Rearranging my Portfolio

Over the last eight weeks, I have taken the initiative to divest my investments in Capitaland and reinvest the returns into Wilmar, Olam and Oceanus.

I have come to view investment in property counters to be difficult in view of the fact that earnings are typically masked by large sum of revaluation gain. With the spectre of property price controls locally and in China, I decided to get out of this counter completely.

My investment in Wilmar has been less than timely as I currently suffering from a small paper loss but I firmly believe that I should be able to reap some benefits when the prices of oil seeds stablized at a profitable level for the manufacturer. I am starting to understand Wilmar business and I believe scale is of utmost importance in such an industry albeit a bit similar to OEM contract manufacturing where Foxconn emerges the clear winner. Wilmar do dabble recently in property development in China,but I believe this a side issue and will not be its major focus.

As for Olam, I basically took the opportunity of a bad analyst report that drive down prices to acquire it at a more reasonable. My timing is not perfect though. I particularly like Olam for what they are providing eg soft commodities against the spectre of increasing world population and rising comsumption patterns.

I made small investment in Oceanus (a counter which I investigated and reject previously) as I believe the price is now reasonable and the business model of
shifting to processed abalones make more sense to me. In any case, I am still hedging my bet on this one by making only a small investment at this stage.

All in all, I have built a portfolio of commodities related companies over the last 2 months by divesting away my property counter (Capitaland)

I am looking forward to receive dividends from the following this month:-

SGSBonds
UOB Pref Share
OCBC Pref Share
K-Green
LMIR
CitySpring

K-Green

Key Statistics for FY2010

Profit After Tax (from date of listing to 31 Dec 2010)  -   $8.7million
EPU - 1.39cts
NAV - $1.16
DPU - 4.31cts
Annualized Distribution Yield - 7.9% (based on share price $1.07)
Adjusted NAV - $1.11 (excluding new units issued for Trust-Manager Fees and distribution payable)
Total Liability -  $35.892 million
Trust Manager's Fees - $2.305 million (from date of listing to 31 Dec 2010)

Currently half of the Trust Manager Fees is paid in terms of issuing new units

Property Cooling Measures

The government unveiled a spate of proprty cooling measures yesterday. It hit the Banks and Property counters. As I owned both DBS and Capitalland in my portfolio, I have also taken a hit.

But I am happy with the measures. With significant exposure to DBS, the last thing I want to see in SIngapore is a property bubble eventually wrecking the banks. If you look at Ireland or Spain, you see how bad that can be.

SPH

SPH just released their Q1FY11 results. Net profit attributable to shareholders was at $102M (about 29.3% less than the corresponding period last year). This is expected because there is no more contribution from SKY@eleven.

However, I made some quick calculation that noticed that Net profit attributable to shareholders in Q4FY10 was only 75M. ( I believe there is no contribution from SKY@eleven for this period also).

So, things are not so bad as it may seems.

Net earnings per diluted share is 6 cents. Doing a linear projection for the whole year, it would be 24 cents per diluted share per year.

With rental income from Clementi Mall coming in at the later stage of the year, this may trend up a little. SPH probably have overpaid for Clementi Mall, but with interest rate at a record low and will stay low for a while, it will mitigate some of the mistakes.

Dividends

We all know that the mood of the typical investor can swing violently between extreme bullishness and despair. When one has magically (typically by accident rather than by deliberate choice) hit on a investment that return mutiple times on the original vested sum over a short period of time (eg buying OSIM when the price is low), there is a tendency to be carried away with how easy money can be made. Vice-versa, we often turn into despair when we see our invested counters plunging in value day after day. One of the way to smoothen over such period is really to devote a substantial  portion of your investment into good quality stocks that give  a decent dividend regularly. From example,

Berkshire Hathaway pays no dividend. However, yield-bearing companies still represent a major chunk of Buffett's portfolio. Aside from being leaders in their respective fields, Buffett positions including Coca-Cola, Proctor & Gamble and Johnson & Johnson are also notable dividend payers.
As we saw last year, distributions have become essential to navigating today's volatile economic climate. The constant reminders of economic turmoil facing both the U.S. and abroad can lead to unexpected shake ups and gut wrenching dips.

Consistent dividends can help alleviate some of this volatility, providing conservative investors with some comfort and confidence.

Having a large number of quality companies sharing the fruits of the success regularly with their investors also lead to a healthier and functional market, In China, despite the booming economy, the market is still at its doldrums because very few (less than 5%) of the companies pay any dividends at all. There is really no point in investing in such companies because whatever fruits of the success of these companies will eventually be swindled away or gambled on some foolish business expansions, if management consciously overlook investor interest over a long period of time.

My dividends for Jan 2011
Suntec Reit
Singtel

Wilmar

I invested 2 lots into Wilmar at $5.70 today. Probably my last investment this year.

I always wanted to build a portfolio around a few good commodities companies. I already had banking, Telcos, Transport, Reits, Infrastructure Trust, Property and Media of varying sizes.

Unfortunately, the entry price was high for companies like Wilmar, Olam, Noble, IndoFood and others throughout this year.

Took opportunity of the "bad" news surrounding Wilmar today to take a small position. I typically monitor companies that I would like to be invested and take position when there are "bad" news that cause a sudden price drop to make a entry. This is one of my ways to minimise going in at a higher than warranted price. I missed the opportunity to invested earlier when there some a tax fraud rumour against Wilmar previously as I had not clue how bad that can be.

Taking a small position in a company forces me to monitor the company performance closely to see if I can continue to build up my position.

Some Personal Reflections on 2010

The year is drawing to a close. My portfolio remain largely the same as in the beginning of 2010 with some additions. Most of the additions are done beginning of the year. I divested Cosco, NOL and MIIF with some small capital gains. I did a rough calculation and my average passive income is running around $5K/month.

My near misses for the year are GMG, Genting and Thomson Medical where I have seriously look at them but hesitated for too long before the counters took off.

Two of my substantial holding (DBS and Capitaland) have been laggards this year but I am not thinking of divesting.

I expect or have received dividends for the following this month:-

StarHub
CitySpring
SP Ausnet
SPH