Friday, February 29, 2008

End-February 2008 Portfolio Summary and Review

More results releases were due during this half-month ended February 2008, with most of the companies releasing their FY 2007 results. It was hectic to check out so many companies’ results to get a grip of how companies are doing in general, but I managed to get the impression that costs are rising and margins are impacted for many companies. For other companies, there were a lot of “exceptional” adjustments such as gain in fair value of property or gain in fair value of biological assets which basically means nothing to me as it is non-cash in nature and is a one-off adjustment. Investors would do well to look more closely into such items and deduct them from net profit to get a more accurate picture of the company’s performance. Otherwise, EPS from core operations may be distorted.

Swiber will be releasing their FY 2007 results this evening, and I will proceed to do a review and analysis of the company including their future plans and strategies. With oil prices hovering at around US$100 per barrel after hitting an all-time high of US$103.05, this may have implications on oil and gas companies and also those companies which support the oil and gas industry. Though I must say that the reason for the high oil price is due to the rapidly depreciating US dollar to new 11-year lows of 1.394 (as of this writing), and not an issue of fundamental demand and supply.

Below is the summary of my investments and related news as at February 29, 2008 (STI at 3,026.45 points).:-

1) Ezra (Vested since October 6, 2005) - Buy Price $0.645 (bonus adjusted), Market Price $2.36, Gain 266%, YTD Loss 28.9%. On February 25, 2008, the company announced that wholly-owned Saigon Offshore Fabrication & Engineering Limited had clinched a US$55.4 million fabrication and assembly contract due in FY 2010. This is the second fabrication project which was clinched in Vietnam by Ezra, the first being a US$103.1 million contract announced on October 16, 2007 won by Saigon Shipyard Limited (also wholly-owned). One point to note is that fabrication project margins are significantly lower than those of offshore chartering, and I am assuming a net margin of only 10% for these projects. Thus, these two contracts may add about US$15.85 million to net profit for FY 2010 onwards. It remains to be seen if they can contribute significantly to Ezra group’s bottom line but at least it is a new business unit which the Group is exploring in order to open up more revenue streams.

2) Boustead (Vested since September 13, 2006; averaged down November 13, 2006) - Buy Price $1.295 (average), Market Price $2.26, Gain 74.5%, YTD Loss 6.2%. On February 22, 2008, the company announced that the disposal of the warehousing facility at 80 Alps Avenue was completed. Please refer to the previous announcement on January 21, 2008 for more details on the numbers involved.

3) Swiber (Vested since February 14, 2007) - Buy Price $1.01, Market Price $2.42, Gain 139.6%, YTD Loss 29.4%. Swiber has successively announced another 2 contracts won on February 24 and 26, 2008; amounting to US$31 million and US$20 million respectively. Details can be found on the company’s website under announcements and news room. The company is building up its competencies but has yet to be able to clinch a mega-project on the size and scale of their Brunei Shell project worth US$146.6 million. Still, the latest contract wins include another oil major in Malaysia and this means that Swiber has the endorsement of 3 oil majors to date; Brunei Shell, an undisclosed oil major (Chevron ?) and the most recent one in Malaysia. I am still keeping a close watch on their joint ventures with Rahaman (Brunei), Petrovietnam and Vietsovpetro JV (Vietnam) and Principia (France) to see if these bear fruit, and am optimistic on a follow-up drilling contract after their first drilling one clinched on November 13, 2007 worth US$25 million. This drilling contract commence in March 2008 and will last for one year, with extension options.

4) Suntec REIT (Vested since December 9, 2004) - Buy Price $1.11, Market Price $1.51, Gain 36.0%, YTD Loss 11.7%. Suntec REIT has announced the issue of convertible bonds of up to US$250 million to finance the purchase of ORQ. The conversion price is set at S$1.968 per unit, with interest rate set at 3.25% p.a. and a yield to maturity of 4.25% p.a. Suntec REIT’s dividend of 2.279 cents per unit was received today, giving me an annualized yield of 8.21% at my purchase price.

5) Pacific Andes (Vested since March 29, 2006; Rights Issue July 11, 2007 at S$0.52 per share; averaged down August 17, 2007) - Buy Price $0.655 (rights-adjusted), Market Price $0.50, Loss 23.7%, YTD Loss 20.6%. Sorry for the delay on PAH’s review and analysis but was pretty busy these 2 weeks. I will be doing the review for PAH after I have done the Swiber analysis.

6) China Fishery Group (Vested since November 20, 2007) - Buy Price $1.50 (average), Market Price $1.72, Gain 14.7%, YTD Loss 7.0%. There was no news for CFG for the period ended February 29, 2008.

7) First Ship Lease Trust (Vested since January 14, 2008) - Buy Price (Averaged Down) $1.105, Market Price $1.11, Gain 0.5%. There was no significant news from this shipping trust during the period. The dividend of S$3.428 cents per unit was received on February 22, 2008, representing an annualized yield of 11.72% based on my previous purchase cost of S$1.17.

Overall Portfolio

My overall portfolio has increased by 60.6% without taking into FSL Trust’s cost. If included, the gain is 44.0% from a cost of S$80.4K as at February 29, 2008. The market value of my portfolio without FSL Trust is S$93.6K, and if FSL Trust is included then the portfolio value is S$115.7K. Realized gains remain at about S$4.9K and there was only a marginal change from my portfolio on February 15, 2008.

Comparison against STI

The FTSE STI had declined by 13.09% since the start of 2008. Without FSL Trust, my portfolio has declined 19.8% thus under-performing the FTSE STI yet again.To date in 2008, my portfolio has under-performed the new benchmark FTSE STI by 6.71 percentage points.

My next portfolio review will be on Friday, March 14, 2008 after market close.


Anonymous said...

hi musicwhiz

perhaps it will benefit the newbies here if you could identify another set of 6-8 companies IF you are not currently invested in these 6 yet.

While your analysis proves a great reading but it benefit more for those who are vested in it while others simply can't do much from it.

Caveat emptor as usual.

Thanks a lot

musicwhiz said...

Hey Anonymous,

Thanks for dropping by. I do agree with your point, but it is very time-consuming to do a full analysis of a company and at the same time, monitor the investments I have as well. If you notice, no other value investing blog does this, and for good reason too ! Perhaps in future I may consider such a write-up, but right now my time and work obligations do not allow for this.

Thanks for understanding !