Thursday, January 5, 2017

Portfolio Review 2016: Portfolio + 28.0% vs STI - 0.2%

The Straits Times Index ended 2016 at the same level it started. After dipping to 2,500 in the January and February, the index recovered to 2,880. This was despite a Trump election victory, which many in US media and Asia expected an end-of-the-world scenario.

The portfolio gained 28.0%, ending the three year streak of underperformance against the STI. Excluding dividends, it would have gained 24.4%. Most of my holdings advanced in price. This was unsurprising given their previous years losses. The biggest percentage loser was Hong Leong Finance. The finance stock lost 8.2% in price. This was followed by F&N, down 2.8%.

Colex and Super Group each post slightly more than 50% year on year increase in share price. Colex remains a very thinly traded stock. Super Group on the other hand, was boosted by the acquisition of the Dutch firm JDE. This will eventually lead to the privatisation of the company.

The portfolio cost now stands at 111.5K and I am in the black by 14%. I collected dividends of 2.3k, excluding the capital reduction paid out by Delfi, and this implies a yield-to-cost of 2.0% which is poor. For CY2017, my yield to cost will likely drop given the poor outlook and that Super Group is put in the freezer.

For CY2017, I intend to buy another 10k plus any remaining cash in the portfolio, just before or after Chinese New Year. I will also need to be on the lookout for places to park the monies eventually received from the delisting of Super Group. I expect the market to go up by at least 5% 12 months down the road. That said, I expect the local economy to be very weak in the coming 6 months. The oil and gas and property sector are not doing well and I cannot see any drivers of growth coming from international trade. 

Saturday, November 5, 2016

Gone Girl: GMG Global and Super Group

I finally submitted my acceptance of the Halcyon Agri offer for GMG Global shares. This will result in me having odd lot shares of the enlarged group, with fractional entitlements being rounded down. This leaves me slightly worse off. I do not have a significant investment in GMG Global and I am content to let the share ride into the sunset or sunrise, the latter being preferred.

As for Super Group, the new offer by the Dutch company will only take me to my breakeven point. I have been acquiring the company's shares since 2014. The bonus issue was supposed to bring me joy but alas.

With two more months of the calendar year, I am now tasked to look for suitable stocks to deploy the cash that will be freed up from the Super Group offer.

Saturday, August 6, 2016

Why this Singaporean thinks Donald Trump will be President of the United States (POTUS)

First off, I do not support either candidates for POTUS. My interest in the US elections are the outcome, namely, who gets elected to be POTUS. I do have wager with a friend on the outcome of the elections. Furthermore, just because I think Trump will win, does not mean I think Trump should win. Meaning, I do not agree with the things he says or the way he does things.

I think Trump will win because of his skills as a public speaker. Some of us will be critical about the things he says at rallies, but he does connect with most Americans. He may seem to alienate non-White voters but that is because his speeches are often contorted by the US mainstream media. The US MSM is owned by Wall Street, who want Hillary to be POTUS. Hillary's connection with Wall Street is a fact that other Democrats, such as Bernie Sanders and his supporters, are well aware of and have documented.

Why is it I think Hillary is weak as a public speaker that I do not think she will win in November? I asked those around me who watched the conventions, which was better, the Republican National Convention (RNC) or the Democratic National Convention (DNC). They, mostly women, said it was the DNC. The DNC has the Obamas and Bill Clinton speaking and they were in good form. There were balloons and katy Perry! However, they added that Hillary Clinton pales in comparison to them. Something about her that makes them feel suspicious of Hillary. She is very cold and clinical.

I have said it elsewhere, Bernie Sanders would be a better candidate against Trump. He may seem to have the support of only university kids, but I think he voices out the issues that Middle America is facing. At the issues levels, he will give Trump a good fight. However, as we have found out, Hillary is the preferred candidate from the time Obama was elected and re-elected as President. She is the establishment's choice.

With less than 100 days to the elections, polls suggest that Hillary has an advantage over Trump. Interestingly, telephone polls put Hillary more ahead of Trump than in online polls. In online polls such as the Reuters/Ipsos, I think Americans are less shy to say they will vote for Trump.

Trump will continue to face challenges from being himself as well as the US press, but if he avoids major faux pas, he will win. Hillary on the other hand faces the challenge of facing the American public continually without the Obamas pitching in beside her. We might see her being strained from all the travelling, possibly affecting her already poor health.

End-July portfolio analysis

For July 2016, my portfolio fell 4.8% month on month, compared to the slight gain of the STI (+0.8%). Year-to-date, my portfolio is ahead by 11.3% compared to the Singapore benchmark's hair cut of 0.6%. For July, my biggest losers were Delfi (formerly Petra) and KrisEnergy. Delfi carried out a capital reduction, returning 13.3 cents to shareholders but share price fell 45 cents. KrisEnergy has been affected by the route in the oil and gas space, following Swiber's liquidation filing and subsequent judicial management u-turn.

Prior to the Swiber fallout, a friend asked me for my opinion on Sembcorp Marine. He was thinking of accumulating the shipyard's shares, which is at the lowest in its history, in anticipation of a sudden swing upwards when oil price recovers. I told him to wait it out as the market is correcting. Upside is marginal but downside is significant, unless you are hoping for a privatisation. It is the survival of the fittest in the O&G space. Clients are not paying and there is no demand for drilling rigs, which is in oversupply. I agree that there is always a possibility of recovery, but as the shipping (NOL), commodities (think Noble and WIlmar) and property markets have shown us, the downturn is long and painful. Gravity applies. 

About a year ago, I warned readers not to buy shipbuilders and services companies. I said:

Any uptick in oil prices may not increase the demand for new vessels given a surfeit of them. For the services company, competition may prevent day rates from recovering to pre-crisis levels.

Personally, I feel that the worst of the sector has yet to come. No one really knows how long oil prices will remain low. I guess that there will be consolidation in the market as some of the E&P, shipbuilders and services companies face financial difficulties. That is another story altogether. 

This would have saved you huge amounts of money and from heartaches.

Wednesday, July 6, 2016

Company merger looms nearer

Not much happened in between the three months since my last serious post at the start of April. I was busy with my evening classes and darts. Day to day work was busy, rushing through consulting projects and client presentations. Work life was punctuated by news of colleagues leaving mostly involuntarily as the company sought to trim headcount ahead of the impending merger as well as in response to the weak market situation.

After abandoning the much-loathed strategy of serially acquiring companies, our company went big and announced it was merging with another company (let's call it Equal). A strategy of acquiring companies is good for shareholders (including the company executives who have share compensation plans) in the short-term because it boosts earnings as well as market share. It is also a means for the company to acquire capability.

However, studies have shown that companies tend to overpay for acquisitions. As a result, share price will underperform in the longer term, despite the vaunted synergies. Just do a simple online search and you will find endless studies supporting this. Evidence that suggest otherwise are typically submitted by M&A consultants who wish to stroke the egos of CEOs. And make the advisory fees of course. At the employee level, it means lesser cash that could be spent on investing in organic capabilities. With a bigger product suite, there is the need to integrate them but this always face resistance where the capabilities overlap.

In a span of three months after the initial announcement, the merger with Equal will take place in a few more weeks. Given that Equal is focused selling to another industry, the impact of the merger will be minimal to me in the short term. Those working in functional groups such as IT, HR, Finance and Estate will probably be edgy. After all, the heads of the two companies promised shareholders that there will be immediate cost savings. There is a very likely possibility that Equal employees in Singapore will move into our current office. Cramp conditions, especially poor toilet conditions will be the order of the day. What will be most interesting to watch is how the senior managers jockey for limited offices.