tag:blogger.com,1999:blog-28021668.post7719764278727513553..comments2023-10-12T21:12:41.408+08:00Comments on Value Investment - Musicwhiz's Journey: Musicwhizhttp://www.blogger.com/profile/10950754156386935254noreply@blogger.comBlogger12125tag:blogger.com,1999:blog-28021668.post-66611269137166588512009-03-16T22:34:00.000+08:002009-03-16T22:34:00.000+08:00Woo, such a long reply, impressive!Regarding the o...Woo, such a long reply, impressive!<BR/><BR/>Regarding the orderbook, if you look at the oderbook of shipyards at around 3 to 4 years, I won't say the orderbook is fantastic. Do understand Swiber is different from shipyards, thus, if this orderbook size is due to the nature of projects and normally oil majors are not likely award a porject at a long lead time, then i would be more comfortable. It would be good if we have some idea of the size of its peers.<BR/><BR/>Regarding receivables, I am referring to the provision of US$4m debts in FY08. According to the reply to SGX, if my understanding is right, this was due to the no collection from one customer (not a major customer) for one project completed in 2007. The total amount is estimated at around US$50m...Swiber has taken provisions for that already, logically, I would think the worst scenario.., particularly in this market environment.<BR/><BR/>Regarding your point 2, totally agree that a larger fleet will give the bidder more credit and help it secure larger projects. Just one question, do you mean 34 vessels can cater for US$700m orderbook PER YEAR? If so, is it reasonable to think that some vessels could be idle this year, if the revenue is less than US$700m in FY09? Personally don't think it is likely to hit such a revenue level.<BR/><BR/>Do agree with you that the growth story of Swiber is fantastic. But, I am still concerned if they can survive if oil price unfortunately remains at US$50-60 for two years ( In the latest oil report, EIA's forecast is US$42 in 2009 and US$56 next year, if my memory is right). Not to say the company won't be able to get any orders, the question is whether the operating cashflow from the depressed orderbook can sufficiently cover its debt repayments and financial lease obligations? In other words, what is the breakeven revenue per year, assuming the margin is the same as before, or a slightly higher margin since they have more owned vessels?<BR/><BR/>Hope this discussion could make the issue clearer, since we are putting our own money in.<BR/><BR/>BTW, the same as you, I am also vested in China Fishery. Stable and defensive business, strong market position, and a definite benefitiary of the coming super inflation, when the financial system is running normally.floatingrokhttps://www.blogger.com/profile/09030533787352216728noreply@blogger.comtag:blogger.com,1999:blog-28021668.post-28481668591311998632009-03-16T22:33:00.000+08:002009-03-16T22:33:00.000+08:00This comment has been removed by the author.floatingrokhttps://www.blogger.com/profile/09030533787352216728noreply@blogger.comtag:blogger.com,1999:blog-28021668.post-23795029462728473122009-03-15T16:24:00.000+08:002009-03-15T16:24:00.000+08:00Hi floatingrok,Nice comments you made, thanks.Firs...Hi floatingrok,<BR/><BR/>Nice comments you made, thanks.<BR/><BR/>First things first, Swiber's services are EPCIC and catered to oil majors in the O&G industry who are in the late stage of oil extraction, meaning viable oil fields which have been discovered and for which production is about to commence. Hence, the drop in oil prices is unlikely to affect the demand for their services within 1-2 years as many projects are still taking off due to the oil boom over the last few years. If you note, many oil majors recently also announced retaining their budgets for the next 5 years in view of oil prices heading north over time, so capex spending on E&P will likely stay at current elevated levels.<BR/><BR/>Regarding the orderbook, there are no details on what the projects are, but the Company does say it adds to their order book of US$593 million, so I would assume these are projects of the normal type rather than the low value types you mentioned. Still, it would be great if the Company could provide more clarity, I agree.<BR/><BR/>For receivables, I am not too worried because for companies such as Ezra and Swiber, most of their work are for reputable oil companies or state-owned oil enterprises such as Brunei Shell and ConocoPhillips (for Ezra's case). Thus, there should not be too much problem in collection - it could just be a timing difference.<BR/><BR/>Let me copy and paste something I wrote on another forum regarding Swiber. These are what I feel make up its potential, though much of it is still speculative.<BR/><BR/>1) High barriers to entry in this industry, as well as specialized know-how and a competent, experienced Management Team, which can negotiate for larger projects and can enable the Company to get the job done without lost man-hours and in time. A strong team can also spearhead expansion into regional markets thus raising the potential for more lucrative tie-ups with partners (e.g. Rawabi of Saudi Arabia was one of them).<BR/><BR/>2) The full fleet of 34 vessels currently can cater to an order book of about US$700 million, as mentioned by CEO Raymond Goh. New additions to the fleet in late FY 2009 will mean the potential to bid for not just higher-value projects, but also projects of greater complexity which may require a longer period to complete; thus giving the Company more long-term stable revenue and cash flows. One example is the 5-year CUEL deal worth US$50 million commencing FY 2009 and ending in FY 2013.<BR/><BR/>3) Better project execution with its own vessels would mean greater control over scheduling and workflow, thus leading to better efficiencies. Net margins could presumably be higher than 16% which I assumed, and as the recession wears on, deflation may also cause the prices of goods and services to drop in the years to come, making costs lower for companies.<BR/><BR/>4) Opportunities to leverage on offshore drilling by seizing the right chance to construct the Equatorial Driller vessel. Note that this vessel was originally scheduled for construction by FY 2010 but due to tight financing and unavailability of credit, it was shelved. With construction costs coming down, Swiber may be able to deploy this vessel some time past FY 2010 down the road, which may significantly add a new revenue stream as the benefits of the Driller had already been explained in a prior press release.<BR/><BR/>5) Opportunities in wind energy contract wins as their vessels can also be used for that (in Swiber's latest FY 2008 presentation slides). On your point about possible idle time causing high fixed costs to erode all of Swiber's margins, I think the fact that the vessels are deployable not just for O&G EPCIC but also for wind energy (wind farms) makes it more versatile than previously believed; and can help the company to cushion the impact from possible idle vessels.<BR/><BR/>6) More strategic tie-ups with sharing of assets by mutual partners. While I understand that the "sharing of assets" does not neccesarily result in the assets being off-balance sheet for Swiber, it could nevertheless mean that their potential capex is reduced as they leverage on the strength of their business partners. Partnering would also help to expand the scope of work they can provide and help them garner more complex contracts which may require various vessels or structures with differing functions. Of course, the X:X profit-sharing ratio means Swiber will not fully accrue the benefits of these projects, but winning them in the first place would be a first of sorts, and can pave the way for continued customer retention.<BR/><BR/>One last thing - the Annual Report you are looking at is probably the FY 2007 one. Why don't you wait about a month for the FY 2008 one to be published ? It would allow you to make a better decision as it is more current.<BR/><BR/>Regards,<BR/>MusicwhizMusicwhizhttps://www.blogger.com/profile/10950754156386935254noreply@blogger.comtag:blogger.com,1999:blog-28021668.post-49572466921523514142009-03-15T12:10:00.000+08:002009-03-15T12:10:00.000+08:00My concern is whether Swiber can continue as a goi...My concern is whether Swiber can continue as a going concern if oil price continues depressed at this level for one or two years.<BR/><BR/>Although the orderbook is still huge at more than US$500m, but if you look at its annual revenue of US$400m plus, I am not that opptimistic. It means the orderbook can lasts for only slightly more than one year. It is right that it is still obtaining orders. For the first two months, it has been US$70m. But, it is strange this time that the company didn't announce what kind of orders they have secured. Previously, the company annouce it when they get it. I suspect this is more like a comfort message that the company want to send to the market , and the orders are more like a repair / maintenance, which may not imply its capability to secure meaningful projects. If the company can't continuously secure projects, I have concerns whether the debt repayments and financial lease obligatiosn that funded its fleet expansion in 2007 and 2008, could drag down the company into mire.<BR/><BR/>Another concern, is the company's reeivables. As it anounced, it has around US$50m receivables happened in 2007 and it is still negotiating with the customer for collections. If can't, this will put a pressure of its bottom line, especialy when you look at its net profit of around US$40m. The no-collection alone will shoot down the company's whole year profit into negative...<BR/><BR/>I was interested in this company, especialy the company's long-term outlook (in 5 to 10 years)and its willingness to share the latest developments all the time. But its anual report really discourages me to go ahead to load it.<BR/><BR/>Please share your thoughts of my concerns.floatingrokhttps://www.blogger.com/profile/09030533787352216728noreply@blogger.comtag:blogger.com,1999:blog-28021668.post-82748038526088054402009-03-08T12:23:00.000+08:002009-03-08T12:23:00.000+08:00Hi TYL,Absolutely right, we answer only to ourselv...Hi TYL,<BR/><BR/>Absolutely right, we answer only to ourselves regarding our own money cos it's our money, so who's going to bother about it more than ourselves ?<BR/><BR/>As I reiterate, everyone can have their own methods and styles. Since this is a value investing blog and most of my analysis is focused on corporate fundamentals rather than price action, I fail to see any additional value in using TA unless you are implying it is to time entry and exit (there might be some utility in such cases I admit). However, for thinly traded counters like Boustead and Tat Hong TA does not work effectively, while if one's idea is to hold a company for long-term then TA is kind of irrelevant.<BR/><BR/>As for sharing of Swiber, I thank you for the info.<BR/><BR/>Wish you all the best in your investing too !<BR/><BR/>MusicwhizMusicwhizhttps://www.blogger.com/profile/10950754156386935254noreply@blogger.comtag:blogger.com,1999:blog-28021668.post-47854127317963045072009-03-08T12:10:00.000+08:002009-03-08T12:10:00.000+08:00hi bro,anyway i am not trying to justify anything ...hi bro,<BR/><BR/>anyway i am not trying to justify anything here with regards to my holdings, eventually we only need to answer to ourselves as an individual investor =)<BR/><BR/>but after hearing that you are so against on TA, guess i shall drop the topic. my sole objective on posting a comment has been reached nevertheless, i.e. to share more info on swiber, hope it helps.<BR/><BR/>jiayou jiayou for everybody here! =)Anonymoushttps://www.blogger.com/profile/09645510907069711150noreply@blogger.comtag:blogger.com,1999:blog-28021668.post-11024181824781975842009-03-08T12:01:00.000+08:002009-03-08T12:01:00.000+08:00Hello Charlesming,Thanks for dropping by my blog !...Hello Charlesming,<BR/><BR/>Thanks for dropping by my blog !<BR/><BR/>Yes I am a little puzzled and perplexed as to why WB continues to use derivatives even though he knows they are bad, bad, bad ! Perhaps he has his own reasons.....<BR/><BR/>As for hybrid investing, if it works for someone, they are welcome to use it. I know what works for me in terms of my character, temperament and belief system.<BR/><BR/>Cheers,<BR/>MusicwhizMusicwhizhttps://www.blogger.com/profile/10950754156386935254noreply@blogger.comtag:blogger.com,1999:blog-28021668.post-49775616903872220622009-03-08T11:59:00.000+08:002009-03-08T11:59:00.000+08:00Hmm TYL,I am quite surprised when you say that peo...Hmm TYL,<BR/><BR/>I am quite surprised when you say that people lose faith in value investing during a bear market. It's more likely for faith in value to be reinforced during times of economic distress, as more people focus on fundamentals instead of sexy stories. In fact, it is during bear markets that value investors can find the most bargains, hence your comments are a mystery to me.<BR/><BR/>Your view on TA in enhancing value investing is, unfortunately, not shared by me. TA will always be viewed as a form of speculation as we are attempting to make sense of price action rather tahn focusing on the financials of a company and what it does. You may have your own reasons for turning from value investing to TA as well as CFD, but I don't expect to do the same for myself. Thanks for the suggestion though.<BR/><BR/>I do also find it strange that your blog had stopped updating as at Feb 2008, yet you say you managed to sell everything during that time and stayed out as the carnage played itself out. If you had indeed done as you mentioned, updating everyone should be of prime importance in order to justify that this statement was not made on a "hindsight" basis. In other words, there is no way to affirm your statement as now is March 2009 and looking back, almost anyone can mention that selling in either late 2007 or early 2008 was a good idea.<BR/><BR/>For me, I do document all decisions and actions taken on a consistent, monthly basis so that there is a historical trace of what I do and the reasons for doing so. While all my decisions may not be correct, at least I show my thought process and learn from it as I go along. This eliminates the chance of me using hindsight to justify a particular action as previous posts have evidence to state otherwise.<BR/><BR/>Regards,<BR/>MusicwhizMusicwhizhttps://www.blogger.com/profile/10950754156386935254noreply@blogger.comtag:blogger.com,1999:blog-28021668.post-72286914973324639082009-03-07T12:42:00.000+08:002009-03-07T12:42:00.000+08:00I don't think musicwhiz is into trading or shortin...I don't think musicwhiz is into trading or shorting as it is not his style. I think what TYL has done is to do hybrid investing. What TA does is to tell u which are the levels for entry at support levels. If it cracks and u wanna add more, u wait at the next support level.<BR/><BR/>One thing bout WB. He totally thinks derivatives are tools of destruction. It is VERY interesting to see his exposure and losses in it despite him hating it. Maybe he hates it cuz he consistently losses money. I cannot understand why someone would use a tool if you don't like it. Very contradicting.<BR/><BR/>--charlesming<BR/>timetohuat.sillypore.comAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-28021668.post-80533611132857092002009-03-06T17:15:00.000+08:002009-03-06T17:15:00.000+08:00hi musicwhiz, so glad and happie that you remember...hi musicwhiz, so glad and happie that you remember me =)<BR/><BR/>ya my blog has not been updated for quite some time as I believe not many will appreciate value investing during bear mkt and also partly tied up with other issues...<BR/><BR/>meanwhile I will like to share with you that I am looking at the other side of the game which is TA, it is a different ball game and truthfully, it gives you more confidence in practicing value investing too, probably you can open up and look into that area as well...fortunately for me, i managed to retain my entire investing capital throughout last year with the help of TA, i sold out all my long-term positions at the start of last year....so right now i can deploy the original capital to snap up some blue chips at fire-sale (and yes blue chips can collapse as well, but at least they have a higher chance of riding out this tough time)....aniwae, WB uses some forms of TA as well, as he managed to sell his petrochina at almost the peak prices.<BR/><BR/>and btw, did you explore shorting singapore stocks via CFD? as a value investor, i believe you come across many companies which are losing $$ or over-valued, you should make use of this edge in the mkt.<BR/><BR/>i am really glad to share with you more on swiber or other stuff, but i am afraid the info can be quite sensitive, you can drop me a private email if interested.Anonymoushttps://www.blogger.com/profile/09645510907069711150noreply@blogger.comtag:blogger.com,1999:blog-28021668.post-56118963535766537262009-03-06T16:29:00.000+08:002009-03-06T16:29:00.000+08:00Hi TYL,I do remember you, your blog was not update...Hi TYL,<BR/><BR/>I do remember you, your blog was not updated for a long time. Quite surprised you popped up suddenly.<BR/><BR/>Well I have admitted buying wrongly for FSL Trust and Pac Andes, so it's nothing shameful to admit it.<BR/><BR/>While you are right to say it's not wise to throw good money after bad, I believe you need to give supporting reasons too. Obviously you do not wish to disclose too much as you may know something as an insider, but for me as a retail investor I am unaware of any factors which may cause me to believe my decision to invest in Swiber was wrong.<BR/><BR/>Swiber's industry - I think you are referring to their EPCIC activities and the oil and gas industry ? Maybe you can comment in general on what you observe but kindly back it up with some facts and figures, thanks.<BR/><BR/>Regards,<BR/>Musicwhiz<BR/><BR/>P.S. - Even "blue chip" companies can collapse, so nothing is totally safe during this downturn.Musicwhizhttps://www.blogger.com/profile/10950754156386935254noreply@blogger.comtag:blogger.com,1999:blog-28021668.post-86007571743094223562009-03-06T15:25:00.000+08:002009-03-06T15:25:00.000+08:00hi musicwhiz,not too sure if u remember me, but an...hi musicwhiz,<BR/><BR/>not too sure if u remember me, but anyway, what I will like to highlight here do not throw good money at bad money....i believe it pays more to acquire blue chips now rather than to buy SMEs....<BR/><BR/>it is never easy for a value investor to admit that he bought into a wrong company, but you really need to learn how to take the loss and move on, because that's what buffett does too, he definitely does not throw good money at bad money....<BR/><BR/>and just a note, i do not want to make any concrete comments, but what i can say is that you should try to get hold of some ppl in swiber's industry and question them before avergaging down again...Anonymoushttps://www.blogger.com/profile/09645510907069711150noreply@blogger.com