Wednesday, August 31, 2011

August 2011 Portfolio Summary and Review

August 2011 was by far the most interesting month thus far, not just for the stock market but also in terms of economic news, upheavals and other alarming news. As I am much busier these days with family and work, I shall not comment too much on news events which I am sure most readers can peruse through in the daily newspapers. Instead, I will focus more on the companies within my portfolio and the portfolio itself.

In a previous post, I had written about my portfolio changes already, so I will be not be repeating it again my portfolio section but will merely detail the usual gains and losses, as well as dividends received. The refund for my daughter’s hospitalization has arrived, thankfully, and the money has been encashed and is ready to be deployed. Dividends have also been very healthy for August, with money flowing in from SIAEC, Boustead, Suntec REIT as well as newly-acquired VICOM.

Below please find my portfolio as well as corporate summaries for August 2011:-


1) Boustead Holdings Limited – On August 10, 2011, Boustead announced that its Energy-Related Engineering Division had secured $22 million worth of contracts from the oil and gas industries globally. These involve the design, process engineering and construction of key large-scale process systems and waste heat recovery units for downstream oil refineries and gas processing plants in Australia, Canada and the United Kingdom. On August 12, 2011, Boustead Projects announced a Design & Build Contract worth $42.45 million for Kerry Logistics to build a logistics facility at the Tampines LogisPark in Singapore. The Facility will have gross floor area of 34,500 square metres and is expected to be completed in 4Q 2012. Also, on August 12, 2011, Boustead released its 1Q FY 2012 results. Revenue was down 53% while net profit attributable to shareholders plunged 73%. The reason for this was that 1Q 2011 saw the sale of a leasehold property of $67.8 million. Adjusting for this, revenue and net profit would have decreased a smaller 27% and 18% respectively. The key reason for this was the slower recognition of revenue on contracts which had only been secured in 4Q 2011. Otherwise, the Balance Sheet remained strong with net cash balance of about $200 million and FCF amounted to $34 million for just 1Q 2012.

The final dividend of 2 cents/share and special dividend of 3 cents/share was received on August 19, 2011. On August 19, 2011, I had increased in stake in Boustead after an absence of about 2.5 years, raising my average cost to 62.3 cents/share.

2) Suntec REIT – On August 12, 2011, Suntec REIT announced that the REIT had entered into a share sale agreement with several parties to acquire 51% of the issued share capital of Harmony Partners Limited (HPL). HPL owns an 80% indirect stake in Suntec Singapore International Convention & Exhibition Centre (Suntec Singapore). This acquisition will raise Suntec REIT’s stake in Suntec Singapore from 20% to 60.8%. The purchase consideration is $114.75 million and will be funded by bank borrowings; and this will form part of the asset enhancement plans which Suntec REIT has.

The dividend of 2.532 cents/share was received on August 29, 2011.

3) MTQ Corporation Limited – There was no announcement from MTQ for August 2011, other than to fix the issue price of the new scrip shares at 82 cents/share. I have chosen scrip to be received on September 16, 2011.

4) Kingsmen Creatives Holdings Limited – Kingsmen released their 1H 2011 results on August 11, 2011. Revenue fell 15% to $93.6 million in the absence of mega-projects like the Shanghai Expo pavilions during the same period last year, while net profit also dipped 15% due to a comparatively weaker performance by the Museums and Exhibitions Division. Gross margin, however, improved to 29.7% for 1H 2011 against 27% for 1H 2010. Interiors continued to perform well with revenue increasing 6% for 1H 2011 against 1H 2010, while revenue also increased by 47.6% and 27.7% for Research & Design and IMC divisions respectively. Cash flow was healthy for 1H 2011, with Kingsmen generating $4.6 million of OCF and spending $1.4 million on purchase of PPE, resulting in FCF of $3.2 million. Though this is far below what was generated in 1H 2010, Benedict Soh is confident that business will pick up in 2H 2011. An interim dividend of 1.5 cents/share was declared (similar to 2010) and will amount to about $2.84 million (i.e. it can be sustained by the FCF generated). If I have time, I will discuss more on Kingsmen but after my 5-part comprehensive analysis, I decided to take a break for a while.

5) SIA Engineering Company Limited – There was no news from SIA Engineering during the month of August 2011. The final dividend of 14 cents/share and special dividend of 10 cents/share were received on August 11, 2011. I raised my stake in SIA Engineering on the same day, bringing down my average cost to $3.97 from $4.064.

6) VICOM Limited – VICOM released no news for August 2011, except to report its 1H 2011 results. Revenue for 1H 2011 increased by 8% to $44.7 million, while net profit attributable to shareholders increased 10.5% to $12 million. This represents a net profit margin of about 26.8%. The Balance Sheet remained solid with no debt and OCF amounted to $9.8 million, while capex was $7.65 million due to the construction of the new facility for Setsco at Teban Gardens. FCF thus amounted to $1.15 million for 1H 2011. Capex under “normal” circumstances would only amount to about $1.3 million (using 1H 2010 as a guide), and thus FCF would have been much more at $8.7 million last year. An interim dividend of 6.9 cents/share was declared and paid on August 31, 2011, up from last year’s interim dividend of 6.3 cents/share.

Portfolio Review – August 2011

Realized gains have increased to S$65.2K due to Boustead and VICOM going ex-dividend this month. A total of $5.5K was received in dividends for the month of August 2011.

For the month of August 2011, the portfolio has decreased by -2.5% (using XIRR in MS Excel to compute) against a -9.6% fall in the STI; thus my portfolio performance has outperformed the STI by +7.1 percentage points. This was a much better performance compared to July 2011, when the portfolio out-performed the STI by just +0.5%. Cost of investment has increased from S$219K to S$238.7K and unrealized gains stand at +7.8% (Portfolio Market Value of S$257,200).

September 2011 is anticipated to be a slow and boring month with no results released by any companies within my portfolio. Analysis of existing results shall carry on, as well as reading up more on value investing and companies.

My next portfolio review will be on September 30, 2011 (Friday).

6 comments:

Singapore Man Of Leisure said...

Hello MW,

So the red colour for the Boustead initial price is to show that your average cost has increased?

And the blue for SIA Engineering is the reverse? Your average cost has gone down?

I've never tracked my average costs up or down. Hmm, I may try it. But I would not want to use "red" colour. Hate to see "red" in my portfolio. LOL!

OT83 said...

Hi MW,

I realise something based on your portfolio.

You mostly goes for stocks with little or no debt or net cash. The dividend must also be substainable by FCF. Please correct me if I wrong.

Given the in depth knowledge of your company as well as the above points, I think that's why you can sleep peacefully at night and eager to add more when more bear comes. I guess that's the beauty of value investing.

I have much to learn from you :)

All the best to your investing journey.

Musicwhiz said...

Hi SMOL,

Yes, that's right! Red means risk has heightened (cos of higher cost) while blue means lower risk since cost has been reduced.

Haha it's not surprising that you don't like to see red. Most people don't I think. But one must conditioned oneself to want to see red so that one can buy shares at discounted valuations! Haha!

Regards,
Musicwhiz

Singapore Man Of Leisure said...

Thanks MW!

I will "steal with pride" this technique in my excel file.

I use Green to indicate I have averaged down (Green stands for growth and possibilities)

I use Orleng to to indicate I have averaged up (Yellow not easy to see; so settle for orleng - still an auspiscious colour during CNY - yet giving me an "amber" alert that risks are higher now)

I never copy paste. I copy but paste special. LOL!

Musicwhiz said...

Hi OT83,

Yes, that's right. I go for the business model which ensures the Company can sustain steady growth as well as generate healthy FCF. In that way, even if there is a crushing recession, at most dividend will get cut but the Company will not go bust.

Of course, it is impossible to avoid making SOME losses, but the idea is to minimize these and to look to the long-term to ensure one gets a decent return. When Mr. Market is depressed, the last thing you should do is sell to him; in fact if the business continues to be sound you should take up his offer to purchase from him instead!

Haha, I often wish I knew my companies more intimately than I do now - there's always room for improvement and I never want to feel complacent that I know a lot about the companies I own shares in.

Since you are younger than me (I assume you were born in 1983?), you still have time to learn and hone your skills and knowledge as an investor. For me I guess I am "older" liao so I have less time to learn and compound haha.

All the best to you too on your journey!

Regards,
Musicwhiz

Musicwhiz said...

Hi SMOL,

Haha great! Learn and adapt yes! That's the way humans will progress. Keep up the good work!

Musicwhiz