loss now, instead of repaying the loan, I may be tempted to use them to buy other counters as they are at rock bottom price. This may lead to the earlier mistake in STX PO's case where a small loss became a bigger loss.

I am very impressed that you were willing to forgo the golden opportunity to place your hard earned money with FSL Trust when there are many blue chip companies selling at bargain prices. I am very sure their price appreciation will surge beyond FSL Trust's in a short period of time.

Alas, it is a pity I can only tearfully watch and do nothing at these bargin priced blue chip companies which only come once in a blue moon. And I missed it again.

The first miss was in Aug 2007 when I spent all my monies in Kepcorp shares at $12.70 one week before it crashed to $10.50.

But I have learnt many lessons from this experience. Anyway, I hope to meet you in EZRA's AGM in Dec 2008. I will still hold onto my 25 lots to remind myself of this painful lesson.

Regards