2017 1Q Performance

I have decided that I will only update on my performance quarterly. Mimicking reporting on SGX. I believe this is a good move as this will subtly push me to spend more time in analyzing the business rather than the stock prices.

Performance

NAV of portfolio grew from $3.78 (30 Dec 2016) to $4.74, providing a return of 25.4% for the quarter. This beats my benchmark STI ETF which returned 10.3% based on its price appreciation from $2.94 to $3.19 and dividend of $0.053 over the same period. 

This quarter's performance is better than the preceding quarter which returned -4.0% and also better 2016 1Q which returned 3.6%.

The fantastic performance is largely attributed to Best World which has almost doubled this year. This was supported by good return from most stocks in my core holdings such as Valuetronics (34%), Food Empire (22%) , Micro-mechanics (17%), FCT (13%) and Plife (8%), Singtel (6%).

The two counters from core holdings that underperform are Raffles Medical (-0.2%) and Straco (-0.7%). This is expected as their 2016 results are flat. I am still holding on to them as their long term fundamentals are still in tact.

Beyond the core holdings, two other stocks did well for the quarter. They are 800 Super (30%) and AReit (14%).

Allocation
Allocation is not far away from planned. With this current allocation, dividend yield based on initial cost stands at 4.6%

	Planned	Actual
Dividend	~ 60%	60.3%
REIT/ Business Trust	<= 30%	27.8%
Growth	~ 40%	33.9%
Punt	<=10%	5.4%
Cash	0%	5.8%

Action

There is not much activity for core holdings. The only transaction was the addition of Food Empire shares which move it into my core holdings. I believe in its turnaround and it should continue to do well for the next two years.

There are a lot more action for punting. These are my transactions for March.

• Bought and sold Fu yu (up 10%) and City Neon (up 5%)
• Bought SPH as I believe that the press giant will be able to find solutions on the drop of advertisement revenue.
• Bought Keong Hong due to the detail analysis by various IN users. I think this stock has the potential of doing well.
• Bought Oceanus. Pure punting. Like what I read about the company. New CEO is cutting cost and re-structuring debts. Prepare to lose all but if CEO is really able to turn the company's fortune, the upside is high too.
• Sold Dutech as it does not generate sufficient interest for me (-0.2%)

Core holdings

Addition of Food Empire in March has moved it into the top 8. Listing the 9th stock as its cost is not that far off from the 8th stock.

1. Raffles Medical @ $1.48
2. Parkwaylife Reit @ $2.32
3. Straco @ $0.84
4. Best World @ $0.60
5. Valuetronics @ $0.56
6. Fraser Centrepoint Trust @ $2.01
7. Food Empire @ $0.38
8. SingTel @ $3.82
9. Mirco-mechanics @ $0.91

Valuetronics - A closer look at the number

Last October, I have written my reason for buying Valuetronics. You can read about it here. Since then, it has reported a strong 3Q results and I have browsed through the last ten years report and crunched its numbers.

At first look, you will see that both its revenue and net profit are lumpy with a few good years and then followed by a few bad years. I believe this is the nature of manufacturing business as it is dependent on their customers' performances.  Compare to a decade ago, its revenue is higher by about 2.5 times, while net profit has increased by about 1.8 times. Nothing to crow about when the CAGR of its net profit is only 5.9%.

The good thing is the company has remained profitable for the past 10 years. Its net profit margin is above 6% for the past 3 years. I might be wrong but I think that is pretty decent for manufacturing. Its ROE has dropped from 20+ % to mid teens over the last few years but that is still a pretty good return. The best number is its cash holding which has increased by 3.6 times over the past decade and this has resulted in the increase in its declared dividend by 3 times.

My general perception after browsing through the annual reports is that the company is growing well with nimble management who strategise well to improve the company, especially since 2010. Some strategies are:

• Starting Lean Manufacturing Programme and expansion of Daya Bay Plant in 2010.
• Reclassification of its business from OEM/ODM to CE/ICE products and improving productivity with automaton in 2013.
• Exiting from mass market LED light bulbs from 2015.
• Getting a new revenue stream from the automotive industry.
• From the latest 3Q report, a new driver in CE - wireless LED.

I think all these bode well for the company and hence my added position in this company. Looking forward to a good 4Q and 2017 results and hopeful for a special dividend since this will the company's 25th anniversary.

Straco FY2016

A flat performance based on revenue and net profit which decreased by 2% and 5.2% respectively. Management guided that Shanghai Ocean Aquarium (SOA) and Singapore Flyer (SF) continues to improve in its revenue but Underwater World Xiamen's (UWX) profitability was affected by the typhoons. Net profit margin remains high at ~37%.

On the cash flow front, Straco generated more than $65 mil for the second year running. This has allowed its cash holding to raise by $30 mil to $160 mil. As expected, the company continues to pare down the debt taken in 2014 for acquisition of Singapore Flyer. They have cleared a third of the loan over the past 2 years.

I am hopeful that with its strong cash generating capability, the balance sheet will continue to improve for the next few years. This may result in an increase in dividend declared or other new acquisitions. A possible catalyst will be an increase in ticket price for SOA which was delayed in 2015/16.

Continue to hold on to my stake for a stable 3% dividend yield. May add more at appropriate juncture.

Food Empire FY2016

A good set of results. I am positive about its turnaround based on:
- Continuous growth in Indochina and other markets revenue. ~35% of overall revenue in 2016 as compared to ~28%. I might be wrong but I think that "Russia, Ukraine crisis" have forced them to move out of their comfort zone and looked into other markets. And the results have been encouraging.
- Slightly stronger balance sheet though still in debt.
- Declaration of dividend shows that management is willing to reward shareholders when time is good. So if company can continue to grow, expect further increase in dividend but if business falls, expect no dividend.

Key risk still lies with currency fluctuation due to Russia and Ukraine. I am a noob in currency but it seems to have more or less stabilise over the past year. Also, with the company having other growth avenues, this factor will hopefully reduce in its effect.

At current price of $0.57, PE is 14.5 and dividend yield is a mere 1.1%. Cheap or expensive? It really depends whether it can continue to grow in the next few years.

Vested @0.33 and will continue to hold.

Best World FY2016

Excellent set of results that is within my expectation. Its best set of results since listing in 2004. Highest dividend payout at a ratio of 36.6%. PEG for 3 years is a mere 0.08. Taiwan continues to provide the growth with China catching up. The following are the opinions of the management on their two main markets:

1. Management opines that China will be our fastest growing market for at least the next three to five years, barring any unforeseen circumstances.
2. The management remains cautiously optimistic that growth in Taiwan will sustain for FY2017.

Will continue to hold on to my stake to participate in the growth of this company. And expect dividend continue to increase with the growth as it has a dividend policy of paying out at least 30%.