TTI’s Portfolio Review – FY17Q1

Before you know it, Q1 came and left. TTI’s portfolio generated an internal rate of return of 15.78% annualized. Total net assets under management grew by $105,937.67, from $943,815.80 at the end of FY16Q4 to $1,049,753.47 at the end of FY17Q1. These figures are nett of all fees.

Looking at the AUM, a gain of about $100k in the 1st 3 months of this year isn’t too bad. Plus most of the companies I own have their financial year ends in March. This means that I haven’t received any dividends and would expect most of my dividend collection to take place sometime in the next few months. These figures also mean that if my portfolio continues growing at this rate, I’ll end FY17 with a 15.78% return, which is not super fantastic, but certainly not too bad either. I wouldn’t mind a long term, multi year compounded return of 15.78%.

On top of that, I could’ve grown AUM more rapidly in Q1 if I wanted to, by capital injections. But as I’ve explained previously, I’m considering a property purchase probably in late 2017 or 2018, so I’ve decided that most of my capital injections for 2017 will go into my property fund instead. That’s separate from SG TTI’s portfolio.

Well, at least those were my happy thoughts initially.

Until I saw what STI ETF did.

And I had to re-check these figures a few times to be sure I’m not doing it wrongly:

489) STI ETF FY17Q1 returns.jpg

Freaking 49.97%!

STI ETF started the year at $2.94, gave out dividends in Feb, and ended Q1 at $3.19.

This means if it grows at it’s current rate, STI ETF will return a massive 49.97%. Of course, this means that STI ETF has to continue growing at this rate for another 9 months, which is a pretty tough feat.

Now, I’ve always maintained that it’s useless to look at your portfolio’s individual returns. A gain is nothing to shout about, unless it beats a passive instrument. So I’m walking the talk here and doing the comparison.

I think most people don’t think of it that way though. I’m concerned as now, I see many people touting their returns and feeling good about it. It always feels good to see a capital gain. But in the context of a passive benchmark, I suddenly don’t feel that great.

I am encouraged though, by the results of my most recent picks. Dutech has been a steady performer thus far, and I’m sitting on 6 digit returns. Geo Energy has been phenomenal since my initial entry on essentially any metric. I’m already profitable in my position in S i2i, despite initiating it barely less than 2 weeks ago.

I’m hoping this streak continues while I implement some of my new thought processes in future investments, while cutting out the legacy issues with some of my previous companies.


Here are my quick thoughts / breakdown of the companies that I own:

LTC Corporation – Nothing much has changed. LTC rose somewhat in Q1, their financial performance improved and more importantly, my initial thesis of continued FCF generation and accumulation remains.

490) BCA steel price index in Feb 2017.jpg

BCA’s steel price index remains steady compared to Q4. And as I’ve explained multiple times in previous posts, LTC’s as well as other steel middlemen’s accounting is such that the earnings grow exponentially when steel prices increases.

I’m optimistic about FY17’s performance in this regard.

BBR Holdings – I’ve previously documented my annoyance with BBR’s management. That does not reflect how the company would perform in FY17 though. My thesis has always revolved around the fact that they’ll eventually complete the loss making general construction projects, while new projects will show better margins and hopefully, better project management execution.

TOP of the Lakelife EC proceeded smoothly and on time, and they’ve already recognized profits partially. This will continue to contribute to earnings in FY17.

The Wisteria project is doing rather well, and as of now, is already >90% sold. So that’s a massive +ve for the company as well.

The main key though, is the completion of all the loss making projects that they’ve undertaken previously. I monitor their projects closely, and I’m pretty confident there are no more losses to be made, or at least minimal losses from this general construction sector.

The share price has risen quite a lot in Q1, but it’s still way below what I value the company at.

King Wan – Terrible. I’m disappointed with the company’s management. There’s no easy way to put it, but they’ve been terrible stewards of the shareholder’s capital. As mentioned previously, the key lesson I’ve learnt with KW, is to not trust management to execute investments. I’d much rather trust my own capital allocation skills and my own due diligence.

Having said that, they’ve reinstated dividends, and the yield is rather juicy at this current share price. I’m not keen to sell out now as they could be in the midst of turning around. I’ll be waiting for more data in the next earnings release.

Boustead Singapore – Now THIS is one company that I can actually kinda ignore. FF Wong is as shrewd a businessman as they come. Add to that is a healthy dose of integrity and a long standing reputation for capital allocation. Boustead gave up chasing 3 investment opportunities in the last FY. I’m actually a bit surprised that they still haven’t done any major acquisitions.

In the meantime, the cash hoard is getting a bit errr embarrassing. I did sell out somewhat in Q1, mainly because I have had odd lots from the acceptance of scrip dividends previously, and yes, I know it’s not good investing practice but I hate to see odd lots.

Also, I’m optimistic about Boustead Projects and think that Boustead Singapore is a good proxy for BP’s fortunes.

Geo Energy Resources – I’m sitting on >100% returns in 6 months. Yep. Wow. The company has recently announced acquisitions of a new mine. I did some digging up on this latest acquisition recently. Geo Energy is entering into the high calorific value coal market with this new mine. This helps to diversify their coal story, as their previous mines were all in the low calorific range.

High calorific value coal though, runs the risk of having generally, a higher sulfur content. Sulfur is the main pollutant for thermal coal, and we all know that China is looking to clamp down on polluting industries now:

Typical Sulfur Content in Coal

  • Anthracite Coal : 0.6 – 0.77 weight %
  • Bituminous Coal : 0.7 – 4.0 weight %
  • Lignite Coal : 0.4 weight %

Anthracite coal is the high calorific coal. In any case, the sulfur content is still below 1% which is the limit imposed by China.

At the current coal prices, the PE for Geo Energy on an annualized basis, still extremely low. Even after a 100% gain in 6mths, I’m still seeing more gains on the table.

Dutech Holdings – Another massive winner thus far. I’m pretty confident in my due diligence done for Dutech, and I intend to make this a long term core position. Dutech will need some time to consolidate their latest acquisition (Metric), but Johnny Liu has a long term track record of doing so successfully.

Hot rolled coil steel prices has also come down substantially since the start of the year, so that further helps their margins.

S i2i – My newest, latest position. Also the smallest by far. Share price continued rising since I bought, I’ve just written about this recently so nothing much to update.

The shares are currently being suspended while a shareholder’s dialogue is scheduled for tomorrow.

It’ll be interesting to see what transpires. This doesn’t affect my overall portfolio much because of the small position sizing, but it’s still very satisfying to see an idea do well because it reinforces my analytical processes.

US listed equities Chesapeake Energy and Valenat Pharma – I haven’t really written about my analysis of foreign companies. It’ll probably be many many posts long if I really do so, but since I don’t think there’s that much interest, I shan’t.

Broadly speaking though, both CHK and VRX have been a drag on my portfolio returns in Q1. VRX in particular, has been in the news constantly for all the wrong reasons.

I’m optimistic though, now that Bill Ackman is out of the way. I’ve spent quite some time understanding VRX’s drugs and products, and I think the market is WAY WAY WAY underestimating the value of VRX’s portfolio and future pipeline.

I don’t even think it’ll take another year for the markets to figure this out. I think with another 2 quarters’ results, we’ll know how well the FCF generation turns out.

Ok that’s all I have for this quick post.

As always, happy hunting!

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12 comments

        1. No lei….
          There are many people who have talked about VRX already, most of them are just sensationalisation of news.
          But some are really good indepth analysis. Not sure if there’s anything much more that I can add to that.
          I guess because of Ackman, this attracts a lot of controversy and attention. Probably lesser now that he’s gone

          Like

  1. Hi TTI,
    Impressive return of more than 100k in 1st qtr without counting your year end dividend …👍👍👍 yah,,, that’s the problem of XIRR when compounding in short period of time… 1st qtr return of STI may not repeat at the same rate of return,,, I ever have a stock returned of 20+ % in 3 week ,,, and if compounded at same rate of return,,, it will turn out to be more than 2000 % of XIRR ,,,such result seems skewed..
    Cheers !!

    Like

    1. Hi STE
      Yes, it better be skewed!
      If not, STI ETF really is a mood dampener
      But as the quarters pass, the XIRR would get closer and closer to an accurate picture for full year IRR.

      ” I ever have a stock returned of 20+ % in 3 week”
      Yea, if that rate of growth continued for a full year……. it’d almost be like you invested in Facebook at the startup stage…

      Like

      1. Yah! Better be skewed and create a wealth effect that could move the economy .. :-)
        Every investor will be happy with that !😀😀✌️✌️

        Like

  2. Came late for GEO but attracted by the high coal price and low annualized PE. Looks like Q1 will be as good as last Q4.. It is quite straightforward but not sure how much market has integrated this fact.

    Anyway recently vested quite big.

    Like

    1. Yep, coal prices have continued to hold up, and in fact, is currently a bit above that of Q4.
      If it holds up for the full year at current prices, Geo should have mega profits at the end of the year to report.
      But things can turn on a dime. On 1 hand, China will not allow coal prices to collapse quickly because they still gotta support many of their own coal companies, many of which have loans from the shadow banking sector. Not to mention jobs in the 3rd-tier cities where it’s crucial to maintain employment levels.
      On the other hand, China is moving away from using thermal coal and switching to natural gas. Beijing has recently completely stopped using coal for power.

      http://www.scmp.com/news/china/society/article/2080270/beijing-shuts-down-its-last-coal-fired-power-plant-part-bid-clear

      Many of the coal power plants were being built halfway and these got halted, even though a lot of money has been put into them already.. So this shows how serious China is about reducing pollution from power plants.

      Hmmm I’m not sure what you mean by recently, but I’d be a bit cautious with position sizing for volatile commodity companies. I own Geo so obviously love the company, but I also know that their fortunes are pegged to indonesia’s coal prices and that can change quickly. On top of that, I noticed now, with more attention and media coverage, the markets are getting more predictive. This means that news of the realized earnings may be less important than the future coal prices (or the expectation of where coal prices are headed at least).

      So even though we make an educated bet that based on current coal prices, Geo’s full year earnings would shoot through the roof, we still gotta remember that even if that happens, the bigger factor affecting share price could simply be the current, spot indonesian HBA coal price.
      TTI

      Like

  3. Hi TTI,
    I am wondering if there is any reason not to have Boustead Projects in addition to Boustead Singapore? Isnt BP somewhat safer than BS?

    Like

    1. Hi KK
      Gd question, I grappled with the qn for some time.
      At the time when it got distributed as dividend in specie, I sold out my share of the allocation at close to $0.9 even though I like BP.
      With the benefit of hindsight, it’s been a good decision then because the share price (Even though it has risen strongly lately), is still below the selling price then and the company doesn’t distribute dividends.
      I’ve been looking at BP since it was below $0.8, but didn’t take up a position then as my rationale is that I already have exposure to BP via Boustead’s 51% stake.
      So ultimately, the question is whether I should purely own BP, or should I indirectly own BP via Boustead Singapore?
      I opted to stick to Boustead Singapore because:
      1) I like BS’s ESRI division. I think it has real competitive advantages that cannot be eroded
      2) I want some exposure to O&G. It’s still early so BS’s O&G division is still suffering. But when it recovers, it’ll rise rapidly
      3) FF Wong!

      How would you define what’s “safer” to own? In this current environment where O&G is suffering, sure, it looks like BP is “Safer”, if you define “safer” as lower revenue/earnings volatility.
      But it also means that when O&G recovers, BS would look a lot better than BP.
      BS also distributes dividends from it’s FCF whereas BP doesn’t.
      It is a hard choice between both, as I view both as very strong companies with durable advantages.
      I opted to stick to BS alone for the above reasons.
      Regards
      TTI

      Like

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