Half-Year Portfolio Review

Half-Year Portfolio Review

2017 was the first full year that I am working full-time and this has taken time away from my investment hobby and more or less contributed to a poor performance against the STI. As I had written in haste previously, I bought and sold stocks in frenzy in order to ride the wave of the bull market. Thereafter, I calmed down slightly to properly review my portfolio and make a mental note of which is a investment stock and which is a trading stock. For myself, I separate my stocks according to these two types and my strategies differs respectively.

Investment Stock -

• Stocks are researched to some degree before buying
• Investment horizon is generally longer
• Willing to take some loss in order realise the supposed value (current limit is 30%)
• Embarrassingly, I do not have a proper exit plan yet (this is the reason for why SingPost is utterly dragging my portfolio down or else I usually wait for an event that trigger me to sell ie. takeover, market starts turning down)
• Recent example: Tianjin ZX, ST Engineering, Falcon Energy and HPH Trust 

Trading Stock -

• Stocks are bought on sentiments though I do make sure there are some safety nets like an existent dividend yield and reasons for the stocks to chiong
• Usually sold when there is a quick gain 
• Stop-loss limit to a tune of -5% or when I know there is no longer any impetus for stocks to chiong 
• Recent example: HC Surgical, M1, HRnetGroup (I bought and sold M1 and HRnetGroup within such a short window that I did not update here)

When I group the stocks according to my objectives, I am more prepared when the prices actually hit the sell price, be it a profit or a loss. Therefore, I advocate to investors out there to know the difference between investing and trading. While I had advocated for a investment slant, I do trade from time to time to feed the itch.

Dividends

In my 2016 Investing Report Card, I had made $1100 as the dividend target to hit this year. As of me writing this post on 16 July, I have accumulated $635.39 in dividend or 57.76% of the target. While it is lagging behind the time equivalent of the year, it will catch up eventually as some stocks do not declare every quarter. However, given the poor performance of SingPost, I will eventually miss my dividend target this year unless I heavily increase my capital. I am not inclined to do so as the market is very high right now.  

Performance

For the first 6 months this year, I have accumulated a XIRR of 2.867%. This return is abysmal compared to the general market. This is really attributed to the fall of SingPost, which is frankly quite unrelenting. SingPost has been the gem in my portfolio and I have refused to sell it despite the many pitfalls and signs it had been displaying. The advice of not falling in love with any particular stock is really true in this case and I have been considering to write a post on how to sell a stock in order to keep myself disciplined.

However, as I am only writing this half-year review post now in July, there had been a offer for GLP to be taken private amongst other movements and I hope it will contribute to an improved full year returns.

So that's all for my half-year review. STI has been huat huat for a while now and I feel that there are increasingly lesser value stocks around. The theme should switch to hunting turnaround stories as the bullish market will handsomely reward these turnaround. At the same time, we should be nimble in our buying or selling so as to not be caught off guard if the market turns. All the best in your investing journey!

Tianjin Zhongxin Pharmaceutical (T14.SI)

Tianjin Zhongxin Pharmaceutical (T14.SI) is engaged in the development, manufacture and distribution of mainly Chinese traditional medicine. In addition to Chinese medicine, its products also include distribution of Western medicine operated jointly with pharmaceutical giants like GSK and Baxter.

Pharmaceuticals in SGX are far and few between and Tianjin ZX certainly piqued my interest. It first appeared in my radar while searching for stocks that have not ran up in this bull market, dividend-yielding, EPS growth in the past 5 years, reasonable market capitalization and in profit. Among all the stocks that appeared, Tianjin ZX had a good economic moat expected. of a pharmaceutical firm.

Digging up the past year's performance, Tianjin ZX was quite impressive as well.

In 2010, the Company reported 0.4 RMB in earnings. This rose to a high of 0.6 RMB in 2015 before dipping to 0.55 RMB in 2016. As shown in the graph above, NAV displayed an even better result. The Company grown from 2.43 RMB in 2010 to 5.38 RMB in 2016. This represent a CAGR growth of 14.16%.

S-chip is still viewed suspiciously by many in Singapore. Most recently, Eratat declared that it has no assets to be distributed to shareholders and delisted without any resolution to them. The cash declared to be held in banks were non-existent. However, Tianjin ZX pays a steady dividend year and this should imply that the cash were certainly present. For year of 2016, Tianjin ZX paid a dividend of 0.25 RMB. This is subjected to a 10% tax rate in Singapore and should amount to a final dividend of 0.225 RMB. At my buy price of 0.965 USD, this will translate to approximate yield of 3.4%. 

At current valuation, Tianjin ZX has a P/E of 11. For a pharmaceutical company, this P/E is somewhat low and have upside potential. For the latest quarter, the Company holds 536,481,000 RMB of cash, approximately 10% of share price. However, the crux of my purchase lies in this fact. Tianjin ZX is also listed in Shanghai at 17.65 RMB or S$3.58. At 0.US$965 or S$1.35, Tianjin ZX is listed in SGX at a 62% discount and 31.52 P/E!!!! I do not understand what caused the extent of this different valuation. However, I do hope that management will buyout my shares in and relist them at Shanghai for better returns. 

All this said, Tianjin ZX has been facing lower revenue but have been compensating by increasing operating efficiency and cost-cuts, leading to higher gross profit margins. In the latest quarter results, Tianjin ZX revealed that it is under challenging economic conditions and competitive environment. It is aiming to overcome these with the following actions:

1. Placing greater emphasis on innovation and creation and establishing the importance of scientific development; 
2. Strengthening its marketing plans to increase the amount of industrial sales so as to create more profits for the Company; 
3. Focusing on research and development activities to enhance the Group’s core competitiveness in technology; 
4. Strengthening the internal controls and management of the Group

Writing this post, I hope that Tianjin ZX will be deserving of my long-term investment and reap future returns. 

Frenzy State

Caught up in a company project, I have not been devoting time to investing as much as I would like it to be. However, these past months, it had been disheartening to see the stock market rocketing while my portfolio languish due to legacy stocks and staying on the sidelines.

I've also been kicked a hard lesson with regards to doing my homework before investing in anything. I admit that I have been caught up in the frenzy of stock market, buying stocks without so much as doing some calculations. This few months, I had actually did some shuffle in my portfolio without much research. 

Here are some of my transactions I did without announcing it here due to a lack of time. From hindsight, most are of poor choice and I really attribute it to the lack of steadfastness in this volatile stock market. 

1) Sold ST Eng @ $3.62 (Wanted to take some profits off the table)

2) Sold Falcon Energy @ $0.128 (I capitulated on this stocks due to the poor outlook, it is not impossible to see this below 10c given the poor performance. However, it did rebound strongly last week to my dismay)

3) Bought Far East Orchard @ $1.685 (Bought on the day some cooling measures were announced. I have eyed this stock for a while due to it trading at a strong discount to book. Good dividend every year. Took into account some measure of takeover play as well)

4) Bought Serial System @ $0.186 (Sam Goi has been buying into it. It has a stable dividend history with good volume. Rare that a stock being "played" has a good dividend payout. Bought it with the hope of riding on Sam Goi's wave)

5) Bought Silverlake Axis @ $0.57 (Technology stock, steady dividend though business has deteriorated. Given that the economy seems to be recovering, a strong comeback in banks may give this stock some business. Waiting for the special dividend as well. Good potential overall with most risk due to its legacy short-seller's report)

As you can see, my investing has been haphazard and I am not proud of it. It is definitely not me. But the lack of time to invest, coupled with colleagues that check stock and telling me about their returns, coupled with the fear of losing out in the market spurred me to do this transactions. Hopefully they do not fail me. Last thing I want is to be caught in the peak of market as many had done before me. As of now, the stocks I had bought are not at astronomical valuation but it is not with the same level of undervalued-ness I had bought before.

Comparison of Falcon Energy vs Ezion Holdings

HC Surgical Specialists Limited (1B1.SI)

HC Surgical Specialists Limited debut on SGX Catalist on 3 Nov 2016 at $0.55 despite an IPO price of $0.27.

HC Surgical Specialists is a a medical services group primarily focusing on endoscopic procedures through a network of 12 clinics in Singapore. These clinics are distributed across heartlands and also in major private hospitals. In addition, the company has entered into a MOU with an independent party to provide training and consultancy at Transport Hospital in Vietnam. Their specialist surgeons will be registered to practice at the hospital and help set up a day surgery and endoscopy centre, thereby securing the exclusive rights to perform surgical and endoscopic procedures for a period of time.

Rational for Purchase

Bought this stock hastily on 6 Jan 2017 to take advantage of the $0.018 declared dividend. At my purchase price of $0.625, it is a 2.88% dividend yield - good for a growth and healthcare stock. I had only analyzed this stock retrospectively (flouting the rules, need to reflect on myself). Besides the attractive dividend for a healthcare stock, this stock caught my attention due to its similarity to another successful IPO by Singapore O&G, attaining multi-bagger returns.

• Both are companies related to healthcare, though Singapore O&G focuses another field
• Both had IPO price in the $0.20-$0.30 range
• Both trading at P/E in excess of 30
• Both declares dividend
• Singapore O&G traded in the $0.60 range when it first debut

With these similarities, I am hoping HC Surgical Specialist will replicate the price trajectory as well. 

On a more fundamental basis, HC Surgical is good due to the following reasons.

• Singapore is an ageing society, with more need for healthcare
• Specialist medical services
• Entry into Vietnam with clear business outlook

This is a superficial comparison that I should be ashamed of, but since my Buy Order was unexpectedly triggered, why not I publish this here as a record. 

Financial Performance

I had briefly looked through the half year financial statement before the purchase. With a quick peek, I gulped at the bottom line, with a 98.5% drop. I knew there was an IPO expense but did not have the time to add it back to compare. Now that it is the weekend, let's sit down and go through the numbers.

IPO expense was $1.258M. Adding it back to profit before income tax, it comes up to $1.357M - still 15% lower than the previous year. I factored in an increase tax expense to reach end profit of $1.357M. With outstanding shares post-IPO of 146,311,530. The EPS comes up to $0.0075 for the half year ended 30 Nov 2016.

Assuming consistent earning at the second half, the P/E at $0.625 is a whopping 42 - really going against my usual theme of value investing.

The declared dividend policy is to pay out 70% of its profit. With my estimated EPS of $0.015, the dividend payout is nearly 120% of profit. So this $0.018 dividend essentially has some parts coming out of the IPO proceed and I should not expect this rich a dividend in the future.

Maybe I have been pessimistic since finance costs will likely go down in subsequent quarters. New subsidiaries will boost earnings (with a chance expenses outpace it) and entry into Vietnam presents growth. But overall, I had find my purchase rather risky and not entirely based on fundamentals. Rather, it is speculative based on my comparison to Singapore O&G. In addition, HC Surgical had declared that "operating environment of the medical industry to remain challenging in the next 12 months..." 

However, a buy is a buy and I will like to see this stock still emulating the trend of Singapore O&G for a better Goat Year!

2016 Investing Report Card

Year 2016 Closes, Results and Returns

2016 closes and with SGXcafe calculating returns on a daily basis, I knew what was coming before the year ended. Disappointingly, my portfolio underperformed STI ETF returns this year - the first time since 5 years of investment. With the negative losses last year, it was quite disappointing to have not grown my investment this year as well.

2016 Portfolio XIRR: -2.215%
STI ETF XIRR: 2.864%

Fun Facts

For now, let's lighten up the mood for some infographic about my portfolio movement this year:

Dividends Goals

With regards to $1000 the dividend goal I had set for 2016, you can see that I have narrowly missed it with $954.25. This partly due to Singpost's tightening dividend policy as well as Falcon Energy not yielding any dividend this year.

For 2017, I hope to increase my dividend received to the tune of $1100. Building up a portfolio that can gives me a steady income stream is one of my retirement goals for the long long term, and I hope that I am able to slowly accomplish this goal.

To increase the dividend, one way is to focus on purchasing stocks that are dividend-yielding and have the cash flow to support it. Monthly investment in STI ETF with my siblings will also contribute in a minor way, probably to cover the shortfalls from the dividend cut by Singpost.

Going Forward

Despite these two years of negative returns, I aim to keep the course. But it has certainly made me re-assess the way I look at gains. A problem is me not realizing profits only to watch it slip away and never coming back. One part of me always wants to be noble and be a "long-term investor". The other part is Graham's and Buffet's mantra of only buying companies where you will never give it up. Falcon Energy has been a bummer and I hope it proves itself in 2017.

For further pickings, I have a few stocks in my mind for research and considerations. Working gives me an steady income to invest but it takes time away from research and homework. But I hope to stay the course and just keep moving ---- towards financial freedom!

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?