Sunday, August 1, 2010

Year-to-date Portfolio Review

Despite a strong start to the year, the Straits Times Index had great difficulty breaking the 3,000 barrier. It did so in April but that was not sustainable.

For my portfolio, it is up slightly more than 30% from the start of the year, even if we include the latest purchases of China Animal Healthcare and Elite KSB. Bulk of the gains came from condensed milk maker Etika International and rubber play GMG Global.

Corporate Updates

The month of July has been an interesting one. As I have mentioned in my earlier posting, Etika International has announced a 1-for-1 bonus issue that would most likely increase liquidity in trading. The stock has risen alot on thin volumes and this capital issue will lower the price, making it poised for further upside to incorporate its latest acquisitions. If there was one stock i would recommend from my current holdings, it would still be Etika International.

GMG Global recently announced a solid set of results. Its second quarter performance had been largely lifted by the strong rebound in natural rubber prices. One news that I am not quite sure how to make of it, is the recent appointment to the positions of CEO and Chairman of individuals linked to the 51%-shareholder, Sinochem International. On one level, I guess that this means that GMG Global has become a full-fledged S-Chip. On another level, this would also mean that revenues from China would be entrenched, driving its bottom line.

Stratech has been a slight disappointment mainly because it has not risen much despite posting a positive set results. It sank further this month when it announced that it had difficulty finalising its annual report due to some administrative glitch. Due to my small position in this technology firm, I am still holding on to it. I hope there will not be any form of stock consolidation like how they did with BBR Holdings.

Looking Ahead
For those who have been following me, I recently passed the CFA Level 1 Exams. I am still considering whether to sign up for Level II which will be held in slightly less than a year. Whether I make that $1k++ investment will depend on whether I make any career move. Furthermore, based on my experience, I have to give up a lot in terms of social life should I want to work and study at the same time.

The portfolio remains sturdy. With the 5 months left in 2010, I believe that another 10% upside will be possible. For those of you who are thinking of going into the market, try to pick out good companies.The reporting season is out and there is plenty of results and time for you to sniff out such companies.

In my opinion, there is and will still be upside considering that there is a lot of negative news globally. All eyes are trained on the 3,000 mark. If that level is breached, a mini rally lasting 2 weeks might be sparked off. That would be a bad time to buy for those intending to buy and hold for more than 1 year, because there will be more room for downside than upside in the short term.


  1. congrats. you are doing much better than me.

  2. Hi, I am currently holding Etika and continue to like the company. The management is busy buying over companies that could add more revenue stream to the group in future. The acquisition actions are consistent with the past whereby they bought different business and try to integrate into the group. However, the dairy division is still the main profit contributor now.

    What do you think about the risk?

    The indonesia instant noodle company they acquired is loss making. Although they plan to use that as base to set up the condensed milk operation, business turn around is usually hard, especially for new entrant. Penetrating into indonesia market might also be difficult.

  3. hey alen,

    in my opinion, Etika is as real a company as it gets. for the key risk, i would think that raw material prices would really dampen their profits going forward. as you may have read in the news, the Malaysian government has reduced subsidies for some of the basic foodstuff, which includes sugar. Etika has guided for this in their financial results for FY09.

    I agree with you that penetrating the indonesian market will be difficult considering that there are MANY companies there including SGX-listed Wilmar and Indofood Agri (which does make instant noodles).

    But more importantly, if you read the announcement, they are acquiring the Indonesian company so that they can access the land bank which they hope to turn into condense milk factories, to lower production costs.

    hope it helps.

  4. sugar price is always a risk. hopefully they can replicate their success in indonesia.

  5. Alen,

    well what do you, there is news that templeton may buy a stake in Etika's debt...

  6. hi,
    they have actually wanted to subscribe to the convertible bond. Just in case the stock didn't perform in the future, they can still get their money back.

    Etika is ambitious. If you look at what the management have done in past few years. Basically every year, they acquire new company to diversify the revenue stream. But, till now the condensed milk is still the core business. Even the Indonesia and Vietnam buy are most likely to set up the condensed milk factory.

    People win on strength, I hope they can continue to build on it and progressively level up on other capability. Buying of the fresh milk maker is one step closer to achieve this.

    Templeton buy at good timing, company has outlined a ambitious plan to expand. Let's hope with extra money, Etika will scale greater height. Even at $1, Etika is cheap. You might see more fund come on board if the market cap grow substantially in coming years.

  7. Execution risks abound. As long as they focus on their condensed milk and how to manage their A&P, things should eventually work out...

    I am pegging Etika's performance to Super Group... As you know, Super has a much longer history and has engaged in serious brand building outside the country...

    Whether Etika can reach $1.00 even after adjusting for bonus issue will really depend on the bigger realities of the economy as well as overall market sentiment...