Ok. am not really good at writing. Here’s a try. I always thought I remember and learn things better by writing them down.
Would like to go through the stocks or rather the business that I have bought.
Below is the list of stocks I have bought, arranged as per percentage (1st being the stock with the most amount invested). Beside each stock I included the date whereby I first bought the stock and which I have yet to sold off yet (for some stocks/counters I have bought earlier and sold off those stocks. These dates are not included as I felt it would better reflect what I have now).
1) Golden Agri (22/12/2010)
2) Capitaland (27/01/2011)
3) Super Group (19/06/2014) – For Supergroup, I have not sold a single share even since I bought it.
4) Vicom (14/11/2011) – For Vicom, I have not sold a single share even since I bought it.
5) Sun Hung Kai (2/5/2012) – For Sun Hung Kai, I have not sold a single share even since I bought it.
6) SIA (03/11/2010)
7) Riverstone (30/10/2013) – For Riverstone, I have not sold a single share even since I bought
8) SMRT (11/05/2010)
9) Lyxor Japan 10 (19/2/2013)
10) ISOTeam (30/12/2014) – A recent buy.
When I look through the list, I realize that as years go by, I tend to buy stocks with stronger fundamentals. My first few buys are well know blue chips in the STI such as SMRT, SIA and Golden Agri. Capitaland is because I worked in the construction sector and am familiar with the group. Sun Hung Kai was bought during a dip in price due to the high profile corruption trial.
A Pen Quotes 
Hi, Golden Agri has dropped to 41 cents(?). Any reasons? Should I go in now? Heard news saying Indonesian Government may have new legislation that might affect palm tree growers (or something like that). Is it true? Profits of GAR was a billion in 2011? Then dropped to 285 million? Is it worth the risk to go in at 41 cents? Thanks for your info!
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Hi Lawrence,
I have previously written about Golden Argi (https://apenquotes.wordpress.com/2015/02/01/the-odd-one-out-golden-agri/)
There are many reasons for the drop in price – oversupply in Crude Palm Oil, CPO (slowdown in China), drop in Soybean oil price making palm oil less attractive – esp in India (bumper soy bean crop in US), drop in crude oil (CPO price nowadays move relatively in tandem to crude oil price, since CPO is used in bio-diesel – it will only make economic sense to use bio-diesel is crude oil is high) and of course relatively Golden Agri seem less attractive compared to First Resource with a higher % of younger crops or crops in the prime, and less leveraged.
Actually I have read in forums that price may drop all the way to 0.38 (http://www.sharejunction.com/sharejunction/listMessage.htm?topicId=5187&msgbdName=Golden%20Agri-Res&topicTitle=GoldenAgr)
There have been articles stating that crude palm oil (CPO) may drop to RM2000 or RM2200 per tonne. Now the price is around RM2,237 per tonne. So there is a chance price will drop further (since price of Golden Agri stocks is heavily correlated to CPO price).
http://www.thestar.com.my/Business/Business-News/2015/02/23/Crude-palm-oil-to-trade-between-RM2000-and-RM2500-in-2015/?style=biz
http://business.asiaone.com/news/export-duty-crude-palm-oil-soon
http://business.asiaone.com/news/malaysian-palm-oil-price-drops-after-holiday
The new legislation from Indonesian Government is not new. It is about restricting foreigner ownership on Indonesian palm oil campanies.
However so far what I read is that it (restricting foreign ownership) has been removed when the bill was passed and would not affect the listed palm oil companies (for the meantime).
http://www.thejakartapost.com/news/2014/10/03/businesses-breathe-sigh-relief-new-law.html
http://www.kppk.gov.my/index.php/news-cutting/3381-palm-oil-industry-indonesia-passes-plantations-bill-drops-clause-on-foreign-ownership.html
Net profit attributable to owners of the Company by years:
2010: US$1,423,045,000
2011: US$1,267,970,000
2012: US$409,641,000
2013: US$ 311,286,000
The thing with Golden Agri is it is a cyclical stock. Cyclical stock is one of the hardest for investors(http://www.fool.sg/2015/02/24/investors-in-commodity-related-companies-need-to-be-aware-of-this-risk/), but cyclical is also one of the most lucrative if you can get in at the right time. Generally I do not advise people to invest in commodity cyclical companies.
We can’t use fundamentals or ROE growth to study the company – really depend on external macro economics. The Indonesian & Malaysian government have been lowering export tax to help in the export of palm oil and implementing laws to increase the use of bio-diesel. Indonesia and Malaysia really have no choice – palm oil constitute a very high portion of their GDP. So I know there is an absolute bottom to how low CPO can go before Indonesia & Malaysia crack.
Peter Lynch mentioned before that a high P/E may indicate a good time to buy (as when earnings are really low – it would mean that there will be a boom soon). http://www.fool.sg/how-to-invest/what-is-guides/what-is-a-cyclical-share/
Now Golden Agri P/E is relatively high compared to the past years.
A better ratio to study Cyclical Stocks may be price to book value (the lower the better).
With the current low price to book value (0.61) it would appear good (to enter during these few months). First Resource is fundamentally a better company but its price to book is 2.83 – some people have highlighted such high price does not justify the better fundamentals. But like I said before there is a high chance it (Golden Agri stock price) would go lower in the near term (when you start to hear of more smaller palm oil firms go bust it would be a better time to buy Golden Agri stocks), and since it is tied to crude oil price (which I don’t think will go up anytime soon) – you must be willing to wait.
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Thanks for info again…
OK – focus on one company but if you are given a sum of money to buy today, which would you pick personally: GAR or First Resource?
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Hi Lawrence,
Personally to me your question can be considered irrelevant, tough and easy.
Irrelevant because I always have spare money to buy stocks, I was never 100% in stocks, and I don’t like to be forced into a situation to buy (or sell).
Tough is because one can really write a lot comparing these two. The Motley Fools has written a lot about these two, just take the below for example. (http://www.fool.sg/2014/03/12/a-blue-chip-need-not-have-the-better-fundamentals-golden-agri-resources-and-first-resources-shows-why-thats-so/).
Easy: I don’t know about others, but for me the first priority is to assess the downside risk. One can argue a lot about which stock has the better chance of increasing in price. But when you consider which company is the most at risk it becomes very clear. And frankly what you really must guard against is yourself. What will prevent you from selling when shits happen, when the market crash, when the stock you are holding drops by 80% or 90%.
A company with minimum or no debt is very very very hard to go bust. You can have an idiot as a CEO, the earnings can slow or stagnant but if there is little or no debt, no banks or creditors can force you to close shop. And the company won’t be the first to go down.
Golden Agri cash holding is 475.56M, total debt is 2.89B, Current Ratio (mrq): 1.46
First Resource cash holding is 180.63M, total debt is 492.41M, Current Ratio (mrq):3.85 (the higher the ratio, the more capable the company is to pay its obligations)
Both not ideal (eg. pristine with no debt or debt less than cash) – but First Resource has proportionally less debt.
I may be more in favour towards Golden Agri because I hold Golden Agri stocks and Golden Agri balance sheet wasn’t always that bad, much better in 2010 and 2011. But if given the choice today (when I holding neither of this stocks) – I would go for First Resource, not because it has better chance of rising, but because it has less chance of going bust.
Last note: Given the choice, I would rather wait and be patient. Both stocks not in their ideal state to buy. First Resource price has too much premium (since it is odd for a palm oil company to be still strong given the CPO price drop, but unfortunately a lot of ppl is aware). Golden Agri fundamentals deteriorating (which is kinda expected given this situation). Your call.
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Hi,
GAR just announced 2014 results this morning. What do you think? I am going to q to buy GAR today! Cheers! Lawrence.
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As expected: bad results.
Actually, to put things a bit in perspective, we can compare the 2014 results to GAR 2013 full year results performance (http://www.goldenagri.com.sg/pdfs/SGX%20Filings/2014/GAR%20FY2013%20Presentation.pdf).
For FY 2013 vs FY 2012 results, EBITDA drop 16%, Core Net Profit drop 21%, Palm product output drop 5%
For FY 2014 vs FY 2013 results, EBITDA drop 14%, Core Net Profit drop 30%, Palm product output increase 7%
Looking at core net profit, fundamentals seem to deteriorating.
For FY 2013 vs FY 2012, liabilities increase 14.5%
For FY 2014 vs FY 2013, liabilities increase 9.4%
Adjusted Net Debt/Equity Ratio: 2014: 0.19x, 2013: 0.13x
Liabilities still increasing – but at slower pace.
Was reading this article on cyclical stocks (http://www.investopedia.com/articles/02/102202.asp).
Found this statement quite interesting:
But Slater warns us to be careful: the first year of falling interest rates is also unlikely to be the right time to buy. He advises that it’s best to buy in the last year of falling interest rates, just before they begin to rise again. This is when cyclicals tend to outperform growth stocks.
Guess we are nearing the end of low interest rates.
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Hi,
Thanks for your reply. What is your take on Iceberg Research report on Noble Group? Is there any truth (if any) in the Iceberg report??? Or they are just false accusations? Thanks, Lawrence.
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Did a quick check on the Iceberg Research (http://www.fool.sg/2015/02/26/what-is-the-short-attack-on-noble-group-limited-all-about-part-3/)
You know this net fair value gains issue isn’t new. I read about it in 2011 about GAR (http://www.valuebuddies.com/thread-793.html
Fundamentally Noble is already not a strong company (http://www.fool.sg/2015/01/27/heres-why-noble-group-limited-is-a-blue-chip-investors-may-want-to-avoid/) even without the attack from Iceberg Research. Similarly for Olam before Muddy Waters attack.
Frankly, there is no justifications on Iceberg accusations. To quote from Fools website:
However, the blogger (from Iceberg Reserach) did acknowledge that much of its analysis had been based on its own assumptions. All the claims are also presented with phrases like “we believe,” “we suspect,” and “we think,” meaning that there could be a lack of real evidence behind Iceberg Research’s logical deductions.
Probably only the auditors can answer if the accusations are true.
Did not buy Olam when it was attacked (since it is already a fundamentally weak company), will probably not buy Noble as well now.
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Thanks for the info! How about Keppel Corp, Sembawang Industries and Sembawang Marine. Share prices of these stocks have dropped a lot! Time to go in – or should we wait? Cheers!
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Well, I am unable to advise on oil stocks. I guess I only have time to read up on palm oil news. Oil is another big universe of macro economics.
Was reading up on Ezion and Nam Cheong at one time. Would have preferred to buy simpler, smaller, faster growing companies, but don’t really like Ezion and Nam Cheong’s fundamentals. I find it really hard to read big companies annual reports (too many variables, subsidiaries etc). Eg. Keppel Corp recent de-listing of Keppel Land.
However since CPO price is roughly correlated to Crude Oil, I think having a focus on one company eg. Golden Agri is enough. However, from a guy who has been watching CPO price drop from 2010/2011 till now – the recent drop in crude oil is likely to be just the beginning of a slow slide down. Cycles don’t start and end so fast.
To add – saw this post on the web that states that the move in Palm Oil normally precedes the move in Crude Oil (by several months). So given the choice – which would you invest? A commodity that is beaten down since 2010/2011 and uptick normally precede crude oil or crude oil which only saw drastic drop in 2014?
http://seekingalpha.com/article/2770695-palm-oil-the-next-best-investment
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Ok, sir, said that u have been buying stocks with strong fundamentals. Which stocks would you recommend at this point in time as having strong fundamental and worth buying into? Thanks!
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Colex and ISOTeam, and to a lesser extend Super Group.
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