Updates to Portfolio

It has been a while since I updated this blog of mine, the last post being in July after I bought Falcon Energy. So three months later, what has changed with my portfolio? Well, below are the three main things I would like to talk about in this blog post, to keep myself and you updated.

DCA on STI ETF

Since June this year, I've start contributing a small amount of money into dollar-cost averaging of STI ETF. This was done through POEMS ShareBuilder Plan. Though the fees were relatively higher than say POSB InvestSaver, I mitigated this consideration by pooling money with my siblings and buying it together. This way, the commission by percentage is comparable to POSB InvestSaver and I also get to enjoy the reinvestment option of dividend issued. 

Every drop of water contributes to the ocean. Buying STI ETF religiously every month will hopefully contribute to my retirement fund 40 years down the road. 

Bought more Falcon Energy

Hindsight is always 20/20. Before the results announcement, share prices were ranging as high as 19 cents - allowing me to exit with some profit. However, thinking it was a start to bull run in O&G, I decided to hold on. Without a dividend, coupled with the deterioration of the industries (think Swiber and Swissco's bond default), Falcon Energy was also brought down. 

However, its full year results were decent still and it left a big question mark for me. 4.92 US cents translates to a P/E of less than 3 leh! Cash generated from operations was US$111,747,000. There was a net decrease of cash because of hefty repayment of borrowings, which was the right thing to do in this environment where debt brings down O&G companies. Reflects the prudence of the management, to be frank. 

A strong argument I had previously was Falcon Energy stake in CH Offshore. CH Offshore's stock price had tanked recently and as of now stands at $0.29. This stake in CH Offshore translates to a value of $177M for Falcon Energy. Funny how at $0.16, Falcon Energy is valued at $129M. So, core business of Falcon Energy is valued at -$50M? 

With this, I've decided to further another round at $0.166. There are a few risks I am aware of and would highlight here for reference. 

1) Protracted depressed oil prices. Similar to the shipping industry, this would probably kill off many O&G companies. While the P&L looks good now, experience says that the bottomline will turn red in a quarter. 

2) CH Offshore revalues. A main reason why I invest in Falcon Energy was the stake in CH Offshore. It is not entirely impossible that CH Offshore becomes a penny stock, rendering its stock worthless. Then, what value to talk about? However, keep in mind CH Offshore does not hold significant borrowings and thus less likely to go under compared to say Ezra. 

3) Interest rate rises fast. In the annual report, every 50 basis points increase in interest rate will decrease Group's profit by US$801,000. US is increasingly likely to raise rate further this year. 

Planning to Sell Karin Tech

Should I....? Debating hard on this one, but already queueing at $0.315 to sell. 

Between China's diminishing economy, lowest EPS ever, and statement like this..,

"After the disposal of KCF A Store Limited, it is not expected the CEP segment will be able to fill the revenue and profit shortfalls in the near future even though the Group has been adding various prestige consumer electronics products into its product mix."

Totally feel like relieving myself of this company. The only thing holding me back from selling is the 7% dividend that was declared along this set of horrendous result. The management totally knows how to keep its shareholder. This is also apparent in its annual report where it shows that the company has already paid out 126% of the IPO price in dividend (within 10 years). Omg, if I hold for 10 years, will I be getting "free" shares as well?

Previously, I was scared that dividend paid out is no big deal as prices drop after the dividend was paid out anyway. But k1 Ventures totally proven me wrong on this point. Therefore, I am totally undecided.

Fundamentally, I should be getting out while stock prices are held up by the dividends. Emotionally, what about the dividends!!! T__T Help pls? 

STI ETF Monthly Investment Plans in Singapore

It's been awhile since my last post. The reason being that I'm currently residing in Sweden for an overseas exchange programme and had been spending the time preparing for this exchange. The cost of living in Sweden is indeed high. A McChicken meal here costs 65 SEK, equivalent of nearly $12 in Singapore. And nope, the portion is the same. The huge expenditure that is going to come with this exchange got me thinking how to recoup the money back eventually. I can only depend on my fixed salary in the future to recoup this expenditure.


However, it is obviously known that the salary is going to be the same every month. How do you maximise this salary that is going to come in every month? INVEST! Like what Warren Buffett once said, "Pay Yourself First". Take out a portion of your salary each month and invest it in monthly investment plans that are provided by POEMS ShareBuilder Plan, OCBC Blue Chip Investment Plan (BCIP) and POSB Invest-Saver. These platforms allow you to invest as low as $100 each month at lower commissions. Once the GIRO instruction goes through, the designated amount will be deducted every month and invested into counters you chose at the start. I highly recommend that you choose one counter to invest in and that is the STI ETF counter. Without going too deep into the subject, STI ETF tracks the STI index and it has been shown that it is very hard to beat the index's return even for seasoned hedge fund managers. So instead of fretting which counters to invest in at the start, I am recommendeding just one: STI ETF



I did a comparison of the three low-cost investment plans and it is shown in the table below.

A few points to note here:

1)  Buying-in Commission

POSB appears to be the lowest cost amongst the three at 1% flat rate. Suppose you choose to invest $100 per month, the commission rate of POEMS itself will be 6%! If you are investing $600 per month, then go for POEMS. $500-$600, you might want to go for OCBC BCIP.

2) Dividend Reinvestment

To me, this dividend reinvestment differentiates POEMS Sharebuilder Plan from the other two. Any dividend from STI ETF will be reinvested the following month. On the other hand, OCBC and POSB only credit the dividend into your bank account. Those who are privy to the power of compounding interest will know that reinvesting dividend will "snowball" your gains over the longer time horizon. Therefore POEMS wins in this aspect.

3) Misc Costs (Dividend Charges, Sell Commission)

After praising POEMS to the sky in point, it's time to point out the elephant in the room. The so-called "hidden costs" in POEMS are pretty high. Any dividend issued by STI ETF will be subjected to a $1 charge. Not mentioned in the table, there are also charges for scrip dividends, corporate actions, insufficient amount for GIRO. Furthermore, the commission that comes with selling the shares accumulated is definitely a downer. From all this, I gather POEMS is trying to attract people that are willing to invest more per month such that all this costs become negligible.
Edit: Self-assisted selling using POEMS is possible at min $25

4) Underlying ETF

The underlying STI ETF that each platform buys differs. However, the difference is minute and should not concern us. For general info, SPDR has a lot size of 1000 shares while Nikko AM has lot size of 100 shares. Also SPDR charges a fund fee of 0.3% per year while Nikko AM charges 0.39%. Again, this only concerns the people running the three platforms.

5) Partial/Total Redemption

POEMS and OCBC allow partial redemption of the shares accumulated. POSB, on the other hand, only allows total redemption. This might be disadvantageous if you are in an urgent need of money. However, since I believe that once you sign up with these investment plans, you should be looking at the time frame of at least 5 years. Therefore this account should not be your piggybank when you want to go on a Europe trip or something. That said, if you happen to run out of money, you can opt to freeze the GIRO payment and continue earn dividends, rather than redeeming the shares for cash. 

EDIT (18/1/16): Partial redemption of STI ETF units is now possible for POSB.

Conclusion:

If you are investing upwards of $500, go with POEMS for the dividend reinvestment. However, if you are still uncomfortable with the numerous charges that POEMS carries, by all means go with OCBC BCIP. 

If anything between $100-$500, choose POSB because of the low commission cost. Also, if you are new to investing, POSB is good as it is more clear cut with the charges. 

As much as I would like to start this monthly investment plans right now, I'm a poor student that can only afford to invest $100 a month at most. However, I really like the automatic dividend reinvestment provided by POEMS Sharebuilder. Therefore, I'd prefer to start with the Sharebuilder plan when I draw a regular paycheck upon graduation.