tag:blogger.com,1999:blog-66229545494611939512024-03-06T14:23:48.124+08:00SG Value StocksAn investment journey through the ups and downs of the stock market.lwthttp://www.blogger.com/profile/10762954193380120137noreply@blogger.comBlogger97125tag:blogger.com,1999:blog-6622954549461193951.post-4118763538703064132011-04-24T23:53:00.000+08:002011-04-24T23:53:02.939+08:00Investing in Growth Themes Part 1Technology appears to have made a strong come-back after years of investor neglect, epitomised by Apple's meteroic rise from US$80+ in early 2009 to US$350 currently, a rise of over 300%. Apple's success has been attributed to its strong product offering, beginning with the iPod, then iPhone and more recently, the iPad. Apple fans will wax lyrical over the superiority of Apple's products, and long queues which form at each new product launch is possibly a testament to the fanatical respect the company commands from technology product users.<br />
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At its current price, Apple's market capitalisation is about US$320 billion, and few companies are larger. Google Finance puts Apple's historical PE at 16.72X, not an expensive multiple of earnings, while the company's latest earnings blowout suggests that valuations are likely to fall further, should the company's explosive growth continue. Also, the macro-picture for Apple appears extremely favourable, considering the huge shift towards mobile computers like the iPad. Coupled with the relatively untapped emerging markets, the growth possibilities are enormous. Is Apple the sure-fire way to tap on an unstoppable growth theme? <br />
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Before we get ahead of ourselves, history offers an alternate opinion. The automobile was a revolutionary invention which changed the way people travelled. However, few investors made money investing in this "sure" trend, and the 2008-2009 crisis even saw the collapse of the "venerable" General Motors, a member of the Dow Jones Industrial Average since 1915. Many automobile companies have collapsed, leaving investors much poorer, even though the industry has boomed (if the number of automobiles on the roads is a measure of the industry's success). Warren Buffett has been quoted to say that the best way to invest in the automobile industry would have been to short the stocks of horse-drawn carriage companies.<br />
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Similarly, the airline industry revolutionised long-distance travel, but investments in airline companies has been generally fared poorly in comparison to the growth in the sector. Engine and aircraft manufacturers were the beneficiaries of the sector's boom, while the airline operators saw shrinking margins as competition intenstified. Many airlines also went bust despite the astronomical growth in air travel over the years.<br />
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What does this tell us about investing in the next major growth trend? We could take an appathetic approach and ignore the growth trend (which has not generally not resulted in poor investment returns, if one considers both the airline industry as well as the automobile makers). Alternatively, we could seek investment opportunities that ride on the trend - we are looking for the horse-drawn carriage companies to short, the Boeings and Airbuses which benefit directly rom a trend, but maintain pricing power, or the indirect beneficiaries like the Exxons and Shells, which drill and refine oil needed to power the increasing number of vehicles on the road.<br />
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Given all this, how then does one ride the growth trend of "portable new media"? We will highlight two themes that may benefit from this growth trend in our next post. lwthttp://www.blogger.com/profile/10762954193380120137noreply@blogger.com3tag:blogger.com,1999:blog-6622954549461193951.post-1337781775330486442011-04-24T23:16:00.000+08:002011-04-24T23:16:16.038+08:00Sino Techfibre - Fraudulent Fire?Last Thursday, Sino Techfibre announced that a fire broke out at an office which did not affect any staff, but unfortunately destroyed books and financial records (see <a href="http://info.sgx.com/webcoranncatth.nsf/VwAttachments/Att_8CBAFFB20622E74A4825787900509C58/$file/Sino_Techfibre_Announcement_210411.pdf?openelement">http://info.sgx.com/webcoranncatth.nsf/VwAttachments/Att_8CBAFFB20622E74A4825787900509C58/$file/Sino_Techfibre_Announcement_210411.pdf?openelement</a>).<br />
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How convenient. The company's stock was halted for trading on 13 April, after auditors raised issues over the legitimacy of invoices. Now, the financial records to "verify" those invoices (likely to be "receivables" on the company's books) will most probably be lost in the fire, rendering an audit impossible.<br />
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This latest incident only serves to highlight the poor quality of S-Chips listed on the Singapore Exchange, something which has kept us from investing in the sector despite having bombed-out valuations. When balance sheets cannot be trusted, it is impossible to ascertain the true value of a company, and the track record of the sector in terms of corporate governance has been attrocious. In academic terms, the "risk premium" attributed to an investment in the S-Chip sector should be extremely high, which goes a long way in explaining the ridiculously-low valuations of most companies in the sector. We sympathise with investors who have fallen prey to these poorly managed companies and will continue to seek value opportunities outside of the S-Chip sector.<br />
lwthttp://www.blogger.com/profile/10762954193380120137noreply@blogger.com1tag:blogger.com,1999:blog-6622954549461193951.post-59685119310227928562011-04-16T12:14:00.000+08:002011-04-25T12:37:13.978+08:00Excess Cambridge RightsIn the recent Cambridge 1-for-8 rights issue (at $0.429 a share), we subscribed for excess units (920 more) to bring our holdings in the REIT to a round lot multiple. On 15 April, we received all our excess units, and now hold 29 lots of the trust.We are looking forward to receiving about $350 each quarter from our holdings, based on an estimated $0.012 quarterly distribution.<br />
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lwthttp://www.blogger.com/profile/10762954193380120137noreply@blogger.com0tag:blogger.com,1999:blog-6622954549461193951.post-48691912275918598862011-03-17T23:58:00.000+08:002011-03-21T14:28:01.648+08:00More Buying For The Portfolio As Markets Remain WeakWe added CapitaMall Trust to our holdings today on general market weakness (3 lots at $1.73). We estimate that the annual dividend yield of 5.5% (based on $0.095 p.a.) is sustainable, and that rate has potential to expand as J-Cube completes and begins contributing to the trust. The recent acquisition of Illuma looks like a shrewd move - The mall's full potential was not being realised by the previous owners (thus they were selling relatively cheap), and CapitaMall's management should be able to ride on synergy between Bugis Junction and Illuma. <br />
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Recall that we sold CapitaMall Trust in July 2010 on the basis that a 4.5% yield was not a sufficient reward for holding the stock, despite the trust holding many prime assets. The stock has since corrected almost 15%, with the running yield now about 5.5%, 100bps higher than when we sold it.<br />
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We also added to Wells Fargo (50 shares, US$30.75) as the stock was slumping even as the broader market rose. There was no apparent reason for the sell-off, and with more clarity on the stock's ability to pay dividends soon to come, there could be some upside potential in the near-term. Nevertheless, the longer-term prospects for the bank continue to look bright, and we believe that the stock could trade nearer the $45-$50 range once bright sunny skies are upon us once again.lwthttp://www.blogger.com/profile/10762954193380120137noreply@blogger.com1tag:blogger.com,1999:blog-6622954549461193951.post-62412196764382666192011-03-15T23:55:00.000+08:002011-03-16T00:42:03.249+08:00Japanese Nuclear Worries Roil Market - Adding to the PortfolioStock markets were roiled by concerns over a potential nuclear meltdown in Japan, triggered by the 9.0 Mw earthquake which hit the Sendai region of Japan last Friday. While the initial reaction of global stock markets to the earthquake was relatively muted (in contrast to the hefty declines posted by the Japanese stock market), concerns over the impact of the earthquake on several nuclear power plants sent global stock markets reeling on Tuesday.<br />
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Prime Minister Kan's live video telecast today (15 March 2011) did little to comfort the jittery global community, and as the PM revealed that the possibility of nuclear leakage was increasing and that those in a 20km radius around the Fukushima Daiichi nuclear power plant were being evacuated, stock markets in Asia plunged on uncertainty surrounding the situation in Japan. The STI fell by as much as 3.3% as selling intensified on concerns that nuclear power plants in Japan could suffer a meltdown, which would have dire and unthinkable consequences. The Singapore market ended the day 2.8% lower, with losers on the exchange outpacing gainers 610 to 59. <br />
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Taking a step back from the frenzied selling and huge uncertainty, we see the sell-off as a manifestation of uncertainty and fear, rather than a rational adjustment of prices for various assets. The Sendai earthquake will likely cause a series of contractions in the Japanese economy, but will have limited impact on the global economy, given that Japan's contribution to overall growth has largely been discounted. As Japan embarks on its rebuilding process, this should boost economic growth (in a perverse way), and given sufficient time, we can expect the economy to emerge from this crisis on relatively firm footing. This will have some impact on select sectors in the near term, but ultimately should prove to be little threat to the overall growth of the global economy.<br />
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A 16% discount in the Japanese stock market over two sessions appears excessive, and it is increasingly tempting to punt the Japanese stock market now. The risk-reward tradeoff certainly appears in favour for those long the market, despite the heightened volatility, especially if a longer-term investment horizon is employed. Nevertheless, we remain unfamiliar with the situation with specific corporate names in the country and will not seek opportunities in that area.<br />
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For the local stock market, we think the selloff in blue chip names remains overdone, and we picked up 500 shares of OCBC at $9.115 and 1 lot of WBL Corp today at $3.90. Both are unlikely to face any severe reprecussions of the latest series of problems, and we will be looking to employ more cash should the irrational sell-off continue over the next few days. <br />
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lwthttp://www.blogger.com/profile/10762954193380120137noreply@blogger.com4tag:blogger.com,1999:blog-6622954549461193951.post-49474073853005451882011-02-27T01:04:00.001+08:002011-02-27T01:04:16.050+08:00Further pain in the S-Chip sector; China Hongxing and Hongwei both suspendedBoth Hongwei and China Hongxing are set to be suspended, following audit issues "<span style="font-family: Helvetica;"><span style="font-family: Helvetica;"><em>regarding issues pertaining to the cash and bank balances confirmation</em>" for Hongwei and "<em>irregularities in the cash and bank balances, accounts receivables, accounts payables, and other expenses during the course of their audits of its subsidiary companies in the People’s Republic of China (“PRC”)</em>" in the case of China Hongxing. Ernst & Young are the auditors in both cases. </span></span><br />
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<span style="font-family: Helvetica;">We have highlighted our concerns over S-Chips in the past (see <a href="http://sgvalue.blogspot.com/2010/09/looking-at-cash-balances-of-s-chips.html">http://sgvalue.blogspot.com/2010/09/looking-at-cash-balances-of-s-chips.html</a> and <a href="http://sgvalue.blogspot.com/2010/06/s-chipped-reprise-2010.html">http://sgvalue.blogspot.com/2010/06/s-chipped-reprise-2010.html</a>) and the latest audit problems in the case of Hongwei and China Hongxing serve to showcase that S-Chip companies are indeed poor quality companies which <strong>cannot be assessed based on balance sheet strength alone</strong>. We do not own any S-Chips and will continue to adopt a sceptical approach towards the sector, which is fraught with fraud (pun not intended). </span>lwthttp://www.blogger.com/profile/10762954193380120137noreply@blogger.com0tag:blogger.com,1999:blog-6622954549461193951.post-30921810759074634182011-02-24T21:28:00.002+08:002011-02-27T00:51:36.144+08:00Added to Guocoleisure and OCBCWe added 5000 shares of Guocoleisure (at $0.685) today, and a further 250 shares of OCBC (at $9.12). Quek Leng Chan has been consistently buying back shares of Guocoleisure over the past few months, which indicates management confidence in the company's stock. In addition, oil and gas royalties have increased with rising oil prices, which should provide a boost to the company's profits.lwthttp://www.blogger.com/profile/10762954193380120137noreply@blogger.com0tag:blogger.com,1999:blog-6622954549461193951.post-25602275623387671782011-02-23T23:13:00.000+08:002011-02-23T23:13:13.878+08:00Correction continues, adding moreFollowing the slump in US equity markets overnight, Singapore stocks continued to slide today. Having sold out of lower-conviction stocks in January, the correction in stock markets presents a "welcome" opportunity, and we added 2000 shares of Noble Group (at $2.00) and 1000 shares of Capitaland ($3.29) today amidst the selldown.lwthttp://www.blogger.com/profile/10762954193380120137noreply@blogger.com0tag:blogger.com,1999:blog-6622954549461193951.post-27104124136368941412011-02-22T19:52:00.000+08:002011-02-23T19:52:45.065+08:00Market Correction - Time to buy?In anticipation of technical downside risks in the market, we actually pared down our holdings in late January to raise cash levels to over 30% of the portfolio. This has worked out rather well as Asian markets have corrected sharply due to concerns over inflation, Chinese policy tightening, as well as fears of an oil shock sparked by tensions in the Middle East. <br />
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We view such developments as short-term overhangs, and we have decided to add to the portfolio in incermental steps. A position was initiated in OCBC, which has a sizable insurance presence via its subsidiary Great Eastern Holdings as well as a strong private banking presence through its acquisition of ING Asia's private banking business in Singapore. While the stock is not cheap, we believe that OCBC will likely deliver the strongest ROE amongst the 3 local banks which should justify a slightly higher price-to-book multiple, and we picked up 250 shares at $9.25 today with a view to add more should the market continue to correct.<br />
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We also added 2000 shares of Tat Hong which delivered rather poor quarterly earnings for the most recent quarter. While the company currently faces some headwinds in China as well as Australia, we believe such issues are temporary and with the backing of $0.82 of tangible book value a share, we added 2000 more shares at $0.80.lwthttp://www.blogger.com/profile/10762954193380120137noreply@blogger.com0tag:blogger.com,1999:blog-6622954549461193951.post-89920840920935531522011-02-01T19:40:00.001+08:002011-02-23T19:42:16.279+08:00Reduced Wells FargoFrom our 350 shares of Wells Fargo, we reduced our stake to 250 shares today (31 January 2011). The stock has run up a fair bit, and while we expect more upside for the stock, we believe it to be prudent to pare down one of the larger holdings in our portfolio at this juncture.lwthttp://www.blogger.com/profile/10762954193380120137noreply@blogger.com0tag:blogger.com,1999:blog-6622954549461193951.post-47636666946092387162011-01-28T19:35:00.000+08:002011-02-23T19:40:01.265+08:00Sold Mermaid Maritime, a disappointmentWe sold our meagre holdings in Mermaid Maritime (5000 shares at $0.41), which has been a disappointment. Since the loss of key management, the company has been trying to restructure as a drilling company with the purchase of two oil rigs from Keppel Corp, but we believe that without credible management, it will be difficult for the new entity to succeed. We have reluctantly cut our losses on the stock, and the experience will serve as a reminder that companies with suspect management should not feature prominently in an investment portfolio.lwthttp://www.blogger.com/profile/10762954193380120137noreply@blogger.com0tag:blogger.com,1999:blog-6622954549461193951.post-11047495058641139882011-01-27T18:55:00.003+08:002011-02-23T19:35:03.957+08:00Sold two portfolio stalwarts - Berkshire Hathaway and Keppel CorpWe sold our 50 shares in Berkshire Hathaway 'B' on the 25th of January (US$82.65) and our remaining 351 shares in Keppel Corp on 27 January. While these two companies embody many positive things which we look for in a stock (good management, strong business franchise(s) etc) and should be considered portfolio stalwarts, we have eliminated both positions for different reasons.<br />
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Berkshire Hathaway - Buffett's stable of businessess are solid companies in most senses of the word, but the growth of these underlying companies are too dependent on the US economy and considering our relatively large exposure to Wells Fargo, a bank which is almost solely dependent on the US economy, we would prefer businesses which generate a bit more revenue from overseas. In addition, growth is likely to be slow for the "lumbering" holding company, where incremental additions of small companies are unlikely to add significant value to the overall stock.<br />
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Keppel Corp - The stock has seen strong investor interest given the strong flow of contracts, but it still appears likely that the company has seen peak profitability already - we do not expect future contract wins to match the 2003-2007 cycle. Having run up considerably over the past month or two, the stock does not look attractive if one looks at normalised profits, and we have thus taken profits on our holding.lwthttp://www.blogger.com/profile/10762954193380120137noreply@blogger.com0tag:blogger.com,1999:blog-6622954549461193951.post-14130885402632989412011-01-21T09:53:00.000+08:002011-01-21T09:53:54.114+08:00Jan 11 Sharebuilder Additions53 shares of STI ETF at $3.32<br />
15 shares of F&N at $6.57<br />
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18 Jan 2011lwthttp://www.blogger.com/profile/10762954193380120137noreply@blogger.com0tag:blogger.com,1999:blog-6622954549461193951.post-92122841616800561462011-01-21T09:48:00.000+08:002011-01-21T09:48:35.972+08:00More selling from the portfolio: Time to weed out "junk"?We sold our small position in Courage Marine on 18 Jan (18 lots at $0.215), following the sudden spike in the stock. The previous day, the company announced that it had plans to list in Hong Kong, which would improve liquidity and branding. While we still think that the company holds decent value, we remain cautious on holding "junk" in our portfolio for the longer term, and we see the rapid move in the stock price as a good opportunity to monetise our position and lock in profits. <br />
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We do not have a terribly optimistic outlook on the BDI; the measure has remained depressed by the weak global trade outlook, while the floods in Queensland will weigh on dry-bulk rates for some time. Coupled with the high price of crude oil, we think that dry-bulk shippers like Courage Marine will have to depend largely on prudent cost management for profit. While the company remains one of the most prudently-financed shipping companies available for investment, we have decided to take profits and raise our cash level to above 20% of the portfolio.lwthttp://www.blogger.com/profile/10762954193380120137noreply@blogger.com0tag:blogger.com,1999:blog-6622954549461193951.post-61780717960482026462011-01-11T16:44:00.000+08:002011-01-11T16:44:54.333+08:00Sold Memtech International; What makes a well-financed companyWe sold out of Memtech International yesterday at $0.14 (25,000 shares), reaping a tidy profit on our cost price of $0.12 (in April 2010). We have also collected a $187.50 dividend on our holdings, adding substantially to total profits (over 20%). While the company still remains cheap, we are happy to take profits on a lower-quality company like Memtech (just as we did for Gallant Venture, albeit a little early). <br />
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We continue to endorse long-term investing, but will prefer to hold companies which have the wherewithal to survive economic downturns via strong business moats (as Warren Buffett would allude to), well-financed positions, or a combination of both. Such companies within the portfolio would include SPH, Keppel Corp, Noble Group and Capitaland. We would even consider a company like Fraser and Neave with its high leverage (given its property exposure) as well-financed, as we believe that the company's strategic assets and portfolio of brands would allow it to access financing even under distressed market conditions.<br />
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We identify that access to financing is far more critical than temporary balance sheet strength, as in the case of the US government's continued ability to refinance at ridiculously-low yields, despite already being heavily indebted. All things equal, we would prefer companies which have both strong balance sheets <strong>and</strong> easy access to financing, but we remain cognizant that strong balance sheets can sometimes be a temporary blip. We recall several apparently well-financed S-Chips on the local Singapore bourse whose balance sheets were suddenly burdened by trade receivables that could not be identified, or the inability to service debt obligations due to cash remmittance issues. <br />
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We are not saying that Memtech International falls into such a category; the company has a healthy track-record of keeping its balance sheet in order. Unfortunately, the company's business moat is nearly non-existent, and we buy such companies to sell once the stock price moves from "deep-undervaluation" to "slight-undervaluation".lwthttp://www.blogger.com/profile/10762954193380120137noreply@blogger.com0tag:blogger.com,1999:blog-6622954549461193951.post-53462126718706004782011-01-07T16:32:00.000+08:002011-01-07T16:32:34.974+08:002010 portfolio summary<div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiaR7cnLPDLjS4ToufMfSZvXToByApdxGvRtS4d2vEUUz8N_oBDS4ImuDBLwz0qxy6OUu0smUSjPdBamVy-4_dAEP4HocEqcXYxz-UpjRsA8pB6xNRRx4lJ8ydrx4q7miGbb5HeyDrz6GY/s1600/performance_chart.bmp" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="266" n4="true" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiaR7cnLPDLjS4ToufMfSZvXToByApdxGvRtS4d2vEUUz8N_oBDS4ImuDBLwz0qxy6OUu0smUSjPdBamVy-4_dAEP4HocEqcXYxz-UpjRsA8pB6xNRRx4lJ8ydrx4q7miGbb5HeyDrz6GY/s400/performance_chart.bmp" width="400" /></a></div><br />
<strong>2010 performance summary</strong><br />
Our portfolio finished 2010 higher by 8.7% (9.4% without the subtraction of performance fees), outperforming our 6% annual hurdle rate, but underperforming the benchmark Straits Times Index's 13.4% gain. We are less concerned about our portfolio's underperformance over the past one year, but will continue to focus on picking undervalued companies for the portfolio in a prudent manner, without any regard for the Singapore stock market benchmark.<br />
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<strong>Cash holdings detracted</strong><br />
As of end December 2010, the portfolio held a cash position of 16.2% of portfolio assets, a fairly large percentage which weighed down on performance vis-a-vis the STI. The average cash position the portfolio held in 2010 was about 12%, and while we have no target cash level for the portfolio, our sizable cash holding is indicative of the lack of good investment opportunities we can find under current market conditions. We are also cognizant of the need to keep some powder dry to benefit from distressed market conditions, instead of watching in envy while others scoop up bargain buys. Nevertheless, we are also not terribly confident of timing the market, and will remain largely invested unless the market heads into an extremely euphoric state. We do not see this happening yet though.lwthttp://www.blogger.com/profile/10762954193380120137noreply@blogger.com0tag:blogger.com,1999:blog-6622954549461193951.post-69275107692447044282010-12-25T18:02:00.000+08:002010-12-30T18:02:57.415+08:00Dec 10 Sharebuilder additions16 shares of F&N at $6.17 and 31 shares of STI ETF at $3.22lwthttp://www.blogger.com/profile/10762954193380120137noreply@blogger.com0tag:blogger.com,1999:blog-6622954549461193951.post-65968301530103964622010-12-13T18:03:00.000+08:002010-12-30T18:13:31.010+08:00Sold Gallant VentureWe sold our 10,000 shares of Gallant Venture on 10 December 2010 at $0.37 apiece, representing a 37% gain from our investment price of $0.27 in October this year. Gallant Venture has been a "hot" stock recently, with Kim Eng citing a $0.75 target price. While the stock looks still looks cheap relative to book value, we are not terribly confident about management's ability to translate its undervalued landbank into cashflow over the next few years, that is to say, our investment in Gallant Venture was slightly speculative. <br />
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While we tend to avoid speculative purchases, our investment in Gallant Venture appeared to have sufficient downside protection, with substantial upside potential should positive newsflow trigger a re-rating. The company does not have the quality which will render it a longer-term investment prospect in our opinion, and we are also mindful that the company does not have a solid business model. The strong gains have come over just under 2 months, and we find this 37% return sufficient to justify a sell.<br />
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lwthttp://www.blogger.com/profile/10762954193380120137noreply@blogger.com0tag:blogger.com,1999:blog-6622954549461193951.post-76006170419383610382010-12-05T18:13:00.000+08:002010-12-30T18:22:28.605+08:00Portfolio gains 0.5% in Nov 10, STI up 0.2%In a largely flat month for the benchmark Straits Times Index, our portfolio gained 0.5% in November 2010, outpacing the 0.2% return for the STI. This comes even as we hold 13.7% of the portfolio's assets in cash, and on a year-to-date basis, the portfolio is up 6.2% (net of accrued performance fees), attaining its 6% annual target one month early.<br />
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Noble Group was a strong contributor to the portfolio, gaining 10.2% in November, while Memtech rose 9.5%. Keppel Corp benefitted from renewed interest in the offshore drilling segment, while Tat Hong and Mermaid suffered with declines of 10.7% and 11% respectively. Wells Fargo remains our second-largest holding, and gained 6.6% in the month.lwthttp://www.blogger.com/profile/10762954193380120137noreply@blogger.com0tag:blogger.com,1999:blog-6622954549461193951.post-24897981668892912962010-11-23T18:00:00.000+08:002010-12-30T18:01:49.954+08:00Nov 10 Sharebuilder additions30 shares of STI ETF at $3.265 and 15 shares of F&N at $6.43 on 18 November 2010lwthttp://www.blogger.com/profile/10762954193380120137noreply@blogger.com0tag:blogger.com,1999:blog-6622954549461193951.post-50795759874586923772010-11-05T18:15:00.001+08:002010-11-18T20:01:26.769+08:00Portfolio rises 1% in October, STI gains 1.5%<div class="Section1"><div style="text-align: justify; text-justify: inter-ideograph;"><span lang="EN-GB" style="font-family: "inherit","serif";">The portfolio gained 1% in October, slightly underperforming the STI's 1.5% rise. On a YTD basis, we are up 5.7% (assuming accrual of a 20% performance fee on outperformance of a 6% annual hurdle rate). The STI is 11.2% higher over the same period.</span></div><div style="text-align: justify; text-justify: inter-ideograph;"></div><br />
<br />
<div style="text-align: justify; text-justify: inter-ideograph;"><b><span lang="EN-GB" style="font-family: "inherit","serif";">Portfolio Changes</span></b></div><div style="text-align: justify; text-justify: inter-ideograph;"><span lang="EN-GB" style="font-family: "inherit","serif";">Other than our monthly Sharebuilder additions, we added Gallant Venture to the portfolio, on the basis of low valuations (on a Price to book basis) and the potential for multi-fold gains as the company's Bintan landbank is carried at cost, while land sales have been locked in at prices far higher. </span></div><br />
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<br />
<div style="text-align: justify; text-justify: inter-ideograph;"><span lang="EN-GB" style="font-family: "inherit","serif";">We did not sell any holdings in the month, while Guocoleisure and Cambridge Industrial Trust went ex-dividend in the month of October. CIT's distribution includes an advance distribution due to the Trust's plan to issue new units to existing investors (1 per 25, at $0.531 a unit), as well as via a private placement. We applied for excess units to top up our holdings to 25,000 units.</span></div><div style="text-align: justify; text-justify: inter-ideograph;"><span lang="EN-GB" style="font-family: "inherit","serif";"></span><br />
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<b><span lang="EN-GB" style="font-family: "inherit","serif";">Performance Discussion</span></b><br />
<div style="text-align: justify; text-justify: inter-ideograph;"></div><br />
<br />
<table border="0" cellpadding="0" cellspacing="0" class="MsoNormalTable" style="border-collapse: collapse; margin-left: -1.15pt; width: 210px;"><tbody>
<tr style="height: 15pt;"><td nowrap="true" style="border-bottom: windowtext 1pt solid; border-left: windowtext 1pt solid; border-right: windowtext 1pt solid; border-top: windowtext 1pt solid; height: 15pt; padding-bottom: 0in; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; width: 109.25pt;" valign="bottom" width="146"><div align="center" class="MsoNormal" style="text-align: center;"><span style="color: black;">PAN UNITED</span></div></td><td nowrap="true" style="border-bottom: windowtext 1pt solid; border-left: medium none; border-right: windowtext 1pt solid; border-top: windowtext 1pt solid; height: 15pt; padding-bottom: 0in; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; width: 48pt;" valign="bottom" width="64"><div align="center" class="MsoNormal" style="text-align: center;"><span style="color: black;">14.1%</span></div></td></tr>
<tr style="height: 15pt;"><td nowrap="true" style="border-bottom: windowtext 1pt solid; border-left: windowtext 1pt solid; border-right: windowtext 1pt solid; border-top: medium none; height: 15pt; padding-bottom: 0in; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; width: 109.25pt;" valign="bottom" width="146"><div align="center" class="MsoNormal" style="text-align: center;"><span style="color: black;">KEPPELCORP </span></div></td><td nowrap="true" style="border-bottom: windowtext 1pt solid; border-left: medium none; border-right: windowtext 1pt solid; border-top: medium none; height: 15pt; padding-bottom: 0in; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; width: 48pt;" valign="bottom" width="64"><div align="center" class="MsoNormal" style="text-align: center;"><span style="color: black;">11.1%</span></div></td></tr>
<tr style="height: 15pt;"><td nowrap="true" style="border-bottom: windowtext 1pt solid; border-left: windowtext 1pt solid; border-right: windowtext 1pt solid; border-top: medium none; height: 15pt; padding-bottom: 0in; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; width: 109.25pt;" valign="bottom" width="146"><div align="center" class="MsoNormal" style="text-align: center;"><span style="color: black;">TAT HONG W130802</span></div></td><td nowrap="true" style="border-bottom: windowtext 1pt solid; border-left: medium none; border-right: windowtext 1pt solid; border-top: medium none; height: 15pt; padding-bottom: 0in; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; width: 48pt;" valign="bottom" width="64"><div align="center" class="MsoNormal" style="text-align: center;"><span style="color: black;">11.1%</span></div></td></tr>
<tr style="height: 15pt;"><td nowrap="true" style="border-bottom: windowtext 1pt solid; border-left: windowtext 1pt solid; border-right: windowtext 1pt solid; border-top: medium none; height: 15pt; padding-bottom: 0in; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; width: 109.25pt;" valign="bottom" width="146"><div align="center" class="MsoNormal" style="text-align: center;"><span style="color: black;">ASCENDAS I-TRUST</span></div></td><td nowrap="true" style="border-bottom: windowtext 1pt solid; border-left: medium none; border-right: windowtext 1pt solid; border-top: medium none; height: 15pt; padding-bottom: 0in; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; width: 48pt;" valign="bottom" width="64"><div align="center" class="MsoNormal" style="text-align: center;"><span style="color: black;">4.0%</span></div></td></tr>
<tr style="height: 15pt;"><td nowrap="true" style="border-bottom: windowtext 1pt solid; border-left: windowtext 1pt solid; border-right: windowtext 1pt solid; border-top: medium none; height: 15pt; padding-bottom: 0in; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; width: 109.25pt;" valign="bottom" width="146"><div align="center" class="MsoNormal" style="text-align: center;"><span style="color: black;">MERMAID MARITIME</span></div></td><td nowrap="true" style="border-bottom: windowtext 1pt solid; border-left: medium none; border-right: windowtext 1pt solid; border-top: medium none; height: 15pt; padding-bottom: 0in; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; width: 48pt;" valign="bottom" width="64"><div align="center" class="MsoNormal" style="text-align: center;"><span style="color: black;">3.4%</span></div></td></tr>
<tr style="height: 15pt;"><td nowrap="true" style="border-bottom: windowtext 1pt solid; border-left: windowtext 1pt solid; border-right: windowtext 1pt solid; border-top: medium none; height: 15pt; padding-bottom: 0in; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; width: 109.25pt;" valign="bottom" width="146"><div align="center" class="MsoNormal" style="text-align: center;"><span style="color: black;">GUOCOLEISURE</span></div></td><td nowrap="true" style="border-bottom: windowtext 1pt solid; border-left: medium none; border-right: windowtext 1pt solid; border-top: medium none; height: 15pt; padding-bottom: 0in; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; width: 48pt;" valign="bottom" width="64"><div align="center" class="MsoNormal" style="text-align: center;"><span style="color: black;">3.0%</span></div></td></tr>
<tr style="height: 15pt;"><td nowrap="true" style="border-bottom: windowtext 1pt solid; border-left: windowtext 1pt solid; border-right: windowtext 1pt solid; border-top: medium none; height: 15pt; padding-bottom: 0in; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; width: 109.25pt;" valign="bottom" width="146"><div align="center" class="MsoNormal" style="text-align: center;"><span style="color: black;">TAT HONG </span></div></td><td nowrap="true" style="border-bottom: windowtext 1pt solid; border-left: medium none; border-right: windowtext 1pt solid; border-top: medium none; height: 15pt; padding-bottom: 0in; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; width: 48pt;" valign="bottom" width="64"><div align="center" class="MsoNormal" style="text-align: center;"><span style="color: black;">2.9%</span></div></td></tr>
<tr style="height: 15pt;"><td nowrap="true" style="border-bottom: windowtext 1pt solid; border-left: windowtext 1pt solid; border-right: windowtext 1pt solid; border-top: medium none; height: 15pt; padding-bottom: 0in; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; width: 109.25pt;" valign="bottom" width="146"><div align="center" class="MsoNormal" style="text-align: center;"><span style="color: black;">COURAGE MARINE</span></div></td><td nowrap="true" style="border-bottom: windowtext 1pt solid; border-left: medium none; border-right: windowtext 1pt solid; border-top: medium none; height: 15pt; padding-bottom: 0in; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; width: 48pt;" valign="bottom" width="64"><div align="center" class="MsoNormal" style="text-align: center;"><span style="color: black;">2.6%</span></div></td></tr>
<tr style="height: 15pt;"><td nowrap="true" style="border-bottom: windowtext 1pt solid; border-left: windowtext 1pt solid; border-right: windowtext 1pt solid; border-top: medium none; height: 15pt; padding-bottom: 0in; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; width: 109.25pt;" valign="bottom" width="146"><div align="center" class="MsoNormal" style="text-align: center;"><span style="color: black;">STI ETF</span></div></td><td nowrap="true" style="border-bottom: windowtext 1pt solid; border-left: medium none; border-right: windowtext 1pt solid; border-top: medium none; height: 15pt; padding-bottom: 0in; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; width: 48pt;" valign="bottom" width="64"><div align="center" class="MsoNormal" style="text-align: center;"><span style="color: black;">2.2%</span></div></td></tr>
<tr style="height: 15pt;"><td nowrap="true" style="border-bottom: windowtext 1pt solid; border-left: windowtext 1pt solid; border-right: windowtext 1pt solid; border-top: medium none; height: 15pt; padding-bottom: 0in; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; width: 109.25pt;" valign="bottom" width="146"><div align="center" class="MsoNormal" style="text-align: center;"><span style="color: black;">WELLS FARGO</span></div></td><td nowrap="true" style="border-bottom: windowtext 1pt solid; border-left: medium none; border-right: windowtext 1pt solid; border-top: medium none; height: 15pt; padding-bottom: 0in; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; width: 48pt;" valign="bottom" width="64"><div align="center" class="MsoNormal" style="text-align: center;"><span style="color: black;">2.0%</span></div></td></tr>
<tr style="height: 15pt;"><td nowrap="true" style="border-bottom: windowtext 1pt solid; border-left: windowtext 1pt solid; border-right: windowtext 1pt solid; border-top: medium none; height: 15pt; padding-bottom: 0in; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; width: 109.25pt;" valign="bottom" width="146"><div align="center" class="MsoNormal" style="text-align: center;"><span style="color: black;">BEST WORLD</span></div></td><td nowrap="true" style="border-bottom: windowtext 1pt solid; border-left: medium none; border-right: windowtext 1pt solid; border-top: medium none; height: 15pt; padding-bottom: 0in; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; width: 48pt;" valign="bottom" width="64"><div align="center" class="MsoNormal" style="text-align: center;"><span style="color: black;">1.7%</span></div></td></tr>
<tr style="height: 15pt;"><td nowrap="true" style="border-bottom: windowtext 1pt solid; border-left: windowtext 1pt solid; border-right: windowtext 1pt solid; border-top: medium none; height: 15pt; padding-bottom: 0in; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; width: 109.25pt;" valign="bottom" width="146"><div align="center" class="MsoNormal" style="text-align: center;"><span style="color: black;">WBL Corp</span></div></td><td nowrap="true" style="border-bottom: windowtext 1pt solid; border-left: medium none; border-right: windowtext 1pt solid; border-top: medium none; height: 15pt; padding-bottom: 0in; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; width: 48pt;" valign="bottom" width="64"><div align="center" class="MsoNormal" style="text-align: center;"><span style="color: black;">0.2%</span></div></td></tr>
<tr style="height: 15pt;"><td nowrap="true" style="border-bottom: windowtext 1pt solid; border-left: windowtext 1pt solid; border-right: windowtext 1pt solid; border-top: medium none; height: 15pt; padding-bottom: 0in; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; width: 109.25pt;" valign="bottom" width="146"><div align="center" class="MsoNormal" style="text-align: center;"><span style="color: black;">CAMBRIDGE </span></div></td><td nowrap="true" style="border-bottom: windowtext 1pt solid; border-left: medium none; border-right: windowtext 1pt solid; border-top: medium none; height: 15pt; padding-bottom: 0in; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; width: 48pt;" valign="bottom" width="64"><div align="center" class="MsoNormal" style="text-align: center;"><span style="color: black;">0.0%</span></div></td></tr>
<tr style="height: 15pt;"><td nowrap="true" style="border-bottom: windowtext 1pt solid; border-left: windowtext 1pt solid; border-right: windowtext 1pt solid; border-top: medium none; height: 15pt; padding-bottom: 0in; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; width: 109.25pt;" valign="bottom" width="146"><div align="center" class="MsoNormal" style="text-align: center;"><span style="color: black;">MEMTECH</span></div></td><td nowrap="true" style="border-bottom: windowtext 1pt solid; border-left: medium none; border-right: windowtext 1pt solid; border-top: medium none; height: 15pt; padding-bottom: 0in; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; width: 48pt;" valign="bottom" width="64"><div align="center" class="MsoNormal" style="text-align: center;"><span style="color: black;">0.0%</span></div></td></tr>
<tr style="height: 15pt;"><td nowrap="true" style="border-bottom: windowtext 1pt solid; border-left: windowtext 1pt solid; border-right: windowtext 1pt solid; border-top: medium none; height: 15pt; padding-bottom: 0in; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; width: 109.25pt;" valign="bottom" width="146"><div align="center" class="MsoNormal" style="text-align: center;"><span style="color: black;">K-Green Trust</span></div></td><td nowrap="true" style="border-bottom: windowtext 1pt solid; border-left: medium none; border-right: windowtext 1pt solid; border-top: medium none; height: 15pt; padding-bottom: 0in; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; width: 48pt;" valign="bottom" width="64"><div align="center" class="MsoNormal" style="text-align: center;"><span style="color: black;">-0.9%</span></div></td></tr>
<tr style="height: 15pt;"><td nowrap="true" style="border-bottom: windowtext 1pt solid; border-left: windowtext 1pt solid; border-right: windowtext 1pt solid; border-top: medium none; height: 15pt; padding-bottom: 0in; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; width: 109.25pt;" valign="bottom" width="146"><div align="center" class="MsoNormal" style="text-align: center;"><span style="color: black;">NOBLE GRP </span></div></td><td nowrap="true" style="border-bottom: windowtext 1pt solid; border-left: medium none; border-right: windowtext 1pt solid; border-top: medium none; height: 15pt; padding-bottom: 0in; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; width: 48pt;" valign="bottom" width="64"><div align="center" class="MsoNormal" style="text-align: center;"><span style="color: black;">-1.6%</span></div></td></tr>
<tr style="height: 15pt;"><td nowrap="true" style="border-bottom: windowtext 1pt solid; border-left: windowtext 1pt solid; border-right: windowtext 1pt solid; border-top: medium none; height: 15pt; padding-bottom: 0in; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; width: 109.25pt;" valign="bottom" width="146"><div align="center" class="MsoNormal" style="text-align: center;"><span style="color: black;">SPH </span></div></td><td nowrap="true" style="border-bottom: windowtext 1pt solid; border-left: medium none; border-right: windowtext 1pt solid; border-top: medium none; height: 15pt; padding-bottom: 0in; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; width: 48pt;" valign="bottom" width="64"><div align="center" class="MsoNormal" style="text-align: center;"><span style="color: black;">-2.4%</span></div></td></tr>
<tr style="height: 15pt;"><td nowrap="true" style="border-bottom: windowtext 1pt solid; border-left: windowtext 1pt solid; border-right: windowtext 1pt solid; border-top: medium none; height: 15pt; padding-bottom: 0in; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; width: 109.25pt;" valign="bottom" width="146"><div align="center" class="MsoNormal" style="text-align: center;"><span style="color: black;">FRASER AND NEAVE</span></div></td><td nowrap="true" style="border-bottom: windowtext 1pt solid; border-left: medium none; border-right: windowtext 1pt solid; border-top: medium none; height: 15pt; padding-bottom: 0in; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; width: 48pt;" valign="bottom" width="64"><div align="center" class="MsoNormal" style="text-align: center;"><span style="color: black;">-4.0%</span></div></td></tr>
<tr style="height: 15pt;"><td nowrap="true" style="border-bottom: windowtext 1pt solid; border-left: windowtext 1pt solid; border-right: windowtext 1pt solid; border-top: medium none; height: 15pt; padding-bottom: 0in; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; width: 109.25pt;" valign="bottom" width="146"><div align="center" class="MsoNormal" style="text-align: center;"><span style="color: black;">Capitaland</span></div></td><td nowrap="true" style="border-bottom: windowtext 1pt solid; border-left: medium none; border-right: windowtext 1pt solid; border-top: medium none; height: 15pt; padding-bottom: 0in; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; width: 48pt;" valign="bottom" width="64"><div align="center" class="MsoNormal" style="text-align: center;"><span style="color: black;">-4.2%</span></div></td></tr>
<tr style="height: 15pt;"><td nowrap="true" style="border-bottom: windowtext 1pt solid; border-left: windowtext 1pt solid; border-right: windowtext 1pt solid; border-top: medium none; height: 15pt; padding-bottom: 0in; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; width: 109.25pt;" valign="bottom" width="146"><div align="center" class="MsoNormal" style="text-align: center;"><span style="color: black;">BERKSHIRE HATH-B</span></div></td><td nowrap="true" style="border-bottom: windowtext 1pt solid; border-left: medium none; border-right: windowtext 1pt solid; border-top: medium none; height: 15pt; padding-bottom: 0in; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; width: 48pt;" valign="bottom" width="64"><div align="center" class="MsoNormal" style="text-align: center;"><span style="color: black;">-5.4%</span></div></td></tr>
<tr style="height: 15pt;"><td nowrap="true" style="border-bottom: windowtext 1pt solid; border-left: windowtext 1pt solid; border-right: windowtext 1pt solid; border-top: medium none; height: 15pt; padding-bottom: 0in; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; width: 109.25pt;" valign="bottom" width="146"><div align="center" class="MsoNormal" style="text-align: center;"><span style="color: black;">Best World W130705</span></div></td><td nowrap="true" style="border-bottom: windowtext 1pt solid; border-left: medium none; border-right: windowtext 1pt solid; border-top: medium none; height: 15pt; padding-bottom: 0in; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; width: 48pt;" valign="bottom" width="64"><div align="center" class="MsoNormal" style="text-align: center;"><span style="color: black;">-13.3%</span></div></td></tr>
</tbody></table><div class="MsoPlainText"></div><br />
<br />
<div class="MsoPlainText"><span lang="EN-GB" style="font-family: "inherit","serif";">Our new addition, Pan United Corp, returned 14.1% in the month of October, while Keppel Corp benefitted from strong oil prices. Capitaland fell amidst widespread weakness in property stocks. Cash is now 14.2% of the portfolio, and will weigh on returns against the benchmark if the market continues to trend up strongly, but we are comfortable with adopting a more cautious stance when asset prices rise too quickly. A pull-back at this juncture may be seen as healthy, and will allow the market to consolidate for further gains. </span></div><div class="MsoPlainText"></div><br />
</div></div>lwthttp://www.blogger.com/profile/10762954193380120137noreply@blogger.com0tag:blogger.com,1999:blog-6622954549461193951.post-27471469863054541822010-10-25T16:23:00.001+08:002010-10-25T16:23:32.250+08:00SGX to merge with ASX, to take on debtSGX has announced a takeover offer for ASX which will see each ASX shareholder receiving a mixture of cash and shares in the new combined entity. <br />
<br />
<em>Under the terms of the Scheme, ASX shareholders as at a record date to be determined will be paid, in relation to each ASX Share, a combination of:</em><br />
<em>• A$22.00 (approximately S$28.04) in cash (the “Cash Consideration”); and</em><br />
<em>• 3.473 new SGX Shares (the “Share Consideration”).</em><br />
<br />
<em>The aggregate value of the Share Consideration is S$5.8 billion (approximately A$4.6 billion), based on the </em><em>last traded price of SGX Shares as at the Latest Practicable Date, and S$5.8 billion (approximately A$4.6 </em><em>billion), based on the volume-weighted average price (“VWAP”) of SGX Shares transacted on the Latest </em><em>Practicable Date.</em><br />
<em>Accordingly, the value of the aggregate consideration payable for the Proposed Combination (the “Scheme </em><em>Consideration”), based on the aggregate Cash Consideration and the aggregate value of the Share </em><em>Consideration (determined by reference to the last traded price of SGX Shares as at the Latest Practicable </em><em>Date), is approximately A$8.4 billion (approximately S$10.7 billion), or approximately A$48.00 approximately S$61.17) for each ASX Share.</em><br />
<br />
<em>The value of the Scheme Consideration based on the aggregate Cash Consideration and the aggregate value of the Share Consideration (determined by reference to the VWAP of SGX Shares transacted on the </em><em>Latest Practicable Date), is approximately A$8.4 billion (approximately S$10.8 billion).</em><br />
<br />
<strong>The move will see SGX coughing up about S$4.9 billion in cash, which will inevitably see the combined entity take on between S$3-4 billion in debt. Depending on the cost of debt, we estimate that interest could cost SGX as much as $150 million a year, which will eat into earnings (and dividends!).</strong><br />
<strong><br />
</strong><br />
<strong>We have maintained that SGX looks terribly expensive at current levels, and it is fantastic that management can utilise the expensive stock to purchase a choice asset (ASX in this case) to benefit shareholders. However, the deal would have made much more sense if an all-stock offer was utilised. By offering cash and taking on debt, it appears that the EPS-accretion (as SGX touts the deal to be, EPS of $0.3008 to $0.3612) will be difficult to achieve after factoring in interest payments.</strong>lwthttp://www.blogger.com/profile/10762954193380120137noreply@blogger.com0tag:blogger.com,1999:blog-6622954549461193951.post-58143832889941207492010-10-22T12:50:00.003+08:002010-10-22T12:53:56.041+08:00Mermaid buys rigs, price appears a good deal<div class="Section1"><div class="MsoPlainText"><span style="font-family: Calibri; font-size: small;"><span style="font-family: Calibri; font-size: 12pt;">Mermaid Maritime today announced that it has entered into a letter of intent for the construction of two new jack-up rigs with Keppel Corp, under a proposed new entity “Asia Offshore Drilling Limited” (AOD). The contract is for US$360 million, which works out to about US$180 per rig, and is based on Keppel FELS proprietary Mod V-B class of jack-up rigs. Mermaid is in the process of seeking other investors to form a JV under AOD, and will likely be the major shareholder of the new entity.</span></span></div><div class="MsoPlainText"><span style="font-family: Calibri; font-size: small;"><span style="font-family: Calibri; font-size: 12pt;"></span></span><br />
<div class="MsoPlainText"><span style="font-family: Calibri; font-size: small;"><span style="font-family: Calibri; font-size: 12pt;">We have talked about Mermaid’s huge cash reserves, and the company has now indicated its intent to invest in new rigs to form an offshore drilling entity, likely focused in the Asian region. Is the price paid too high? We dug out old contract values for similar (or identical) Mod V-B class jack-up rigs from Keppel Corp:</span></span><br />
<br />
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<div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgQxtafzONUerftOEh03mGdXX7NJ_jUddBXSZWw-VnehjYmfZ8-t_Nq6e2xlicF-80UXgZKYLpPylb7eJX8hnh4TMj-dq9jO_SrzBySjMNstlRfGlQkx8KfgWFC2gWgwbgtzTFt5rcbK1o/s1600/mermaid_1.GIF" imageanchor="1" style="clear: left; cssfloat: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img border="0" height="136" nx="true" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgQxtafzONUerftOEh03mGdXX7NJ_jUddBXSZWw-VnehjYmfZ8-t_Nq6e2xlicF-80UXgZKYLpPylb7eJX8hnh4TMj-dq9jO_SrzBySjMNstlRfGlQkx8KfgWFC2gWgwbgtzTFt5rcbK1o/s640/mermaid_1.GIF" width="640" /></a></div><br />
<span style="font-family: Calibri; font-size: small;"><span style="font-family: Calibri; font-size: 12pt;">On a price basis, the US$180 million per rig price tag appears substantially lower (a 30.5% discount) compared to the US$259 million average paid by other customers from 2005 to 2010. Relative to the price of WTI Crude oil (taken as a simple ratio of rig price in USD millions to oil price in USD), the low ratio for the AOD deal suggests that Mermaid got a good deal on this one. We are slightly puzzled by the disparity in the contract value; the rig appears to be of the same make (under Keppel FELS’ Class B design) as others detailed in prior contracts. With oil prices above US$80, we would also assume that Keppel Corp would have more pricing power. </span></span></div><div class="MsoPlainText"><div class="MsoPlainText"><div class="MsoPlainText"><span style="font-family: Calibri; font-size: small;"><span style="font-family: Calibri; font-size: 12pt;"></span></span><br />
<div class="MsoPlainText"><span style="font-family: Calibri; font-size: small;"><span style="font-family: Calibri; font-size: 12pt;">We own both Keppel Corp and Mermaid Maritime in our portfolio, and read this as a positive development for Mermaid, as the company has now indicated its intent to deploy cash in an area within its expertise. The price paid also appears cheap in comparison with other similar rig contracts. While it looks like Keppel Corp makes out worse on this one, the deal will add to Keppel Corp’s rapidly declining order book, and the positive sentiment associated with the contract is possibly more important than the associated profit.</span></span></div></div></div></div></div></div>lwthttp://www.blogger.com/profile/10762954193380120137noreply@blogger.com0tag:blogger.com,1999:blog-6622954549461193951.post-25960090634996335482010-10-21T17:58:00.000+08:002010-12-30T18:00:24.437+08:00Oct 10 Sharebuilder Additions15 shares of F&N at $6.385 each, and 29 shares of STI ETF at $3.27 each on 18 Oct 2010lwthttp://www.blogger.com/profile/10762954193380120137noreply@blogger.com0tag:blogger.com,1999:blog-6622954549461193951.post-10763002209775349522010-10-19T23:07:00.001+08:002010-10-19T23:08:08.034+08:00Asset bubbles forming in Asia? Not yet, but early indications are there<span style="font-family: Arial, Helvetica, sans-serif;">We have talked about the potential for asset bubbles forming in the Chinese property market, highlighting that as a key risk to global stock markets. The potential problem appears even more dire, with Asian (and EM) assets the likely beneficiaries of waves of liquidity flowing out of developed markets.</span><br />
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<span style="font-family: Arial;">The current situation: while developed economies (most notably the US) are required to keep interest rates low to stimulate their domestic economies, the emerging markets (and Asia in particular) are booming once again. Output is at record-high levels, while consumers on the ground hardly feel the recessionary chill of the Western world. </span><br />
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<span style="font-family: Arial;">A quick look around us in Singapore emphasises this: Bustling car showrooms, packed shopping malls, an extremely tight labour market (a JobsDB email I receive daily highlighting jobs in the financial sector is noticeably longer, compared to a year ago). The IPO market is booming once again, with the latest IPO of GIobal Logistic Properties 12 times subscribed, and Mapletree Industrial Trust set to join in the fray. These are all indications that sentiment is turning positive again, with the STI recently climbing to new 2-year highs. </span><br />
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<span style="font-family: Arial;">With Asia and Emerging Markets the obvious forerunners in the post-Lehman world, investors in the US are more than happy to borrow at near-zero rates to participate in the tremendous growth opportunities in the emerging market regions. The expected appreciation of Asian currencies is an added bonus, and also the result of strong inflows of capital into the region. Singapore recently tightened monetary policy further, which will add to upward pressure on the SGD against the USD.</span><br />
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<span style="font-family: Arial;">As with all asset bubbles, the flight of capital will be swift, and many investors will be left nursing their wounds in the aftermath. Fortunately, stock market valuations still appear fair at the moment, despite the onslaught of new capital inflows from the West into Asia. Several segments of the Asian stock market appear slightly expensive (Indonesian and Indian equities, consumer discretionary stocks in China and India, as well as hospitality/leisure plays in Singapore), but the overall market is generally fairly valued at present. We will maintain our exposure to the stock market within the portfolio, but will be keenly watching out for bubble-like symptoms which we expect to develop at some stage over the next few years.</span>lwthttp://www.blogger.com/profile/10762954193380120137noreply@blogger.com0