5th Oct 2008 Update

I did not continue with what I started out to do in August in writings.  With much turmoil in the market in September, I have thought about some of my positions in my current portfolio and sold some of the counters to raise cash for purchase of other more attractive counters.

Sold
Inter-roller:  I sold my stakes in Inter-roller at a loss of $2959.  I first purchased this company thinking that a drop in their profit is a one-off event.  As updated earlier on, 2008 visibility is low and while in recent months, it has won contracts in South America and I still believe in its management, in short term it will have difficulty turning around.

KODA: Yes, I like this company for the honesty of the management, the way they communicated their results through their Annual Report and statements through SGX.  They have done well over the past few years and attracted more clients along the way.  However, with its large reliance on US-based customers, its performance will suffer (in fact already suffered for this year) going ahead.  This will still be on my RADAR even after I sold it at a loss of $3116.

The Hour Glass: Sold at a loss of $1761 to raise cash for other purchases.

Spore Land (CPF): Sold at a loss of $5752.  Finally gave it up as I really know nuts about the property scene.  An expensive lesson for me.

With all the selling done last week, I have made a realized loss of $2800 for this year, my first realized loss since year 2000.  YTD, my cash portfolio dropped by 27.8%, the largest since I have started in year 2000 too.  For CPF portfolio, I suffered a drop of 32.8%.  My first negative return since I started investing CPF in 2002.
2008 has really proved to be a difficult year for me and again showed me that there’s so much more to learn in investing.  On hind side, I could have hold on to my cash for a longer period after earning some profits from Pokka and sold Inter-roller and KODA faster knowing that their fundamentals have changed for 2008 and would need a longer time to turn-over with the economic turmoil.  On the positive side, I have been pretty emotional unaffected (ie, I don’t feel panicky) by the drop in market and portfolio values.  I just wish I have sold out earlier and retain more cash as advised by many forummers.

To buy
While the market movement has caused losses to my portfolio, it also provided opportunity to purchase other companies at a much lower price.  I will be purchasing Fibrechem a company that manufacture different forms synthetic fibres from polyester to microfibre leather.  Listed in 2004, the company’s net profit margin and ROE has been above 20%.  Net profit has a CAGR of 36.3% over the past 5 years.  While margin might be squeeze and market might be tighter the coming two years, the company is poised to grow further with their microfiber leather.  At the current price of $0.385, I will be purchasing the company at a PE of 3.8x.  This is cheap valuation, especially when the company has $0.05 per share and a market cap of $400 mil.

I will also average down on the following counters, Celestial, SIA Engineering and Pan United.

As for my CPF Portfolio, I will average down on First REIT and Metro.
Other counters which are on my radar include:
Li Heng: Nylon producer listed in March 2008 at a price 0f $0.80.  Now $0.375 at a PE of 3.4x.
Beauty China: One of my favourite counters before I sold it out at $1.14 last Sep.  Now at $0.52 at a PE of 5.6
PFood: Another of my favourite counter. In fact the steep drop of its price to $0.485 last Tuesday was on of the trigger to sell out some of my counters for a better buy.  Its price has returned to $0.61 at a PE of 5.3.

On Thursday, I have also used CPF to purchase the following unit thrusts ($5000 each)
Aberdeen China Opportunities
Aberdeen Global Emerging Markets
LionGlobal Japan Growth
LionGlobal Infinity US500 Stock Index SGD

I viewed this current economic turmoil a good opportunity to re-enter the market.  Will the market drop another 20% to 30%? Yes, it might happen and I will average down further if that happens.

23rd Aug Review of Position 1

As the market continues to trend lower and my year-to-date returns negatively for almost every counter, I decided to turn my attention away from the near term prices and re-focuses again on the fundamentals of the companies which I have invested in.  I would look at their vision, mission statements, the direction and strategies used by these companies.

And this exercise should assist in me in position I will take on my portfolio which I would make in the coming weeks.

(a) Celestial Nutrifood

No explicit vision, mission statement is found in the company’s latest AR.  However, in the corporate information, the company states that “The operating ethos of Celestial is to provide products of the highest quality”. 

It seems that the company has been doing well in this sense.  The company is the only soy bean manufacturer in Heilongjiang province to be invited to develop the Soy Bean Zone in 2004 and it has successful completed Phase 1 of the project.  In 2007, Celestial’s brand “Sun Moon Star” (日月星) was awarded “Asia Top 500 Brands” (亚洲品牌500强) for its overall excellence and innovation in branding at the Second Asia Brand Ceremony (第二届亚洲品牌盛典).  In addition, Celestial’s Executive Chairman and CEO Mr. Ming Dequan (明德泉) received the prestigious “Asia Brand People of the Year” (亚洲品牌年度人物大奖) award, for his entrepreneurial spirit and visionary leadership.

It seems to me that the company will continue to do well in the near term as it expands its product range since last year and with a higher acceptance of its product from both retail and industrial customers even after it has increased its selling price twice over the past year.   While I continue to like this company, I might trim my holding if I need the cash for other counters.

(b) KODA

VISION

To be a reputable, profitable and significant global original design manufacturer of furniture

MISSION

We must be the most effective value-for-money manufacturer.

We must remain design-relevant.

We must invest in Research & Development.

We must ensure that our products remain affordable and accessible.

We must ensure we have the right people with the right skills.

We must deliver to our shareholders value and investment comfort.

Mid Year Review III Benchmarking

Read from Newspapers that STI has dropped 14.7% this year.

Looked like I have done better with my cash portfolio which suffers a drop of 8.6% 
However, my CPF portfolio fared worse with a drop of 16.1%

24thJune Mid Year Review II

(e) Kingsmen Creative

Kingsmen posted an increase of revenue and net profit by 34.1% and 89.7% respectively.  Prior to its 2-to-3 splits, I bought another 5 lots and after the split, the average purchase price of my 30 lots is $0.222.  The company has declared a dividend of $0.015 per share which gives me a yield of 6.76%.  I will continue to hold on to this counter as I expect the company to turn in good numbers over the next few years.

(f) KODA

Since decreasing my stack in this counter to 5 lots in Oct 2007, the price of the counter has dropped by more than 50%.  Its 20083Q result is disappointing and the company is definitely affected by the sub-prime as it reported one $2 mil order is delayed.  It is expected that the next few quarters the company’s earning will be lumpy and it will probably take the next one or two years for it to get back to its growth path.  Fundamental has changed but not the management which still impressed me with its forthcoming report.  I purchased 5 lots this month to average down my purchase price to $0.553.  I do not expect the counter to touch this price this year, might not even reach this next year.  However, I believe that in long term, it has a potential to be a multi-bagger.  In the latest Edge issue, the company reported that it is looking into China as a possibility for future growth.  Currently, the management is studying the feasibility and risk before committing to this expansion plan.

(g) Pokka

Pokka reported an increase of 15.4% and 629.8% in revenue and net profit for FY2008.  Net profit margin is still at a low of 4.2% with ROE jumping to 18%.  A general offer to take the counter private was made last week at a price of $0.66.  This translates to a gain of about 39% for me.  The offer seems to be at the low side especially with the company doing so well over the last year.  Fellow forummers share similar views and at the moment I am not inclined to take up the offer.  Of course, if Pokka is able to round up 90% of the total shares, the offer will be irrevocable.  If that’s the case, I will enjoy the 39% gain. 

(h) Inter Roller

My thinking that the big drop in profit in 20071H is a one-off event does not seem to stand.   For the year 2007, the company reports a decrease of revenue and net profit by 13.7% and 32.5% respectively.  Visibility for the year 2008 is low with a poor 20081Q results.  However, I still believe that this is a well-run company and in medium term, it will get back to its growth path.  The price has dropped by near to 50% since I took up a small stake in Oct 2007.  I am still weighing the choice of averaging down since I am already 93% invested at this point.

(h) Lantrovision

A punt I made in last November which is suffering from a 50% drop.  As this only takes up only 4% of my portfolio, I have no intention to sell (as I believe it will do pretty well this year) or buy (visibility not that clear) at the moment. 

(j) SIA Engineering

I purchased 2 lots of SIA Engineering to add stability to my cash portfolio.  Short term, there isn’t much surprise but I am positive of the company’s prospect in the next 2 to 3 years with the increase earning from JV and also a new income source from A380.  At my purchase price of $3.84, the dividend yield stands at 5.2% which I will enjoy collecting yearly.

(k) Pan United Corporation

Another counter which I have bought and sold in the past.  At my purchase price of $0.66, this small to mid cap company is trading at a PE of 7.7x.  An attractive entry point for me since the visibility of its profit for the next few years is high.   Based on 2007 dividend, I stand to get a dividend yield of 6.8%. 

CPF Portfolio

To date, my CPF portfolio has dropped 14.6%.  If this continued, this will be the first time since I started using CPF to invest in stock which I will post a negative return.  Subsequently, this brings my CAGR down to 12.9% as compared to an average of 20% over the past few years.  Is there any different this year? Any major mistake?   Taking a look at last year buy-sell decisions that I made, I will attribute to this performance to two factors.  The key factor again the sub-prime factor which has caused most stocks to drop in values and hence the low price is the few counters I am holding now even though I am confident of their long term prospect.  Another mistake is the purchase of Food Junction for its historical dividend yield, which did not keep up this year.  I have since divested FJ at a loss of $1400 not just because its dividend has not kept up but I am not impressed by the new initiatives, concepts came up by the management.  The final decision came when I had dinner at the newly renovated outlet at Bugis Junction.  It is not that bad but it does not meet up with what the management has described in their report.

(a) Singapore Land

Cheap can get cheaper.  I thought at $8.45 per share, it’s cheap but it became cheaper and dropped to $6 plus by May 2008.  I purchased another lot at $6.31 as I still believe that mid-term prospect of Singapore Land is positive especially with the properties that the group holds in the prime areas.  Current dividend yield of 2.7% is not impressive but I am still comfortable holding on to this counter as it offers large discount to its RNAV. 

(b) Metro

Another property counter that is selling at a huge discount to its RNAV.  I am confident of the group’s management of its China properties which it has ventured into in early 2000.  A dividend yield of 5.36% soothes the drop in principle.

(c) First Reit

Its price has been pretty stable and so far it has distribute out its dividend.  Yield stands at 8.5%. 

(d) ComfortDelgro

It faces pressure from the run-away oil price.  Over the past four years, the counter only provides a compounded return of 3.3%.  I am still positive of the group in posting a jump in results once the oil price stabilizes.  Dividend yield stands at 5.85%.

31st May Mid Year Review I

Yes, I miss my quarterly review.  *spank* myself once for the lack of discipline.  No matter how busy I am, I must find time for this! 

Cash Portfolio

In general, last half a year has been roller-coaster ride for my cash portfolio.  The sub-prime fear has driven my portfolio down by as much as 20% in the first quarter of the year with some of my stocks dropping by as much as 40%.  Even to date, with my portfolio 2.0% lower than December 2007, I have three stocks trading at 40% below my purchase prices.  I am glad that the large fluctuation has not affected me too much emotionally.  I was calm and looking for opportunity to purchase some counters at a lower price and holding on to some cash as I am uncertain of the outlook of other counters.

(a) Celestial Nutrifood

Celestial is a counter that fluctuates a lot due to high trading volume.  I have taken the opportunity (or you can say it’s risk) by dollar-averaging this counter by 2 separate purchases in Jan and Feb, bringing the average purchase price to $0.9 from the initial price of $1.28.  My confidence with the company lies with its success in its execution of phase 1 expansion plan; ability to pass the higher cost to the customer; visible expansion plan in the next 1 or 2 years.  Couple with the low PE (6.8 based on 2007 results at $0.9), it’s a bargain.

The company announced its FY 2007 results in Feb with revenue growth of 55.4% and net profit growth of 13.3% with net profit margin at 23.3% (lower than 2006 31.9%).  The lower net profit growth and margin is attributed to the higher finance cost on the issue of convertible bonds which will reduce in time.  The company declares a $0.02 dividend which translates to a 2.22% dividend yield for me.

In May, the company announced a positive 20081Q results with both revenue and net profit 50% higher than 20071Q.  The growth is attributed to higher utilization rate, expansion in sales and higher pricing.   The company’s 2008 plan for the four High Protein Nutrient products are on schedule; and the manufacturing of biodiesel is in progress too but Directors advice a change in input, using of other materials instead of soybean oil as the price of soybean oil has increased.  Overall, the long term market for soybean-based products is favorable.

As mentioned this stocks fluctuates very much.  From a high of $1.4 plus (last may/jun), the price drops to a low of $0.56 (in Jan / Feb).  It is “scary” as I see the price plummet down; yet on the other hand I wonder why is it hit so badly when the fundamental is intact.  And the price goes back all the way to $0.90 now with no change in the company’s fundamental as compared to 3 months ago.

My holding is break-even now and with this high amount of fluctuation, I might consider offloading some of my holdings when the price hits $1.35 (50% gain).

(b) Midsouth

A company which I felt has potential for a high growth in the next few years but the market did not think so.  Against the muted response by the market on the counter, the company has decided to delist from SGX with an offer of $0.8 per share which is still lower than my purchase of $0.815 *sigh*.   I do feel a bit gutted as I can see its growth potential in the next 3 to 5 years but I cannot fault the management’s offer which is a premium of 30 to 40% over its average trading price over the last few months.

I have since sold the counter at $0.775, so that I can utilize my cash for other potential candidates.  Also, if the deal does not go through and the company fails to take it private, I expect the share price to trend downwards and provide me another opportunity to purchase the counter cheaper.

(c) The Hour Glass

The Hour Glass reported a revenue growth of 20% and net profit growth of 63.8% over 2007.  Net profit margin improves to 6.2% with ROE hitting 17.4%.  The company expects a slowing in sales momentum for 2008 and decides to seize this opportunity to position itself for growth in the next 3 years which I take this as a positive move for long term growth. While company guides that there could be a slow down, I personally feel that the sentiment might not hurt the rich as much as the not-so rich.

Since my purchase in December last year, the company did a 2-for-1 split in Feb, hence now I hold 10 lots of the counter which I have no intention to divest in the near future.  A $0.02 dividend was declared for FY2007 which is slightly disappointing as I have expected more but given that the company needs the cash for expansion, it is acceptable.

(d) Pacific Andes

The company just reported its full year results on 30^th May.  Revenue and net profit grew 32.3% and 23.2% respectively.  At current price, the company is trading at about 9x is earning.  It has declared a dividend of $0.0207 which gives me a dividend yield of 3.1 %.
 
As mentioned previously on my uncertainty of its debt structure, I have not loaded more of its shares even though its price is now 30% lower than my purchase price.  At the same time, I am in no hurry to off-load this counter as I am still impressed by its growth rate.  To sum it up, I am pretty neutral towards this counter at this moment.

2007 in Review

Cash Portfolio

2007 has been a good year for my cash portfolio. NAV of my cash portfolio has increased by 49.4% from $1.44 to $2.15.  I have no confidence that I will repeat this performance in 2008 but I believe that in long term (10 to 15 years), getting a compounded return of 10% from stock can be quite easily done.  With this record-breaking performance, my compounded return over the 8 years is 10.1%.

The best move of the years must be the selling of People’s Food.  PFood was sold at an average price of $2 after it announced shortage of pigs.  Since then, the price has retracted to $1.11, which translates to a PE of 10 but I will continue to monitor the situation before getting back to the counter.

The mistake of the year must be the series of transaction near end July.  Instead of holding on to the build up in cash position, I hurried to purchase a couple of counters which does not offer really good values and results in a loss of $2.2 k in a month.

Currently, I am still positive of long term prospect of Celestial, Pacific Andes despite sitting on paper loss.  I am confident of performance of Hour Glass, Pokka, Kingsmen Creative and Inter Roller going into 2008.  As for Mid-south, Lantrovision and Koda, I am neutral on them.

Companies that are within my radar are FSL (for its high dividend yield), Apex Pal (bold expansion plan), Pan United (benefiting from construction boom), Beauty China (re-entry if valuation becomes attractive again)

CPF Portfolio

NAV increased by 10.3% from $2.19 to $2.41.  This is the lowest YTY increase for the past 5 years but it is still much better than CPF return of 2.5%.   Compounded return for the 5 years now stand at 19.3%.

The portfolio would have better showing if I had not sold off Sincere to raise cash for Jardine C&C and this mistake is compounded by the subsequent selling of Jardine in September.  Again, I need to be discipline in holding to a winning counter instead of realizing the gain!

For the currentlportfolio, I am confident of a steady return in terms of dividend at an average yield of 6.22%.  Any positive move in price will come from market revaluating the counters due to NAV (Metro, Singlan).  Food Junction remains a wild card which I might dispose of if there are better buying opportunities.

December Update

Cash Portfolio

In December, I have added 3 new positions to my portfolio, Hour Glass, Inter Roller and Pokka. 

Hour Glass is the second luxury watch counter that am investing in.  The first being Sincere (CPF) which I have sold off after making a 60% return.  The counter continued to rise and I would have a 3-bagger if I still hold on to Sincere.  After comparing both business and valuation, I decide to purchase 5 lots at $1.64 (I miss the $1.44 price earlier in the year) and luck was on my side as news on acquisition of Sincere causes the price of Hour Glass which was trading at a discount to Sincere to spike up.  I am positive of Hour Glass FY2007 performance and expect an even better showing for FY 2008.

Inter Roller’s main business is handling of cargo in airport.  I knew the company since 2006 and am positive about the management and their business.  However, I have not bought the counter before as its valuation is steep.  The company reported a large drop in profits in 20071H and this causes its share price to plummet too.  The steep drop in profit is attributed to slow in getting contract for the year.  I expect this to be a one-off event and view the present price of $0.625 a good one to hold a very small stake of 5 lots.  If the price slides further on announcement of final year results, I will pick up another 5 lots of this well managed company.

I have got to know about Pokka from a forumer dydx from Wallstraits this year.  Of course, I know and have drunk Pokka drinks (especially green tea) before this year.  The company’s results has not been consistent but has done exceptionally well in 2007.  It final results should be impressive which makes current price of $0.47 valuing the company only at a PE of 6.1 (or 4.2 after deducting cash).  I THINK the company might have found the correct strategy in its expansion plan and if this is true, future is bright.

 
CPF Portfolio

Received dividend of $328 from Metro.  Thank you.