Investment Update

A summary of my investments:


1 Talisum Lithium
2 Boustead
3 People Food
4 Super Group
5 Spindex
6 Lithium One
7 Hock Lian Seng
8 Cerebos Pacific
9 Metro
10 Sing Holdings
11 Hour Glass
12 APB
13 MTQ
14 SMRT
15 Soup Res
16 Lee KT

YTD up 34%, 92% invested, cash 8%

Oct Update - Move House and FInalise HDB Sale

Celebrate my BD on 3rd Oct.

Reno- During that time although most of the furniture has been finished, there are still many small nitty gritty things

- Outdoor furniture, finally selected a affordable yet comfortable outdoor set from Woods and Woods. As my balcony is rather big, and have a nice scenary, I wanted to choose a nice outdoor furniture so that I can relax and invite friends over in the balcony. It was a 3+1+1 set with a table with a cost of 1850.

- hooks for toilets,

- my wife wanted to get decals (stickers) and we went to United Square twice at least, finally getting some flowers for the electrical cabinet


- choosing paintings - went to Balestier and a few places to look at drawings, finally settle it online

- kitchen ware

- sourcing for Movers, finally settled for Soon Seng Transport

- Got my outdoor furniture, and beds for my children's room in

Moved house on the 10 Oct - 10/10/2010 Yeah !


Really tough weekend, on Sat. Packed since morning with just so much work, which seemed never ending. It is really tough for us as we need to pack with 2 small kids around, especially the small one whom u need 1 person attention when he is awake.



My sil came in the afternoon to "help" take care of my kids while we packed. However in the evening, she conveniently excused herself to see her bf sister and was away from 5-9. This really pissed me off. When you commit to help, people really depend on you to help during the crunch time.



During the evening, as always there is last minute things to get. I went out to get monster cable, tape to tape the boxes (which ran out) and ice box to keep food while we power off the fridge for 1 night before the move. Only when my sil came back did we have time to pack again.



At night after packing the fridge, I removed the cables slowly from my TV set which was connected to the AM, Starhub, DVD, Mio TV. I really hate such messy connections especially when the wires are so short and connected at the back. The reason why we disconnect them is because we wanted to assemble the wires in the new place before the move. Once the movers move the TV, all they have to do is to mount the TV and we can just pluck the cables to the TV withouht much hassle. The movers will not bother about connecting the wires for you. At my new place, we spent close to 2-3 hours just trying to assemble the wires from the TV console. This took us close to 4am .



The next morning on Sunday 10th Oct 2010 8:30 the movers came. They sure are professional, moving boxes really fast. There were close to 5 of them, and wrap all our things very well . The only thing that took almost an hour was the deassembly of our master bedroom, which had a hydraulic lift.

By 12 noon, they finished and we started to unpack. It was a good relief that the tedious part was over. We also started to rewire the TV and took about an hour before getting the Starhub and Mio Tv & DVD working.

The next day the furniture came in - sofa/dinner table.

For the next whole week till 18th Oct, we got a hanger installed, got the decal person to come in to stick, and moved whatever leftover from the old house. The left over really took some time to move as we could only move bit by bit and took almost 10-15 trips. eg. clothes, fish tank, toys etc.

We finally signed the HDB 2nd appointment letter on 18th .

For the new house,
- the painting was mailed to our house, and I went to Balestier to frame it.
- we also got grills for the house and
- got shades as the afternoon sun is rather glaring.

I was especially busy with my office work as well
- 2 targets setting / QBR/BMR/ Results which lasted till late November.

Had a house warming on 2 dates + celebrating my youngest son birthday

Sep update

Business
Looked for the lawyer, according to the one I approach it requires to itemized each item.
My Uncle mention to include a catch-all clause.

Search for the FY2009 Annual reports. After searching high and low in the house and office and couldn't find it, I asked the accountant to reproduce it and backdate it.

Did a Executive & Financial summary for InXX

Seach for product brochures and mailed to a prospective buyer.

Shares exercise - coporate secretery

House
- settled the old HDB. In the 1st appointment as I had no so-call agent, I represent ourselves. But basically the HDB officier just told us what to do
- if we use the HDB lawyer, just pay the conveyancing charges on the 3rd floor (300+)
- Pay the property tax at Singpost
- Pay the Services and Conservation charges at MP TC. ( and get the bank to remove the GIRO)

For the new place, there is still the nitty gritty things to look at - kitchen/ toilet accessories, better get it done before the ID contractors go off.
Also got the glasses with scratches removed/ balcony door fixed..still left the front door which has some cracks.

Executive View - Rights and Remedies of Minority Shareholders in Singapore

Executive View - Rights and Remedies of Minority Shareholders in Singapore

Aug 2nd week update

Mon - Wed Balestier/ Geylang to look at lights.
thur evening Designer to confirm design and choose paint
fri evening - confirm defects and went to Audio house (unfortunately closed after we finish our dinner and looking at other shops)
Sat morning- HZ class
afternoon/ evening - Designer (choose lights $1.6k /wallpaper and curtain $4.4k ) spent
Sun morning - visit Dad
afternoon - KIV lights yesterday , visit Lightcraft and then lighting.com.sg to confirm room lights.
evening - went to dad's office.

Update

Tuesday -
Morning (Electricity Inspection)

Wedensday
Morning (Send Maid to Post office to send money)
Evening (went to see lights at Balestier)
Night (Write Business Proposal)

Thursday
(Check for Annual report)

Sat (Send Mum/Bro & Myself for Medical checkup)

Next confirm lawyer letter
Source for buyers

Bathroom + Kitchen accesssories



Tuesday (Choose Lights/ Curtains/ Wallpaper / review design again (balcony/ Master Bdroom (TV console/ Children's bed)

May- Aug Weekend burnt

Every weekend is burnt, from May, all weekends burnt at my Dad's office (inventory check/sorting accounts) , that I dun even have time to cut my hair.

The previous previous weekend was mainly
-checking for defects at my property
- meeting up with designer (confirm design & material)
- busy chasing the property agent for property agreement

The previous weekend Sat was
- morning (Hsien Zheng's class)
- afternoon meeting up with the designer to confirm materials, designs etc.
- Sunday morning was breakfast
- visiting my Dad
- going to Parkmall to shop for sofa, finally got a satisfied German sofa from Castilla.

The last weekend Sat was
- morning (Hsien Zheng's class)
- afternoon went to Ubi to look at sofa and dinning set
- Later in the evening, went over my Dad's property for defects inspection
- and after dinner went to Furniture mall to get my dining set. (really super productive).
- Sunday morning breakfast
- visiting dad
- afternoon went to my dad's office to sort out accounts again and record payment.

Rental of Property

Rental of property
My Dad actually wanted to rent out his new property, so I had to see what is the best way to rent out. I actually thought of renting out myself, but after seeking advice from my Uncle, it is best to leave it to an agent. Why ?
- my dad's property is a 4 bdroom, and usually those are expats from MNCs and these MNCs will employ property agents to do it
- at the end, after co-broking it is still the agents who will get the commission
- the agent will sort the SP Power (electric/water and Gas) transfer to the
Anyway I also posted in SingaporeExpats and was going to post in PropertyGuru and SPH (ST171??) and newspaper.
My Uncle advise is to try to get as much conditions favourable to myself (owner) as possible. For. eg. if there is any defects to be repaired, the bar should be at an individual case.

May- July Had to take over my Dad's business

May Investment

Divested most of my shares (was caught by part of the fall) and shifted to gold & silver. After making some profits, my mind was affected by something that happend to my family. Anyway after clearing my Gold & Silver profits, I shorted Oil at 70 (Should have shorted S&P 1080), the lesson learnt (again) is to short the relevant one.

Portfolio July - YTD up 10% (excluding property taken as constant) - 20% Property, 40% shares, 40% cash

I had to take care of my family business.

1) First thing was to ensure I had the signatory authority so that my dad business can continue (pay supplier etc)

2) Check for outstanding payment - Eg. Singtel, CPF (pay by post), income tax etc

3) Next get the aging list and chase for outstanding payment from customers. Had to make sure cash comes in. My dad is an excellent Salesperson, but business-wise, he needs to convert this into cash, otherwise there are alot of bad debts. Some customers especially overseas are very hard to chase for payment. It is really tough to get money from customers. The accounts were terrible also, some payment were not recorded correctly and I had to investigate several times and correct them. There were also several bad paymasters and had to get them to commit dates to repay. After which many follow ups and even threatening for legal actions. We had to differentiate between

• i) Bad paymasters and no business dealings already (Tough action)
• ii) Bad paymasters and still have business dealings (Have to be polite but firm). Also have to withhold sending of goods unless they pay.
• iii) Those overseas r the most headache

4) Other operations, - Tried to resolve the dot-matrix printer problem but unsuccessful - Removed a wuauclt.exe virus (takes up hugh memory as I thought that could be the problem) - Downloaded - ATF Cleaner, DrWeb, SuperAntiSpyware, booted up in Safe mode and removed wuauclt.exe not in Windows32 directory. - Get Epson dot-matrix printer (280 + USB printer) from SLS and assembed it to work The above spent 3 days ( had to take 2 half days)

5) Got company on-line statement (Compay registry had to prepare a resolution) so that we can track TT payments/ cheques bounce, otherwise we have to wait till end of the month to countercheck payment

6) Spend my weekends doing inventory checks.

7) Now to get Singtel Giro and continue to chase for payment.

Property Investment in April

Shares

Divested my remaining SMRT at 2.16 and Best World. The visibility in Best world is really not there. And I feel that the startup cost for the circle line for SMRT will take a long time (at least 1 -2 years to recoup see NE line).

Property

- Bought my 2nd property at Dakota Residences. I was tempted to buy when I knew that Waterbank ( the property to be launched next to it was selling at 1200psf. So after much thoughts, I bought a 4-rm at Dakota at 1050 psf. Comparing around, i feel that it has more potential to appreciate comparing The Shore (1300 psf) which is not near any MRT/Shopping Centre, SilverSea (totally overhyped high end selling) at 1600 (no sea view)- 1900 psf. Also interest rate should be low for 1-2 years. + Dakota is next to the upcoming Sports Hub (Lifestyle and 2nd Singapore expensove Architectural Icon)

- Sibor/SOR Had to look for banks (Sibor/Sor) finally settled for OCBC (SOR).

SIBOR stands for Singapore Interbank Offered Rate and is a daily reference rate based on the interest rates at which banks offer to lend unsecured funds to other banks in the Singapore wholesale money market (or interbank market).SIBOR stands for Singapore Interbank Offered Rate and is a daily reference rate based on the interest rates at which banks offer to lend unsecured funds to other banks in the Singapore wholesale money market (or interbank market).

The Swap Offer Rate (SOR) represents the effective cost of borrowing SGD synthetically through borrowing USD for 3 months and swap out the USD in return for SGD for the same maturity

The simple reason why I settled for SOR is I believe the interest rate in US will be ultra low for a long time. The low interest rate will not help the US unemployment rate and with unemployment rate still high, interest rate will remain low in US. Also SOR (abt 0.38 as of today) is cheaper than SIBOR (0.438)

I got a very good deal at OCBC (1st year 0.5 +SOR, 2nd year 0.75+SOR and 3rd year 1.25+SOR). Also I got a mortage broker to get a mortage referral to get some dough back. Ha ! It looks like my property agent course got its refund.

- Sold my HDB flat ! I also advertised in the newspaper and sold my HDB property 50+ K over valuation (in 1 day!). Had to spend time advertising SPH and find free online

• cleaning up the house, paint (red wall & TV consle),
• fix several items (lights/kitchen cabinet door).
• And after that HDB inspection, had to fix up the aircon pipe to touch the basin(went to Lavender SimBH to buy pipes/ connectors and saws)

Jan - Mar Investment & Personal Update

Jan - Finally Fixmarket got strike off

2009 is up a paltry 9% compared to the 40-50% gains by most markets.
The main culprit was my biggest holding 40% Celestial which went down 50% (-20% in my portfolio) which unfortunately had to sell at a substantial loss. Celestial did not have $$ to pay off its bond and defaulted. Cashflow & profit grind to a halt and its survival is in the balance.

Divested most of my SMRT (1.87 and 2.16) and CDL (1.78) and move into tech (already make some movement upwards) (Hiap Seng & Broadway, Best World)

For work wise, my business orgnanisation got a new head and everything got restructed, which means I had to work several weekends (burn CNY) for new reports / meetings etc, same as last year. sigh This continued till March

Personally, my 2nd kid Hsien Yi really a handful, making us having little sleep ( wakes every 3 hours) at night.

D.O.G on Oilpods

WARNING: VERY LONG POST

For those thinking about Oilpods, here is some information that may prove useful.
1. Oilpods is a project of OL&M, Business International Pte Ltd, a company registered in Singapore. OL&M's website is: http://www.oilpods.com.

2. OL&M sells shares in oil and gas production leases, known as "working interests" in industry jargon.

3. Investors in working interests buy a percentage of all current and future oil and gas revenues for a particular project. An upfront payment is made, in exchange for a revenue stream tied to the sale of oil and gas from that particular project.

4. Revenue stops when that project's oil and gas is exhausted or uneconomic to extract. If the upfront payment is less than the NPV of the future oil and gas revenues, a profit is made. A loss is made if the converse is true.

5. The working interests are sold to OL&M by Powder River Basin Gas Corp, a company quoted under the code "PRVB" on the OTC BB in the US. OL&M in turn sells these working interests to investors. The websites for PRVB and the OTC BB are: http://www.powderrivergascorp.com http://www.otcbb.com

6. PRVB's business has 2 arms: a. Purchase of marginal / non-producing oilfields with the aim of increasing or restarting production; and b. Sale of 25% working interests in the above oilfields to generate working capital.

7. PRVB currently owns working interests on about 8,000 acres of land, in either 100% or 75% proportions.

8. According to the Form 10-K (available at the OTC BB website) filed with the SEC, for the year ended 31 Dec 2005, PRVB booked revenue of US$4,643,965 and net income of US$699,335.

9. The revenue breakdown was US$622,882 in oil and gas revenues, and US$4,021,083 from the sale of working interests.

10. The commission paid to outside investors of the working interests was US$482,500.

Some lay analysis:
PRVB sells working interests to OL&M, which then sells them to investors. Investors' funds flow to OL&M, which passes a portion of the funds to PRVB, which in turn books these as revenue.

As PRVB develops the oilfields and sells oil and gas, a portion of the revenues are paid out to OL&M, which in turn pays the investors. Therefore, the investors' income streams are dependent on the oil and gas production at the PRVB fields where they own a working interest.

However, we can see that PRVB sold only US$622,882 of oil and gas. Since it only sells 25% working interests and retains a 75% stake, the commissions paid to investors in the working interests should be at most 25% of oil and gas revenues i.e. US$155,720.50. However, the actual commissions paid were US$482,500. The extra US$326,779.50 paid out appears to simply be a return of capital.

In other words, it seems that PRVB may actually be operating an elaborate Ponzi scheme. For as long as it can sell working interests, it can generate cashflow, from which previous investors can be paid, regardless of whether it is actually selling any oil or gas.

Evidence:
FY05 administrative expenses were US$1,181,374, and lease operating costs were US$258,662. These expenditures supported the production and sale of oil and gas, yet the company only sold US$622,882 of oil and gas. The story is the same for FY04: adminstrative expenses of US$513,854 and lease operating expenses of US$97,025 were used to generate US$248,328 in oil and gas sales.

Clearly, the current cost structure of PRVB makes it impossible to actually earn any profits from selling oil and gas. It is deriving all its "profits" from selling working interests. These working interests appear to be overpriced with respect to the value of the oil and gas they appear to be producing. It is possible that PRVB is deliberately misrepresenting the true value of the recoverable oil and gas i.e. fraud may be occuring.

Implications:

So, back to Oilpods. If someone was to invest with OL&M, he would be buying a working interest directly from OL&M and indirectly from PRVB, and his future cashflow would ultimately depend on the sale of oil and gas from the corresponding field being operated by PRVB.

As shown above, the cashflow being paid out is coming from other new investors purchasing working interests as well as from the sale of oil and gas. For as long as PRVB can find new investors, current investors will be able to receive an income stream.

If, however, PRVB is unable to continuously sell additional working interests, based on its current cost structure, its oil and gas revenues alone will not suffice to pay the investors their due commissions. PRVB will then default on its payments to OL&M.

If OL&M is not able or willing to make good the payments out of its own pocket, it too will default. The investors can then choose to either write off their investment, or sue OL&M for misrepresentation, fraud, etc. Of course, their legal choices may be limited by any waivers that they signed when purchasing the investment in the beginning.

As usual, YMMV. The analysis above is based on public information only. It may be flawed and is not conclusive. IMHO anyone interested in Oilpods should visit the 3 websites (OL&M, OTC BB, PRVB) and do some reading, so that they can make an informed choice

D.O.G Investment Lessons

1. When fundamentals deteriorate, sell NOW.

I wish I'd listened to myself in 2008. I would have ended 2008 with a lot more money! By the time 2009 rolled around the fundamentals were pretty much at the bottom. So it would have been time to start buying instead.For 2009 there wasn't much more deterioration in fundamentals so I was a net buyer.

2. The market leader is not always a good investment.

The market leaders in finance and property e.g. DBS, Capitaland and Capitamall Trust were also the ones who did rights issues. These were severely dilutive to existing shareholders. Those who managed to pick up excess rights ended up doing very well, but since their profits were at the expense of the original shareholders I think it speaks poorly of the company management to have given so much wealth away.I did much better with companies who were not market leaders but had outstanding balance sheets. No rights issues, no business risk, and many of them doubled anyway.I will continue to ignore "market leaders" in favour of what the financial statements tell me.

3. AGMs and EGMs are a valuable source of information.

I made it to a few AGMs and again, it was good to read the body language of the management and see how they answered shareholders' questions. In one case where I sat in as an observer, the management gave a reason for not paying dividends. I went home and counterchecked, and concluded the excuse was nonsense. I stayed away, and later in the year the company's results took a significant turn for the worse.I also made appointments to visit a few companies, and called some others. All very useful, and sufficient to seal the buy/don't buy decision.I continue to believe it is vital to meet management every chance you get.

4. The margin of safety must be sufficient.

A hard lesson here. I took an unnecessary 25% loss on a large holding because I thought a low price was sufficent to compensate for a so-so business. Nope. As it turns out, if I'd held on and sold later the strong market would have rescued me. But I was proven right about the business: fundamentals declined in the quarters after I sold out.

5. Beware companies in cyclical industries.

No kidding. The business decline for cyclicals like steel, airlines and shipping (both container and bulk) was not funny. Since I was on the sidelines here it was not painful, merely interesting.On the other hand, the buyout of SPC pointed to the importance of understanding replacement value. SPC couldn't be easily replaced, so even in the worst of times it had a value. Maybe this will be useful in future when looking at steel mills. But aircraft and ships are fungible assets so replacement value doesn't hold here.Property is also cyclical, and here I did well with the replacement/liquidation value method.

6. Dividends are important.

All hail the almighty dividend! Cash is indeed king. Dividend yield was a great screening tool in 2009. From the list of high-yielders, I bought the strongest balance sheets. Many yielded 10% and some over 15%. Low risk, high return. Best deal I'd seen in years.

7. Keep some spare investment ammunition.

I started 2009 with 47% in cash so it was a blessing to be able to invest on the way down (into March). If I'd been fully invested I would have been unable to take advantage of the fantastic prices.As prices went up I began to sell. I think it is good to keep some spare cashavailable at all times. You never know when you'll find something good.

8. Watch out for changes in the core business

None of the companies I followed had significant changes to their businesses. Only those who were floundering were trying to buy new businesses. Environmentally-friendly businesses like water treatment, waste treatment, solar energy etc seemed rather popular. Maybe that's where the next bubble will be.

9. Watch the gross profit margin

I looked into many companies and concluded that companies with a long-term trend of declining gross margins were headed for mediocrity. Declining gross margins point to severe competition as well as lack of pricing power. Good for customers, bad for shareholdes. Given the many bargains available I decided to reserve my money for companies that had demonstrated pricing power. At least those will have a fighting chance against the secular background trend of inflation.

D.O.G on REITS

There is a sinister reason why Management are paid in units which I learnt in Wallstraits. Quoted from D.O.G

That depends on who the REIT manager is. For REITs where the managers were originally the asset owners i.e. virtually all the S-REITs, the owners have basically already divested their real estate at a good price in the REIT IPO. Any remaining stake is a call option, and it continues to pay out cash. So these ex-owners are having their cake and eating it - they sold most of their stake, and now they are slowly clawing it back via payment in units.

One analogy might be - I sell you a house for cash, and I manage the tenants for you. Instead of sharing in the rental, I am paid in shares of the house. So each quarter I own a few more bricks in the house. Given enough time, ownership of the house will revert to me. All this while, I get more and more cash from my increasing ownership of the house. So the net effect is that I get cash upfront from selling you the house, then I get paid to wait while the house reverts back to me. Nice deal for me, not so nice for you.

For REIT managers who were not the original owners of the REIT assets, payment in units does increase alignment of interest. However, if they then sell the units for cash (see: ARA Asset Management), alignment of interest is eroded.