Friday, February 15, 2008

Mid-February 2008 Portfolio Summary and Review

This half-month consisted mainly of full and half-year results releases, and all eyes are now trained on companies as they report their earnings report card. As far as I can tell, the Business Times is sometimes not accurately reflecting the underlying core net profit because some companies’ net profit was boosted by a one-off gain or a revaluation of property values. The discerning and intelligent investor should take note of each company’s numbers and business and therefore not rely too much on the summaries provided in the papers. After all, the hard work involved in analyzing a company should never be neglected !

China Fishery and Pacific Andes both reported their FY 2007 and 3Q FY 2008 results on February 14, 2008 respectively. I shall be undertaking an analysis of their results in due time and will share my analysis and insights for each company. More of my focus shall be on analyzing China Fishery as it is their fishing business which represents the growth driver which is powering earnings for Pacific Andes as well. Swiber should be releasing their FY 2007 results close to the end of February 2008, and I shall follow-up with an analysis and commentary as well.

Below is the summary of my investments and related news as at February 15, 2008 (STI at 3,088.68 points).:-

1) Ezra (Vested since October 6, 2005) - Buy Price $0.645 (bonus adjusted), Market Price $2.35, Gain 264%, YTD Loss 29.2%. There was no news from the company for the half-month ended February 15, 2008.

2) Boustead (Vested since September 13, 2006; averaged down November 13, 2006) - Buy Price $1.295 (average), Market Price $2.30, Gain 77.6%, YTD Loss 4.6%. There was no news from the company during the half-month ended February 15, 2008.

3) Swiber (Vested since February 14, 2007) - Buy Price $1.01, Market Price $2.32, Gain 129.7%, YTD Loss 32.4%. Swiber announced a joint venture collaboration with Principia on February 12, 2008 which I had written a blog post about recently. On February 14, 2008, they announced that they had clinched a contract extension worth US$35 million from an oil major. This LOI is an extension of their win in Nov 2007 from the same oil major and the total contract value is about US$66 million. The work is expected to commence in 2Q FY 2008 and will be completed by the end of FY 2008 and involves the transportation and installation of three pipelines in the waters off Indonesia. It is hoped that with Swiber’s expanded fleet, they will be operational ready to capture more contracts or larger value to boost earnings.

4) Suntec REIT (Vested since December 9, 2004) - Buy Price $1.11, Market Price $1.55, Gain 39.6%, YTD Loss 9.4%. There was no significant news from this REIT for the period ending February 15, 2008.

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%. As mentioned, PAH’s 3Q 2008 results were released and I shall be doing a review on them soon.

6) China Fishery Group (Vested since November 20, 2007) - Buy Price $1.50 (average), Market Price $1.84, Gain 22.7%, YTD Loss 0.5%. CFG also released their results for FY 2007 and declared a final dividend of 2.19 cents per share. I shall be reviewing their financials and strategic plans shortly and am expecting the Annual Report to arrive by April 2008.

7) First Ship Lease Trust (Vested since January 14, 2008) - Buy Price (Averaged Down) $1.105, Market Price $1.10, Loss 0.5%. There was no significant news from this shipping trust during the period.

Overall Portfolio

My overall portfolio has increased by 61.7% without taking into FSL Trust’s cost. If included, the gain is 44.5% from a cost of S$80.4K as at February 15, 2008. The market value of my portfolio without FSL Trust is S$94.2K, and if FSL Trust is included then the portfolio value is S$116.1K. Realized gains remain at about S$4.9K as CFG has not gone ex-dividend yet with their 2.19 cent/share final dividend.

Comparison against STI

The FTSE STI had declined by 11.3% since the start of 2008. Without FSL Trust, my portfolio has declined 19.3% thus under-performing the FTSE STI yet again. This is not too much of a concern as the portfolio is meant to be long-term and what I am doing is simply using short-term (half-month) yardsticks to measure performance against the FTSE STI. The “true test” will probably be about 3 to 5 years later to see how my overall portfolio has performed, and hopefully I will still be blogging by then !As a result, to date in 2008, my portfolio has under-performed the new benchmark FTSE STI by 8 percentage points.

My next portfolio review will be on Friday, February 29, 2008 after market close.


H said...

Hi MW,

Thanks for posting your portfolio review and company results analysis.

Most companies in my portfolio are blue chips with growth of 15% annually for years; even then, I still monitor them constantly. I agree with you that we should not take figures listed in BT or Share investments without reading the reports ourselves. I just sold out one of the best companies in Malaysia because of its new ventures that cast some uncertainty over its long term returns and reinvest into another undervalue growth company.

I saw your chat on LP's blog about humility and would like to comment that you are one of the most humble guys around. I admire you for your humility and hope I can learn from you.

You remind me of my mentor; he too, is humble. I always thought my mentor was a Christian just as I thought you are a Christian initially. He is deeply involved in music too -- was a musician and music consultant. His achievement in Sports, academic, music and now, investment makes him so unreal. I used to gauge him with my own standard and I thought "how can that be possible". I thought I saved a lot monthly until I know he saved the same amount daily when we were doing the same thing!

There are many mentors in my life. My property mentor taught me about property valuation and she has 5 fully paid up properties with 2 going en bloc. If you find her during property launch, you probably won't notice her.

I am thankful to these God sent mentors, without them I would not be financially so comfortable.

As I study the bible each time, I marvelled at how humble, gentle and meek, Jesus is. And to think he is the son of God. I felt ashamed for speaking loudly some times just because I have "backing" of mentor. Jesus has the "backing" of God and yet he is so humble.

My mentor helps me accumulate wealth on earth. I hope one day, he could accumulate wealth in heaven too.

Someone just offered 20% rental increment for a space at my premise but I turn him down base on his business capability (F&B). What is 20% increase if he can't maintain it for long?

On the other hand, a friend converted his space to eating house (with 70K invested) and managed to get very high rental. Its not sustainable business but someone drools on the high rental and offered to buy up the place for 1.1m. (initially worth 700K) with rental deposit. The true side of the story is, this person who rented the place could not even pay the high rent for months and the sum was WRITTEN OFF including the rental deposit. The buyer just look at some superficial fact to make his decision to purchase.

Sound familiar? so many companies out there are window-dressing their accounts and its so much harder to find out unless we follow up their accounts and business closely.

Wow, such a long post.

Thanks again for your postings MW.


musicwhiz said...

Hi HH,

Wow thanks for a very long comment. A pleasure to read about your views and thanks for the compliment along the way !

My reason for being humble is that I still have mountains of stuff to learn about value investing, and have just started on my investment journey and am barely four years "old"; so I dare not say that I had made the right choices about companies or that my gains are sustainable as I could be proven wrong in 5 years time.

It is good to know that your mentor is also humble yet so talented. We need more people like him around instead of the arrogant and the pompous. Your lady friend who is into real estate also sounds like the typical millionaire who lives well below her means and keeps a low profile. I aspire to be like such people too; to me wealth is to make myself and my family comfortable and worry-free, not to flaunt and flash around.

Your example of the real estate purchase/sale is one typical case of people buying based on what I call "circumstantial evidence". It's something like a court case where you are found guilty even before all the charges are read to you, and the evidence is 50% incomplete. As you say, sometimes people do not seek any margin of safety in their purchases, whether it is for equities, bonds or real estate. This will cause them to lose money eventually which is sad. Hopefully, you and I can avoid such mistakes which can be detrimental to one's wealth.

Regarding window-dressing, I have to admit that if anything funny was going on in the companies I own in order to "fudge" the books, I won't be the wiser either ! The case about JEL Corp illustrates that even veteran investors such as Mr. Sam Goi could not see such fraud coming. I do not fully agree that keeping track and following closely can prevent instances of intentional wrongdoing or fraud; which is why margin of safety is needed to minimize the impact of losses even though it will be impossible to eliminate it.

Take for example my recent purchase of FSL Trust which many readers have commented on. After much extra reading, analysis and digesting information, I may eventually come to the conclusion that I made a mistake and divest. This shows that I still have a lot to learn and will need more knowledge and guidance in order to achieve the "greatness" which your mentor has achieved.

Nevertheless, with your blessings, I will strive to be a better investor. Thank you !


PanzerGrenadier said...

Hi Musicwhiz

I admire your openess in baring your portfolio to all and sundry.

For me, I still prefer to keep my net worth confidential to continue to maintain a low personal profile and to let my ideas and thoughts as well as thoughts from other people genuinely interested in financial freedom come true.

Let's uphold one another as it's good to find people who have similar thoughts about focussing on achieiving financial freedom while living a balanced life.

Be well and prosper.

H said...

Hi MW,

Like you mentioned, humility should not be about inadequacy or achievement -- although we are usually impress by super achievers who are modest.

I agree with you, margin of safety is a MUST. Property mentor insisted on buying at least 10% below bank valuation.

I am sure you will get there, being realistic and so willing to learn.

What is your definition of financial independent? more than enough to fund your living expenses from a passive income?


musicwhiz said...

Hi Panzer,

Thanks for sharing your thoughts too. Yes, let's do exchange pointers and tips on how to move more quickly towards financial freedom ! Take care and all the best for your investments !


musicwhiz said...

Hello HH,

Yep, financial independence (freedom) means being able to get by on my current lifestyle which is entirely funded through passive income. This theoretically means that I can stop working tomorrow and still continue to live the same lifestyle I am enjoying now, free of worry. However, 2 things to consider are that our lifestyle changes over time (e.g. having kids) and thus passive income requirements may need to scale up to accommodate this. Also, even if one has achieved financial freedom, he still needs emotional freedom too to pursue his desires. Hence, one may still choose to work but it will definitely be more for self-actualization than for safety needs (on Maslow's Hierarchy of Needs).


H said...

Oh yes MW, and debt free. :)

musicwhiz said...

Haha HH,

Yeah debt-free is something pretty rare these days in Singapore. Most people have a mortgage loan debt; others have car loans or renovation loans, and a proportion of silly people have the worst debt of all which is credit card debt or overdraft debt. Clearing debt is a priority but since I am on HDB concessionary rate I am in no hurry to clear off the loan as yet.