Thursday, July 31, 2008

End-July 2008 Portfolio Summary and Review

The second half of July 2008 was much quieter, if you compare it to the flurry of activity which characterized the first half of July 2008. There were no significant updates from the companies I own and only Suntec REIT and FSL Trust released their results. DPU, fortunately, was higher than expected and continued to provide me with high yield amid the current high inflationary conditions. China Fishery is expected to release their 1H 2008 results on August 14, Swiber’s will be on August 13, while Boustead will be releasing their maiden quarterly results (for 1Q 2009) some time in late August 2008.

The USA continued to suffer bouts of crisis of confidence, and Merril Lynch was the next “victim” of the credit crunch as it urgently needed to shore up its Balance Sheet as a result of massive write downs. As at time of writing, it is not known if there are further “skeletons in the closet” for other major banks, as it seems they keep getting pummeled one after another. Sometimes I wonder who or what will deliver the knockout blow ! Many smaller banks are also quietly folding in the fallout of the sub-prime crisis, in what is reminiscent of the Savings and Loans Crisis of the 1980’s. Home prices are falling about 16% in what is a continued drag on the USA housing market.

Of course, all this is very good news for investors who wish to buy cheaply. Just slightly more than a year ago, it was all good and positive news headlines in the paper but now it’s nothing but “doom and gloom”. Such conditions are conducive for investing as valuations will be reaching trough levels (assuming they have not) and one can then cherry pick at his own time.

Below is the summary of my investments and related news as at July 31, 2008 (STI at 2,929.65 points).:-

1) Ezra (Vested since October 6, 2005) - Buy Price $0.645 (bonus adjusted), Market Price $2.00, Gain 210%, YTD Loss 39.8%. There was no news for Ezra for the half-month ended July 31, 2008.

2) Boustead (Vested since September 13, 2006; averaged down November 13, 2006) - Buy Price $1.295 (average), Market Price $2.33, Gain 80%, YTD Loss 3.3%. Boustead held its AGM on July 30, 2008 and approved all resolutions in its AGM and EGM circular. The shares will trade cum-entitlement to the share split until ex-entitlement date of August 18, 2008. Ex-dividend date is August 4, 2008 for the 5 cents/share final dividend and 2 cents/share special dividend.

3) Swiber (Vested since February 14, 2007) - Buy Price $1.01, Market Price $1.93, Gain 91.1%, YTD Loss 43.7%. Swiber announced on July 16, 2008 that their Dalihao vessel had successfully wrapped up the offshore installation mission for Brunei Shell without incident and on time (there was no mention of whether they were cost overruns though). Dalihao’s next project is with ConocoPhillips in Indonesia. Subsequently on July 25, 2008, Swiber announced the appointment of 2 new CEOs to head the Offshore Construction Services and the Offshore Support Services divisions. They are Mr. Nitish Gupta (former COO of Swiber) and Mr. Darren Yeo (current Executive Director of Swiber). With this streamlining, the company can be more focused on building business in its three core divisions. Mr. Raymond Goh will remain as overall Chairman of the Swiber Group.

4) Suntec REIT (Vested since December 9, 2004) - Buy Price $1.11, Market Price $1.55, Gain 39.6%, YTD Loss 9.4%. Suntec REIT released their results on July 30, 2008 and declared a DPU of 2.793 cents per share. This was significantly better than expected and represents an annualized yield of about 10% based on my purchase price of S$1.11.

5) Pacific Andes (Vested since March 29, 2006; Rights Issue July 11, 2007 at S$0.52 per share; averaged down August 17, 2007 and July 3, 2008) - Buy Price $0.5475, Market Price $0.445, Loss 18.7%, YTD Loss 29.4%. The AGM for Pacific Andes was held on July 30, 2008, and I will post my view on the AGM as well as some updates from the Chairman Mr. Ng Joo Siang. I will also be commenting more on the scrip dividend scheme in a subsequent post, for those who are still unsure about it.

6) China Fishery Group (Vested since November 20, 2007) - Buy Price $1.50 (average), Market Price $1.30, Loss 13.3%, YTD Loss 29.7%. There was no news from China Fishery for the half-month ended July 31, 2008.

7) First Ship Lease Trust (Vested since January 14, 2008) - Buy Price (Averaged Down) $1.105, Market Price $1.21, Gain 9.5%. FSL Trust released their results on July 22, 2008 and declared a DPU of 2.80 US cents per unit for the period ending 2Q 2008. This was above their previously announced projected DPU of 2.77 US cents per share. At my purchase price of S$1.105, this represents a yield of 13.6% using an exchange rate of SGD 1.36 to the US dollar. The counter has gone ex-dividend and the exchange rate will be fixed closer to the payout date of August 26, 2008.

Overall Portfolio

The gain on my current portfolio is 28.5% from a cost of S$89.2K as at July 31, 2008. The market value of my portfolio is S$114.6K. Realized gains have increased to about S$7.0K as a result of the dividend from FSL Trust. Boustead, Suntec REIT and Pacific Andes will also go ex-dividend soon, providing me with some cash inflows.

Comparison against STI

Using my new benchmarking technique:-

The FTSE STI had declined by 15.9% since the start of 2008. My portfolio (without FSL Trust and the new PAH purchase) has to date declined 30%. Therefore, I have under-performed the STI by 14.1 percentage points.

FSL Trust has gained 9.5% thus far from my date of purchase while the benchmark STI has fallen 9.0% (from my date of purchase Jan 14, 2008 when STI was 3,218.14); I am happy to report that FSL Trust has managed to out-perform the index for FY 2008 thus far.

The new Pacific Andes tranche which was purchased at 44 cents per share on July 3, 2008 will be analyzed separately from the rest of the portfolio. STI as at July 3 was 2,880.45 and STI today is 2,929.65, thus this represents a 1.71% gain. Current share price of Pacific Andes is 44.5 cents, representing a gain of 1.14%. Hence, my purchase of Pacific Andes has lagged the index by 0.57 percentage points.

My next portfolio review will be on Friday, August 15, 2008 after market close.

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