Mid-September 2008 Portfolio Summary and Review

Interestingly, this was the half-month where everyone’s long awaited “crash” scenario came finally came true. The instability of the economic situation, coupled with the global slowdown as a result of the sub-prime crisis, finally hit home as the Straits Times Index fell through the 2,500 level. As a gauge of market sentiment, the index is very useful and there is currently a lot of uncertainty and fear going around as investors are finding out that every rally is simply a bear market rally which “traps” them to buy, even as prices go inexorably lower. Mr. Market is ferociously thrashing every stock that made a fool of him a year ago (by being over-valued) !

The fascinating aspect of the current bear market (and probably previous ones too, which I have not lived through as an investor) is that prices have the tendency to dip downwards almost every single day without fail, as if the selling is so pronounced the savage that it resembles a tidal wave. It is only with such ferocious and brutal selling that one uncover gems of companies selling at bargain basement prices. However, as Mark Sellers said, not many have the guts to purchase when the entire world seems to be selling, and the psychology of human behaviour is indeed fascinating when it comes to the stock market, as people start avoiding stocks like the plague when they become better bargains !

I took the opportunity to purchase more of China Fishery, seeing that Mr. Market was extremely manic-depressive today. Please also note that due to time constraints and the nature of value investing, I will NOT be providing half-monthly updates for my portfolio from October 2008 onwards. In future, all portfolio updates will be on a monthly basis.

Below is the summary of my investments and related news as at September 15, 2008 (STI at 2,486.55 points).:-

1) Ezra (Vested since October 6, 2005) - Buy Price $0.645 (bonus adjusted), Market Price $1.23, Gain 90.7%, YTD Loss 63%. There was no news for Ezra for the half-month ended September 15, 2008.

2) Boustead (Vested since September 13, 2006; averaged down November 13, 2006) - Buy Price $0.6475 (split-adjusted), Market Price $0.965, Gain 50.2%, YTD Loss 19.9%. There was no news from Boustead for the half-month ended September 15, 2008, other than a brief notice of the striking off of a dormant subsidiary in the United Kingdom. FF Wong purchased shares in Boustead from September 9 through 12, at S$1.00 a piece, for a total of 600,000 shares.

3) Swiber (Vested since February 14, 2007) - Buy Price $1.01, Market Price $1.22, Gain 20.8%, YTD Loss 64.4%. Swiber had a string of announcements this half-month, beginning with their third sale and leaseback arrangement with Platou Finans for US$225 million. This was announced on September 2, 2008 and involves three 18,000 bhp AHTS as well as two 78-metre DP2 subsea support vessels. I will not go into too much detail as all the numbers have been presented in the press release, I just wish to highlight that Swiber will receive 25% downpayment on each vessel and the total consideration will be US$225 million. US$18 million will be recognized in stages in an exceptional gain as this represents the excess of the proceeds over the book value of the vessels. The next day on September 3, 2008, Swiber announced that they had achieved a milestone for pipelaying installation whereby Swiber Conquest, the Group’s flagship pipelay barge, has laid 150 kilometres of pipelay work within 6 months. This press release sounds more like a PR exercise though, as there is not much informational content which can be construed as being useful for the investor to alter his evaluation of the company’s capabilites (no comparison was made with industry standards – so we will not know how “good” 150 km of pipelay work in 6 months is !). On September 4, 2008, Swiber announced the formal inking of the contract (formerly LOI) with CUEL in Thailand for a 5-year job beginning September 2008 (worth an estimated US$50 million per annum). The company has also been consistently buying back its shares from the open market (check SGXNet for details).

4) Suntec REIT (Vested since December 9, 2004) - Buy Price $1.11, Market Price $1.29, Gain 16.2%, YTD Loss 24.6%. There was no news for Suntec REIT for the period ending September 15, 2008.

5) Pacific Andes (Vested since March 29, 2006; Rights Issue July 11, 2007 at S$0.52 per share; averaged down August 17, 2007 and July 3, 2008) - Buy Price $0.5475, Market Price $0.24, Loss 56.2%, YTD Loss 61.9%. There was no news from PAH for the half-month ended September 15, 2008.

6) China Fishery Group (Vested since November 20, 2007) - Buy Price $1.211 (average), Market Price $0.90, Loss 25.7%, YTD Loss 51.4%. There was no from CFG for the half-month ended September 15, 2008. I have added to my position in CFG at prices of S$0.925 and S$0.90 on September 15, 2008, bringing down my average cost to S$1.211 from S$1.50.

7) First Ship Lease Trust (Vested since January 14, 2008) - Buy Price (Averaged Down) $1.105, Market Price $1.07, Loss 3.2%. There was no news from FSL Trust for the half-month ended September 15, 2008, except for a small news snippet of FSL Trust wanting to list on ADR (USA OTC Bourse).

Overall Portfolio

The loss on my current portfolio is 6.9% from a new cost of S$98.4K as at September 15, 2008. The market value of my portfolio is S$91.6K. Realized gains amount to S$8.6K as a result of the dividend from FSL Trust, Boustead, Suntec REIT (inclusive of the dividend from Pacific Andes which I will choose to accept in cash instead of scrip). Including realized gains, the total gain as a % of my cost is 1.8% (about S$1.8K).

Note that this will be the last half-monthly review for portfolio. In future, I will just be providing an update on the companies I own and how their businesses are doing. I am also exploring a better method of benchmarking performance, probably to book value growth of my companies. Comparison to the STI is inaccurate as the index components are switched over time – thus there is survivorship bias involved.

My next portfolio review will be on Monday, September 30, 2008 after market close.