Tuesday, September 01, 2009

August 2009 Portfolio Summary and Review

August 2009 was the month in which many countries reported that they were out of the long recession caused by the sub-prime fallout in 2007. Among the countries to emerge from recession were Japan, Hong Kong, Germany and Singapore. This still qualifies, however, as one of the longest recessions since the post World War II era, and is also one of the deepest in terms of the magnitude of GDP decline. Economists are now saying that recovery will be very weak and tentative and is likely to take up to 5 years or more for global trade to resume its 2007 level. It is also one of the rare instances where global growth was negative, dragged down by the developed economies of USA and UK.

Valuations have continued to normalize in the stock market, as can be seen by the gradual increase in market price of blue chips across the Board. Although the sentiment on the ground is still wary and fragile, the stock market had managed to make a remarkable recovery from its March 2009 low of 1,456 points; and the surprising thing that the property market in Singapore had taken a surprising twist and headed up to new record highs, defying expectations and stunning the “experts”. As we see mid-level and mass market condominiums hitting new highs (in psf basis), including those selling beyond the city fringes, one wonders if Singapore may be subject to the same kind of sub-prime type crisis which hit USA (the USA housing market had been booming since 2002 as a result of cheap credit which the Federal Reserve had initiated to recover from the dot.com crash). In Singapore, banks are all too ready to lend and interest rates are at record lows; plus schemes such as interest-absorption has made it very attractive for people who are not willing to stump up money and yet be able to secure a unit. Whether prices can continue to scale the stratosphere is another question though – this sounds uncannily like the Greater Fool Theory in play, but in the property market this time instead of the Stock Market.

This month saw many interesting corporate events, as well as my divestment of Swiber Holdings Limited, an investment which I had held for 2.5 years. There were results releases by Swiber, Tat Hong, Boustead and China Fishery and I had provided an analysis of both Swiber and China Fishery in previous posts. I also received dividends from Tat Hong, Boustead, FSL Trust and Suntec REIT.

September 2009 is likely to be a very quiet month as no corporate results are expected for the companies I own, until mid-October 2009 when Ezra releases its FY 2009 results. In the meantime, I shall hunt for suitable investment opportunities using the proceeds from recently divested Pacific Andes as well as Swiber.

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

1) Ezra Holdings Limited – Ezra announced on August 28, 2009 that it had entered into a “landmark deal” to provide fleet management services to a specialist offshore fund, in return for a 50% profit sharing arrangement (after deducting operating expenses). Ezra has signed a Vessel Operating Agreement (VOA) which will allow it to provide its services without major capital outlay, and should be viewed as a positive move in extracting more value from its assets and expertise without incurring significant capex. Probably, more detail needs to emerge before one can conclude if this latest deal is positive in the long-term.

2) Boustead Holdings Limited – Boustead released their 1Q 2010 financial statements on August 13, 2009. It was a credible showing with revenue rising 49.4% to S$118.9 million and net profit rising 68.3% to S$9.5 million. However, the company cautions not to use quarterly results for comparison as its projects are lumpy and revenue are recognized on a piecemeal basis. Cash balance stood at S$173.1 million as at June 30, 2009, and Boustead is still expecting more cash to flow in from the completion of the sale of property by GBI Realty. In addition, on August 5, 2009, Boustead Projects announced a S$15 million contract to design and build a new HQ for Charles and Keith. Today, on August 31, 2009, Boustead re-started their share buy-back program and re-purchased 307,000 shares at S$0.742, spending a total of S$227,781.63. Just to re-cap, the last re-purchase occurred on 1 April 2009 when Boustead bought back 8 million shares at 40 cents each in a married deal. To date, a total of 9.807 million shares have been bought back at an average price of S$0.4527.

3) Suntec REIT – There was no news from Suntec REIT for August 2009.

4) China Fishery Group Limited – China Fishery announced their 1H 2009 financial results on August 14, 2009 and I did a post some time back reviewing and analysing their performance. In addition, on August 26, 2009, the Company announced that it had changed its year-end from December 31 to September 28 in order for ease of preparation of financials and less “clashing” with other listed companies. The entire Pacific Andes Group has changed its year-end to September 28, and CFG will report its full-year (FY) 2009 results by November 29, 2009.

5) First Ship Lease Trust – There was no news from FSL Trust during August 2009.

6) Tat Hong Holdings Limited – On August 3, 2009, Tat Hong announced that AIF Capital will be injecting S$65 million into Tat Hong, in exchange for the issuance of 65 million RCPS (Redeemable Convertible Preference Shares). Immediately the day after, Tat Hong announced the formation of an EJVC with Mr. Yuan Zheng to take a 53.8% stake in a Tower Crane company. These 2 events have been mentioned during my Tat Hong AGM review (in my post dated August 6, 2009). Subsequently, on August 14, 2009, Tat Hong released their 1Q 2010 results which showed sharply lower revenues (down by 37%) and drastically reduced net profit (down 64% to S$10.6 million). Though the results looked bleak at first glance, I was mollified by the fact that rental revenues remained relatively resilient, and that their China operations showed good potential for growth in the years ahead.

Portfolio Comments – August 2009

No direct comparison can be made between July 2009’s portfolio and August 2009 as there had been a divestment in shares of Swiber Holdings Limited, but in general price levels for all my companies had risen, with the exception of FSL Trust and Tat Hong. For the record, my portfolio has registered an unrealized gain of +26.1% (S$25,000) and a realized gain of S$9,000. The total dollar value gain (realized + unrealized) is S$35,000 or +35.5% of my reduced cost of S$95,700.

I must admit it can get rather stressful when one has too much funds staying idle, waiting to be deployed and allocated to suitable investment opportunities. Of course, this is a much happier “problem” than having insufficient cash when the right opportunities strike. My job now is to actively do my homework and seek out suitable companies for long-term investment, based on value principles. I must also avoid making the myriad mistakes which I had documented under “Investing Mistakes” since 2005, in order for me to grow and mature as a more seasoned value investor. To be honest, right now I still feel like a greenhorn and very wet around the ears….

My next portfolio review will be on Wednesday, September 30, 2009.


Anchovies said...

Hi Musicwhiz

Market Cap
China Fish - 1.1B
PA - 800mil

As PA owns 78% of china fish, the stake in china fishery alone is worth 858mil which is higher than the entire PA value.

As you practice value investing, rationally, you would be switch to be holding PA instead?

Hope you can your view on this.

Musicwhiz said...

Well Anchovies,

PAH has the issues I mentioned previously, which is why I refrain from investing in it. It's not so simplistic as to take the % ownership and multiply by China Fish's market cap, I feel. It's a complex structure and I would rather own the company with the potential for better revenues and which has higher net margins.


Anchovies said...

Hi Musicwhiz,

Would like to be naggy abit more. The fact is PA still owns 78% of china fishery and irregardless of how well China fish is doing, they own 78% of them.

A dollar worth is a dollar worth. If the rest of the PA business vanished, they are still worth 78% of China Fishery.

Now you are paying X to get X + Y.
Unless you are saying that Y is a deficit figure. Otherwise i would deem it is a good bargain/deal.

I respect you for your own style of investing and will not disagree with your decision.

I am learning and i pretty much does NOT expect my analysis to be accurate.
My aim is to have you exchange your views for a healthy discussion.


Akatsuki said...

Dear Musicwhiz,

Im soo happy to that my blog is FINALLY under your "Good blogs to visit" list. Despite having a very hard time at school, at least there is some joy that i experienced tonight :]. Thanks for making my day.


8percentpa said...


Congrats on your good performance, I am very happy to see that you are up 30 over % over 3+ years. You are on your way to Buffett's 24%pa :)

One stock idea i have is Cerebos, but it never come to a price where the margin of safety is comfortable enough...

Do take a look, cheer!

Musicwhiz said...

Well Anchovies,

I would argue that one should apply a discount factor to PAH's stake in CFG due to the fact that PAH is essentially doing just the SCM business and derives most of its "value" through its stake in CFG. Also, the market value of CFG at any point in time may be an over or under-statement of PAH's true value, and this is a moving target.

Suffice to say you may very well be right (that PAH is under-valued), but I did not bother to do a detailed valuation.

Thanks for your comments.


Musicwhiz said...

Hi Akat,

Haha, aiyoh don't need to say until like this - your blog is a good one to read and visit and I enjoy reading the insights you share there, so obviously it will be listed as a "good blog".

Take care and stay happy !


Musicwhiz said...

Hi 8percentpa,

Unfortunately, the 30% gain is on a smaller cost base, so I think it cannot be measured as such. Technically, I should be using XIRR Function in Excel (which I do not have) to measure my returns which are adjusted, instead of using an absolute % on my cost as my cost keeps changing as I divest or invest.

But thanks for your well-wishes anyhow, it's good at least that I have an overall gain (up till now) instead of suffering debilitating losses. I guess value investing ensures you do not go broke, though it may not make you insanely rich ! Haha.


kongming said...

Hi Musicwhiz,

You have good track record of your portfolio. May i know if you have lower down your purchase price whenever you receive dividend?

Anchovies said...

Hi Musicwhiz

Thanks again for your input.
I guess i should use apply qualitative approach to view investments.


Musicwhiz said...

Hi kongming,

I had already explained this in a previous post some time back, but no problems I can explain it again.

When I receive dividends, I will book it in as realized gains instead of offsetting the dividends against my cost of investment. In this way, I can track my total realized gains (consisting of dividends and net of capital gains versus capital losses) as well as unrealized gains/losses.

Hope this clears up any confusion.


Musicwhiz said...

Hi Anchovies,

Thanks too for raising up the issue. The analysis of a company always consists of "fuzzy" science, which means we cannot totally use just numbers to come up with a "true" value. So you are right - we should combine qualitative and quantitative. Unless you are a strict "net-net" investor (Graham style), then you would take qualitative factors into consideration too.

All the best for your investing journey ! I am still learning as well.....


JW said...

Hi MW,

This sentence of yours makes me think: "The analysis of a company always consists of "fuzzy" science"

No matter FA or TA, the key is to be as objective as possible. But because of personal interests at times, we tend to see what we want to see, hence becoming more subjective than we would like to.

My recent views changed a little more as I explore further in this arena. I would use FA whenever STI is very low, and TA at this moment for hit and run as the margin of safety is not sufficient.

Musicwhiz said...

Hi JW,

I agree with you that even as we try our best to be objective, there is always an element of subjectivity as we are after all humans and have our own opinions and biases.

This is why 2 investors can look at the same company and come up with different views and conclusions. Different people may also define margin of safety differently, but the underlying concept is the same.


SGX Indices said...


CAn i have the excel file to calculate stock returns?


Musicwhiz said...

Hi SGX Indices,

As mentioned, sorry I cannot send the file as I do not have a blank template of it for use.