Monday, May 7, 2018

My Portfolio Management - Building & Sitting On CASH!


Investing for me: owning a business

Holding period: infinite (or longer time horizon)

Monetary gains: working towards achieving my 1st million of profit thru investing as soon as possible

Strategy:
1. To search for brilliant business with good economic moats, being managed under good management team, and is offering at bargain price.

2. To continue building and sitting on cash so at any moment an opportunity arises, i can act fast!
(I need to really work harder on this!)


“It takes character to sit with all that cash and to do nothing.
I didn't get top where I am by going after mediocre opportunities.” -  Charles T. Munger

Saturday, April 28, 2018

What will i do with my Sunningdale shares?

Sunningdale share price has been dropping sharply for these past few days from the average price of $1.90 on the 2nd April to $1.27 as per yesterday closing price (about 33% drop).

When the share price of a counter i am holding has been moving drastically up or down in a short period of time, i will have to reassess my thesis in the company (my based will only be on the fundamental of the company for long term hold):

(1) The sustainable business model attracts me to own this company for longer term,

(2) Solid balance sheet, consistently generates cash flow in the business every year,

(3) Consistently looking for improvement operation costs either by consolidating its under-performed plants in similar locations or adding new plants to those areas which are able to bring more efficiency to their operation costs,

(4) Year to Year comparison on business performance on Revenue, Gross Profit, Net Profit, Cash, Debts, Dividend per share and Forex (loss)/gain for the past 5 years:


Full Year
Revenue SGD ('000)
Gross Profit SGD ('000)
Net Profit
SGD ('000)
Cash
SGD ('000)
Debts
SGD ('000)
Dividend per Share
SGD (Cents)
Forex (loss)/gain
SGD ('000)
2013
476,003
55,402
13,649
79,215
59,753
3.5000
(316)
2014
475,613
59,928
27,676
104,833
137,020
4.0000
1,427
2015
674,464
90,842
42,104
121,113
120,000
5.0000
12,849
2016
684,457
94,335
39,071
115,255
99,758
6.0000
8,952
2017
724,545
105,533
31,360
105,281
103,680
7.0000
(10,647)
*Q12018
168,974
21,409
1,940
105,448
106,556
-
(5,205)

1. Revenue has been increasing YoY.
2. *Q12018 revenue dropped 1.6% QoQ or $2,807,000. If the exchange rate of the US Dollar and the Euro remained at the Q12017 rates, Q12018 revenue would has been $173,474,000 or about 1% increased from Q12017 and the GP margin would has been 14%.
3. Excluding foreign exchange loss, retrenchment costs and gains from the disposal of plant, property and equipment (“PPE”), net profit would have been $7.1 million for Q12018.
4. The Group reported an increase in revenue from all business segments except for the Consumer/IT segment. The decrease in revenue from the Consumer/IT segment was due to a decline in demand from end customers for certain projects, project end-of-life and new projects which have yet to commence the ramp up phase. This also caused the GP margin to be decreased to 12.7%. 
5. Construction of the Group’s latest manufacturing site in Penang, Malaysia has been completed and is in the midst of doing pilot runs for mass production in the Consumer/IT segment that is scheduled for ramp up in the second half of 2018.
6. If i sum up the forex (loss)/gain for the past 5.25 years, the Forex (loss)/gain will result in the gain of $7,060,000.

As i have mentioned in my post before, my investment knowledge is really very little, as so my business knowledge. 
Apart from the reports or announcements they made via SGX, how much more i know about Sunningdale business environment, the challenges they are facing including volatility of foreign exchange markets and rising labour costs accross their 20 plants in 9 different countries? their operation efficiency in 20 plants with thousands of headcount involved? 

Am i able to translate all the contents of their reports precisely?

Can i trust their management completely?

Do i have faith in their business going forward?

Do i think Sunningdale will still be around and surviving in the plastic business world in the next 5 - 10 years down the road?

My guess is as good as everyone's guess.

Having said all that, i still have faith in this company and i strongly think the current business valuation of $240mil is still far undervalued comparing to their business fundamentals as per shown so far. 


* Above are just my thoughts. The accuracy or completeness of the information above cannot be guaranteed. 

Monday, April 16, 2018

Turning cents into dollars (small change book 2)


I just finished reading "Turning cents into dollars (small change book 2) by Goh Eng Yeow.

This is a compilation of articles written by Mr Goh Eng Yeow into a book.

Below are some of the contents from the book - to remind myself:

(1) Doing good brings goodness
Compassion is a two-way street. Those touched by compassion will reach out to help others. Indeed, many go beyond donating money or goods to adopting charitable causes, giving generously of their time to teach poor children or help out at an old folks' home.
Our lives would be assessed, not based on dollars, but on the people whose lives we have touched.
It is an affirmation that what goes around comes around. By doing good, we will be rewarded with goodness.

(2) Knowing when enough is enough to get by
Being wealthy is not necessarily about having lots of money. Rather, it is about holding plenty of cash, and being able to maintain your standard of living and take care of your family without facing the risk of running out of money.

(3) What it takes to be rich
Sure, most of us believe that the more money we have, the happier we will be. But if we really want to have a fulfilling life, it is not the wealth we have accumulated that matters. It is how we spend it that counts. Wealth should not just be measured in material terms. As the ancient Greek philosopher Epicurus once opined: "Wealth consists not in having great possessions, but in having few wants."

(4) Keep good friends - and good stocks
True friendship also applies to investing. Too often, as soon as an investor buys a stock, he is already planning an exit strategy, as he looks at how to dump the newly purchased stock. Of course, taking profit is not a bad thing. But simply selling a stock because we have made a quick buck misses the point about investing.
So, just like having lifelong friends, it may not be difficult to achieve extraordinary returns by buying the shares of good companies with which we are comfortable, and then to hold on to them.

(5) The best investors stay hard-headed
There will always be ups and downs in the market. The best investors stay hard-headed about the risks they can handle and the returns they want.

(6) Lessons from the financial crisis
China's late paramount leader Deng Xiaoping once said: "It doesn't matter whether a cat is black or white. A cat that catches mice is a good cat." Investors should view the stock market in a similar way: It doesn't matter whether it is a bull or a bear market. As long as one makes money, it is a good market.
Investors should remember that they are putting their capital at risk when they invest in order to make money. Legendary investor Warren Buffet once summed it up as:
Rule No. 1: Never lose money.
Rule No. 2: Never forget Rule No. 1.

(7) Tips for the novice investor
Financial advice for young & novice investors: Work hard, spend little, and invest the difference.
Dollar-cost average for your entirely life and you'll beat almost everyone who doesn't. What this means is to invest the same sum in the stock every month, or even consider buying more of it when the market is down and less when it is up. Over the long term, this will ensure that you buy low and sell high. Of course, this advice applies only if you are buying into stocks whose earning capabilities have been proven beyond the shadow of a doubt over the years.
Investing is simple but never easy. The mantra is to start early enough - and to stick to solid assets which you understand.

(8) Trump your inner miser
In order to stay the course and add to our investments over the years, we must keep up the rigorous discipline of ignoring the "noises" sent out by a stock's short-term trading patterns and the overall market trend. Part of the problem comes from the myopic focus of research reports put out by stock analysts as they chase a company's next earnings numbers.
Sure, such information is useful but what determines a company's long-term fair value is the dynamic of its earnings growth, and not the size of its short-term profits.

(9) If in doubt, sell half
There are times when a company is unloved, for whatever reason, even though it enjoys good business fundamentals. This is reflected by its depressed share price. It may take a long time before it is priced correctly. In the meantime, it can be frustrating and painful for investors who are right about the company at the wrong time.
For so many investors, it may be the tallying of votes - what other people think of the stock - that matters a lot more than the weighing machine Mr Graham talked about.
There is another analogy for investors who take much shorter view on their investments, one enunciated by another great investor, the British economist John Maynard Keynes. He described investment as a beauty contest with a difference. To guess the winner, what is important is not to select who you believe to be the most beautiful contestant but to guess at how the judges will rate the various contestants. Seen in that light, successful investing is really a lot more psychology that anything else, a process of coming to grips with your won emotions as well as others'.
Mr Goh's answer to any investor who is confronted with a dilemma over taking profit on this winning bet or cutting loss on a plunging stock, is to sell half of it. Selling half of the investment will release the psychological logjam that comes from trying to decide whether to keep the investment or get rid of it completely. He can then analyse why he bought the stock in the first place, and whether to hold the remaining shares, sell them or buy more.

(10) In investing, stick to the best companies
Legendary investment guru Warren Buffet has made the wry observation that "when a management with a reputation for brilliance tackles a business with a reputation for bad economics, it is the reputation of the business that remains intact".
So, in any successful investment strategy, the key rules are: buy into only the best companies, stick to business sectors which enjoy predictable earnings and higher-than-average growth, and pay a fair price for the investment. The principles may sound simple but sticking to them is easier said than done.

(11) The case for buying Asian stocks
According to billionaire US fund manager Howard Marks: "Sometimes, emerging markets are considered to be scary and exotic places, and sometimes, they are the attractive high-growth alternative to the stagnant developed world."
The importance of making the right call on emerging markets, or any investment for that matter, is to understand that a stock price is affected in a big way by investor behavior. He said: "We want to buy when prices seem attractive. But if investors are giddy and optimism is rampant, we have to consider whether a better buying opportunity might not come along later."
Hence, the important point to bear in mind is that in good times, investors tend to chase after assets till they hit prices well beyond reason. But when a financial calamity occurs, prices tend to be depressed to unreasonable levels.
So, remember to apply caution in investing in the attractive but volatile Asian markets. While stock prices look attractive today, they may become even more attractive tomorrow if investors' sentiment sours.

(12) The attractions of dividend stocks
Investors should consider:
- The company has a business model with the cash flow to sustain further their dividend in the future. After all, a company with a solid business and a long history of making - or increasing - dividend payout is likely to stick to its track record of doing so.
- The dividend payout ratio. This is the proportion of earnings which a company pays out as dividend. As a rule, it is better to invest in companies whose dividend payout ratios do not exceed 50 percent of its earnings. This will ensure that the company has the ability to maintain the same payout, even if its business should suffer an unexpected downturn.
- A company's debt servicing ratio - the amount of cash it uses to service the interest payment on its debts. This is to ensure that the company is not borrowing heavily to pay out the dividend - a ploy that will prove unsustainable.




Friday, April 13, 2018

Portfolio Value as per April 2018

No.
Counters
No of Shares
Market Price
per Share
(SGD)
Total Value
(SGD)
1
800 Super
20,000 $1.140 $22,800.00
2 AEM 12,000 $6.960 $83,520.00
3 Avi-Tech 100,000 $0.485 $48,500.00
4 Best World 50,000 $1.720 $86,000.00
5 Chasen 400,000 $0.071 $28,400.00
6 Innotek 190,000 $0.440 $83,600.00
7 Sunningdale 60,000 $1.830 $109,800.00
8
Tat Seng
Packaging
30,000 $0.800 $24,000.00
9 Cash $5,084.60

TOTAL: $491,704.60

(1) I have divested all my Trek 2000 shares at the price of about $0.24 per share. Taking a loss of about $3,500 excluding the broker fees. Trek 2000 is still a good company which has potential to grow more in future. They are also giving a dividend of 1cts per share with the yield of about 4.3%.
The reasons for my divestment are because i am not very comfortable with their accounting issues which are not closed yet until now and also part of my holding consolidation plan to have about 7-8 counters the most. I will keep Trek 2000 in my watchlist, if the circumtances have changed, i might be interested again in the future.

(2) Added 60,000 shares of Innotek at about $0.42cents per share. Will try to share more on this company in my next post. Up to date, Innotek is my biggest invested capital in terms of dollar values into a single counter.




Monday, April 9, 2018

Some notes for my investment journey...


The company with the highest profit margin is by definition the lowest cost operator, as the lowest cost operator has a better chance of survival if business conditions deteriorate.

When investing, we are looking for a relatively High Profit Margin for a Long Term Holding stock and a relatively Low Profit Margin for a Turn Around stock.


How inflation will effect the share price?

Inflation will lead to low earning or profit to a company. Inflation means too much money is in the market that leads to money's value become lower, material cost become higher. With higher overhead, profit margin become lower. With lower price earning ratio, people/investor become less interested to shares, the share price will fall.

What is the sign of inflation?
1. Commodity Price (oil, rubber, steel) increase.
2. Interest rate high
People do not wish to borrow loan with a high interest, then business is hard to expand, economic growth is under control. High interest is to control inflation.