Mid-November 2007 Portfolio Review

The half month from end-October 2007 to mid-November 2007 has been a turbulent one for the stock market, with sub-prime fears coming into play again as large banks such as Merril Lynch and CitiGroup making astounding write-offs for the CDOs in their portfolio. The carnage has spilled over to Japanese banks as well, as it was reported today that Mizuho had to make a large write-down on their CDO-backed assets. Who knows what the extent of this crisis will be, and when will it finally peter out ? I am watching this saga closely to see how it affects the markets, in order to try to determine a good safety margin for long-term investment.

Below is the summary of my investments and related news as at November 15, 2007 (STI at 3,477.59 points):-

1) Ezra (Vested since October 6, 2005) - Buy Price $0.645 (bonus adjusted), Market Price $3.64, Gain 464%. The bonus shares from the 1:1 bonus have been listed and quoted on the Stock Exchange of Singapore today. Ezra has also initiated a series of share buy-backs commencing November 7 to date (November 14, 2007 was the latest announcement). They purchased a total of 4.473 million shares at an average price of S$3.4528 for a total consideration of S$15.444 million, thus reducing the issued share capital from 585.4 million shares to 581.367 million shares. The shares will be held as treasury shares and this move enhances EPS for all shareholders and should be viewed as positive.

2) Boustead (Vested since September 13, 2006; averaged down November 13, 2006) - Buy Price $1.295 (average), Market Price $2.38, Gain 83.8%. Boustead reported a sterling set of results, with revenues increasing by 47.6% to S$206.2 million for the half year ended September 30, 2007. Net profit attributable to shareholders was up 227% to S$26 million, and earnings per share has increased 229% to 10.2 Singapore cents per share. A dividend of 3 cents per share (tax exempt) was declared, representing a yield of 2.3% based on my buy price. I will be doing a review and analysis of Boustead’s results in due course.

3) Swiber (Vested since February 14, 2007) - Buy Price $1.01, Market Price $3.48, Gain 244.6%. Swiber released a decent set of results on November 14 which were mostly within expectations. I had done a part 1 review of Swiber yesterday and the positive surprise was the significant increase in gross margins which bodes well for the company in the long run as they capture more LOI and contracts. On November 6, Swiber announced the incorporation of Swiber Offshore Drilling Pte Ltd, and placed Mr. Glen Olivero as the head of this unit due to his vast experience and expertise. Just a week later on November 13, Swiber announced their first drilling contract worth US$25 million in the Gulf of Thailand, and subsequently on November 14 announced another LOI from Indonesia worth US$31 million (details are in my previous post). This evening, Swiber has also released a presentation for Equatorial Driller, which is a new deepwater vessel (with subsea capabilities) which Swiber undertakes to build as part of their commitment to serving the deepwater segment; and this vessel will be placed under their new wholly-owned subsidiary Black Gold Drilling Pte Ltd. I will be posting more details of this once I go through the slides presentation prepared by Swiber.

4) Suntec REIT (Vested since December 9, 2004) - Buy Price $1.11, Market Price $1.69, Gain 52.3%. There was no news for Suntec REIT during the half-month ended November 15, 2007.

5) Pacific Andes (Vested since March 29, 2006; Rights Issue July 11, 2007 at S$0.52 per share; averaged down August 17, 2007) - Buy Price $0.655 (rights-adjusted), Market Price $0.73, Gain 11.5%. Pacific Andes released a decent set of results for 2Q FY 2008 but there was some margin contraction on the part of CFG, which means that the results could have been much better. Also, the elongation works for the super-trawlers operated by CFG are expected to be completed on schedule by the end of 2007, thus they will be deployed only in early 2008 and will contribute to 4Q FY 2008 results. In addition, the Group is going to target Chilean Jack Mackeral, which it sees as an under-utilized fish species in order to increase revenues. The prices of fishmeal had dropped and operating costs for their new vessel fleet had gone up significantly, thus impacting margins. There was no interim dividend declared, but the company said that the dividend would be “reserved” till a final dividend under a new scrip dividend scheme in which shareholders could elect to receive the dividend in cash or in the form of shares. I will also be doing a review of Pacific Andes’ results in due course.

Overall Portfolio

My overall portfolio has increased by 136.8% from a cost of S$43.2K as at November 15, 2007, as compared with 143.0% as at October 31, 2007. The market value of my portfolio is S$102.4K. Realized gains have increased slightly to S$3.98K as a result of the ex-dividend for Suntec REIT, while Boustead is currently under “cum-dividend” and so the dividend amount will not be included under realized gains yet.

Comparison against STI

The STI was 3,037.74 on January 3, 2007. It is currently at 3,477.59 today, representing a gain of 14.5%.

Adjustment of cost to ensure consistency of comparison – My cost and market value were S$33.9K and S$46.0K respectively as at Jan 3, 2007 while my current cost is about S$43.2K. Therefore, my adjusted market value will be about S$58.6K. The market value of my holdings as at today is S$102.4K. This represents an increase of about 74.7%.

Thus, as at November 15, 2007, my portfolio has risen by a gain of 60.2 percentage points higher than the STI.

My next portfolio review will be on Friday, November 30, 2007 after market close.