Friday, 7 November 2008

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.

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.

Monday, 3 November 2008

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

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.