I guess March 2011 will be very memorable because of one very striking event – the huge 9.0 magnitude earthquake in Japan which triggered a massive, deadly tsunami which wiped out more than 20,000 people and which left Japan in a state of paralysis and shock. My heart goes out to the victims and to those whose lives were irreparably shattered by this natural disaster, as Japan reels from the worst earthquake since records began. But the Japanese are a resilient people and rebuilding is due to commence once search and rescue have completed their grim tasks and the rubble is cleared away, which may take many long months. Such horrifying tragedies only serve to remind me every day of how lucky I am to be living in a disaster-free country (no volcanoes, earthquakes or typhoons), and I am thankful for that. The Nikkei plunged about 13% in 2 days as a result of this catastrophe, and the Singapore market also took its cue from Japan and started to plunge below the 3,000 mark, only to swiftly rebound when the panic and fear had subsided over the possible worldwide nuclear contamination.
The other “big” piece of news which needs no more mentioning is the war and violence in Libya, and I shall not go into details because the news is already reporting it to death. Other than this, other news included URA coming up with a new set of guidelines for property developers to make sure they do not deceive prospective buyers with misleading showflats (they are seeking public consultation on this till mid-April 2011). Inflation is once again rearing its ugly head in rising food prices (gosh, even school kids are not spared), and COE prices remained high at S$43,813 for small cars and S$59,073 for Open Category. I guess all this means that elections are coming soon, because there is definitely a lot to talk about and even more to contest over! (And also because all the parties are starting to “parade” their candidates publicly, thus heightening the already palpable tension in the air).
In the interest of brevity, and because I know I have a tendency to start to ramble on about news, economics, politics and other seemingly mundane issues, I shall forcibly stop myself here just in case.
My portfolio and comments for March 2011 is as follows:-
1) Boustead Holdings Limited – From the bad news in February 2011 comes a sudden turnaround in March 2011, with Boustead announcing contracts for Boustead Projects as well as a tie-up for ESRI Singapore. But first, the bad news – on February 28, 2011 Boustead quantified their potential financial exposure to the ongoing crisis in Libya, to the tune of S$15.5 million to S$39.6 million. This was omitted from my previous month-end portfolio review as the review had been prepared before the announcement came out late on the last day of February. With luck though, the Company can activate the “Force Majeure” clause and recoup some of the losses, but at this point in time it looks like the war may be a protracted one and is not likely to end soon, so I will take it that Boustead will write-off their entire investment in the Al Marj Township in Tripoli. And now for the good news – Boustead Projects announced a total of 3 contracts almost back-to-back; two were announced on March 16, 2011 and involved a S$55 million design and build contract for SDV Logistics to build a logistics facility, and a S$17 million design and build contract for a high-tech production facility (client not mentioned). The next day on March 17, 2011, Boustead Projects announced a design, build and lease (DBL) contract for Continental Automotive Singapore Pte Ltd, and this will be Boustead’s eighth DBL contract in their portfolio of leasehold properties. Then on March 22, 2011, Boustead announced that ESRI Singapore (their geo-spatial arm) had teamed up with Earthmine to deliver 3D panoramic street level imagery in Singapore.
2) Suntec REIT – There was no news from Suntec REIT for the month of March 2011.
3) MTQ Corporation Limited – MTQ announced on 4 March 2011 that they had subscribed for 200 million shares of Neptune Marine Services Limited (“NMS”), an oil and gas services company listed on the Australian Stock Exchange, at AUD 5 cents per share. NMS was undergoing a re-capitalization exercise and was offering 3.6 new shares for every ordinary share in order to raise money to clear off debts and to restructure the Company’s business divisions. As a result of many existing shareholders not taking up their rights entitlement, MTQ then moved in to purchase a nearly 12% stake in the Company for A$10 million (about S$12.93 million). The rationale for this investment was that MTQ viewed NMS as a strategic extension of its predominantly workshop-based operations in Singapore and Bahrain. MTQ wanted exposure to a complementary business which would bring about synergies with its current business and enhance long-term shareholder value. These quoted investments will appear under MTQ’s Balance Sheet as at March 31, 2011 when they release FY 2011 financial statements some time in May 2011. For info, the closing price of NMS on the ASX on March 31, 2011 was AUD 4.6 cents.
4) GRP Limited – There was no news for GRP for March 2011. The interim dividend of 1 cent/share was received on March 2, 2011.
5) Kingsmen Creatives Holdings Limited – There was no news from Kingsmen for the month of March 2011.
6) SIA Engineering Company Limited – There was no news from the Company for March 2011.
Portfolio Review – March 2011
Realized gains remained at S$55.4K in the absence of any divestment and also no dividends were declared for the month of March 2011.
Due to the Japan mega-earthquake and the turmoil in Libya, Mr. Market became rather manic-depressive and therefore I took the opportunity to increase my stakes in Kingsmen Creatives and SIA Engineering. A total of about S$16.8K was injected to purchase more shares in Kingsmen at 56 cents and 55.5 cents on March 1 and 2, 2011; while S$7.8K was injected to purchase more shares of SIA Engineering at S$3.91 on March 17, 2011. A total of S$24.6K was added to my cost which has now risen from S$185.3K as at end-February 2011 to S$210K as at end-March 2011. My cost for Kingsmen remains the same at 56 cents, while I have reduced my cost of investment in SIA Engineering to S$4.064 from S$4.087 previously.
For the month of March 2011, the portfolio has dropped by -5.1% (using XIRR in MS Excel to compute) against a -2.6% fall in the STI; thus underperforming by 2.5 percentage points. Cost of investment has increased to S$210K as explained earlier, and unrealized gains stand at +10.5% (portfolio market value of S$232.1K). Cost of investment now stands at its highest level ever, and I plan to continue to add on to my positions or to initiate new positions if opportunities arise.
April 2011 will be an interesting month to sit through as the crisis continues to unfold in many parts of the Middle East such as Yemen and Bahrain, and as turbulence continues to rock Libya, resulting in escalating oil prices. The earthquake relief efforts and containment of nuclear radiation in Japan’s Fukushima plant are still ongoing, and this will cast a pessimistic pall over sentiment in the short-term. Suffice to say that I am constantly building up my cash reserves month after month through regular savings, rental and dividends; and will not hesitate to deploy more cash should I see suitable opportunities.
Of course, monitoring the health of my companies is of utmost importance, as is reading news pertaining to their industries and businesses and reviewing any announcements or press releases which they may come up with. Such is the interesting journey of a value investor, and I seek to constantly learn more about how companies tick and what separates a great company from a mediocre one. April 2011 will not see many results released (in fact, only Suntec REIT), so it will be a time for reading, research and reflection as I polish my craft and enhance my knowledge base.
My next portfolio review will be on April 30, 2011 (Saturday).