Thursday, July 23, 2015

"Jul 15" - SG Transactions & Portfolio Update"

 No.
 Counters
No. of Shares
Market Price (SGD)
Total Value (SGD) based on market price
Allocation %
1.
China Merchant Pacific
74,150
1.03
76,375.00
25.0%
2.
Vicom
8,000
6.22
49,760.00
16.0%
3.
Nam Lee Metals
70,000
0.29
20,300.00
7.0%
4.
Silverlake Axis
14,400
1.02
14,688.00
5.0%
5.
Kingsmen
15,000
0.99
14,850.00
5.0%
6.
Accordia Golf Trust
17,000
0.65
11,050.00
3.0%
7.
ST Engineering
3,000
3.39
10,170.00
3.0%
8.
Stamford Land
10,000
0.58
  5,800.00
2.0%
9.
Noel Gifts
18,900
0.31
  5,860.00
2.0%
10.
MTQ
7,000
0.72
  5,040.00
2.0%
11.
King Wan
5,000
0.28
  1,400.00
1.0%
12.
Warchest*
95,000.00
31.0%

Total SGD


310,291.00
 100.00%




There's a couple of changes that I have made into the portfolio as I continue to seek and incorporate highly qualified businesses which meet my criteria that I feel will present a sustainable long term returns as the businesses continue to grow.

For the month of Jul, I have divested both FCT (Link Here) and FCOT (Link Here) which I thought was overvalued in terms of valuation. I like the way the management has operated for both companies but the steep price makes it as such that they will be prone to a much larger fall should the market heads downwards. I will continue to monitor their situation including their recent quarterly performance which they did well as expected.

I also added Kingsmen and Accordia into the portfolio which I have blogged on my thoughts here and here. On top of that, I have also added a small position for an O&G play in MTQ which I did not post a blog on but have exhibited the same strong characteristics of strong operating cash flow, increasing free cash flow, strong balance sheet and a reasonable valuation. I am closely monitoring the O&G situation so the amount I've nibbled is really small but will increase over time as and when I think is wise to do so. You can view here under the "Recent Transactions" for the details.

The amount of warchest currently stands at 31% of the overall portfolio, a position which I am comfortable to hold at the moment while waiting for the right opportunity to come by. I wouldn't want to rush utilizing these amount of warchest even though they yield really low returns because you never know when you are going to get your opportunity of a lifetime in the market. In any case, these will be utilized if the right opportunities came by, and not a matter of when.




The equity networth has increased for this month to $310,219, mostly due to the divestment mentioned earlier as well as some improved performance from the portfolio and bonus shares received for CMPH and Silverlake.

The projection target is to reach the end year networth of $333,105 (Link Here), which I have revised back in November last year due to certain circumstances. With Aug and Nov being a strong dividend month, and December having an AWS to cater to, I am silently confident that I can hit the goal by year end. In addition, online income has recently came in rather unexpectedly strong as well which has definitely helped to push on. For this, I'd like to thank everyone who has supported the blog.

Projected dividends based on the current portfolio stands at $12,232 per annum, which translates into about $1k/month, and they are not as high as I would like mostly due to the amount of warchest which I have accounted for zero dividends. I guess this just reinforce the idea that it takes years to build an arsenal of solid dividend paying portfolios, and it requires years of perseverance to see it out. I know it will pay off one day so I'll just have to keep the motivations high, and keep it going.

For now, we'll just have to see where the market is going and an important factor which I can't control. One thing for sure, I don't mind having more opportunities presented even if it means not hitting the goal by year end. So that's it from me for now and I hope everyone has a solid month in the month of July as well.

How did you fare for the month of July?


29 comments:

  1. Quite a big bet on China Merchant Pacific. Has it been a good investment so far? I'm personally staying away from most S-chips. Prefer Yangzijiang. But also has risks.

    Like your choice of Kingsmen and VICOM. Perhaps can examine Boustead and HourGlass?

    ReplyDelete
    Replies
    1. Hi Lizardo

      Thanks for your concern.

      I don't think this is the first time someone has raised their concerns about the counters :). I'm constantly reviewing the business risks of every companies I am vested in, so hopefully there won't be nasty surprises on everyone's hated S-chips stocks :)

      I have previously tried to understand Boustead business but they are difficult for me to understand, so i have not been vested in the counters.

      Delete
    2. Looks like its toll business is generating a reliable source of income.

      I've seen another portfolio with some similarity. That one was heavily weighted in Starhub thought.

      Delete
    3. Hi Lizardo

      I think you are referring to Lady You Can Be Free?

      Delete
  2. Hello B,

    A very consistent portfolio you have there. I see that you have a large portion of 20% of your portfolio in CMP. CMP has attractive dividend yield, steady payout ratio and strong earning margins with their business capable of churning recurring income. However, as it is a S-chip, do you have concerns, if any, that investors should be concerned about?

    ReplyDelete
    Replies
    1. very good point there.... over 20% on a S-Chip
      feels risky to me but maybe because I don't understand as much about this company

      Delete
    2. Hi Koala / Felix

      You are right. Every companies have their risks and more probably so because the market has been fearful of S-chips counters. But I'd advise that you look into it deeper, especially with their corporate governance as well as track record in rewarding minority shareholders. For example, if you look at one of the lead independent directors, who are in charge also for the remuneration committee, he is one of our former MP who has served various boards well.

      I would think things like this would present a fairful representation rather than simply dismissing the case because it is an S-chips counters. Having said that, it is not without risk also, you just need to look into it deeper.

      Delete
  3. Hi B, thanks for sharing. Based on 1k dividend per month average, what is your dividend yield on your overall portfolio. I guess you will have to omit recent addition such as kingsmen for counting yield

    ReplyDelete
    Replies
    1. Hi Trademarksg / Felix

      My portfolio yield is somewhere in the range of 5.3%, mainly driven by my CMPH, Vicom and Accordia which are yielding higher than the rest of them. I didn't count the cash portion as anything though, so if I am including that, it would be much lower.

      Delete
    2. This comment has been removed by the author.

      Delete
    3. 5.3% overall is very good by my standard. Can I ask if your 5.3% is based on current market value or based on your amount invested. I could only achieve 3% overall, but trying to do some pruning to bring the overall closer to 4%. . Thanks for your converage on Kingsmen, your purchase accumulation at 98c is making me relook at Kingsmen. I accumulated quite a bit in the range 93 to 97c, but 97 is my internal (arbitrary) limit in terms of margin of safety

      Delete
    4. Hi Trademarksg

      5.3% is based on current market value. The yield on cost is much higher than this. How did you only manage to achieve around 3% overall? Are all your counters growth stocks?

      Delete
  4. Yeah, do u keep track on your overall portfolio PE or dividend yield?

    cheers ^^

    ReplyDelete
  5. Hi B,

    Many good companies in your portfolio.

    Market is in turmoil, the warchest is only sensible thing to do. CMP is providing good dividends and its business is pretty defensive. I also like it to be backed by one of the largest state-owned co - China Merchant Group.

    Maybe to add some explanations for your readers, refer to http://www.rolfsuey.com/2014/08/added-china-merchant-holdings-pacific.html

    ReplyDelete
    Replies
    1. Hi Rolf

      Many thanks for including your posts on CMPH. The parents are indeed a strong owned state which many have overlooked.

      Delete
  6. Hi B,

    An article which could be of interest to you:

    http://www.value-edge.com/china-merchants-holdings-pacific-a-lesson-on-negative-dividend-yields/

    ReplyDelete
    Replies
    1. Hi Betta Man

      It's a well written article. Thanks for sharing.

      However, to be fair, I'd argue that it's pretty common to see the likes of Reits alike and CMPH, who owns a limited number of concession life for an asset to constantly looking for external growth to lengthen the concession life.

      The thing to look out for is the cashflow, and and whether the dividends paid out is sustainable. CMPH has over the years been retaining quite a bit of cashflow, more than Reits, and they have been diligently reducing their debts conservatively. I don't think this is new news at all, in fact, CMT has been doing it every other years, just like most other reits who have done the same.

      You just need to read it and dissect them accordingly.

      Delete
    2. Hi B,

      Can you explain further what you mean by looking out for their cashflow and what aspect of the cashflow should we be looking more in detail at?

      Thank you for your help B. :)

      Delete
    3. Hi Hughes

      Dividend payouts are ultimately distributed out from the cashflow of the company, not earnings, so it is important to see if the operating and free cash flow can support the dividends paid out to shareholders. Some companies many have huge earnings on their PnL but if those earnings does not flow to the cashflow, it's pretty useless in my view.

      Delete
  7. Hi B,

    Many roads go to Rome. Interestingly currently you and I do not even have one common stock in our portfolio.

    Cheers,
    Farmer.

    ReplyDelete
    Replies
    1. Hi PIF

      Ahh, that's interesting!!!

      I think we used to have both FCT and FCOT in the past but I'll be sure to come back for them again :)

      Delete
  8. Proposed 1-for-2 rights issue. The Group announced a 1-for-2 rights issue of up to 633.8m new shares at an issue price of S$1 per share, with an undertaking by parent shareholder China Merchants Group to take up their allotment and any excess new shares. With a current outstanding share capital of 1,167.3m shares and including outstanding convertible bonds and employee options that may be converted/exercised, the number of new shares to be issued would be between 583.6m and 633.8m, implying 46-50% dilution. The proceeds would be used to partially fund the recently announced acquisition of three toll roads in Guangxi.

    your top holding has a very big rights issue, if u take all... its adding another 12%? omg... u better be careful man

    ReplyDelete
    Replies
    1. "Give you a drumstick, take back whole chicken"
      and i thought the culprits would mostly be the reits...
      as a shareholder, i'm also not decided whether i want to pump more capital in or be diluted (presumably with much lesser dividends down the road)

      Delete
    2. Hi Felix & Anonymous

      Thanks for the info. I am aware of the rights issue.

      I am actually seeing this more of a placement to the parents group than rights to every shareholders because for retail investors like us, it is apparently not looking to be attractive to subscribe to the rights. That being said, it just means that the parents will take up all the excess shares at a price higher than the current market price and dilution will take place temporarily, until the 3 acquisitions prove to be a successful and accretive in years to come.

      I don't foresee dividends of 7 cents to be cut anytime soon.

      Delete
    3. Thanks for responding B!
      I assume that you meant the dividends will not be cut if the investor subscribes to the rights? If opt not to subscribe, definitely will be cut by 33% (33% more shares out there) to the investor, so it becomes ~4.6cents to the investor who doesn't want to pump in more capital. It's not likely for the earnings accretion of the 3 acquisitions to make up for the 33% dilution in the near future, imo... please correct me as I might be wrong?
      feel a bit sick to have to return all the dividends collected + pump in more capital.

      Delete
    4. Hi Anonymous

      What I was trying to say is while earnings will get diluted, they will still be able to maintain dividends of 7 cents on a fully diluted basis, so investors will still be able to receive the 7 cents dividends.

      The acquisitions are unlikely to be earnings accretive right away, but they are part of a larger project scale which CMPH has on their agenda. In fact, they are being aggressive and they've got the parents as their backing. While we never know about the future, I'm still convinced that the management are steering growth into the portfolio which will benefit all shareholders at the end of the day.

      Delete
    5. Hi B!

      With a full dilution, you still believe they are able to dish out 7cents dividends? Wow, let me go check out their current dividend payout ratio. Thanks a lot for your opinion, appreciate that!

      Delete

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