TTI’s Portfolio Updates – 02/11/2016

As of 9M2016, TTI’s portfolio eeked out a 3.12% return, barely beating STI ETF’s 2.45% by a whisker.

Honestly, I was somewhat disappointed whilst doing the calculations as I was expecting to beat the index by a much larger margin. On closer inspection though, I was very encouraged as my position in Valeant dragged down the overall returns. It’s no secret how Valeant has performed of late.

Excluding my US equity positions, my SG portfolio would’ve returned 10.36% in 9M2016, a very decent performance in a tough year.

Still, it is ridiculous to exclude parts of your portfolio. If so, anyone would be able to show magnificent returns. I went back to re-read my initial investing thesis though, and nothing has changed so I’m sticking to my guns.

AUM is rather close to the magical $1mil mark, and I’m likely to cross that in 2016. (whether it’s by capital gains, dividends or capital injections). I generally don’t bother too much about AUM though, it’s the ROI figures that I’m focused on.

This is a short summarized review of my holdings, and companies that I do not own, used to own, or never owned but have above average insight on as I did intensive research on them before.

I deliberately wrote this just before Q3 earnings release, it’s a good exercise for me to see how the results pan out vs my documented thoughts here.


BBR Holdings

I’m not expecting anything drastic here, both on the up or the downside. Full Year results will be much more interesting. I’ll be very curious to see if the company manages to stop losses this quarter, I’m expecting some losses from the general construction division.

If BBR manages a profit, regardless of how puny, I’ll consider that a major plus. The worst thing is to have widening losses, which I’m currently not expecting.

I have since figured out who’s the “extra personnel” that BBR’s management brought in. He’s Dr Jeremy Wu, who was hired in May 2016 as Executive director and the director of corporate development. I’m interested to see how, if at all, he can help change things around.

BBR’s existing projects seem to be progressing well. The Wisteria residential unit sales are still progressing despite the tough operating environment, obviously. 148 units out of the 216 units have been sold, and there has still been sales transactions every mth thus far. That’s encouraging.

BBR is also market their PPVC technology to the Malaysian market. Not sure if that will work out, but there’s  no harm trying to “cross-sell” or utilize existing capabilities in different markets.

Boustead Singapore

This is one company that I spent quite some time on recently. Having re-read the latest AR, I understand what FF Wong is trying to do with the distribution of Boustead Projects to shareholders in a separate listing.

I have previously worked out in my thesis that it has NOT been value accretive. However, FF Wong wasn’t trying to create value by hiving off BP, he was trying to de-risk the revenue. This is part of his succession plans.

Going forward, I think Boustead will still have tough times ahead. I shan’t share the substantiation here just yet, but I am not optimistic about Boustead’s prospects in the near term.

Many people are calling the bottom for the oil market, I’m sure things will start looking rosy if OPEC manages to strike a production curb deal at the end of the month.

I’m not so optimistic. I don’t think a recovery is anywhere near the corner. We’re probably not even halfway there IMO..

I still love Boustead’s management though. They’re the best in class. And that includes Boustead Projects. Real competitive advantages.

Dutech Holdings

Yet another acquisition that looks to be a bargain buy. I was surprised as I thought Johnny Liu would want to wait longer to acquire again. But then again, you gotta capitalize when the opportunity presents itself.

The obvious thing to look out for is how the different parts of the businesses work together and whether there is synergy post acquisition. I’ll be scouring the 3Q earnings for evidence of that.

I’m also interested in monitoring the FCF and the ROIC rates. With all these acquisitions, I’m not sure the previous figures I have would still hold true, or would the newly acquired companies lower these rates.

Geo Energy Resources

What can i say about this. It is a home run thus far, no matter which way you slice it. I’d normally be delighted, but in this case, I can’t help but feel….. kinda irritated.

The whole idea of my deep value, intense research methodology is to find situations where I’m highly confident, and this confidence should enable me to take up sizable positions, allocate large amounts of capital and bunker in for the revaluation.

After just 400,000 shares though, I didn’t have the chance to accumulate further as the prices just shot up. This is reminiscent of my previous experience with Boustead years ago, when I bought below $0.7 and just kept watching as it went to $1.90.

Anyhow, the company just recently released a new development, tying up an agreement to manage the coal mine just adjacent to their SDJ mine.

This is a big development as it is new, and thus far, no value has been accorded in my investing thesis.

On top of that, the company gets the right to 5mil tonnes of coal in 2017 from this mine. In addition, the dynamics of the deal is very favorable to Geo Energy. They do not have to invest a dime, the owner of the mines is the one taking on capital risks. Geo Energy also gets paid an as yet, undisclosed fee, for management services. On top of all these, there are major cost savings from utilising SDJ’s existing facilities, so the way I see it, this is just a win win win for Geo Energy.

Bear in mind though, this is just taking care of the supply side. Geo Energy will still have to secure clients to take all this coal off them. I don’t think that is a problem though. The share price has shot up substantially on this piece of news, I’m expecting it to go up much more if the client side (Demand side) is taken care of. (more offtake agreements)

In somewhat related news, the US is trying to make China stop importing coal from North Korea. If they succeed, China would most certainly increase it’s coal imports from Indonesia.

http://www.reuters.com/article/us-northkorea-nuclear-china-usa-idUSKCN12T039

On a separate note, some readers have asked me what’s my usual or preferred holding period for any 1 investment. My reply is that I have none. If I build up a huge position in what I deem to be an undervalued situation, if the markets recognize that and corrects it the very next day, that’s the best scenario for me!

On average though, thus far, my core positions are held approximately 3-5 years.

King Wan

Just 1 word. CASHFLOW.

I’m excitedly awaiting to see if the company continues to collect on outstanding receivables, and monitor the CF.

Again, on a related note, not sure if I mentioned this in my earlier posts:

When I started out as a newbie investor, the income statement and the earnings are the metrics I look out for mostly. I’d spend the most time on the income statement.

As I progressed, I started looking more at the value and the price for the value. So the balance sheet becomes more important.

These days though, I’m primarily interested in the Cashflow statements.

Sure everything is important, but the CF tells me a lot more these days. Earnings can be manipulated, the balance sheet’s NAV is easy to understand and see so everyone knows, but the CF itself, can be complex and tracing it takes effort.

Libra Group

The share price has gone ballistic suddenly and I am suddenly in the green in this.

286) Libra group share price 02112016.jpg

I have my thoughts on this, but I’ll reserve that for later.

Anyway, this is not a core holding so I don’t wanna spend too much time on it.

LTC Corporation

As per my recent update posts on this, I’m interested in the FCF generation, and how it’s utilized.

From the recent AGM, one kind reader who attended, updated me about management’s plans (I didn’t attend the AGM), and it does seem like the FCF will be utilised for organic expansion of the new retail arm. It remains to be seen how successful that will be.

I’ll be eagerly waiting to crunch some numbers about this new retail branch.

Chesapeake Energy

Be careful what you wish for!

I was really glad when the share price dropped a mth ago, because of the huge amount of call options that I sold, and I didn’t really want to have them exercised.

Everything went well, except that the options have expired, so CHK you can stop falling now please. LOL.

Valeant

What a ride. I’m lazy to put the chart up, but pls google the share price. This is the 1st time anything I’ve ever owned, went up 35% IN A SINGLE DAY. (Of course it went down like 15+% the day before)

That is not normal. It means nobody really knows how to value the company.

As per today’s news, the company is in talks to sell it’s Salix subsidiary. I haven’t had the time to analyze that yet, but this is a massive plus.

My hypothesis is that it’s so volatile because nobody has any gauge to value the company on a SOTP basis. With this, suddenly we can have a guesstimate of what Valeant’s assets are worth.

I mean, I’m in healthcare, and even I can hardly understand the massive portfolio of drugs. (Except for B&L, the rest are not even available in Singapore) I highly suspect most supposed “investors” are just reading the headline news and reacting according. Most probably have never seen the 10-K before, much less did any analysis.

I have a relatively huge position in VRX, and thus far it’s been punishing me. I was probably about a year early in taking up a position, but then hey, nobody gets it right exactly all the time.

It’d be very exciting to see where it goes from here, I’m eagerly awaiting the next 2 quarters of results.

SPY shorts

I’ve earlier mentioned in my posts that I’m short SPY at 217.

For a long while after I shorted, the position went against me. Now, there’s no doubt that it’s been a great move. My options expire in Jan 2017, so I still have time. I’ve already taken profit on the earlier shorts, but still have a sizable position.

I’ve also learnt (From experience) that as the price approaches the exercise price of the option, the price volatility of the option increases dramatically. So it’s not proportional from being far out of the money, vs just a little out of the money. That sure has implications on how I build my position in future.

Hard for me to explain that concept, it’s probably best experienced oneself.

Miscellaneous

Some of the other companies that I’ll be monitoring include my previous core positions such as Hock Lian Seng and Metro Holdings.

I’m also looking at Asia Enterprises Holdings. Although I am unlikely to take up a position, knowing and understanding related companies teaches me a lot. For example, understanding other steel players gives me an idea of LTC’s position and future. Knowing where steel prices are heading to also helps in stuff like knowing the upcoming costs for Dutech (Steel is a raw material)

So basically it’s all linked

S i2i and CDW Holdings are companies that I’ll be assessing as well. Just for curiosity sake mainly. (For CDW Holdings, management has replied me generically, but has still not answered regarding the exercise price for the granted options)

Good luck to all for the upcoming earnings release season. The upcoming ones (for me) is most likely going to be Asia Enterprises Holdings or Hock Lian Seng, either this week or next.

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12 comments

  1. Hi TTI,
    Very detail analysis of your holding , Yup, ROI is more important than AUM and same for Cash Flow vs Income statement,, for me ,cash flow is like blood circulation in our body !! As my ” Rojak ” portfolio is more skew towards incomes stock,,, cash flow seems much more important for me ,,, :h
    Cheers !

    Like

    1. Hi SY
      That’s really hard to predict, it depends on their cash on hand, and more importantly, what the capital requirements are for their associates and JVs. If there is a mid term dividend, it’ll be a strong positive for the share price.

      Like

        1. Yup!
          Because of the CF from The Skywoods project, and collection of receivables.
          Their BS looks better now.
          As expected, it’s a +ve for the share price, dividend declared is only $0.005, but share price is up $0.015.
          Markets are expecting yr end dividends to be resumed too.

          Like

            1. Hi SY
              I’ve literally just (a few minutes ago) finished analying the latest 3Q. My take is that there’ll be a final year dividend as well. It just doesn’t make sense to resume dividends in 2Q an not have 1 for FY.
              I’m guessing the final div would be only 0.5 cent or 1 cent though.
              At 0.5 cent, it’d cost the company $1.75mil. Currently, the company has about $10.5mil in cash, so sure, the company can afford to sustain the dividend.
              BUT I don’t think the company is totally out of the woods. The improvement in the BS in this quarter is from the payout from their associates, in particular, the 2 condo projects: Starlight and Skywoods.
              There is no breakdown, but as I have shown in my previous post about hock lian seng, I think the skywoods is a done deal, so I’m not expecting any more distributions from there.
              The remaining associates, are not performing well and I’m not expecting any distributions of significance from them in the coming quarters.
              Still, we must remember that a total dividend of 1 cent (0.5 + 0.5), is still = a yield of 5.3% based on the current share price of 19 cents. Which is very very respectable in today’s environment. On top of that, with the payment of an interim dividend, the annualised ROI is in reality, a bit more than 5.3%,
              Plus, it is hard to see how the share price can fall any further from here, as all the skeletons are out of the closet. So there’s a natural built in MOS.

              Like

    1. Hi TUB
      Join you? You mean as a shareholder? Actually, I’ve just recently divested. I’ve discussed my reasons for divesting, and my concerns regarding CDW:
      https://thumbtackinvestor.wordpress.com/2016/10/25/post-mortem-of-cdw-holding-ltd-divestment/

      For these reasons, it’s very unlikely I’ll take up a stake again anytime soon. I meant in my post that I’ll continue to update and assess the company, even if I have no intention of being a shareholder.
      Will be happy to hear your thoughts, if any, on this.
      Cheers
      TTI

      Like

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