Author: (The) Boring Investor

Do Not Judge A Blogger By Short-Term Price Movements

How do you judge if a blogger is correct? Is it by price movement? That is, if the price moves in the same direction as what the blogger writes, then he is correct. Conversely, if the price moves against him, then he is wrong. This is an easy and convenient way of judging a blogger, but is not necessarily correct. If you are a short-term investor, then short-term price movement can be the yardstick to measure a blogger. But if you are a long-term investor, short-term price movement is the wrong yardstick. Using last year’s Brexit referendum as an...

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Which Offshore Support Vessel Companies Will Survive?

Following the success of the minion strategy described in The First Class of Minions, I have continued to use it to place speculative bets on companies which have a reasonable probability of turning around. These include the Oil & Gas (O&G) companies. The first batch of O&G minions are from the upstream Exploration & Production (E&P) companies, as they are the first to benefit from the rise in oil price. See The Missing Link Between Oil Price & O&G Profitability for more info. This group of minions (Interra, KrisEnergy and Ramba) is not particularly successful, with Ramba currently having...

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The IQ, EQ and AQ in Investing

To be successful in investing, it takes more than just having a high Intelligence Quotient (IQ). As Warren Buffett said, “Investing is not a game where the guy with the 160 IQ beats the guy with 130 IQ.” Besides IQ, Emotional Quotient (EQ) and Adversity Quotient (AQ) also play important roles in determining the outcome of our investments. Intelligence Quotient (IQ) IQ is about the ability to rationalise our investments. It involves setting up a framework to determine asset allocation, risk management, stock selection, stock valuation, buying and selling rules, etc. If you are an active investor who picks...

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The First Class of Minions

3 years ago, I embarked on a new strategy of placing small, speculative bets into loss-making companies with the potential to make a turnaround. That strategy is now affectionately known as the “minion” strategy. The first class of minions is from the semiconductor sector, which has risen strongly this year. Most of the minions have been sold in the last 1 year, and they have graduated with flying colours. The triggering point for initiating this strategy is that I realised that although there were many semiconductor stocks listed on SGX, only 2 made good profits and gave out good...

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The Accounting for Hyflux’s Water Treatment Plants

Hyflux develops and operates various types of water treatment plants for municipals and industrial companies in concessions of 20 to 30 years. It has a strong order book of $3,187M as at Dec 2016, of which $1,916M is related to future revenue from the operations & maintenance (O&M) of the water treatment plants over the concession periods. Fig. 1 below shows Hyflux’s order book. Fig. 1: Hyflux’s order book Yet, despite the strong O&M order book, Hyflux lost money in recent quarters from the operations of the Tuaspring Integrated Water and Power Project. In 1H2017, Hyflux lost $25.4M, of...

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Know Your Customers Well!

Ouch! I just lost $33K on Triyards after it got suspended last month. Triyards is a shipbuilder and a subsidiary of Ezra, which is now under Chapter 11 bankruptcy protection. By right, if you read my post on My Upstream Oil & Gas Rescue Operations, ship and rig builders have not seen the worst of the Oil & Gas (O&G) long and harsh winter and I should not have invested in Triyards in Mar this year. However, Triyards has successfully diversified away from the O&G sector. Among its new orders for the financial year ending in Aug 2016 are...

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If You Invest In Fixed Income, Read the Fine Print

After the exertion to read the Offer Information Statement (OIS) of Hyflux’s preference shares and perpetual capital securities (perps) in the past few weekends, this week’s post will be a lighter one. In my post last week, I extracted the relevant portions of the OIS of Hyflux’s preference shares and perps to discuss the conditions upon which Hyflux could omit the preference dividend and perps distribution respectively. For me, the most surprising discovery is that the preference shares are ranked pari passu (or have the same seniority) with the perps! See the figure below, which is extracted from the...

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Watch Out for Hyflux’s Omission of Ordinary Dividends

Hyflux announced its half year financial results last month. For holders of Hyflux preference shares and perpetual capital securities (perps), perhaps the most noteworthy point is that it did not declare  an interim dividend on its ordinary shares. Why is this important? It is because the payment of a preference dividend or perps distribution is discretionary. If certain conditions are met, the company can choose not to pay or only pay partially any preference dividend or perps distribution. One of these conditions is that a dividend on the ordinary shares is not paid out. The conditions for preference shares...

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The Small Cushion That Warrants Provide

I have a small, speculative strategy affectionately called the “minion strategy”, which involves throwing a small amount of money into certain depressed stocks that have the potential for a turnaround. The money is mentally written off the moment it is invested. The strategy is described in more details in Meet The Minions. Since the money will be written off anyway, if the stock has a warrant, I would choose the warrant over the mother share, as warrants are cheaper and rise (or fall) proportionally more than the mother shares. One of the recently added minions is Ezion warrant. As...

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It Is Possible to Survive a Currency Depreciation

Since that fateful day when Britons voted for Brexit a year ago, the British Pound (GBP) has fallen by 11.8% against US Dollars. Worries about Singaporean companies’ investments in UK were raised in the aftermath of the vote. However, the fall in GBP was small fry to one Singaporean company which faced much larger currency depreciation in the countries it invested in. The company is Food Empire, which derived 58% of its revenue from Russia and 13% from Ukraine in 2013.   In Mar 2014, Russia annexed Crimea from Ukraine. International sanctions on Russia followed suit. Both the Russian...

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It Is Possible to Survive a Currency Depreciation

Since that fateful day when Britons voted for Brexit a year ago, the British Pound (GBP) has fallen by 11.8% against US Dollars. Worries about Singaporean companies’ investments in UK were raised in the aftermath of the vote. However, the fall in GBP was small fry to one Singaporean company which faced much larger currency depreciation in the countries it invested in. The company is Food Empire, which derived 58% of its revenue from Russia and 13% from Ukraine in 2013.   In Mar 2014, Russia annexed Crimea from Ukraine. International sanctions on Russia followed suit. Both the Russian...

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Did Hyflux Make Money for its Ordinary Shareholders?

Hyflux is an interesting case. In FY2016, it reported a net profit attributable to owners of $4.8M but a loss per ordinary share of 7.51 cents. Its net asset value correspondingly dropped from $0.56 in Dec 2015 to $0.45 in Dec 2016. The main reason? There are a few different types of owners of the company. Besides the ordinary shareholders, there are preference shareholders and perpetual capital securities (perps) holders. The net profit attributable to owners of $4.8M has to be shared among these different types of owners. Both preference shareholders and perps holders have prior claims over ordinary...

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Buying the Most Expensive Integrated Shield Plan When Young and Downgrading When Old

Integrated Shield Plans (IPs) are hospitalisation insurance plans offered by private insurance companies to cover hospital stays in public and private hospitals. They are integrated with the basic Medishield Life plan run by CPF. There are typically 3 types of IPs, namely those covering Class B1 wards, Class A wards and private hospitals. For ease of reference, they are named as Class B1, A and P plans respectively. Annual premiums increase with age and are most expensive for Class P plans. For this post, I will use the IPs offered by my insurer as the basis for discussion, since...

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No Need to Maximise Profits with Cash of Last Resort

CPF funds are my cash of last resort in investing. I have quite a good record of investing my CPF funds. However, that statement would be incomplete, because majority of the time, the funds are parked in bank preference shares and collecting regular dividends that pay higher than CPF Ordinary Account’s interest rate of 2.5%. On equity investments, there were only 2 occasions when CPF funds were deployed. The first was during the market doldrums during 2000-2003, when I ran out of cash for investments and had to rely on my CPF funds. The second was to buy more...

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What Are Driving Those Numbers!

The quarterly earnings season has started and I have been busy reading the financial results. It is sometimes frustrating that the reports do not reveal much about why the business is doing well or poorly and whether the trend will continue. The reports contain a lot of numbers and some discussions, but most of the time, the discussions just regurgitate what the numbers already show. To illustrate what I mean, I will use M1’s financial results as an example, but it is not the only company that has the issue.   The figure below from M1’s financial results shows the numbers...

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