Tuesday, September 30, 2008

September 2008 Portfolio Summary and Review

From this portfolio update onwards, I will be changing the format of the portfolio review to make for easier reading. Instead of everything being text-based (which can be hard on the eye especially when it concerns numbers), I have resorted to using an Excel spreadsheet (see below) to document the key aspects of my portfolio. Of course, some details have been left out such as averaging dates, but these are not as important as the first date of purchasing a company. I have arranged this in order to when I bought the company.

The main change to the portfolio since the mid-September 2008 update is the addition of Tat Hong Holdings Limited on September 18, 2008. The US$700 billion bailout has NOT been approved by Congress as at the time of this writing but the Democrats are purportedly working on another bailout plan to be tabled to Congress; voting can only take placed earliest next week so the market will, as usual, be on tenterhooks. The good news is that the DJIA and S&P 500 crashed about 7% and 9% respectively, which means valuations are getting increasingly attractive as the days go by.

Separately, Singapore is also expected to enter a technical recession once the 3Q 2008 GDP figures are released, due to a sharp drop in manufacturing output. This was not entirely unexpected as our economy is very open and thus prone to such global “shocks”. Other vulnerable countries will include Malaysia and Hong Kong as well.




There was not much news regarding the companies I own, and I will give a quick summary below. The STI stood at 2,358.91 points on September 30, 2008.

1) Ezra Holdings Limited - There was no news for Ezra for the half-month ended September 30, 2008. The Group’s FY 2008 results are expected to be released on Tuesday, October 21, 2008.

2) Boustead Holdings Limited - There was no news from Boustead for the half-month ended September 30, 2008. FF Wong’s total purchases thus far from the open market amount to 701,000 shares at an average price of S$0.98 each.

3) Swiber Holdings Limited – There were no updates from the company regarding the Equatorial Driller, and the Company did buy back more shares to the tune of 2,195,000 at an average cost of S$1.2454. This cost the Company about S$2.73 million.

4) Suntec REIT - There was no news for Suntec REIT for the period ending September 30, 2008, except for the fact that the REIT will change their year-end to December 31 instead of the current September 30.

5) Pacific Andes Holdings Limited - There was no news from PAH for the half-month ended September 30, 2008. A total of about 41 million new shares (at S$0.44 per share) were issued as a result of the scrip dividend scheme. I chose to receive the dividend in cash at the market price of PAH is much lower than the scrip dividend price, thus it would be more prudent to accept cash which can be reinvested for higher returns.

6) China Fishery Group Limited - There was no news from CFG for the half-month ended September 30, 2008.

7) First Ship Lease Trust –FSL Trust is proposing a dividend reinvestment scheme (similar to a scrip dividend scheme) whereby shareholders can choose to receive their dividends in cash or in the form of new shares. The new shares are subject to a maximum discount of 10% off the last traded market price. There will be an EGM convened to address this issue and it will be held on October 7, 2008 (Tuesday) at 3 p.m. Marina Mandarin (the venue for their last AGM).

8) Tat Hong Holdings Limited – There was no news for the company for the half-month ended September 30, 2008.

Portfolio Comments

There are no immediate pressing problems or issues with the companies I own, other than those with high leverage (Pacific Andes, China Fishery, Swiber and Ezra) which may prove a problem in the current credit crunch. However, with Ezra getting a recent S$500 million loan approved, Swiber using their third wave of sale and leaseback and China Fishery generating strong operating cash inflows, these worries have been somewhat mitigated. However, as an investor, it will still be good for me to remain vigilant and to track the companies’ quarterly reports to identify potential problem areas.

With an imminent recession and global slowdown, it is also prudent for me not to expect overly strong earnings growth for the companies I own. Tempered expectations always lead to much better outcomes as one is emotionally prepared. I am also of the view that steady, consistent growth over a period of years is much better than explosive growth which fizzles out after a brief sporadic period.

With a total portfolio return of -3.7%, the portfolio is still showing resilience during this time of turbulence, and deep into the bear market.

My next portfolio review will be on Friday, October 31, 2008 after market close, but note that I will provide a summary of my companies’ updates during the middle of the month (i.e. Wednesday October 15, 2008).

32 comments:

peter lee said...

Hi, well done.
that is good achievement.

for the 2 stocks (swiber and china fishery), their total debt to equity ratios were high.
wonder they can raise fund to tie over any financial crisis if there is.
may i know your view about the total debt (all liabilities) to equity ratio?
OR: you prefer current debt
(all current liabilities) to equity ratio

will it be a part of the criteria in stock selection?

thank you.

peter lee

Anonymous said...

Hi,

the table is definitely better for viewing. keep up the good job for constantly updating your blog. Not many ppl can keep doing this.

Jack

Anonymous said...

Hi,

Thanks a lot for sharing. Keep it up!
:)

small_bird

musicwhiz said...

Hi Peter Lee,

Swiber just did a third S&L transaction to boost their cash position, and they will keep their debt:equity ratio constant at 1:1 for now. So I am not too worried.

For China Fishery, their high gearing was for the acquisition of the Peruvian business, of which synergies should only be visible in the next 2-3 years. It has the ability to generate good operating cash inflows, so I am also not too worried (for now). I will continue to monitor their businesses.

And yes, I would of course prefer companies with good cash flow (FCF), but it's not easy to find a combination of decent growth with good FCF generation.

Regards,
Musicwhiz

musicwhiz said...

Hi Jack,

Thanks for the feedback ! I will be using this new format for subsequent months. Thanks too for visiting.

Cheers,
Musicwhiz

musicwhiz said...

Hi small_bird,

Thanks for visiting too !

Regards,
Musicwhiz

Anonymous said...

I notice a large proportion of your portfolio is involved with cyclical industries and another significant part in a niche area like fishing.

Don't know much about any of these industries, but ya best be careful man. Sometimes many of these stocks might look cheap not because the market is dumb, but could be a sign of the down cycle setting in. Not careful could get trapped under water for many years.

Brendan Lee said...

I hope you still have a lot of excess cash, because STI Index is likely to fall to 1900 level.

musicwhiz said...

Hi Anonymous @ Oct 6 2:19 p.m.,

What exactly do you mean by cyclical ? Is oil and gas cyclical ? As far as I understand oil is a finite resource and the main dangers are substitute products, otherwise the "cycle" will most likely sustain.

Thanks for the advice though. I did do quite a lot of research into each company and its related industry, so I hope I am right about my convictions.

Regards,
Musicwhiz

musicwhiz said...

Hi Brenden Lee,

So sure eh ? Many people believe the Index will fall to XXXX, but basically everyone's just playing a guessing game eh ?

I will buy based on value, in an unhurried manner, as long as I have sufficient cash. I will NOT be hurried into making a decision based on market levels and I don't intend to predict market levels either. My focus is company-specific.

Thanks,
Musicwhiz

Simon said...

yo mw,
do you want to include an annualised return of yr portfolio summary from 2004 onwards and compare that to the annualised return of the sti?
this performance comparison would be more accurate. here is a very good website for the formula.
http://www.gummy-stuff.org/petrovski.htm

Invest SGX said...

I do expect people to eat the same amount of fish if not more, even in bad time as population growth in long term.

I like fish too.

Brendan Lee said...

Today Dow Jones is down another 600 points, so tomorrow STI is going to get lower. 1900 is only a matter of time, and the worst is that 1900 may not be the bottom.

I have been predicting that S&P500 will go below 1000, not a guessing game, here is my analysis:
http://www.commoditiestradingpro.com/2008/10/where-is-s-500-index-heading-to-part-3.html

Anonymous said...

I agree with some of the forummers who have left some comments. It is not possible to 'time' the market, but just as it is important to be able to purchase stocks at a good price, it is important to release them once a good profit is to be made.

If, and this is a BIG if, I were in your shoes, I would have sold off some of my holdings when they were up 100%. This holds true for any of my stock that I hold as I know that a 2 fold gain is a 2 fold gain regardless.

musicwhiz said...

Hi Simon,

OK I may include in from FY 2009 onwards. Currently am still getting used to the new format of presentation. Thanks for the link though.

Regards,
Musicwhiz

musicwhiz said...

Hi Invest SGX,

Yep, I happen to be a "fish fan" too !

Cheers,
Musicwhiz

musicwhiz said...

Hi Brenden Lee,

Thanks for stating your prediction. However, it really does not matter to me as I do not buy the Index.

Regards,
Musicwhiz

musicwhiz said...

Hi Anonymous,

Buying a company at good value does not mean planning to sell at a price which seems reasonable. On hindsight, it's always easy to point a finger and said "you should have sold". But valuations may appear reasonable as long as the company is growing steadily; so what is the rationale to sell a good company with long-term prospects ?

So that one can start the search for another such company ? A lot of time and effort if you ask me, and one may not always be successful.

Regards,
Musicwhiz

Anonymous said...

Hi ,

i agreed with Musicwhiz.
Buying a company at good value does not mean planning to sell at a price which seems reasonable.
what is a reasonable value?
it is anybody guess.

as long as the company is growing, you can hold for decades.
in reality, very few companies can satisfy this crieria.
many company have life cycles,
thus, these campanies can only hold for few years.

In short, different strategies for different type of stocks.


regards.

peter lee

Ricky said...

Hi MW,

i'm looking at suntec reit and i think it has very good dividend yield. However, rather concerned about office rental rates, which can drop to 25% of the current rental in bad times. Also, the debt to assets ratio is about 31.4%...is it a bit too low? What do you think of its prospects going forward? Hope to hear from you

Anonymous said...

Suctec reit is trading at >$1 now... and its PE ratio is quite high.

I read Temasek Holdings subsidiaries coy have recently sold off quite a big bunch. Not sure if it is still a good buy.

You can consider Fraser Comm Trust with PE of 1+...

Rell

Ricky said...

It closed at 97c today...thanks for your recommendation, i'll take a look at it

musicwhiz said...

Hi Peter Lee,

I agree too. The difficulty is in choosing companies which can weather crises like the one the world is going through right now, and yet emerge stronger or the same. I know the companies I own may face problems (which company won't eh ?), but hopefully they are not insurmountable ones.

Regards,
Musicwhiz

musicwhiz said...

Hi Ricky,

The yield is good for me at about 10%, and it's probably even higher now with the price dropping below IPO. However, the drop in rentals will be a factor too in deciding whether to buy. For me, I have collected dividends over the years so my rationale for investing may be quite different from yours. So please make your own assessment of the facts and decide accordingly.

Regards,
Musicwhiz

musicwhiz said...

Hi Rell,

Using PER to value a REIT is not appropriate. Most will turn to NAV instead as they are holding a portfolio of properties and properties are valued based on NAV too.

Regards,
Musicwhiz

Ricky said...

Thanks MW

cif5000 said...

Hi Musicwhiz, I can see that your confidence has increased. Stay cool.

Simon said...

yo mw,

maybe next time in your portfolio review, could you disclose your portfolio weights as well? e.g. the total cost price of one stock expressed as a % of the total cost price of the portfolio. u don't have to disclose yr absolute amount, just in terms of % of the whole portfolio. then we could see where your overweight and underweights are.

musicwhiz said...

Hello cif5000,

Thanks, I view you as a very astute investor and I value your comments here on my blog.

You stay cool too !

Regards,
Musicwhiz

musicwhiz said...

Hi Simon,

Thanks for the suggestion. I will consider implementing it.

Cheers,
Musicwhiz

Leader of Akasuki said...

Hi Musicwhiz, im interested to invest in this company Swiber. I find the company has done alot and obtain huge growth prospects. However im concern with their current balance sheet figures,like their huge trade recievables and huge trade payables. In your opinon do you think the company will be able to payoff their current debts in time?

musicwhiz said...

Hi leader of akasuki,

I think the company should be able to manage its cash flow soundly as they are deferring their ED, which is an indication they intend to consolidate their position first to let the global meltdown pass.

Regards,
Musicwhiz