Portfolio down YTD 7.1 percent as small caps languish

Although the STI has recovered to levels close to the start of the year, my portfolio is still down 7.1% due mainly to the sharp fall in the price of Etika International. That is still close to a 5 percentage points improvement over last month. Biosensors International has shined, breaking past the $1.30 mark. That we despite the dilution caused by the placement in shares. It seems that the big boys behind the scenes are optimistic of its prospects.

Although the spotlight here is the General Elections, the events that will determine the stock market direction will be the US and a slight extent Europe. Ben Bernanke has signaled that the stimulation of the economy (stock market rather) will end on schedule as promised. In Europe, the fears of the PIIGS have returned, as the impasse over how to bail the afflicted out remains. In my opinion, there will be little breakthrough in the month of May. Incidentally, it is the same month where most dividends are paid out.

82 of 87 Seats Contested

After some hi jinks, Nomination Day ended with 82 out of the 87 seats in Parliament being contested. There is only one Single Member Constituency (SMC) that will have a 3-cornered fight. The uncontested seat was Tanjong Pagar Group Representation Constituency (GRC), anchored by Minister Mentor Lee Kuan Yew.

The most notable nominations were Low Thia Khiang and Chiam See Tong, who have opted to leave their SMC and contest in a GRC. It should be noted that both Opposition candidates have been MPs for more than two terms, which will entitle them a pension.

There was a surprise pull out in the People's Action Party Camp (PAP). Steve Tan from the NTUC, said that he has decided to pull out from the elections due to "personal reasons". Artistic director Baey Yam Kehng will move from Tanjong Pagar to the Tampines GRC, and surgeon Chia Shih Lu will take over Baey's slot.

It will be an exciting 9 days of campaigning. But I am of the opinion that the PAP will sweep all the seats in Parliaments once the votes are tallied. Both Low and Chiam's stepping out from their SMC is preemptive in my opinion. One, I believe that the residents of the SMC do want to have their estate upgraded. Secondly, I think that the two Opposition MPs intend to work the ground for the future GE.

The PAP government has had an impressive track record. Housing, transportation as well as economic development of the city-state are feathers in the cap. Nonetheless, there is that niggling feeling that the one-party dominance my be feeling the strain of globalisation.

TPV Technology to acquires Philips' TV Biz in Europe and S America

TPV Technology has announced that it will acquire the TV business of Philips in Europe and certain South America countries. The announcement is fairly completed as it encompasses the establishment of a joint venture company, of which TPV will acquire a 70% share. The price of TPV's stake will be announced later, but will be 4 time the Earning before interest and tax for 2012. Consequently, TPV will also be required to pay loyalty for using Philips' brands. Overall, the move is congruent with TPV's existing business model as well as Philips' strategy of using contract manufacturers to produce its products.

The full announcement is here.

GMG posts strong 1Q11

SINGAPORE – 21 April 2011 – GMG Global Limited (“GMG” or “the Group”), Singapore’s listed integrated producer of natural rubber engaged in the planting, growing, tapping, processing, marketing and exporting of natural rubber; recorded outstanding growth for three months ended 31 March 2011 (“1Q11”).

The Group’s revenue increased 241.8% y-o-y to S$282.8 million from S$82.7 million in 1Q10. The strong growth was supported by a 59.5% increase in average selling price of rubber from S$3,902 per ton in 1Q10 to S$6,223 per ton in 1Q11.

Read more here.

Sgxstockpicker says: I believe that GMG's stock price should be lower because of the situation in the Ivory Coast. However, based on what I can see, GMG's stock is heavily supported by the "big boys". This stock is waiting for the next catalyst to go past 30 cents, and I believe that the catalyst will be greater earnings visibility for 2Q11 when, the impact of the closure of Ivory Coast's ports will be accounted for. GMG has said that almost 12% of revenue comes from that part of the world.

China Animal Healthcare posts RMB 58.3m Profit for 1Q11

China Animal Healthcare posted a 14% increase in revenue on-year to RMB 131.3 million for the first quarter ended March 31, 2011. Net profit for the quarter was up almost 60% to RMB 58.3 million, from RMB36.6 million a year ago. China Animal Healthcare said the increase in revenue was due to the surge in sales of bilogical drugs.

Management said that it has commenced commercial production of animal foot-and-mouth disease. Also, it has said that it has obtained indicative orders of close to RMB 90 million in total, for compulsory vaccine sales. They are expected to be delivered in the next 6-12 months.


China Animal Healthcare's stock is closed $0.31 on Thursday.

How many votes will PAP win this time?

Singapore's Parliament was dissolved yesterday and May 7, 2011 has been decided as Polling Day. Given the current state of preparations, it is unlikely that the the erstwhile ruling political party, the People's Action Party (PAP), will be returned to power on Nomination Day, which is next Wednesday. Opposition parties are expected to contest in more than half the seats available in Parliament. This will be the second time in a row that the PAP will not be returned to power automatically on Nomination Day.

My question to readers is, how many percent of votes that have been cast, will be won by the PAP? Cast your "vote" in the poll on the right.

P.S.
My apologies for the typo in the poll. "een" should be read as "between". This is was due to poor cut and paste. I cannot change the spelling as readers have already voted.

Investing in international stocks

There are many good companies all over the world. If you have more than enough money, you can consider casting your net for super stocks out wider. The problem with buying stocks overseas is that there are many hidden costs such as with holding taxes as well as foreign exchange risk. That said, Singapore's stock market is the home of many small companies that may not make the leap to the big stage, and existing local blue chips may have already been priced in with little upside.

In my opinion, look towards the European countries as a starting point. This is because there are plenty of mature firms looking to penetrate the emerging economies, and they look more likely to succeed compared to those from China and even Singapore. If you are cautious, then Malaysia could be the safer alternative as companies listed on the Bursa Malaysia can tap into a large and growing economy. Furthermore, it has been less correlated with the Singapore stock market due to the capital controls and bumiputera requirements imposed there. Just some thoughts.

Eratat Lifestyle Halted - Rights or Placement?

I really wanted to write about this yesterday before the halt was announced! Anyway, I wanted to say that the stock move from 19 cents to 22.5 cents could be the result of its lack of free float - 400 million plus shares at last count. Moreover, there has been some good publicity, which is enough to move the shares up due to thin trading. And I believe that the stock will issue a cash call again, or a placement at least,  after the earlier one failed to get clearance from SGX due to the size of the discount to average trading price.  A cash call is very likely (privatization a bit remote), and is definitely preferred to announcements pertaining to its financial statements.

A writer's block

If you look at the market at the moment, is there something for you to write about at all? Maybe, I have been too consumed by all the news on the coming General Elections that I have neglected the stock market. It could be that I have just have the good ol' writer's block.

Something about Politicians

The General Elections are due anytime soon, some say late into May 2011. A lot has been written about politicians in the press and on line. I can only say that at this point in time, while I have a distaste for politicians, due to the nature of their job of having to convince everyone by telling them different thing, I feel some of the arguments against them have been pretty weak. To be continued.

March Portfolio Stable but 12% down YTD

 I am looking at my portfolio and wondering, " it's down 10 percent?!"

Although the broader stock market has recovered to pre-Fukushima levels, my portfolio has stayed submerged mainly due to C&O Pharma and Etika International. The antibiotics maker has shed close to 10 cents off its share price since Sumitomo bought a 30 percent stake. This could be that the Japanese had overpaid for the acquisition.

For Etika, my explanation for its decline has been the rapid increase in raw material prices. EPS for the first quarter of its financial year is around RM 0.8 cents. Annualise it and it works out to be RM 3.2, which is about 8 times smaller than the EPS for the financial year 2010 of RM 24 cents.

There are some bright spots. Biosensors has managed to surge recently despite having a placement. However, you have got to be careful and gauge the growth possibilities of the company. This is perhaps the n-th time that the company is raising cash from the market. I am not sure if their product is going to dominate the geographical market that it intends to penetrate, but it is burning cash for sure.

The nuclear crisis in Japan does not look like reaching a conclusion soon. But the worse for the rest of the world has been avoided. Now, we have to wait and see how the Japanese government is going to deal with the run off into the ocean, that is affecting the sea food. The impact on the stock market as a result of limited sea food is limited.

The outlook ahead looks brighter than the previous review. I am guessing that April will be a positive month and there should be no surprises that can cause the market to tumble.