Wednesday, November 30, 2011

November 2011 Portfolio Summary and Review

November 2011 will go down as the month where the Euro crisis escalated in severity, as even Italy, Germany and France got into some form of trouble. With no ready solution in sight, it looks as though Mr. Market will remain pessimistic for the foreseeable future, which means it is a good environment indeed to consider the purchase of equities. In the USA, political wrangling also ensured that there was no ready fix to their burgeoning debt crisis, which is threatening day by day to spiral into something as huge and unmanageable as the Euro Crisis. To add fuel to the already raging fire, China has also announced a sharp and unexpected contraction in its purchasing index, which signals a sharp decline in manufacturing activity. With housing in decline as the Government there reins in runaway prices, the prospect of a hard landing has spooked investors worldwide and stoked the flames of panic.

With bad news hogging the headlines almost daily during the month, it’s no wonder markets have been anaemic, and share prices have been in decline. Those who remember the fateful events which led to the 2008-2009 bear market (myself included) can see some parallels, but then again every crisis is different in nature; but will ultimately lead to new measures to tackle it (through austerity, fiscal policies and monetary pain). My take is that the world will find a way out of its mess, but it will take time, effort and a lot of suffering before the wrongs can be righted. Even then, it’s more of a stumble through a muddy swamp rather than walking along a well-paved road.

As an investor, I keep track of the news but generally am dispassionate about it unless it creates good and enticing opportunities for investment. I continue to keep a close watch on the businesses of the companies within my portfolio, and for the month of November three of my companies released results, and these are summarized below. With corporate updates trickling to almost nothing as the calendar year begins to wind down, I can probably expect nothing much more from my stable of companies.

Interestingly, inflation remained high for the fifth month in a row, exceeding 5% (it was 5.5% for Oct 2011) due to the high cost of cars and rising property prices (what’s new eh?). Housing remained out of reach of most ordinary Singaporeans earning median incomes and though asset values kept increasing, there was no direct evidence of Singaporeans getting “wealthier”, unlike what was reported by MAS recently.

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


1) Boustead Holdings Limited – On November 1, 2011, Boustead announced that Boustead Projects, its 100%-owned subsidiary, had clinched a $57 million design and build contract with ST Electronics to construct an integrated manufacturing, technology and office facility. This will be completed in first half of calendar year 2013, and will boost Boustead’s order book to over $380 million. Also, on November 14, 2011, Boustead released their 1H 2012 results. Revenue for 2Q 2012 was down 30%, but gross profit was up 14% as COGS dropped by a larger 44%. Note though that since Boustead’s revenues are lumpy, such comparisons are not very meaningful and year to year comparisons make much more sense. Profit attributable to shareholders improved 13% to $9.1 million for 2Q 2012, and cash balances dipped slightly. I will be doing an analysis of Boustead’s 1H 2012 results in subsequent posts. An interim dividend of 2 cents/share was declared, similar to last year. The dividend is payable on December 16, 2011.

2) Suntec REIT – There was no news relating to Suntec REIT for November 2011. The dividend of 2.533 cents/share was received on November 29, 2011.

3) MTQ Corporation Limited – There was no news for MTQ for November 2011. The company went ex-dividend on November 16, 2011; and it was announced on November 21, 2011 that the scrip dividend issue price would be 73 cents/share. I have decided to choose scrip and therefore my portfolio has been updated with the market value of the additional shares which I will receive (on Jan 16, 2012); and this will be used to compute XIRR returns and compare against the index. I had previously written a detailed two-part analysis on MTQ’s 1H 2012 results, and will be looking towards April 2012 for the FY 2012 results.

4) Kingsmen Creatives Holdings Limited – Kingsmen released their 3Q 2011 results on November 9, 2011. Revenue for 3Q 2011 increased 27%, while net profit attributable to shareholders increased 76% to $4.45 million. For 9M 2011, revenue was flat but net profit increased by 9.4% to $10.3 million, and this was a pleasant surprise since 1H revenues were actually lagging year-on-year. A breakdown of revenues showed that all four divisions experienced strong growth year-on-year, and with 4Q usually being the busiest this bodes well for Kingsmen. The Company was awarded contracts of $254 million, which was higher than the $233 million (a 9% increase). Balance Sheet remained strong with $30.2 million of cash (net cash stood at $27.1 million); and 9M 2011 cash flows showed a FCF of $9.2 million. This should be more than sufficient to support a projected final dividend of 2 cents/share (assuming unchanged from FY 2010) as they would only need to pay out $3.8 million (based on 190 million issued shares net of treasury shares).

5) SIA Engineering Company Limited – On November 29, 2011, SIA Engineering announced that it had secured a 6-year TSP contract with Airbus to maintain SIA’s additional fleet of fifteen A330-300 aircraft being acquired from Airbus. SIAEC will provide a wide range of MRO checks, including transit and light maintenance checks, defect rectification, cabin maintenance, fleet management and heavy maintenance checks at SAIEC’s facilities in Singapore. I had also posted up a two-part analysis of SIA Engineering which explains its prospects moving forward. The counter has gone ex-dividend on November 11, 2011 and the dividend was received on November 29, 2011.

6) VICOM Limited – VICOM released their 3Q 2011 results on November 10, 2011. For 3Q 2011, revenue was up 5.6% while profit attributable to shareholders increased 11.6% to $6.2 million. For 9M 2011, revenues increased 7.2% to $67.6 million and net profit increased by 10.9% to $18.2 million. The Balance Sheet remains debt-free and cash balance stands at $46.3 million as at Sep 30, 2011. For cash flow, 9M 2011 saw very strong operating cash inflows of $19.6 million, while capex was only $9.5 million (note that this includes the spending on the new facility for SETSCO, if not capex will usually hover even lower at $2-3 million); therefore FCF of about $10.1 million was generated. The outlook for vehicle inspection is expected to remain “strong” for 4Q 2011 and 2012; while there will be sustained demand for non-vehicle test and inspection services. This is expected hold up VICOM’s revenue and earnings and hopefully we can see a 10% rise in net profit attributable to shareholders for FY 2011, and a correspondingly higher final dividend as well compared to last year’s 6.6 cents/share (note: a special dividend of 3.2 cents/share was also paid out for FY 2010).

Portfolio Review – November 2011

Realized gains have increased to $69,500 from $67,400 as a result of dividends from Suntec REIT, SIA Engineering and Boustead.

For the month of November 2011, the portfolio has decreased by -4.5% (using XIRR in MS Excel to compute) against a -15.3% fall in the STI; thus my portfolio performance has outperformed the STI by +10.8 percentage points. This was a better performance compared to October 2011, when the portfolio out-performed the STI by +6.5%, as there were several blue-chip components which announced worse-than-expected results (Noble Group comes to mind) and hence had their share prices beaten down (which dragged the index down). Cost of investment has increased from remained at $242,600 and unrealized gains stood at +3.8% (Portfolio Market Value of S$251,800).

December 2011, being the final month of the calendar year, should be somewhat dull with many companies’ staff clearing leave and going for holidays, hence I do not expect that there will be many significant corporate announcements or events.

I will be doing my usual monthly portfolio review on December 31, 2011 (Saturday), and there will also be a special year-end review of my performance, what I had learnt as well as a discussion on my strategies as we move into 2012.

10 comments:

Singapore Man Of Leisure said...

Hello Musicwhiz,

You know!? Your summary and review has your unique personal touch. Interesting.

I am more a macro top down guy - so your opening macro review is a good benchmark for me.

Bottom up investing is not my strong suit, but I like to stick close to those who are good at it!

Can "borrow with pride" some useful company review techniques here.

OK, I buy you coffee in return! So I guess the score is even now!?

LOL!

the_eels said...

Your value investing approach resonates with me. Thanks for the well rounded update, was looking around for a Singaporean perspective.

Affordable items said...

hi MusicWhiz.

i've actually monitor vicom since 1 year ago but it it never really drop down.. :(
but its alright because i tag it as overprice that time.

hope your portfolio goes into the direction you want.

Musicwhiz said...

Hi SMOL,

Thanks! Glad you like the format haha.

Yep, I do try to include some macro-summary (when I am not too lazy to do it) and my own views, though I feel they are usually quite shallow compared to what some pundits have written!

I'm still working on my bottom-up investing, to be honest. I can firmly say that I think I am far from good and require lots more improvement, so thanks for the support!

Yes, you buy me coffee and we "cancel" out the score haha!

Musicwhiz

Musicwhiz said...

Hi the_eels,

Thanks too for visiting!

Regards,
Musicwhiz

Musicwhiz said...

Hi Affordable Items,

Haha well continue to be patient, that's always a virtue!

My main aim now is to grow the portfolio steadily and increase the passive income over the years.

All the best for your own portfolio!

Cheers,
Musicwhiz

FoodieFC said...

Hi

Look on the bright side. Nov was the month where Euro Crisis escalated. It was also the month where by the market sentiments suddenly became positive in the last week of Nov. We will never know what will happen =)

Musicwhiz said...

Hi FoodieFC,

Haha sure I will thanks! There's always a chance to purchase good companies at bargain prices, and waiting is just part of the process. I think I've taught myself to be much more patient as the years go by, so this is becoming less and less of an effort!

Regards,
Musicwhiz

san said...

Hi, MusicWhiz,

I am a newbie in investing. Thank you very much for your generous sharing.

Just wondering why you didn't take profit when you had 30.8% of profit from Boustead which fell to 26.6% at the end of Nov?

Can you share your investing wisdom please? Holding for long long?

Thanks
Sanmuzi

Musicwhiz said...

Hi Sanmuzi,

You are welcome.

The portfolio is constructed based on an assessment of the businesses which these shares represent, and only by holding over the long-term can one enjoy business growth and also an increase in dividends. Technically, I should be selling only when I detect obvious over-valuation of a company with respect to its long-term prospects. Either that or there is a irreversible deterioration in the business of the Company.

Hope this explains.

Thanks,
Musicwhiz