March 2010 Portfolio Summary and Review

March 2010 turned out to be a seriously boring month, in terms of both corporate news and developments as well as economic issues. The same usual issues were “recycled” back and forth while the experts at the top debated over economic policies for the USA, with the Federal Reserve again holding the benchmark rates at record lows (as expected) to allow the US economy to recover further. In spite of all this, unemployment rates remained high and the housing market stayed sluggish; signs pointing to a very slow (but probably more sustainable) recovery.

The same few issues saw frequent rotation in the news – that of Greece’s debt as well as China’s growth (or over-heating if you want to call it that). Many US blue-chip companies also released results and gave forward guidances which were positive, as the economic recovery meant spending would increase and demand for goods and services recovering to pre-crisis levels. This had the effect of pushing the US Stock Market gradually higher, and it broke 17-month highs recently on renewed optimism; but it was still significantly below the all-time high of 14,000 reached during the heights of the bull market in October 2007. It has been about 2.5 years since the peak was breached, and throughout history the average time period for a bear market recovery has been about 4-5 years.

With low interest rates, Singapore’s property market went into (another) frenzy, with many mass market projects hitting new highs (The Vision at west coast area sold for >S$1,000 psf despite leasehold, a record for that area), while The Estuary in Yishun also saw healthy demand despite exorbitant pricing (this is the author’s own personal opinion). The reasons given were the usual – record low interest rates, massive liquidity sloshing around as a result of the unprecedented stimulus packages, and also people’s risk appetite increasing as they sought to park their funds in investments which yielded returns above inflation (and pathetic bank interest rates). In this kind of environment, what could go wrong? The newspapers have been trumpeting bullish news for months and new records are being set even as I type this.

Even with the recent measures announced by the Government to dampen speculation in both private property and HDB, prices still seem to rise unabated. I myself have visited some showflats to get a sense of what is out there, and came back amazed and flabbergasted by the strong take-up response of seemingly pricey units. Some were as tiny as 500 square feet but going for $1,600 psf (Mickey Mouse units, no doubt). Others boasted of potential new MRT developments, never mind that these plans will not materialize for the next 10 years! Everyone is riding along on a wave of euphoria, and even the sales agents at each launch seem overly exuberant and look like sharks eager for their (almost guaranteed) fat commissions. HDB resale prices have soared to new highs with an apartment in Bras Basah “smashing” records and commanding a COV of S$70,000!

With the announcement of the COE quota cut, COE prices shot through the roof, with small car COEs hitting S$28,000 and larger cars hitting S$36,000. Open Category actually hit an amazing S$42,000, a level not seen since the 1990s. So to add insult to injury, not only do we have rising unaffordability in HDB and private properties, it has trickled down to transportation as well. Singapore is truly an amazing place to live in – sometimes I wonder if my neighbourhood shop will start selling a loaf of bread for S$5.00 in time to come?

The Singapore stock market saw many small penny stocks running up recently, as interest rotated to the smaller companies as the major blue chips were perceived to be “fully valued”. Companies such as Healthway Medical, Techcomp and even OSIM were heavily traded, and in more than one case there was an amazing jump in market prices (and hence valuations). Whether these enhanced expectations can be met or not would depend on time, but if an investor were to target promising companies for investment, generally he would avoid those with too much coverage, news and hype.

Another interesting development was that Oslo Bors and Singapore Stock Exchange were in talks for dual listing of companies on both bourses, with a focus on oil and gas as this was the specialization of Oslo Bors. Already, China Fishery aims to list on Oslo Bors while Golden Ocean has listed on SGX as part of this agreement, and more companies may follow. Note that this is all part and parcel of raising money through an alternative secondary route, and does not in any way imply that such dual-listed companies are “superior” to those already listed on either exchange. The euphoria continues for Hong-Kong dual listings, with another company Swing Media announcing this as well. A few other companies such as Bread Talk and Techcomp have announced bonus issues and share splits respectively, and one wonders about the rationale for such administrative exercises, since they add nothing to shareholder value and only serves to give an illusion of being beneficial in the long-run. I have always maintained that such corporate actions are “cosmetic”, and I have also frowned upon Boustead’s 1:1 split back in 2008.

Cash reserves continue to build up and now there is a healthy balance with which to purchase shares of good companies, assuming I have the time to do my research! Below is a snapshot of my portfolio and associated comments for March 2010:-


1) Boustead Holdings Limited – After market close today on March 31, 2010, Boustead made two announcements. One was that its 91.7% owned Boustead Projects was awarded a S$40 million contract by Cenco inc. to design and build an integrated test facility and this makes it the fifth contract which Boustead Projects secured in 8 months. The facility will occupy 7,900 square metres and is expected to be completed by 2Q 2011. Separately, another announcement stated that Boustead Projects had been awarded a second contract from the Safran Group (the value was not mentioned). This announcement is separate from the first one although Cenco Inc is a company within the Safran Group. Boustead Projects will design, build and lease an integrated factory and office facility occupying 6,000 square metres spread over two floors and it will be completed in 1Q 2011.

2) Suntec REIT – With the news statutory requirement for REITs to hold AGMs, Suntec REIT will be holding its first AGM on April 15, 2010 at (where else) Suntec City Convention Centre Level 3 at 10:30 a.m. There will also be an EGM held at the same time and a circular was despatched to shareholders for these meetings. The Annual Report for 2009 was received and makes for interesting reading.

3) First Ship Lease Trust – There was no news from FSL Trust in the month of March 2010. Latest update on shipping trusts in general is that the coast is far from clear, and many concerns still dog shipping trusts in general, threatening their business model. I also received FSL Trust’s Annual Report for 2009, and will be perusing through and posting any interesting bits I see.

4) Tat Hong Holdings Limited – Surprisingly, there was quite a bit of corporate news from Tat Hong in March 2010. Firstly, on March 1, 2010, they announced corporate reshuffling by placing 4 CEOs to take care of their markets located in different regions, and mentioned that this reshuffling was “in line with planned expansion”, though no further details were provided as to what constitutes “planned expansion”. Then on March 4, as if to give hints of their plans, they announced the incorporation of a new wholly-owned subsidiary Tat Hong Heavylift Pte Ltd with a paid-up capital of S$10 million (no small sum). So it could be that Tat Hong intends to build up this division of their business, to be in direct competition with its competitor Tiong Woon (which does Heavy Lift and Haulage). On March 16, another corporate announcement stated that Tat Hong was increasing their investment in Beijing Tat Hong Zhaomao Equipment Rental Co., Ltd (a tower crane rental company) from RMB 11 million to RMB 27.5 million (an increase of RMB 16.5 million or about S$3.4 million), using the proceeds from the issuance of the RCPS (increasing their stake from 55% to 100%). These corporate developments seem to imply that Tat Hong is gearing up to expand their product/service offerings, and that their tower crane division is doing very well (as they are increasing their stake hence also consolidating 100% of earnings instead of just 55%).

5) MTQ Corporation Limited – On March 15, 2010, MTQ announced that they had purchased 100% of the business assets of an Australian company Premier Fuel Injection Services Pty Ltd, for a cash consideration of A$500,000. This company is a privately owned service organization engaged in the diagnostic and repair of diesel fuel injection parts and engine management systems, and is located in the State of Northern Territory (“NT”). The rationale for the M&A is that MTQES owns a network of 9 branches within Australia but NT is one of the few capital cities that MTQES does not operate in, thus the acquisition will broaden their network and reach and enhance MTQES’ service offerings. The operations will contribute to the FY 2011 operational results. Separately, CEO Kuah Kok Kim purchased another 93,000 shares in MTQ at S$0.72 on March 17, 2010, raising his stake to 22.474 million shares (25.52% of the Company). Yet again on March 30, 2010, MTQ announced that it had injected a further USD 495,000 (about SGD 691,020) into MTQ Oilfield Services W.L.L (MTQ Bahrain), which is a 99% subsidiary. MTQ Engineering also injected USD 5,000 for its 1% stake in MTQ Bahrain. Both injections were from internal cash flows.

6) GRP Limited – There was no news from GRP for the month of March 2010.

7) Kingsmen Creatives Holdings Limited – There was no news from the Company for March 2010.

Portfolio Review – March 2010

My realized gains remained stable at S$53.6K as there were no dividends for March 2010, and also no capital gains or losses. The portfolio improved from an unrealized gain of +5.4% to an unrealized gain of +10.5%. Volume is dwindling rapidly and trading is also anaemic on the Stock Exchange, so altogether it has been a very boring and sluggish month (again!). If not for some corporate announcements keeping me tied up, it would have been uneventful even in terms of economic news.

April 2010 should see some corporate result announcements from Suntec REIT and FSL Trust, and hopefully some decent dividends will start trickling in from May 2010 onwards.

My next portfolio review will be on April 30, 2010 (Friday).