Friday, August 31, 2018

August 2018 Portfolio Review

As was the style with my blog previously, I would always do a month-end review and summary of all portfolio positions. The display would only include my purchase price, market price and capital gain/(loss). Please note that the portfolio review is simply to catalogue all corporate announcements and associated news flow relating to my positions - it is NOT to be construed as an attempt to "brag" about portfolio size or to sound arrogant over specific security choices. If there is any indication of this occurring, then I apologize in advance.

1) Suntec REIT - There was no news from the REIT for the month.

2) Boustead Singapore Limited ("BSL") - BSL released its 1Q FY 2019 earnings on August 13, 2018. Revenue was up +18% yoy to $107m, while GP was up +26% from $33m to $41.4m. NPAT was up +315% to $12.2m, mainly due to a one-off gain of $5.9m from the disposal of a property held for sale (25 Changi North Rise - see BPL) and forex gains of $1.5m. Balance Sheet continued to remain robust with cash of $$280.5m against total debt of $72m (net cash of around $208.5m). OCF was $22m and capex excluding the purchase of WhiteRock Medical was just $161k, so FCF was ~$20m. Acquisition of WhiteRock Medical announced in June 2018 amounted to $19m (as announced), but net of cash the purchase consideration was less at $15.5m. Divisional performance saw improvements across all divisions, with revenue rising on a yoy basis (for Geo-Spatial, the change was due to the change in revenue recognition policy from the adoption of SFRS(I) 15). The change front-loads more of the revenue from the maintenance portion of the contracts early on, and less revenue is thus recognized at the back-end of the contract.

PBT for all divisions also improved but note that energy-related engineering was impacted by exchange gains, while real estate solutions was helped by the disposal of a property (more in BPL below). The good news is that order book backlog improved to $304m as at end of 1Q FY 2019 (consisting of $102m under Energy-Related Engineering and $202m under Real Estate Solutions). Comparative numbers for 1Q FY 2018 were $209m total order backlog (of which $72m was for Energy-Related Engineering and $137m for Real Estate Solutions). So to summarize:-

Total Order Backlog: $304m (+45.5% yoy)
Energy-Related Engineering Order Book: $102m (+41.7% yoy)
Real Estate Solutions: $202m (+47.4% yoy)

I am planning for a comprehensive review of BSL and this should come in due course (slated for perhaps October if I am still blogging by then), and hopefully it will come out before the release of the 1H FY 2019 earnings (which should include the new "Healthcare" division by then).

3) Boustead Projects Limited ("BPL") - BPL released its 1Q FY 2019 earnings on 10 August, 2018. Revenue was up +7% yoy to $48.7m, while GP was up slightly more at +8% yoy to $15.7m. NPAT was up +73% yoy to $10m, mainly due to the one-off gain mentioned earlier under BSL. Cash on Balance Sheet increased further to $129m from $111m 3 months ago, and total debt remained fairly constant at $69.1m. FCF continued to be very healthy, with 1Q FY 2019 registering an OCF of $12.8m and capex of just $31,000; and overall cash inflow from the three sources came to $17.6m.

On a divisional level, design and build revenue was up +9% yoy while leasing revenue was down -5% yoy, and this was mainly due to lease expiry at 85 Tuas South Avenue 1 in January 2018, which was partially offset by fees from BDP. PBT for leasing dropped more significantly, by -30% yoy, due to higher overhead expenses, investment in new capabilities and additional professional fees. While this is a cause for concern, I will treat it as an investment in BPL's future and will continue to monitor this for now.

One piece of positive news is that BPL has managed to secure a new tenant on a long-term lease for 85 Tuas South Avenue 1 (which has been vacant since January 2018). However, as there are A&A works ongoing to prepare this property for the new tenant, rental cash flow will only commence from FY 2020 onwards (i.e. April 2019 onwards). Pre-committed space at ALICE @ Mediapolis and the first phase of marketing of the Boustead Industrial Park in Vietnam are proceeding well, and should bear fruit in the next 12-18 months.

4) Design Studio Group ("DSG") - There was no news from DSG for August 2018. The Group had just released their 2Q 2018 earnings on July 19, 2018; the numbers showed some improvement with revenue increasing +44% and NPAT rising +340% (albeit off a low base). $109.5m worth of new orders was secured in 1H 2018 alone (for an average of around $18m per month), compared to just $13.5m in the whole of 1H 2017. Order book as at end-June 2018 stood at $157.1m (+10.8% yoy), which was $141.8m as at end-June 2017. With the arrival of the new CEO Edgar Ramani last year, DSG is undergoing a slow, steady but painful transformation to wipe the slate clean of old inventories and also to better prepare the firm for more consistent, sustainable growth. The AGM slides had also demonstrated that the new Management (along with newly-appointed CFO Ronald Kurniadi) has garnered some momentum is securing more contract wins; now they have to demonstrate that they can deliver, collect on receivables and also earn a decent margin. I will have to closely watch DSG in future quarters as it is currently my worst-performing position.

5) Kingsmen Creatives - I must admit I am puzzled on Kingsmen. No doubt the last 2-3 years has seen earnings fall off a cliff and net margins contracting from a once-healthy 6% to 7% to the current 2% to 3%, but recent news and announcements on contract wins and also the tie-up with Hasbro for the NERF FEC (Family Entertainment Centres) did not seem to spark any buying interest at all, thereby keeping the stock at depressed trough valuations. This is actually a blessing in disguise as I managed to accumulate more shares in Kingsmen for my CPF IA at an average price of 55c/share, and this comes with a 4.6% yield paid twice-yearly (1c interim, 1.5c final).

August corporate announcements would include the incorporation of a wholly-owned subsidiary in Singapore called NAX (Singapore) Pte Ltd with a paid up capital of SGD 1.6m, as well as the Group's 1H 2018 earnings announcement. More will be shared on this in my detailed Kingsmen review and report coming up next month, but in a nutshell, revenue was up +8.9% yoy while GP was up a smaller +2.8%. NPAT was up +6.1% and an interim dividend of 1c/share was declared, unchanged from last year. On August 21, 2018, Kingsmen also announced that they had increased the paid-up capital in their K-Fix (Nantong) subsidiary from zero to USD 3 million, demonstrating their commitment to the fixtures business and possibly also in anticipation of more contracts due for JEWEL and NERF FEC construction.

6) VICOM - VICOM announced its 2Q 2018 earnings on August 6, 2018. For the second quarter, revenue increased by +2.4% from $24.1m to $24.7m. EBIT increased by a higher +5.1% from $7m to $7.36m but NPAT only increased by +2.9% yoy mainly due to higher tax expenses. The balance sheet remains clean with no debt and cash balance of $97.9m, and FCF generated in 2Q 2018 was $4.4m versus $5.2m in 2Q 2017. An interim dividend of 13.46c was declared, against 13.12c a year ago. This represents a pay-out ratio of exactly 90% based on the 1H 2018 EPS of 14.95c/share. I am very happy to continue owning this Company as it is providing me with a yield of almost 10.6% (at 36c/year) based on my purchase price of $3.408.

7) Straco Corporation - Straco announced its 2Q 2018 earnings on August 14, 2018. Revenue fell by -6.4% yoy from $30.2m to $28.2m, and this was mainly due to a slight dip in visitor numbers (~1.2% lower yoy at 1.22 million visitors) and also a tax waiver not being issued yet for ticket revenue collected for SOA. NPAT fell by -5.1% yoy $10.8m, and 1H 2018 NPAT stood at $14.4m, a drop of -29.3% yoy mainly due to the operational issues at the Singapore Flyer which caused a shutdown from mid-January till end-March 2018. The Balance Sheet remains very healthy with $180.5m of cash and debt of $44m (note that Straco pays down $12m worth of debt every year - or $1m per month). FCF also remained strong at $12.2m, though down compared to 2Q 2017 with $16.4m of FCF. Currently, there is no cause for undue worry as cash continues to build up on the Balance Sheet despite the payment of a 2.5c/share final dividend for FY 2017. Potential catalysts would include the redevelopment of the Singapore Flyer (Flyer 2.0) as well as higher ticket prices for both SOA and UWX (subject to the Chinese Government's approval).

8) iFast Financial - iFast had just released their 2Q 2018 financials in late-July 2018. I will avoid giving a run-down of the numbers as the Company has many numbers to run through - gross revenue, net revenue and also NPAT split by territories and recurring / non-recurring revenue. AUA (assets under administration) hit a new record high of S$8.33b as at June 30, 2018, revenue was up +25.4% yoy and NPAT was up +40.4% yoy. Balance Sheet remains debt-free with cash of $25.8m and very strong FCF of $9m was generated (these are two factors which determine why I like this Company). The Group declared a 2Q interim dividend of 0.75c/share, up from 0.68c/share a year ago.

Also, on August 21, 2018, iFast announced that it had appointed PwC Corporate Finance as the lead financial advisor in relation to a potential capital injection for their Greater China business. iFast's intention was to enlarge the share capital of their Hong Kong and China holdings by about 15%. Assuming the dilutive effect kicked in, it would improve the Group's NPAT for FY 2017 by around S$0.34m (as the China business had incurred a loss for FY 2017).

9) Keppel DC REIT - The REIT announced, on August 7, 2018, that it will be expanding its footprint in Sydney, Australia with a new shell and core data centre. This will be built on vacant land and will cost between A$26m to A$36m (final costs yet to be determined) and will be backed by a 20-year triple-net master lease when completed. It will feature a minimum NLA of 86,000 sq feet and is expected to be completed between 2019 and 2020. This transaction will increase the WALE of the portfolio from 8.8 years to 9.9 years assuming the transaction had occurred on June 30, 2018, and the portfolio aggregate NLA will increase to 1.198m sq feet.

10) Frasers Logistics & Industrial Trust ("FLT") - FLT had a slew of announcements in August 2018, which I will try to summarize. Earnings-wise, revenue for 3Q FY 2018 (the REIT has a Sep year-end) increased by +22.6% yoy from $40.2m to $49.3m, adjusted NPI was up +27.4% and income available for distribution was up +22.4%. This was mainly due to the acquisition of German and Dutch properties as announced by FLT some time back; but though income rose a lot, a rights issue also enlarged the issued share capital base and therefore DPU was up by just +2.9% from 1.75c to 1.80c.

Aggregate leverage at 36.3% meant that the REIT would have room for more borrowings for accretive M&A, and weighted average cost of borrowings was low at just 2.5% with average weighted debt maturity of 3.2 years (all as at June 30, 2018).

On August 6, 2018, FLT announced the divestment of Lot 102 Coghlan Road in South Australia for A$8.75m, which represented a +36.7% premium to book value. This is one of the smallest and oldest assets within the portfolio, representing just 0.2% of the total portfolio value. The divestment therefore allows FLT to recycle capital as this asset has limited future income growth potential.

On August 31, 2018, FLT announced the acquisition of two properties in Sydney and Brisbane for A$62.6 million. The average property age is 1.0 years with WALE of 5.7 years, and these acquisitions will be financed from the proceeds of the sale of the two properties 80 Hartley Street and Lot 102 Coghlan Road. The acquisition should be completed by September 2018 and FLT's portfolio will then contain 82 properties with GLA of approximately 1.9 million square metres with portfolio value of around ~A$2.9 billion.

11) NetLink NBN Trust ("NetLink") - NetLink released its 1Q FY 2019 earnings ended June 30, 2018 (it has a March 31 year-end, in line with SingTel). Revenue was up +2.8% against forecast and EBITDA margin was at 70.8%, while PAT was up +27% against projections at $19m. NAV per unit stands at 78.8c/share and there was a +2.1% increase in residential and non-residential fibre connections, while NBAP connections saw a +35.2% increase since March 31, 2018. The Trust is on track to deliver on FY 2019 projected distribution, and the distribution yield should be around 5.7%.

General investment blog trends and observations

As I had been away from the blogging scene for the last six and a half years, I thought it might be good for me to pen down my thoughts in general on how the blogging scene has evolved, the general tone and language used in investment blogs nowadays and also the overall sentiment I detected through others' portfolios and transactions. Please also note that I am not pointing fingers at any particular blog out there - these are just general observations I made and am putting down on paper for future reference.

More entrants, less details

The first general observation is that after I stopped blogging, the blogosphere has literally exploded with many new entrants. Some bloggers may just be starting out, while other veterans have continued blogging. This has undoubtedly expanded the investment blog universe and given readers a plethora of choices in order to enhance their knowledge on companies, industries, markets and trends. However, I also realized that many of the blogs contained less detail - namely on the investment thesis behind each purchase or sale, why the portfolio was being structured this way, a comprehensive review and assessment of risks versus rewards, and also an admission of mistakes made along the way. Some of the above attributes were either absent, or not fleshed out in sufficient detail to justify a particular action.

Many blogs simply provided an account of their portfolio structure (by % or monetary value per security), some in a pie chart, others in tabular format, their transactions (and associated gains or losses) and also a simple summary of their investment plan or philosophy. This is perfectly fine if you intend to keep a sort of "diary" for transactions online, but I feel it may fall short if the investor wants to studiously keep track of his rationale for buying/selling, his thought process behind mitigation of risks, and also his views on valuation and business prospects.

More trading, less investing

Obviously, I cannot expect everyone to be an investor, much less a value investor; but most of the "investment" blogs should probably be named "trading" blogs. This is due to the frequency of transactions, most of which are conducted at a frenetic pace - buy this, sell that, with not much justification as to why one should stop owning a good business and switch instead to another. Most of the blogs seem to focus more on "taking profit, locking in gains, setting a stop loss" rather than wanting to own more of a great business and to see it grow with time. This is something I find tough to comprehend.

Apparently, capturing "maximum upside" with frequent trades seem to be more the fashion than owning a stable, consistent portfolio of companies which grow over time and which contribute a steady stream of dividends to the patient investor. I see two reasons for this - the increasing ease with which one can gain access to trading apps contributes partly to the increasing trend with which people tend to "flip" stocks (or "stir-fry" stocks if you are aligned with the China way of thinking), making holding periods increasingly short. The other reason is because most of the newer investors have never ever experienced a bear market, thereby letting ebullience take over their senses and clouding their vision with a perpetually sanguine outlook. The requisite "buffer" which is essential to any portfolio seems to be conspicuously absent from most investors' portfolios or even if there was one, does not seem to be articulated in a detailed enough fashion for even the investor himself to gain comfort. If all they have seen thus far is a steady stream of rising prices, then why is there ever a need for a buffer?

More macro appeal, less corporate deep-dive

This is probably one of the most glaring observations I have made over the course of the last few years - where headlines get larger and more glaring in a world of never-ending news, and where media outlets continually spew a steady barrage of head-turning, gut-wrenching bad news. Amidst this roller-coaster of emotions, investors who follow this incessant flow would inevitably feel nervous and emotional about the world and their shareholdings. And this, in a nutshell, is going to be extremely detrimental to their long-term wealth.

Let me put it this way - there is ALWAYS some kind of bad news in this world. The job of the media is to highlight the bad news and to accentuate it as much as possible so that they can sell subscriptions and attract eyeballs. That is their job and objective and they perform it creditably and admirably. However, as an investor, we would do ourselves a favour by ignoring around 98% of the headlines, and just focusing on the few which matter (~2%) - and these should be the ones which tie in to corporate and industry news and which directly have an impact on the companies within our portfolio.

Deep-dive due diligence is by no means easy. It is tedious, frequently boring, time-consuming and also difficult. News flow can help in this regard - by zooming in on articles written on companies, one can immediately get a summary of the important points one needs with regards to any corporation, without needing to undertake a read of the latest annual report or (horrors!) the prospectus. But many blogs do not devote sufficient time to discussing corporations in deep detail, instead letting macro-factors dictate their buy and sell decisions with perhaps just a superficial, surface-level review of the business. It seems washing machines and refrigerators receive much more due diligence from buyers than shares in companies......

The next post (or series of posts) would be on Kingsmen Creatives, where I will do a comprehensive and deep review of the business and also talk about how I feel the shares are currently providing a lot of value, along with a respectable yield with limited downside.

Saturday, August 25, 2018

July 2018 Portfolio Snapshot

As promised, I present below my revamped portfolio after my six and a half year hiatus. I will not be using this post to go into details on each new position, but it is more to highlight how the portfolio has evolved over the years where I have added to existing positions, and also initiated on new positions to hold for the long-term. Note that the portfolio has also expanded from the six positions I held as at end-Jan 2012, to the current eleven (11) holdings that I now own. This is in line with my intention to diversify my holdings instead of concentrating too much on a few core positions, as events had occurred in the intervening years which made me realize that there is only so much you can know or control. There are other reasons for increasing the breadth of the portfolio, which I will detail in later sections.

As can be seen above, I have included two additional columns (but only in this July version) - the profit % after including dividends and also the CAGR (i.e. holding period return) for each position. This gives more colour and also helps to explain how my philosophy in being prudent and holding good companies over the long-term translates to decent (but not spectacular) holding period returns. Most importantly, I believe that these companies can weather a bad storm and economic crisis and still be able to emerge battered but relatively unscathed, due to their strong Balance Sheet and prudent Management style and also low debt levels.

One notable aspect is how my cost has increased over the years, from the $252,800 to the current $469,474. This was the result of disciplined additions over the years to the portfolio, while limiting divestments mainly to the three companies mentioned in the previous post. My philosophy is to continue to increase my stakes in well-run, prudently-managed companies which are under-appreciated by Mister Market, and over the years this has translated into investments both in existing holdings as well as new holdings. The idea going forward is to continue to add to the portfolio in a disciplined manner to raise the cost base in order to improve the overall absolute dividend.

The reason for the realized gain being significantly higher (from $69,550 as at end-Jan 2012 to the current $201,653) was due mainly to dividends, and was not a result of stellar capital gains from any one security. In fact, though the initial years 2012-2014 saw very good performances, this was dampened by 2015 and 2016 where performance lagged badly when certain companies within the portfolio suffered from business issues and competition. That said, the state of the portfolio now is such that the companies within suffer from woeful neglect and a lack of sell-side coverage, and has priced in most of the pessimism over the last 18-24 months; therefore I would argue that most present very good value if you have a 3-5 year time horizon with limited downside potential (barring a sharp and unexpected recession or downturn where investors are forced to sell their holdings).

The dividends received over the years have been compiled as follows:-

2012: $14,185
2013: $17.680
2014: $16,709
2015: $15,387
2016: $23,215
2017: $24,585
2018: $12,448 (year-to-date, accounts for received dividends)

Total 2012-2018 (YTD): $124,210

Another notable difference is the use of my CPF Investment Account, which was only activated this year. As I have already paid off my HDB loan in late-2015, I managed to accumulate a sizeable balance in my CPF OA account, out of which only 35% can be utilized for equity purchases.

The emphasis over the years has been capital preservation with a constant focus on risk. It is always important for me to protect my downside and avoid losing money than to shoot for the stars and end up crashing into Earth like a supernova. Of course, having a concentrated portfolio of 6 companies back in 2012 meant there would always be significant volatility associated with the portfolio, which explains the returns fluctuating wildly over the years.

My returns profile is as follows:-

2012: +35.0%
2013: +41.5%
2014: +3.5%
2015: -23.4%
2016: -1.7%
2017: +12.1%
2018: -8.1% (YTD July 2018)

Total portfolio CAGR from 2007-2017 = +7.1% per annum (inclusive of dividends)

The strong performances in 2012 and 2013 were due mainly to positions in MTQ and Kingsmen which increased significantly, and the large drawdown in 2015 was due in part also to the subsequent crash in oil prices which caused a sharp re-valuation in MTQ and also the luxury spending troubles which plagued Kingsmen in late-2015, causing NPAT to fall over the last three years and dividends to be cut from the 4c/year level to the current 2.5c/year level. 2016 and 2017 were years where I built up the portfolio to become more diversified and robust, relying on less concentration than before, though my largest positions still accounted for around ~40% of the portfolio. REITs were added just last year in order to form a stable base of dividends but also with an element of growth, as the gearing levels for these REITs allow for debt headroom for M&A and each REIT also has a long WALE with higher overall occupancy rates. I will be describing some of these new positions in detail in subsequent posts, and will also be revisiting existing positions which I have held since 2012 (namely Kingsmen Creatives, VICOM and Boustead) to check on the thesis and why I would still be adding to two of them.

A summary of transactions since Jan 2012 is provided below:-

2012 & 2013

No additions or divestments


·         Increasing stake in Kingsmen Creatives
·         Purchase of Straco Corporation
·         Divestment of SIA Engineering


·         Acceptance of scrip dividend from Boustead Singapore
·         Dividend-in-specie of Boustead Projects
·         Purchase of Design Studio Group


·         Increasing stake in Design Studio Group
·         Increasing stake in Boustead Projects
·         Increasing stake in Boustead Singapore


·         Increasing stake in Kingsmen Creatives
·         Purchase of iFast Corporation
·         Purchase of Frasers Logistics & Industrial Trust
·         Purchase of Keppel DC REIT

2018 (Year to Date)

Increasing stake in Kingsmen Creatives
·        Subscription to and acceptance of rights issue (1 for 10) for FLT
·        Purchase of NetLink NBN Trust
·        Purchase of Boustead Singapore (CPF Investment A/C)
·        Purchase of Kingsmen Creatives (CPF Investment A/C)

I would like to emphasize again that the portfolio has been structured to withstand a large drawdown and to remain resilient in the face of economic shocks. It is NOT geared towards high returns and to capture maximum upside. The main aim is to buffer against downside by purchasing companies with strong balance sheets, good cash balances and which generate healthy amounts of FCF.

My next post would be the month-end post where I will summarize any corporate news flow or earnings announcements from the companies I own.

Saturday, August 18, 2018

A Long Hiatus......

And so, I am back. Blogging again once more after an absence of 6.5 years, but it feels good to be able to express myself through writing once more. Much has happened in the intervening time - I obviously got much older (I am in my 40s now, and in danger of suffering from the dreaded "mid-life crisis" which everyone talks about), fatter (a consequence, no doubt of being married and corpulent) and hopefully, much wiser. At least the years have been kind enough to leave me with most of my hair, seeing many of my compatriots and peers with balding pates is enough to make me thank my lucky stars!

So what happened to me during the six and a half years? In a nutshell, I was recruited into the investment industry (yes, the day of my very last post was the day I started work) and was not allowed to blog due to conflict of interest, and also because of MAS requirements. While in the industry, I enhanced my knowledge significantly through on the job learning, training with financial modelling and meeting more companies than I could ever imagine. The experience has been humbling, to say the least, as I also encountered scores of very sharp and smart investors along the way. Networking events and many a cocktail have exposed me to the myriad ways in which one can invest, across all asset classes, and with many different strategies (some obviously worked better than others!).

My aim in joining the investment industry was to build up my knowledge to become a much better investor (OK, part of the reason was also because the money was more attractive than my previous role, but not a whole lot more). In the process, I found that even trained investment professionals suffer from the same biases and mental shortcuts which afflict retail investors; and that relationships matter more than performance alone when it comes to dealing with high net-worth clients. I also found out just how competitive the investment landscape was - everyone and anyone would start a Fund, attract around USD 10 million and then start marketing aggressively. I must have met at least more than a hundred Funds (some with very colourful names, no doubt) in my course of work, and also learnt from numerous fund managers and IR personnel on how they size positions, analyze companies and businesses, observe management, manage their cash positions (to avoid cash drag) and turn over their portfolio.

The really good funds are few and far between, and have a track record of >10 years (dating past the GFC) and returning low teens % every year, on average. Most Funds are new and the managers are excited to shout out their performance to the world, but these will tend to fall flat on their face amidst a crisis or fizzle out and under-perform their benchmark after a while. After a while, I learnt that those which stuck to a good, consistent and rigorous process tended to do well over time, and beat those with arcane strategies as well as those with more bluster than substance.

But even though much has changed, a lot has also stayed the same. I am still living in the same HDB flat (no "upgrade" to a condo), still do not own a car (yes, I still commute using BMW "C Series - Bus, MRT, Walk and Cycle) and my family still generally frequents the same cafes and restaurants over the years. My daughter is older now and attending a primary school instead of kindergarten but essentially our lives have stayed fairly constant - just the way I like it.

Portfolio Changes

As I have not been updating my blog for such a long time, readers would naturally be curious as to how my portfolio has changed. My philosophy remains the same as it has been before - I would even venture to say that it has even strengthened further over the years as I learn more and cultivate a stronger, more consistent mindset for value investing. Some friends whom I have been communicating with regularly in the investment blogosphere even think I am rather "staunch" as I strictly believe in a "no speculation" policy, refusing to do any short-term trades and also staying away from crypto-currencies (the current "hot" fad") and lottery (yes, including the recent World Cup, where I did not place a single bet). I guess I believe in being disciplined over the small stuff, so that I can remain disciplined on the big matters.

In a nutshell, my portfolio has changed quite a bit from my last update as at 31.01.2012. I will be revealing my latest July 2018 portfolio in the next post, but right here I would like to fill the gap by providing a list of what I had divested, along with reasons and with a summary of profit and loss numbers.

Below is a table showcasing each position, the divestment date and price, dividend received, adjusted gains/losses and also CAGR on the position. I had started measuring CAGR for each investment position in order to ascertain if each individual investment decision was made correctly and if it would yield a decent return. This would also be displayed in my first portfolio showcase since I stopped blogging, but subsequently will only be updated on an annual basis.

Explanations for the three divestments are as detailed below:-

SIA Engineering ("SIAEC") - A starting position was taken in this blue chip, large-cap company in 2010, with additional positions taken in 2011 to average down on the position. The original thesis can be found in the older posts within my blog and thus I will not repeat myself again. The position was divested in 2014 when the Company reported weaker earnings, and also lower cash flows from JV and associates. I did not merely act on one quarter's results, as this could have been a one-off event and an aberration or temporary phenomenon. A second quarter of weak results and also commentary from industry reports confirmed my suspicions though - aeroplane engines were becoming more efficient and newer models needed less checks, and checks may not have to be so comprehensive. This meant that the cycle for checks would lengthen, and this would have an impact on SIAEC's earnings and cash flows. In addition, there was also more competition as MRO players started to expand and muscle into SIAEC's turf and territory. These two phenomena were structural changes occurring within the MRO industry and did not seem like temporary cyclical headwinds. Hence, the decision was made to exit the position.

Including dividends received over the 3-4 years, a total gain of +38.4% was made on this position which represented a CAGR of 9.6% over the period of time I was vested.

MTQ Corporation - This can be considered a very "old" position as it was first taken in 2009. MTQ is an oil and gas services company which is servicing blow-out preventers from the oil and gas industry. It also has an Engine Systems division which supplies engines and turbochargers to the motoring industry. This position was divested in August 2015 as MTQ was severely affected by the downturn in the oil and gas industry when oil prices crashed from around USD 150/bbl to USD 20-25/bbl (at the nadir). Though the Company had good FCF and also a strong Balance Sheet, the downturn was very sharp and looked to be protracted, and their cost base was apparently too high to be able to sustain profitability. During good times, during my visits with Management at AGMs, it was mentioned that the Company could get orders and still be profitable if oil prices fell to USD 40. In hindsight, that was probably too optimistic a projection as the reality was that even when oil prices are hovering at USD 60/bbl, the Company is still making losses. Compounding the problem was also the purchase of Binder in Indonesia just before the oil price crash, and this proved to be a drag for Management. MTQ eventually sold off their Engine Systems division (something which I was lobbying for during many an AGM), but they still needed to announce a 2-for-5 rights issue at 20 cents/share to beef up their Balance Sheet. There were also free detachable warrants of 1 warrant for every 4 rights shares at an exercise price of $0.22/share as a method to potential raise more money for the Company. Needless to say, this corporate move was dilutive to earnings per share and the warrants would have also significantly increase the issued share capital base if fully exercised.

My action to divest MTQ was already considered belated, as I read the (bad) news on the sector at the time with growing consternation without taking any action, mistakenly thinking that the Company I invested in would be somewhat immune or protected from the troubles plaguing the industry. In hindsight, I was probably wrapped up in a cocoon of invulnerability and failed to see that the Company I owned was just another player suffering from the growing malaise afflicting the oil and gas industry. Lesson learnt here - don't be complacent and also don't behave like a rabbit caught in the headlights - freezing and not doing anything is not going to help when the business world is dynamic and ever-changing.

Fortunately, I managed to divest MTQ at a profit despite the thumb-sucking, netting a total gain of 52.8% after dividends which worked out to be a CAGR of around 8.64% over my holding period.

The Hour Glass - This one deserves a post on its own, and it will be detailed in a subsequent post as to the rationale for making the investment; as well as the reasons for the eventual divestment and recognition of the loss. This investment unfortunately generated a return of negative 8.35% over the holding period. The key, of course, is to learn from the mistakes and avoid a repeat of his sad situation.

Whatsapp Chat Groups - Boon and Bane

To end off this post, I would like to state a major difference between the way I was communicating prior to stopping the blog, versus currently. I started using Whatsapp to create chat groups for investment some time around 2015, and it has been both a boon and a bane, I would think. A boon in that it is now much easier to communicate ideas on investments to like-minded people, and also to receive interesting ideas with which I can act upon and do more intensive due diligence. The bane is when there is a lot of noise generated, short-term thinking along with a trading mentality (yes, stocks as inventory rather than assets) and also the problem with "Group-think" (which is much more pervasive than I had ever imagined).

So, sometimes it is better to distance yourself from groups and just have some quiet time to think over investment theses and ideas, and to make sure that the logic and reasoning and both sound and defensible. This is not to say that I eschew the idea of using chatgroups, it is just that I feel there are limits to sharing deep due diligence ideas through a chat platform (not efficient for typing and also somewhat too informal) and also that people do not tend to provide constructive criticism whenever I say something, probably either because they do not want to antagonize me or that they had not read deeply enough into a Company to be able to comment. I will probably say more on this in due course but will just end off here for now.