Purchase of AEM, Nordic, China Sunsine and Sale of AP Oil, Memtech, Best World, ISEC

                                                                                   
On 15/1/18, I added to my stake in AEM Holdings at $3.27 and Nordic Group at $0.57. AEM has been my biggest winner so far, with my initial purchase at a ex-rights price of $0.58. I sold the bulk of my stake at $2.63, but decided to increase my position again due to its strengthening fundamentals. This experience really goes to show how a stock can keep on rising as long as its business keeps growing stronger. The recent sharp jump in its stock price has made its valuations less attractive, but I’m still looking at accumulating more of AEM in the future. Hopefully, there will be an opportunity to do so at a more attractive price. In the same manner, I hope to continue increasing my stake in Nordic at attractive valuations, as I feel it is a very well-run business in the hands of Chang Yeh Hong.

On 19/2/18, I purchased a stake in China Sunsine at $1.25. I feel China Sunsine has a competitive advantage in the rubber accelerator space, where it is the world’s largest producer. Its competitive advantage stems from its ability to adhere to China’s environmental regulations, something which its competitors have been found flouting. This has resulted in a closure of their factories which has seen supply tightening and subsequently a rise in the prices of rubber accelerators –  a chemical needed in the making of tyres. As a result, China Sunsine has seen its sales and profits increase significantly this year. As compared to its nearest rivals, China Sunsine is trading at a discount despite having greater revenues and being more profitable. I believe the stock can continue to re-rate as it expands through the adding of more production lines. At my purchase price, it is trading at a ex-cash FY17 PE of ~7 and a dividend yield of 2.4%. A lot of information regarding the company can be found online. Although my scepticism regarding S-chips has largely stopped me from investing in them (after China Minzhong), China Sunsine is my first exception. I will be watching this space closely in the coming few quarters.

                                                                 
On 9/1/18, I sold off my shares in AP Oil at $0.26, giving me a a loss of 1.99%, with dividends included. I sold it because I wanted to raise funds to focus on my better ideas – a goal which I set out for myself to do this year. Moreover, AP Oil is a value stock that requires time for the market to recognise its undervaluation. In this regard, I found myself more suited to value growth investing where I focus more on the company’s economic moat and management’s capabilities as compared to the traditional cigar-butt investing.

On 16/1/18, I also sold off my stake in Memtech International at $1.20, giving me a gain of 22.9%. Similar to AP Oil, I wanted to raise funds to focus on my conviction picks and I didn’t have as much information as I had with regards to AEM. On hindsight though, I missed out on alot more gains, as Memtech surged shortly after my sale to $1.85 as of 18/3/18. Hindsight is always 20/20, and I will have to be content with my gains instead of mulling over my potential profits. On 20/2/18, I also sold off all my shares in Best World at $1.3, pocketing me a gain of 32.02%, dividends included. I sold it off because I felt that its Taiwan business was deteriorating, which turned out to be true, but its China business more than made up for its drop, resulting in its share price surging to $1.82 as of 18/3/18. Both my stakes in Memtech and Best World would have been one-baggers if I had held on just a little longer. Nevertheless, I treat it as an experience or rather an opportunity to be responsible for my own decision-making as I felt there were legitimate reasons for my sell transactions. On the same day, I sold off my stake in ISEC Healthcare at $0.325, giving me a loss of 1.13%, dividends included. I sold it off for the same reasons as AP Oil and Memtech.

* From the sales proceeds, I followed up my purchase in AEM on 20/2/18 at $5.56, on 23/2/18 at $6.35, in Nordic Group on 20/2/18 at $0.585, and in China Sunsine on 27/2/18 at $1.26. Currently, all the three companies occupy the top three largest positions in my portfolio. 

 

Disclaimer: The author owns shares in the abovementioned company. The ideas expressed in this blog should not be construed as an enticement to buy or sell the securities, commodities or assets mentioned. The accuracy or completeness of the information provided cannot be guaranteed. Readers should carry out independent verification of information provided. No warranty whatsoever is given and no liability whatsoever is accepted for any loss howsoever arising whether directly or indirectly as a result of actions taken based on ideas and information found in this blog.

Advertisements

Updates to my Portfolio

During the past few weeks, I have made some updates to my portfolio:

On 10/4/17, I purchased shares of AP Oil at a price of $0.27. AP Oil is a value play to me. Its PE is 12.7, PB is 0.8 and is currently giving me a yield of ~4.6% based on my purchase price. It is net cash, and cash in fact makes up ~86% of its market cap. AP Oil has been looking around to deploy its cash hoard. The CEO frankly mentioned that the company is in a business that has low growth prospects. He also said, “We have grown organically for the past 10 years, and now we are at a stage where we can take risks and not die.” Recently, it invested RMB25 million ($5.1 million) in a joint venture that provides financial leasing services in Chongqing, China. This deal is interesting in that it gives AP Oil downside protection + upside participation. Two key clauses were included in the JV agreement: 1) Put Option: After 1 Jan 2018, AP Oil will have the right to sell-back its stake to Zongshen at an agreed market valuation (determined by an approved valuer) at not less than the initial capital contribution of RMB25m. This creates a sort of capital guarantee for AP Oil. 2) Tag-along rights: That ensures AP Oil is able to participate in the same kind of upside as Zongshen should they decide to sell their stake in the JV to a third party. These are deals which tell us that management is savvy at the negotiation table. Revenues and margins might drop in the coming years due to low growth and volatility in selling prices while management tries to diversify the business. Nevertheless, its huge cash hoard is reassuring.

On the same day, I purchased shares in Alliance Mineral at $0.35. As the company was not profit-making yet, I bought a small amount purely as a speculation play – it is and remains the smallest constituent in my portfolio. To me, the rewards of seeing the company successfully hitting its targets one by one was worth the high risk involved. However, my risk averse nature prevented myself from investing more. Enough has been mentioned about the company online so I will not go into the details. Let’s see how this works out in time to come.

On 19/4/17, I bought more into Spackman Entertainment at a price of $0.152 as I felt that the stock was being unfairly penalised for its CEO’s lawsuit. The tension in the Korean Peninsula did not make things any better. Spackman has issued a positive profit guidance for the upcoming quarter and I believe that the company is slowly making progress forward with its acquisitions. Will its upcoming movie – Golden Slumber be a hit? Only time will tell. What I do know, is that Zip Cinema has a very good track record in its producer – Eugene lee.

Lastly, on 25/4/17, I purchased shares in Bund Center Investment at a price of $0.82. Bund Center Investment is a value-yield play, similar to that of AP Oil. It owns the Bund Center office tower and the Westin Bund Center Shanghai hotel in Shanghai; as well as the Golden Center Shopping Mall in Ningbo. As the company adopts a conservative accounting policy of valuing its properties at cost less accumulated depreciation, the current assets are carried in its books at SGD407m, while the carrying value is around SGD1946m according to an analyst report. This makes my purchase price of $0.82 around 31% of its RNAV of $2.58. It is currently in a net cash of $61 million, and is debt free. It also generates strong cashflows of around $70million a year of which an average of $51million goes to dividends. This is $0.067 a share, representing a yield of ~8.17% at my purchase price.

As my recent purchases have shown, I have been looking more at value stocks, especially now when markets and optimism have climbed. I am currently more averse to investing in growth plays, as I feel my portfolio has enough growth stocks in it. As markets continue to rise, we need to be more careful and cognizant of the risks that lie ahead, one of which I feel is overconfidence – the pride before the fall.

 

 

Disclaimer: The author owns shares in the abovementioned company. The ideas expressed in this blog should not be construed as an enticement to buy or sell the securities, commodities or assets mentioned. The accuracy or completeness of the information provided cannot be guaranteed. Readers should carry out independent verification of information provided. No warranty whatsoever is given and no liability whatsoever is accepted for any loss howsoever arising whether directly or indirectly as a result of actions taken based on ideas and information found in this blog.