Author Archive

Posted on September 3, 2010 - by musicwhiz

August 2010 Portfolio Summary and Review

August 2010 was indeed an interesting month for me in terms of portfolio changes; as I made the somewhat painful decision to divest of my entire stake in FSL Trust (as I had previously blogged about in this post). The decision was a mixture of relief and regret, as the funds from this investment can finally be freed up to be redeployed into a more promising investment. What I dislike most is “deadweight” in my portfolio, and I will not hesitate to cut loss on a position in order to re-allocate the funds to another position should I objectively conclude that it would be in the best interests of my portfolio.

I had mentioned that I expected August to be a relaxed month; but it was not to be so as I spent quite a bit of time researching and poring over Annual Reports for my latest purchase – SIA Engineering Company Limited (“SIAEC”). In order to do a more comprehensive analysis as compared to my previous one on Kingsmen Creatives, I spent a lot more time dwelling on the Annual Reports, doing deeper analysis on each division, poring through SIAEC’s many associated companies and joint ventures; as well as doing a detailed competitive analysis for three of SIAEC’s competitors. The result is a rather lengthy report to justify my purchase of SIAEC which I will split into five separate sections (in order to keep each section readable). The full report is about 32 pages (along with 14 tables of figures) and it is my intention to post up as much of the analysis as I can in its entirety; as this is the first blue chip company (SIAEC is, incidentally, part of the Straits Times Index’s 30 component stocks) I have seriously researched on and I will need to get some feedback so that I can improve for future research and analysis work. (more…)

Posted on August 30, 2010 - by musicwhiz

GRP – FY 2010 Analysis and Review

GRP released their FY 2010 results on August 20, 2010 (the company has a June 30 year-end). Suffice to say that there were no major surprises; either negative or positive, but the prevailing sentiment from me is that the Company can do more to either increase their dividend or to reinvest the cash which is just piling up. There was not much articulated about how the cash will be utilized or how the business would be grown beyond what it is now; so it was quite a disappointment for me. I will go through the usual review and analysis which will be kept brief as this is a simple company to analyze; but I will focus at the end on what I’d expect from the Company in FY 2011 and how I hope it can communicate better to shareholders.

Financial Analysis

Profit & Loss Statement

Revenue was essentially flat, rising just 1.4% from S$25.3 million to S$25.6 million; and was mainly due to the weakness in Hoses and Marine as well as the PVC pipes division (in China). Cost of goods sold, however, increased by 6.2%, which resulted in gross profit falling by 6% from S$10 million to S$9.4 million. (more…)

Posted on August 26, 2010 - by musicwhiz

Personal Finance Part 18 – To Crave and Covet (C&C)

It’s been a while since I’ve talked about aspects of personal finance, as I was kept busy the whole of May to July 2010 with analyzing the financial results of the companies in which I hold shares, as well as writing about Sun Tzu’s War On Business episodes. I’d realized the last entry on personal finance was back in April 2010 and was on cycling! I had been thinking in the last couple of weeks about the problems associated with our society in relation to over-spending and lack of prudence or knowledge about financial matters; and it boils down to one major problem which I term “C&C – Crave and Covet”. This will link up to many other concepts which I will point out later (and which have been popularized by the mass media as well).

The simple definitions of the words crave and covet are as follow (from Dictionary.com):-

Crave – To long for; want greatly, desire greatly
Covet – To desire wrongfully, inordinately, or without due regard for the rights of others

It is in our basic human nature to crave and desire for more, of course after ensuring our basic necessities are provided for. But society today is a lot more materialistic and capitalistic than it was say, two generations ago. This is sadly due to the modernization of Singapore, which in some ways has outpaced the maturity of the young minds, who are still struggling to adapt to the “First-World” mentality inculcated within them by our education system. A mature mind is one which is able to handle pervasive emotional influences which may have a detrimental effect on one’s wealth and spending habits. (more…)

Posted on August 23, 2010 - by musicwhiz

Tat Hong – FY 2010 Analysis and Review Part 3

Part 3 of this analysis delves into Tat Hong’s inventory levels for crawler cranes as well as tower cranes. It also attempts to discuss Tat Hong’s prospects for the next financial year and beyond by incorporating recent news as well as from attendance at Tat Hong’s FY 2010 AGM which was held on July 27, 2010.

Crane Inventory Levels (All Cranes)

Looking at Tat Hong’s total fleet profile, it can be seen that their inventory levels have hit a new high of 481 units even as they are trimming their inventory and boosting their fixed assets (transfer from trading stock to fixed assets for rental). The one glaring figure which explains the depressed performance is the overall utilization rate of just 56.6%, which is a far cry from their “peak” performance of 83.5% utilization as at June 30, 2007 (nearly 3 years ago). This would explain why revenues for crawler crane rental are so depressed – companies have not really kick-started their spending on buildings, oil and gas projects and infrastructure as these will lag the economic recovery; hence Tat Hong’s performance in this division will generally lag the economy by about 6 to 9 months. (more…)

Posted on August 21, 2010 - by musicwhiz

Sun Tzu – War On Business Part 11 (Ultizen Games)

Photo by Kyle May

Episode 11 of this highly successful series brings James Sun back to China, Shanghai. In this episode, he meets up with entrepreneur Lan Hai Wen, who heads a video-gaming company called Ultizen Games. Ultizen is in charge of producing and marketing games for adults and children, but the Company recently was awarded a contract (thanks to the CEO’s networks and contacts) to produce and develop a children’s game, for the Chinese mass market. As can be imagined, the potential is huge as China has a very large child population, and if the game takes off it could elevate Ultizen to a whole new level.

However, as with all businesses, it is prudent to check out the competition first. The video gaming industry is large and fragmented and there are many companies which are muscling in to grab a piece of the lucrative pie. Ultizen is purportedly one of the larger gaming companies in Shanghai, but it is difficult to grab the leadership position as people’s tastes keep changing and the industry has to continually churn out new games and software to keep consumers interested. There is also not much product and brand differentiation as people usually just buy the game without bothering much about the company behind it (as well as the legions of developers who helped produce it). I can safely say this because I used to be a gamer too, and seriously I cared more about the content and graphics than the actual gaming company (OK, maybe except Blizzard which produced Diablo II)! (more…)

Posted on August 11, 2010 - by musicwhiz

Divestment of FSL Trust

I guess this was an action which should have been taken some time back, but trust me to allow inertia and false hope to dull my thought processes, rationality and objectivity; thus causing me to delay my decision to completely divest First Ship Lease Trust (“FSL Trust”). For the record, I have completely divested my position in FSL Trust on August 3, 2010 at an average price of S$0.41125, crystallizing a realized loss of about S$14,000 (or about -64%). If dividends of S$6,300 are taken into account over the years, the actual loss from this investment stands at S$7,700 or about -35%, still nothing to sneeze about. Since I had recognized realized gains from dividends under realized gains/losses in my portfolio review, I shall now take in the full S$14,000 loss there to offset the $6,300 recognized over the years (as per proper accounting procedures).

Let me categorically state right now that even as early back as mid-2008, I was “warned” about the structure of Shipping Trusts and of FSL Trust in particular as being vulnerable and unsustainable. (more…)

Posted on August 2, 2010 - by musicwhiz

July 2010 Portfolio Summary and Review

OK, so maybe there’s really not much to say for July 2010 after all; unless you count the “usual” economic troubles with Europe, the housing crisis in USA, and the red-hot (but possibly overheating) property market in China. It’s basically the same old stories and news being churned over and over again for dramatic effect (playing out like a Mediacorp drama serial, no less), where the headlines and presenters are the only things changing. This has the unfortunate effect of making me very sleepy and my mind has the tendency to just “switch off” when any of these news topics come up. I apologize if I had really missed anything of significance which I somehow failed to include in this month-end summary; but then again if it was really that important most people would have known about it without me saying anything (unless you were a hermit living in a cave in the last 6 months).

So with that out of the way, I can focus on commenting on something much closer to home – property market, cars and personal finance! Apparently, HDB resale prices have hit yet another high for eight straight quarters; in the last quarter April to June 2010 prices inched up another 4.1%; with median cash over valuation (“COV”) rising to S$30,000. Some “hot” estates even saw COV rising to as high as S$80,000 to S$100,000 (as reported by Business Times July 24, 2010). This is indeed very preposterous and disturbing and it seems to be a trend of never-ending prices rises which will culminate into increased inflation for all. (more…)

Posted on July 28, 2010 - by musicwhiz

Boustead – FY 2010 Financial Analysis and Review Part 3

In this third and final part of Boustead’s analysis, I will post the entire transcript of Boustead’s audiocast for FY 2010 results, and after that I will highlight some salient aspects of the company (coupled with insights from the recently obtained Annual Report for FY 2010) to shed some light on the future plans and prospects for Boustead. Note that the company’s AGM will be held on July 28, 2010 at 10 a.m. at its office at Starhub Green.

Part of the reason for the delay in coming up with Part 3 was because of the arrival of the Annual Report (“AR”) and the voluminous amount of facts contained within, which required some time to digest and for me to come up with some thoughts and comments. Note that the AR should be read in line with the audiocast transcript and the reader should also have some background knowledge of each division and sub-division of Boustead and its press releases in the past 1-2 years, in order to fully appreciate and understand the implications of the analysis. I trust that readers can gather this information from downloading the AR and news from either SGXNet or Boustead’s website at www.boustead.sg. (more…)

Posted on July 25, 2010 - by musicwhiz

Sun Tzu – War On Business Part 10 (Digital Academy)

We have now come to Part 10 of this 13-part series for Sun Tzu, War On Business. So far, it’s been a good journey with yours truly learning a lot of business lessons by observing and watching this half-hour program every week. Hope readers have been enjoying the posts so far as there have not been many comments on each post (could it be people are not bothering to watch this series?). Whatever the case, I hope readers can read through each episode’s summary and glean some useful knowledge from it.

In this episode, James is back again in Mumbai, India; and this time he visits a film school called Digital Academy headed by Mr. Kartikeya Talreja (“Talreja”). It occupies about 44,000 square feet of space and has many theatres and elaborate built-up sets within the compound. Currently, though, this film school only has 600 students enrolled per year, and according to Talreja this is less than optimal as he envisions a capacity of 1,200 students per year. His vision is for Digital Academy to be a world-class brand, attract international students (i.e. not just from around India) and have branches/outlets in major international cities. James mentions that one should “Carefully Compare the opposing army with your own”, a reference to comparing the competition out there with your own business to see if your goals are realistic or not. (more…)

Posted on July 20, 2010 - by musicwhiz

The Essence of Investing

After the trials and tribulations over the past 4.5 years, I admit I do spend an inordinate amount of time doing self-reflection, and at the same time, reading up on value investing and doing some independent thinking and analysis of my past mistakes; and how I can always improve on my investing techniques and stock selection process. Close to my heart is Benjamin Graham’s definition of investing, which bears repeating: “An investment operation is one which upon thorough analysis, guarantees safety of principle and an adequate return. Operations not meeting these requirements are speculative.” Notice that the man does not define investment in terms of making lots of money, and he also does not specify any time frame with which one should practice the above. This has led me, in recent months, to truly define and ask myself what is my purpose for investing; and what I would eventually like to achieve from it. The answer was quite clear and simple – my purpose for investing is not to “strike it rich”, but to obtain an adequate return on my invested capital which is higher than inflation. With that in mind, I focused on capital preservation and margin of safety, concepts which most readers are familiar with by now but I will discuss these two concepts from a slightly different perspective this time. In particular, the concept of margin of safety is not cast in stone and its definition is subject to interpretation by the practitioner.
(more…)