Good Saturday morning folks!
It's election fever here in Singapore as we are in the midst of our elections to vote for the next party to be in parliament. My vote is still undecided as a myriad of topics emerge for both deliberations and considerations. Usually in the past, there is an 'election effect' that we would see for Singapore stocks. However, with the current overall market volatility this effect has been completely dilluted.
Nonetheless, I remain steadfast in having strong belief in our local companies. More so of the ones that I have invested in. In recent weeks I have been faced with a dilemma.
- Do I average down only on some of my heavily beaten down positions?: OCBC Bank (11% down), Jardine Matheson (11% down) & Sembcorp (17% down).
- Or do I maintain allocation discipline and add evenly across all names?: Currently I have 8 names in the portfolio which has not changed for the last 6 months: OCBC Bank, Sembcorp Industries, Jardine Matheson Holdings, CapitalandMall Trust, Mapletree Commercial Trust, Singtel, ComfortDelgro and Raffles Medical.
- Or do I add positions to the ones that have continued to hold up well?: Comfortdelgro and Raffles Medical, both positions are the top performers in my portfolio.
As I type this and with limited resources at any one point, I'm still pondering on the next step to take. However and I say this with immense pride, I am glad that I rejected the urge to panic sell or to re-consolidate certain positions indiscrimately. With proper planning and selective stock picking, it became apparently clear and more so during the recent market madness that the companies which I have chosen are solid names that I would want to add even more when markets rotate.
So I'm glad my decision moving forward is skewed towards where to ADD rather than where to SELL as there is no impairment I see at all to any of the 8 businesses that I have stakes in. Nonetheless and on the flip-side, in a bullish market if any of the positions have risen to levels that I feel are prime for trimming, the appropriate rebalancing will be done. This was done a couple of times on both the Comfortdelgro and Raffles Medical positions earlier this year (for those of you who have been following my blog you may have read those earlier posts).
So remember, to empower your portfolio you need to have faith in the companies you put your hard earned money in. Not blind faith I have to reiterate, but faith stemming from hard work and research in the companies you own.
If you are new to investing and would like to construct a portfolio for a start, you may wish to follow my selections and get updated via this blog. However, please do not take this as buy-sell recommendations but they are suggestions on how to construct a proper stock portfolio. This will hopefully set you on the course to a better financial future and less reliance on your active work income.
Ending off with sharing some of my dividend updates for Sept below:
*Dividend Update for Sept
- Scrip reinvestment elected: OCBC Bank $360
- Scrip reinvestment elected: Jardine Matheson US$38
Signing Off and Have a Great Weekend
Transitioning Stock Investor
Showing posts with label Sembcorp Industries. Show all posts
Showing posts with label Sembcorp Industries. Show all posts
Saturday, 5 September 2015
Saturday, 15 August 2015
Earnings Season - Portfolio Update
Hi all, it's been a week since I last blogged as I was away on holiday in HK and what a hot holiday it was as the temperatures there just were sky high.
Nonetheless, as I was in HK I still kept a close watch on the markets in general. It was earnings reporting season for a host of companies in Singapore, which included names like Comfortdelgro, Singtel, Sembcorp Industries, Jardine Matheson Holdings. Of these names all reported solid earnings except Jardine which saw a firm-wide knock on the profits of its businesses.
I would be expecting a bumper crop of dividends for Sept of around $500 plus in which they will be entirely reinvested in their existing holdings.
What we also saw recently was a massive sell-down of many stocks mainly due to flowover concerns from China's recent devaluation of its RMB, not once but twice. This leaves many of the prices of the companies within my portfolio at rather attractive levels. I may consider either adding unto my REIT positions (ie. Capitaland Mall Trust and Mapletree Commercial Trust) or adding unto a postion to Comfortdelgro, Singtel or Sembcorp Industries. I am still undecided at the moment but will commit the funds later this month.
Meanwhile, it's more studies on my CFA Level 2 and just monitoring the market dynamics in general. Will update again when I further consolidate my portfolio with new additions to my existing holdings + reinvestment of the incoming dividends.
Signing Off
Transitioning Stock Investor
Nonetheless, as I was in HK I still kept a close watch on the markets in general. It was earnings reporting season for a host of companies in Singapore, which included names like Comfortdelgro, Singtel, Sembcorp Industries, Jardine Matheson Holdings. Of these names all reported solid earnings except Jardine which saw a firm-wide knock on the profits of its businesses.
I would be expecting a bumper crop of dividends for Sept of around $500 plus in which they will be entirely reinvested in their existing holdings.
What we also saw recently was a massive sell-down of many stocks mainly due to flowover concerns from China's recent devaluation of its RMB, not once but twice. This leaves many of the prices of the companies within my portfolio at rather attractive levels. I may consider either adding unto my REIT positions (ie. Capitaland Mall Trust and Mapletree Commercial Trust) or adding unto a postion to Comfortdelgro, Singtel or Sembcorp Industries. I am still undecided at the moment but will commit the funds later this month.
Meanwhile, it's more studies on my CFA Level 2 and just monitoring the market dynamics in general. Will update again when I further consolidate my portfolio with new additions to my existing holdings + reinvestment of the incoming dividends.
Signing Off
Transitioning Stock Investor
Sunday, 2 August 2015
Thoughts on Sembcorp Industries - 2 Aug 2015
It's been a pretty interesting week hasn't it. I hope many of you have solid portfolios, that in spite of the recent volatility has held up well.
I recently have been receiving a few queries on Sembcorp Industries and my views on the company. As you may know I am currently holding unto 3,000 shares of this company with an average cost price of $4.26. To be very honest, although I do feel uncomfortable seeing the recent stock price plummet, I still am very convicted in this position. Now do let me make some points on why I say this, with some caveats obviously.
1. Correlation of Sembcorp Industries and Oil Prices
- Now, we know that Sembcorp Industries owns a large share of Sembcorp Marine and we have seen the recent poor numbers from the latter company. I did a correlation study of Sembcorp Industries with the price of oil, over time. What can be seen pretty obviously is the high correlation of oil price to the price of Sembcorp Industries. What I also noticed is the convergence of the stock price to oil and based on current values, the stock price still has some way down to go if it does converge.
2. Oil Market in General
- Now, in relation to the point above we need to understand the oil market and its dynamics. I could go on and on but in summary what I can describe the market is there are two main factors: Supply and Demand.
-Supply of Oil: This is closely controlled by OPEC in which there are key parties like Saudi Arabia, Russia, Kuwait, etc. The current dynamics is this, the Saudis refuse to cut production to prop up oil prices because they want to maintain market share. They also want to force out the shale oil drillers in the US because when oil prices are low, they go below the production costs of shale oil and as a result if these shale oil drillers are unable to sustain low prices and margins, they need to shut down. And the Saudis have large pockets to wait this out. However, you also have countries like Russia which need oil prices to recover to prop back up their economy.
-Demand of Oil: China has been slowing down and as such the demand for oil. Some countries are also exploring alternative energy sources which may affect oil demand albeit not in the forseeable future.
Summary of Oil: There are a myriad of other things about oil that I can nag about, however in summary what I can say is this. I expect oil to stay low, but probably come back up by next year. It is anybody's guess but I really dont see this scenario panning out for too long. And when oil does shoot back up, which it has done many times before, this stock is well-positioned to capitalise on that.
3. Sembcorp Industries's valuation and businesses
- Similarly, we can scrutinise all of their businesses to a fault and come to a premature conclusion. But I won't. However, what I can observe is that the current valuations of Sembcorp to me are very fair. I say this being fully aware of their relatively high debt levels, declining margins, etc.
- However, let us not forget these factors:
a. Sembcorp Marine is still one of the world's best offshore rig builders with superior management and a rather long history.
b. Secondly, utilities is still a necessary business model and in spite of domestic pressures, the company has expanded overseas like India to build their businesses there.
c. Most importantly I still do not see any impairment to their business models. Yes, they have lower orderbooks and declining margins, but it is obvious that these are highly correlated to the concerns on oil prices. Do I see this as a long term impairment? Clearly not.
d. The businesses that Sembcorp is in require high levels of capital investment and are large moats with high barries of entry. I love that for any business.
In summary, what I can comment about Sembcorp Industries is that even though I see declining profits currently, I don't have much concerns on it going forward. In times of uncertainty, we really need to dig deep and ask ourselves our initial reasons for investing in a current company and whether those reasons remain intact. They clearly do for me in this company as I wait out patiently for oil prices to rebound and as a result recover the margins for this well-managed, world class company that will soon prove its detractors wrong. There is no signs of impairment of the business and more importantly its management and any near term price concerns will be shrugged off and/or good reasons for adding more positions in which I am planning to do so probably.
Comments are most welcome!
Signing Off
Transitioning Stock Investor
I recently have been receiving a few queries on Sembcorp Industries and my views on the company. As you may know I am currently holding unto 3,000 shares of this company with an average cost price of $4.26. To be very honest, although I do feel uncomfortable seeing the recent stock price plummet, I still am very convicted in this position. Now do let me make some points on why I say this, with some caveats obviously.
1. Correlation of Sembcorp Industries and Oil Prices
- Now, we know that Sembcorp Industries owns a large share of Sembcorp Marine and we have seen the recent poor numbers from the latter company. I did a correlation study of Sembcorp Industries with the price of oil, over time. What can be seen pretty obviously is the high correlation of oil price to the price of Sembcorp Industries. What I also noticed is the convergence of the stock price to oil and based on current values, the stock price still has some way down to go if it does converge.
2. Oil Market in General
- Now, in relation to the point above we need to understand the oil market and its dynamics. I could go on and on but in summary what I can describe the market is there are two main factors: Supply and Demand.
-Supply of Oil: This is closely controlled by OPEC in which there are key parties like Saudi Arabia, Russia, Kuwait, etc. The current dynamics is this, the Saudis refuse to cut production to prop up oil prices because they want to maintain market share. They also want to force out the shale oil drillers in the US because when oil prices are low, they go below the production costs of shale oil and as a result if these shale oil drillers are unable to sustain low prices and margins, they need to shut down. And the Saudis have large pockets to wait this out. However, you also have countries like Russia which need oil prices to recover to prop back up their economy.
-Demand of Oil: China has been slowing down and as such the demand for oil. Some countries are also exploring alternative energy sources which may affect oil demand albeit not in the forseeable future.
Summary of Oil: There are a myriad of other things about oil that I can nag about, however in summary what I can say is this. I expect oil to stay low, but probably come back up by next year. It is anybody's guess but I really dont see this scenario panning out for too long. And when oil does shoot back up, which it has done many times before, this stock is well-positioned to capitalise on that.
3. Sembcorp Industries's valuation and businesses
- Similarly, we can scrutinise all of their businesses to a fault and come to a premature conclusion. But I won't. However, what I can observe is that the current valuations of Sembcorp to me are very fair. I say this being fully aware of their relatively high debt levels, declining margins, etc.
- However, let us not forget these factors:
a. Sembcorp Marine is still one of the world's best offshore rig builders with superior management and a rather long history.
b. Secondly, utilities is still a necessary business model and in spite of domestic pressures, the company has expanded overseas like India to build their businesses there.
c. Most importantly I still do not see any impairment to their business models. Yes, they have lower orderbooks and declining margins, but it is obvious that these are highly correlated to the concerns on oil prices. Do I see this as a long term impairment? Clearly not.
d. The businesses that Sembcorp is in require high levels of capital investment and are large moats with high barries of entry. I love that for any business.
In summary, what I can comment about Sembcorp Industries is that even though I see declining profits currently, I don't have much concerns on it going forward. In times of uncertainty, we really need to dig deep and ask ourselves our initial reasons for investing in a current company and whether those reasons remain intact. They clearly do for me in this company as I wait out patiently for oil prices to rebound and as a result recover the margins for this well-managed, world class company that will soon prove its detractors wrong. There is no signs of impairment of the business and more importantly its management and any near term price concerns will be shrugged off and/or good reasons for adding more positions in which I am planning to do so probably.
Comments are most welcome!
Signing Off
Transitioning Stock Investor
Monday, 13 July 2015
Market Catalysts and Quick Portfolio Update
Looking at the current market today, there will be some short term catalysts that will be of interest.
Firstly, it has just been confirmed that an agreement has just been reached on a Greek bailout plan. This deal when voted into the Greek government will hopefully keep Greece in the Euro and Grexit will not occur. In fact, it further shows the solidarity of the Euro and keeps the other countries that went through austerity (ie Spain, Portugal, etc) happy. I see this as a positive catalyst.
In the Chinese stock market, I see a longer term systematic issue. Nevertheless, the recent moves by the Chinese government to steady the ship and prop the market up has went some way to steady the market. To me, in the long term the Chinese investor needs to learn from past lessons, but at least for now things look better than a few weeks ago. I similarly see this as a positive situation.
In terms of the local stock market, a slew of companies are poised to announce earnings with the next month. All of the stocks in my current portfolio are slated to announce earnings during this time period. I attach a nice screenshot of the positive price action today:
I await better results especially from the less performing companies: Sembcorp Industries and Jardine Matheson. I hope that my trust in these companies will pay off in terms of better earnings numbers.
I continue to be fairly confident in the earnings of the core companies in my portfolio: Singtel, OCBC, ComfortDelgro and Raffles Medical. I similarly expect the REITS in my portfolio to continue their good performance: Capitamall Trust and Mapletree Commercial Trust.
I will be taking a break from adding to positions in the current month as I continue to build my warchest. I recently sold a holding of Raffles Medical (at a profit of c.S$700) to fund a watch purchase. Oh well, all work and no play makes Jack a dull boy, but I definitely look to lessen such activities moving forward.
The markets do look very interesting now and some of the positions in my portfolio looking prime for adding, especially Singtel, ComfortDelgro and Raffles Medical. Will closely monitor these positions and update accordingly when I make stock additions. As of now, I relaxingly sit back and let the portfolio recover and continue to churn out its dividends.
Signing Off
Transitioning Stock Investor
Firstly, it has just been confirmed that an agreement has just been reached on a Greek bailout plan. This deal when voted into the Greek government will hopefully keep Greece in the Euro and Grexit will not occur. In fact, it further shows the solidarity of the Euro and keeps the other countries that went through austerity (ie Spain, Portugal, etc) happy. I see this as a positive catalyst.
In the Chinese stock market, I see a longer term systematic issue. Nevertheless, the recent moves by the Chinese government to steady the ship and prop the market up has went some way to steady the market. To me, in the long term the Chinese investor needs to learn from past lessons, but at least for now things look better than a few weeks ago. I similarly see this as a positive situation.
In terms of the local stock market, a slew of companies are poised to announce earnings with the next month. All of the stocks in my current portfolio are slated to announce earnings during this time period. I attach a nice screenshot of the positive price action today:
 |
| Watchlist of My Current Stock Portfolio (Source: sgx.com) |
I continue to be fairly confident in the earnings of the core companies in my portfolio: Singtel, OCBC, ComfortDelgro and Raffles Medical. I similarly expect the REITS in my portfolio to continue their good performance: Capitamall Trust and Mapletree Commercial Trust.
I will be taking a break from adding to positions in the current month as I continue to build my warchest. I recently sold a holding of Raffles Medical (at a profit of c.S$700) to fund a watch purchase. Oh well, all work and no play makes Jack a dull boy, but I definitely look to lessen such activities moving forward.
The markets do look very interesting now and some of the positions in my portfolio looking prime for adding, especially Singtel, ComfortDelgro and Raffles Medical. Will closely monitor these positions and update accordingly when I make stock additions. As of now, I relaxingly sit back and let the portfolio recover and continue to churn out its dividends.
Signing Off
Transitioning Stock Investor
Sunday, 28 June 2015
Portfolio Update - June 2015
Good Sunday Morning Folks!
Today's an interesting day as I sum up my portfolio for June and share the recent developments for the month.
In terms of portfolio additions, as shared earlier in the month I have added 1 lot of Singtel at $4.13. Subsequently in early last week, I added another lot of Sembcorp Industries at an attractive price of $3.91. Overall, I'm quite glad with the prices I paid for both companies as I thankfully managed to capture the downside of the price curve for both stocks. I also now see a nice recovery in the price of Sembcorp and hopefully the price recovers even further.
In terms of portfolio subtractions, I took profit on 2 lots of ComfortDelgro just last Friday before the market closed, locking in a 18% (36% annualised) profit. This leaves my current holdings of the counter at 2 lots. I pondered extremely long over this decision and as can be seen I seldom try to take profits as I do hold my holdings over the LT. However, I do have some concerns on the overall market with the bubble in the Chinese 'A' share market + Greek talks I found that it was a good opportunity to take some money off the table especially as I had made some good percentage profits already. I continue to overweight this company and will definitely accumulate more in future on price dips (this also means I am still overweight transport as an industry and I seek to maintain that).
Finally, in terms of dividends it was a really good month for me as other than May & August, June sees the most dividend payouts as I saw dividend inflows from Mapletree Comm. Trust, Raffles Medical and OCBC (both of which I elected to receive dividends by DRIP).
Here's a summarised look of my holdings and dividend records and trends at the end of June 2015:
I still love the look of my portfolio and struggle to find good companies to add unto it. As such my near-term strategy over the next 6 months is to continue to find good opportunities to add unto my current holdings and to increase my dividend stream consequently. That's it from me this weekend and have a great week ahead!
Today's an interesting day as I sum up my portfolio for June and share the recent developments for the month.
In terms of portfolio additions, as shared earlier in the month I have added 1 lot of Singtel at $4.13. Subsequently in early last week, I added another lot of Sembcorp Industries at an attractive price of $3.91. Overall, I'm quite glad with the prices I paid for both companies as I thankfully managed to capture the downside of the price curve for both stocks. I also now see a nice recovery in the price of Sembcorp and hopefully the price recovers even further.
In terms of portfolio subtractions, I took profit on 2 lots of ComfortDelgro just last Friday before the market closed, locking in a 18% (36% annualised) profit. This leaves my current holdings of the counter at 2 lots. I pondered extremely long over this decision and as can be seen I seldom try to take profits as I do hold my holdings over the LT. However, I do have some concerns on the overall market with the bubble in the Chinese 'A' share market + Greek talks I found that it was a good opportunity to take some money off the table especially as I had made some good percentage profits already. I continue to overweight this company and will definitely accumulate more in future on price dips (this also means I am still overweight transport as an industry and I seek to maintain that).
Finally, in terms of dividends it was a really good month for me as other than May & August, June sees the most dividend payouts as I saw dividend inflows from Mapletree Comm. Trust, Raffles Medical and OCBC (both of which I elected to receive dividends by DRIP).
Here's a summarised look of my holdings and dividend records and trends at the end of June 2015:
 |
| Transitioning Stock Investor - Portfolio Holdings June 2015 |
 |
| Transitioning Stock Investor - Portfolio Dividend Trends June 2015 *Note that future dividend trends are projected based on historical dividend payouts |
I still love the look of my portfolio and struggle to find good companies to add unto it. As such my near-term strategy over the next 6 months is to continue to find good opportunities to add unto my current holdings and to increase my dividend stream consequently. That's it from me this weekend and have a great week ahead!
Signing Off
Transitioning Stock Investor
Monday, 22 June 2015
Sembcorp Industries - Updated Holdings
Hey Guys,
Quick update. I added 1 pop of Sembcorp Industries today at the price of $3.91. This brings my average cost of this counter down to $4.26 from $4.43. This position I'm fairly confident should pay off, especially when the following happens:
- Sembcorb's share price converges with the price of oil.
I did a simple comparison of the share price vs WTI oil and there is a obvious divergence seen. I expect some levels of convergence, something which when extrapolated over time has shown to recur consistently.
- Market realises that Sembcorp is good value currently
All ratios, be they P/B, P/E etc all point to good value for the company
- Sembcorp's businesses pick up
I know we have all recently read their declining margins, businesses not doing well, falling revenue and asset turnover etc. However i like their overall business and strongly feel that they will revert to mean in the long run. Most of their businesses, marine included are fairly important and I expect again mean reversion in the LT.
Shall monitor the market closely for other developments but feeling glad on the addition today. Again one must take a long term view for this view to true play itself out positively.
Signing off
Transitioning Stock Investor
Quick update. I added 1 pop of Sembcorp Industries today at the price of $3.91. This brings my average cost of this counter down to $4.26 from $4.43. This position I'm fairly confident should pay off, especially when the following happens:
- Sembcorb's share price converges with the price of oil.
I did a simple comparison of the share price vs WTI oil and there is a obvious divergence seen. I expect some levels of convergence, something which when extrapolated over time has shown to recur consistently.
- Market realises that Sembcorp is good value currently
All ratios, be they P/B, P/E etc all point to good value for the company
- Sembcorp's businesses pick up
I know we have all recently read their declining margins, businesses not doing well, falling revenue and asset turnover etc. However i like their overall business and strongly feel that they will revert to mean in the long run. Most of their businesses, marine included are fairly important and I expect again mean reversion in the LT.
Shall monitor the market closely for other developments but feeling glad on the addition today. Again one must take a long term view for this view to true play itself out positively.
Signing off
Transitioning Stock Investor
Tuesday, 16 June 2015
Portfolio Update #3 Sembcorp Industries
This is the 3rd instalment of my portfolio update and this is where it becomes interesting. I will be touching on Sembcorp Industries today, a stock in which I own 2 lots of. This stock represents the Industrials segment of the sector allocation within my portfolio.
Share Price
As can be seen above, the share price of the stock has been seeing a steady decline since Aug 2014 last year. This as we all know can be attributed mostly to the fall in oil price over the same period. The average cost of my holdings is $4.43, so this is around halfway of the peak to trough price.
Pros of Sembcorp
The reason why I commented that this post is interesting is because I truly do not know or have a good gauge where the share price of this company is heading to in the near future. On one hand I know that there is a solid business model in place for Sembcorp and I was not only focussed on their O&G businesses when I bought the stock. I also greatly favoured their utilities and waste management businesses, sectors which I found important and necessary in any market environment.
The dividend payout and yield of the company has been excellent as well and has been really consistent over the years.
Cons of Sembcorp
Neverthless, the company could not escape the eventual impact of a low oil price and its effect on its margins and marine segment of the business. I also re-studied their latest financial statements last evening and the numbers do paint a pale picture of their businesses. Overall, turnover and margins have been falling with also a drop in free cash flow generated. Debt levels are increasing for the company which is inevitable for a capital intensive company. Lessons previously learnt from a local water management company which can be read in my previous post on "Due Diligence" and the importance of throwing caution to capital intensive companies still ring fresh in my mind.
Valuation
Usually I have strong conviction in my portfolio holdings and when the price falls I usually average down due to that conviction. However, using the Graham's discount model (will not furnish the valuation here, as this is just used as an estimate) the fair value for the company that I have derived at is still at a level that is lower than its current share price. Do note that this is not a recommendation to you to buy or sell the stock but just a valuation guide that I have used to help determine my investment decision.
Summary
I may probably add holdings of this position if I see a turnaround in prospescts of the company moving forward. At the current moment, I'm adopting a wait and see approach as there are just too many potential headwinds and questions left to be answered.
Signing Off
Transitioning Stock Investor
 |
| Sembcorp Ind. 1 year share price (Source: Bloomberg） |
Share Price
As can be seen above, the share price of the stock has been seeing a steady decline since Aug 2014 last year. This as we all know can be attributed mostly to the fall in oil price over the same period. The average cost of my holdings is $4.43, so this is around halfway of the peak to trough price.
Pros of Sembcorp
The reason why I commented that this post is interesting is because I truly do not know or have a good gauge where the share price of this company is heading to in the near future. On one hand I know that there is a solid business model in place for Sembcorp and I was not only focussed on their O&G businesses when I bought the stock. I also greatly favoured their utilities and waste management businesses, sectors which I found important and necessary in any market environment.
The dividend payout and yield of the company has been excellent as well and has been really consistent over the years.
Cons of Sembcorp
Neverthless, the company could not escape the eventual impact of a low oil price and its effect on its margins and marine segment of the business. I also re-studied their latest financial statements last evening and the numbers do paint a pale picture of their businesses. Overall, turnover and margins have been falling with also a drop in free cash flow generated. Debt levels are increasing for the company which is inevitable for a capital intensive company. Lessons previously learnt from a local water management company which can be read in my previous post on "Due Diligence" and the importance of throwing caution to capital intensive companies still ring fresh in my mind.
Valuation
Usually I have strong conviction in my portfolio holdings and when the price falls I usually average down due to that conviction. However, using the Graham's discount model (will not furnish the valuation here, as this is just used as an estimate) the fair value for the company that I have derived at is still at a level that is lower than its current share price. Do note that this is not a recommendation to you to buy or sell the stock but just a valuation guide that I have used to help determine my investment decision.
Summary
I may probably add holdings of this position if I see a turnaround in prospescts of the company moving forward. At the current moment, I'm adopting a wait and see approach as there are just too many potential headwinds and questions left to be answered.
Signing Off
Transitioning Stock Investor
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