Saturday, May 30, 2009

May 2009 Portfolio Summary and Review

If April 2009 was the “Month of Reflection”, then perhaps May 2009 can be aptly described as the “Month of Green Shoots” ! The start of the month saw a sudden improvement in business sentiment and the theory was put forward that “green shoots” were being observed which slowed the pace of decline in the real economy. Other horticultural terms were being flung around as well, with some saying that there were equal amounts of “brown weeds” and that a recovery was not clear at all despite signs that some areas of the US Economy were bottoming out. The situation was echoed back here in Singapore as well, with prominent MPs giving divided and conflicting views over the economic situation.

The result of the sudden burst of optimism was the biggest one week jump in global stock market indices I had seen so far in my limited years of investing. It was just back in March 2009 when STI hit a low of 1,456, and as of this writing, the STI is close to the psychological resistance point of 2,300. That’s almost a 58% jump in the Index within just two short months, and does illustrate the point that when valuations revert to the mean, they can do so suddenly, sharply and without prior warning. Suffice to say almost all the people I spoke to were taken completely by surprise, and many are somehow convinced that this is a bear market rally and not the “real” recovery. Whether this is so will only be known on hindsight.

My divestment of Pacific Andes this month has returned some capital back to me to be recycled to other worthy investment opportunities. Suffice to say I am devoting some time to research and studying some potential companies right now, and admit I was rather slack and lazy over the past few months and thus was only comfortable in adding to my existing positions (back in October 2008 and March 2009). It would be splendid indeed if I could find another value investment when conditions have not totally improved, and sentiment continues to be depressed. Once valuations revert fully back to the mean, it may prove difficult to find sufficient margin of safety.

With the FY 2009 reports for Boustead and Tat Hong released on May 28, 2009, I shall be busy in the coming weeks doing some in-depth analysis for each company and its prospects, and will post these up separately when they are available.

For May 2009, corporate updates and result announcements for my companies are as follow:-

1) Ezra Holdings Limited – Ezra had done a placement of 78 million new shares at $1.185 to raise capital for paying down debt and possible M&A. This was detailed in a previous blog post of mine, therefore I will not give further details here.

2) Boustead Holdings Limited – Boustead released their FY 2009 results on May 28, 2009. Revenues for FY 2009 rose 17.9% from S$438.3 million to S$516.6 million. Gross profit, however, increased by a smaller 5.4% due to higher COGS booked. Net profit attributable to shareholders increased by 16.8% to a new record S$60.1 million, as Boustead celebrated their seventh year of record revenues and profits. A final dividend of 2.5 cents per share was declared, payable on August 20, 2009. My dividend yield was 6.63% after taking into account my additional purchase of Boustead in March 2009 (based on a total dividend of 4 cents/share for full-year 2009). I will be doing a detailed analysis and review of Boustead’s financials and prospects in a separate blog post, but I have to caution that FY 2010 will definitely not be as good as FY 2009 as the global economic crisis hits home for Boustead.

3) Swiber Holdings Limited – Just yesterday, on May 29, 2009, Swiber announced a share placement of 84 million shares at 88 cents each, raising about S$71 million (after deducting expenses). The fund raising was done through CIMB GK Goh and was stated as being for general working capital purposes. The new capital raised is about 20% dilutive, which represents an exercise similar to Ezra (incidentally, at least Ezra got a better deal with 78 million shares at $1.185). Oil prices have been trending up to US$66 per barrel at the time of writing and the prospects for the industry look bright with more deepwater E&P taking place in the years to come.

4) Suntec REIT – There were no updates from Suntec REIT for this month, and I received the dividend on May 29, 2009. There was a proposal from MAS, however, which mentioned that REITs should conduct AGM from FY 2010 onwards. That would indeed be a welcome change with respect to improved corporate governance.

5) China Fishery Group Limited – CFG released their results on May 15, 2009 and reported a 40% increase in revenues year-on-year, but only an 8% increase in net profit due to higher COGS and also higher selling expenses. As this is a 1Q 2009 results release, I will not go in detail on the analysis. Readers are welcome to visit SGXNet to obtain relevant information on CFG’s latest results and press release.

6) First Ship Lease Trust – I received the dividend of US 2.45 cents per unit from FSL Trust on May 29, 2009. It was converted at an exchange rate of 1.458 to the SGD. Conditions in the shipping market appear to have improved, as evidenced by the BDI jumping to the 3,200 level; its highest level since Sep 2008 on higher demand for iron ore from China. However, my feel is that there is still a long way to go before the shipping industry recovers, thus all shipping trusts would still face significant headwinds moving forward. As long as the cash flows from lessees are steady, I do not feel overly worried about my investment in this Trust.

7) Tat Hong Holdings Limited – Tat Hong released their FY 2009 financials on May 28, 2009. Revenue for FY 2009 was flat at S$632 million, while gross margins stayed constant at 38.2%. However, net profit attributable to shareholders declined 23% from S$89.8 million to S$68.9 million, mainly due to a S$16.1 million forex loss, impairment of goodwill and disposal of associated company, as well as provision for losses. A final tax-exempt dividend of 1.5 cents per share was declared, bringing my yield to 2.2% based on my purchase price of 68 cents. The dividend will be paid on August 18, 2009, subject to shareholders’ approval at the upcoming AGM. Taking into account my additional purchase in March 2009, average dividend yield for FY 2009 was 6.31% (using a total dividend of 5 cents/share for FY 2009). I will be doing a detailed review and analysis of results and prospects for Tat Hong in a future post.

Portfolio Comments – May 2009

My portfolio for May 2009 is not directly comparable to April 2009 as there was a divestment of Pacific Andes, which lowered my cost of investment. However, one thing I can conclude is that with the recent reversion of valuations towards the mean, I also saw a substantial increase in the value of my portfolio. It has now turned positive for the first time since October 2008 and is up 22%. The loss from the divestment of Pacific Andes had reduced my realized gains from S$12.8K to a mere S$4K. If this is added on to the unrealised gains, the total gain on my portfolio cost is 25.6%.

May 2009 itself has proven to be an amazing month as my net worth has increased substantially due to the rise in market value of my portfolio. This is the fastest and most drastic increase since I began embracing the concepts of value investing, and it is a small testament on how investment principles can help one to preserve capital and give one a decent return on investment. However, I must remind myself not to be overly complacent as my focus is still to closely monitor my companies to ensure they adhere to my original purpose for investing in them. After all, the financial crisis is far from over and recovery still seems remote as of this writing, so the companies I own may face further headwinds and difficulties in the months to come. While I do believe that most of them will be resilient, it is an undeniable fact that they would still be negatively impacted in one way or another.

On a separate note, the companies I owned had seen a total of two placements (Ezra and Swiber) and one rights issue (PAH) for the month of May 2009 alone, and this itself proves that my method for selecting companies needs to be fine-tuned and improved. Companies should be using most of their internal cash flows to sustain and grow their businesses, and should also be paying out a healthy dividend to their shareholders. That said, one must keep in mind that the balance between growth and income is tenuous, and my investments in Swiber and Ezra are considered “growth” investments; hence the fund-raising itself does not come as a surprise, though it is admittedly unwelcome. My screening process in future will account for high gearing and cash inflows as being a critical and pertinent part of the decision-making, and I will be more rigorous and demanding in my selection criteria as well.

My next portfolio review will be on Tuesday, June 30, 2009.


Anchovies said...

Hi Musicwhiz

Happy to see your portfolio turns green. Your hardwork, patients and preseverance has paid off!

Have a good weekend!

PanzerGrenadier said...

Hi Musicwhiz

Sometimes we won't know when it the bottom and when is the top so it pays to be invested.

I'm fortunate that while my portfolio is still in the red, it's much less than 1-2 mths ago mainly due to SPC's 45% stake held by Keppel being sold to PetroChina.

So hurray for the Chinese conglomerates buying into SGX shares!

Be well and prosper.

cif5000 said...

Some mathematics. Your portfolio return should not be based on the portfolio cost of "current* holdings. Just imagine, as you sell away your stocks, you lock in the profit/(loss) while the denominator keep reducing. If you did that, then the return figure is greatly affected due to the shrinkage of the "cost".

musicwhiz said...

Hi Anchovies (ikan bilis ?),

Thanks for visiting !

Have a good weekend too.


musicwhiz said...

Hello Panzer,

Yes I do agree with you on that. But of course, there are others who believe in selling at the top then buying back. Problem is I have yet to see anyone practise this successfully and consistently ! Most of my friends got left out of the sudden and sharp rally and are now pondering what to buy.

This shows that Mr. Market is extremely unpredictable !


musicwhiz said...

Hi cif5000,

Thanks, actually I did see that as a potential problem as it distorts the % returns. However, what I am (personally) more concerned with is absolute returns. Thus, as long as I have a positive return over time, I don't really need to compute an exact %. If I were to take into account the number of times I had sold and bought since I started investing in 2005, then it would make the job much tougher.

As it is, I had already reflected the loss on disposal as a net off against the realized gains, so that the absolute gains (realized + unrealized) gives an accurate reflection of my results at this point in time.

I was wondering if you could suggest something which makes it better and more effective in tracking portfolio returns, without being too tedious ? Thanks in advance !


Createwealth8888 said...

Hi MW,

The reason that we spend so much time and effort in investing is to get better ROC. If it is just about absolute returns, then just park yr capital in Fixed Deposit and better spend yr valuable time elsewhere.

One method of tracking portfolio returns is ROC% as follows:

Firstly, you can only maintain or increase yr capital, but not reducing yr capital to prevent distorting ROC%. We want to assume the worst case of ROC%.

1) Cost of Stocks + Cash = Capital + Realized P/L + UnRealized P/L

2) Future P/L = Realized P/L + UnRealized P/L

3) ROC% = Future P/L / Capital

Not tedious at all and can be computed daily at market close.

Createwealth8888 said...

Hi MW,

Pls note if you draw down more than your realized gain for yr expenses, then you may have negative cash position in (1)

JW said...

Hi MW,


My portfolio is only very mild positive (this excludes realised gains) ever since I started dabbling in stock market with little knowledge fresh from uni back then in 2008.

Made a mistake of selling DBS too early, but learned from it and held on to Capitaland throughout the peaks and troughs.

It's ok to make mistakes, but it's not ok not to learn from them. It would be even better to learn from other's mistakes and see other's opinions :D That's why I read your posts quite frequently :D

Good luck for your next month's portfolio. May you see more positive, even though it is widely expected that STI might start a decline... But no sweat, we accumulate more funds to buy in more if and when it goes down :D

Kay said...

Hi Musicwhiz,

I agree with the other commentators. There can be a better way of tracking your portfolio objectively.

A positive absolute return without taking into account the time used to achieve such a return is not that useful as a comparison. To put things in perspective, a 100% absolute return on capital may seems impressive but what if that is achieved over 20 years ? I think that can be achieved by simply through the purchase of government bonds.

In contrast, computing an annualized return will be much more useful. An above 20% annualized returns for the past 10 years speak a great deal about the prowess of an investor.

Mike from sti-stocksinfo blog has an excellent article on how to compute the annualized return from XIRR function using an Excel spreadsheet based on the concept of internal rate of return. The link is @

Alternatively, there is another article on Morningstar @

This is a rather easy way of computing the annualized return of your portfolio. All you have to do is to key the amount of cashflows and the corresponding dates of the cashflows.


musicwhiz said...

Hi Createwealth8888,

Sorry I don't really understand your method of ROC%. I think I can stick to what Kay suggested, problem is my Excel does not have XIRR Function and somehow I cannot find my original CDs either ! So for now, I have to live with just absolute gain; but after reading the related websites on how to compute CAGR I have an idea how to do so.

And I also don't understand the part about drawing down more on expenses than realized gain. After all, don't we all incur expenses over time ?


musicwhiz said...

Hi JW,

Thanks, my aim is just for capital preservation (plus a decent return) and I am glad to have achieved this. However, consistency is the key word here and I must maintain my discipline and patience to be able to put up a credible long-term performance, otherwise I would not be adhering to my own investment principles.

And yes, it's good to learn from mistakes, as long as they don't disable us !


musicwhiz said...

Hi Kay,

Hey thanks the links are very, very useful indeed. I agree my method for measuring returns is somewhat crappy, but that's the method I've been using all this time. Oh well, flawed haha !

However, I do not have Excel XIRR Function or a financial calculator, so am unable to key in the numbers relating to my portfolio to be able to see what my true CAGR is.

I will attempt to do so by my next portfolio review to give a better indication, instead of a distorted one.

Nevertheless, I am gratified that I did not lose any money overall as at this point in time, so my overall objective of capital preservation was at least attained.


Createwealth8888 said...

Hi MW,

Do you maintain separate bank account for investing and another bank account for living expenses and saving?

If you have separate account, you can track easily how much and how fast your investing account grow or shrink over any period of time.

musicwhiz said...

Hi Createwealth8888,

Yes I do. Thanks for the tip. I have an account purely for investments which I put regular savings from salary/bonus into every month. So basically this balance can only grow with time, except when I take money out of it to invest in companies.


H said...

Hi MW!

I agree with your investment plan, that was what I did when I was young - regular saving plans.


musicwhiz said...

Hi HH,

Nice to hear from you again. I am glad we share the same philosophy and goals !