2/2/2017 Major Position Movement

Assume I am addressing my stakeholders of JC Fund, I will mention the following.

Today, I made a major switching of position by selling 20 lots of OCBC at S$9.44 and buy into 26 lots of Company M which was mentioned in previous post. Hence, my total holdings in Company M will become 33 lots. 

I sold 20 lots incurring a position loss of S$9k+. The reason of selling is twofold. I saw the impairment issue of EMAS Chiyoda which means DBS is going to write down further losses. I am sure DBS has already catered for this under NPL. I am just not confident of the quality of the loans, the O&G positions are just a small portion of banks' portfolio. The larger portion belongs to the property developers and construction companies. To add salt to the wound, SME loans will further deteriorate in the next 2 years. 

My OCBC original position consists approximately 30% of my portfolio which is overexposed in the finance sector. I want to reduce the holdings to a comfort level of 10%. The 26 lots of company M which I switched to will generate approximately S$14k of dividend. This will cover my loss and have a margin of safety for my entry price. My downside is covered.

I think back, maybe I should switch out slowly. 

Only time will tell whether this move is right or wrong. Let's reflect this again.

09/02/2017 Reflections on my actions

From the previous post, I did not think deeper and on a hindsight, it is a rash decision. Emotion is at play. Looking at the above chart, OCBC today is at S$9.71 range. I believe eventually this will close up higher to S$10 and I will not incur any losses at all. There is an additional factor which I have ignored. There will be the final dividend which will amount to 20,000 x ~S$0.2 = S$4k. All in all, my this move is equivalent to a loss of S$14k.
Yes, the future company M's dividend should cover this loss.

What I could have done is to wait a while longer for OCBC to rise, get the dividend and immediately switch to Company M. Well, if I am that accurate, my net worth should be a few folds more than now. 

24/2/2017
The switching out from OCBC is about to breakeven. Hang in there.

28/3/2017
The price went past breakeven point. The switching works. Now Mr Greed is in the hot seat. I sold 5 lots already. By mid of April, I will sell down more.

QAF Ltd

Introduction to QAF
QAF Limited is a leading multi-industry food company listed in Singapore. Its core businesses are bakery, primary production, trading and logistics. 

The QAF Group has an extensive network of operations across the Asia-Pacific region including Singapore, Malaysia, the Philippines, Australia and China.

The principal activities are:

Bakery Operations: 

QAF manufacture and distribute packaged loaf bread, pastries and bakery products in Singapore, Malaysia, the Philippines, Australia and China.

Pork production, processing and distribution 
QAF is the largest producer of pork meat in Australia.

Feedmilling 
The feed mills in Australia manufacture pelleted stockfeed for a broad range of livestock.

Food trading and distribution 
QAF imports and distribute a wide range of liquor and food products.

Food manufacturing 
QAF produces own proprietary brands of food and beverage products.

Warehousing and logistics operations 
QAF operates a comprehensive logistics operation including warehousing and distribution.


Key Brands



Management
Tan Kong King is the Group Managing Director, he has worked for a number of years with an international accounting firm before joining QAF in his current role. In 1996, he streamlined and refocussed the QAF group's business expanding in existing bakery segment, disposing of non-food related operations. He is not related to the Chariman Mr Didi Dawis. The day to day management of the Group is through Mr Tan and assisted by Deputy Group Managing Director and other executives.

In 2015, Mr Tan is drawing a salary of about 2m. 

The directors' fees are nominal and interestingly none of the immediate family member's remuneration exceeds $50,000 for the year 2015. They own shares of the company and are remunerated through dividends. Their interest is aligned with shareholders.

High-level Financial Reviews

From Thomson Reuters, it shows that net profit margin for Sep 16 increases to 8.98% compared to 2015 5.48%. Return on equity increases from 12.52% to 16.7% in Sep 16. Price to Cash Flow is 6.85 and is lower than 15.57%. Long Term Debt to Equity Ratio is very low at 7.6. Receivable Turnover is excellent at 10.06 compared to the industry norm of 29.09.


Net Income is a constant upward trend. Gross Profit is a constant upward trend. (In future, I will show a graph, I am going out in a while to visit my friends for CNY). 

Retained earnings are increasing steadily over the years.

The Free Cash Flow is still positive over the years and constantly paying down the debts.

The dividend history has been consistently rising since 2008. 

Conclusion

I will not provide my estimated price for the company. Definitely, this company is added into my watch list. When the opportunity comes, I will acquire shares of this company.

Q1 2017 strategy

Today the company which underwent the acquisition of the Australian company had declared a special dividend of $5/share. I am holding to 10 lots of this company and I am going to use the dividend income of about $50,000 to acquire about 1 lot of another company M. The money should come in around end February.

I have a stock which is a trust and it should issue an estimated dividend of $0.18/share. I own a total of 380 lots which will give me about dividend income of about $68,400. The money should come end of March. This will allow me to acquire 2 lots of company M. 

Company M is giving out a special dividend of $2.20/share this year and the final dividend should be about $0.8/share. I currently hold 7 lots of this company M. With the additional dividend income, I will increase my holding to 10 lots. With 10 lots, I will be entitled to additional $30,000. By end May, the first company will issue $2/share for final dividend. This will generate $20,000. I will use the total dividend of $50,000 and some additional cash in May to boost my holdings in company M by an additional 2 lots to 12 lots.

Total dividend gain from this strategy will be 168,400.

24/2/2017
Company M price has gone up. This will affect my "ideal" strategy.

Less is More

Less might actually be more.

https://www.ted.com/talks/graham_hill_less_stuff_more_happiness/transcript?language=en

Uncluttering
We are in this world drowning with possessions, we keep buying and accumulating more stuff. We do not have the opportunity to discard our things. Early this year 2017, we start to segregate some of the unwanted clothes. We took stock of my wife's bags and we decided that we need to let go of those that she does not need. 

Please support by helping us to buy some of the stuff, visit here:
https://sg.carousell.com/uniquehkcollections 


I am guilty of buying too many books and have more than thousands of ebooks in my hard disk. There is no way I will finish reading them in my lifetime. I am hoarding them like the drake hoarding the gold in the Hobbit movie. 

We are currently living in a 1550 sqft Executive Apartment HDB and this gives us the room to buy more stuff. We need to constantly remind ourselves not to buy unnecessary stuff to clutter the house. 

Maybe in ten years time, we should move to a smaller HDB flat and design the house as a minimalist concept. 

Benefits

• By donating your stuff to Salvation Army or charities will help others who need them more than you. 
• It helps to free up your cupboards and shelves.
• It provides free cash to accumulate more financial assets
• With lesser things in life, you will feel happier
• While rearranging our stuff, it helps to look at each of our possessions and force us to evaluate them. It helps us to question our passion, values and what is more important in our lives.
• It rearrange our lives.

Removing things from our house helps us to desire less and work towards real freedom and happiness. 

21/1/2017 Another watch sold

Today I sold my remaining watch.

Tag Heuer Men's CJF211A.BA0594 Link Automatic Chronograph Day-Date Watch

I bought this watch on 28th December 2010 at Changi Airport. 

This watch is part of my memory. I was working with a SME company providing OSVs on the Gorgon Project in Australia. I was rotating with another colleague of mine on a month rotation basis. It was just after Christmas and I need to spend new year in Perth. Actually, it was a very good experience to watch the fireworks from Applecross. 

This watch signifies a journey and an achievement unlock.

Personal Finance Habits since young

Since young I have cultivated the habit of saving, for every $1 my parents gave me when I am in primary school, I will save $0.3-0.5 out of it and put it in my piggy bank. Back then one bowl of noodles only cost $0.5 and drinks only cost $0.30 in school. We used to stay at my grandfather's place and my uncle was running his fruit wholesale business back then. My sister and I would help to count his coins and stack them nicely for him and he would pay us $1 each for our hard work. :)

Sweet memories.

In secondary school days, I would save up my money to buy Super Nintendo RPG games such as Final Fantasy, Chrono Trigger and Secrets of Mana. I didn't remember having a lot of allowance but a mere $3-4 per day. 

JC days were the same, I would be able to save some from my allowances. At 19, I entered BMT as a recruit, it was tough, back then was only paid about  $250 as a recruit and as a corporal about $400+. Throughout the army days, I got to teach tuition and performed guard duties (people sell their guard duties) on behalf of others for money. I did have some money to party but on a very budget mode every Wednesday, Friday and Saturday. I remember I would take the night rider instead of taking taxi. 

I remember to go out on dates during university days, I worked every single holiday whereas my wealthy friends will go for exchange and travels. I have worked as store man, dress up as an elf at Raffles Place for an event, work as a zoo facilitator (that's fun) and giving 2-3 tuitions for the entire 4 years. The money I saved since army allowed me to pay down $15k of my university school fees and loan the rest from my father.

I continued to give tuition from 2007 to 2009 during my first 3 years of working to supplement my income. Tuition days were tough. I remembered that I had to brave the rain to reach my student's house, walked in the afternoon sun (in short brave the weather) and waited at the bus-stop late at night after classes. In order to save some money, I went to the bus-drivers' coffee shop to buy dinner as the price is cheaper than other places. I remember my first take home paycheck was not even $2k. It was $1,999 less CPF contribution and charity to Chinese Society. I was very hungry to be rich. 

Fast forward 10 years after graduation, despite earning high income, my saving habit is still the same. I am able to save at least 50% of my income for investment. I can easily afford the Audi Q7 and AP watch my secondary school classmate has but I choose not to. It is a choice, a lifestyle choice. Maybe it is a habit which I have cultivated since young. 

I am your typical millionaire next door. I will highly recommend that you read that book.

16/1/2017 Investment Journey - Acquisition

Today I learn something from my mentor. One of the key counters which I am holding on made an announcement that together with other two parent companies will acquire a company in Australia. The parent companies and the counter will hold 40%, 40% and 20% respectively. On the surface, paying AUD 7 billion for a very high gearing company (approximately 6b in total debt) does not justify the rationale of acquisition.

I was told to look up the Average Cost of Debts of the 3 companies, one of the parent company has an Average Cost of Debts at about 5% taking into consideration of 2016 debentures and perpetual securities. The Average Cost of Debts for Acquiree is about 6%. The ROA is using Net Operating Income over Total Assets as a ratio is about 2.6% for the acquiree. We are trying to investigate whether it is a situation of trying to use their reputations to get a low cost of finance which can inevitably reduce finance cost for every 1% equates to another 100m.

The cost of acquisition is AUD 7 billion less AUD 1 billion of cash.

Another possible reason is to diversify its core UK-centric business to Australia and shift its currencies as well.

If it is only a $5/share special dividend plus this year dividend of say $2.9 (3% increase) will be a total of $7.9/share. A dividend yield will be approximately 10.8%. It is a disappointing situation where I thought more special dividend will be issued.