Portfolio update for Q4 2010

The past 3 to 4 months is a rather rewarding period for me. I had been busy restructuring portfolio and at times, havesting the sweet returns from the seedlings planted during the recent global financial crisis.

Switched from Food Junction to Food Empire on 16 August 2010

While Food Junction continue to struggle in its food court and F&B segments (~2% drop in revenue and 20+% drop in profit), Food Empire's business surprisingly rebounded with a spectular recovery of 60% increase in revenue and nearly 70 fold increase in profits. Fortunately, food junction is very thinly traded all these while that I've invested so that I didn't really suffer material loss on the sale. Even more furtunate that no one seemingly cared how well Food Empire recovered so that I can buy more of its shares cheaply. If I can trust their opinions about their business outlook, I'd rather bet on Food Empire for a continued sustainable recovery, well ahead of Food Junction.

Selling coffee for cash, took profit on Super Group and bought Matex on 14 September 2010

This is the 2nd time I made hefty gain on Super Group (formerly known as Supercoffeemix Manufacturing). I was lucky to buy this again during the financial crisis and just slightly over a year, the stock price doubled. While I still think its business fundamentals are still strong and there is still potential for further growth, I doubt the share price had equal amount of potential. So as my usual habit, I sold halve to recoup my principal.

With new funds, I turned my attention on one business waiting on my watchlist, Matex. Normally I shunned manufacturing companies due to their poor margin, i.e. high expenses and pricing pressure. But Matex is different. It got cash. It is another typical cash rich cigar butt that I just can't ignore. When I bought it, it was trading at slightly below its cash and equivalent less term loan per share. Business wise, though the company is still making loss, it has narrowed significantly. Together with the disclosure that the company is looking at other emerging markets (South America, Middle East and India) besides overinvested China, I am quite optimistic of a recovery in the near future.

Selling healthcare for water, took profit on Thomson Medical Centre and bought Darco on 4 October 2010

Similar to Super Group, I was fortunate to be able to buy TMC in the midst of the global financial crisis and since then, price also doubled. And like Super Group's case, I also sold halve of my stake. This turns out to be a good move as in just a few weeks later, Peter Lim, the legendary remisier king, offered to acquire TMC at $1.75 a share. I straight away sold my remaining stake without much hesitation. No matter how much business potential there is over the long term, I doubt the share price has significant upside after it hit $1.75. That's pricing it at 3.6 times book!

Looking at my watch list, I selected Darco. I am well aware of the fraud case that hit its Taiwanese subsidiary. But judging from the impact ($8m SGD) versus its cash and eqvialent of $20m SGD. I judge that its significant but not dangerous to threaten the company to function normally. With a huge discount to its net tangible assets and the slew of contracts the company manage to capture recently, I am optimistic the company can turn around in the very near future. Thus I used part of the TMC profit to acquire some Darco shares.

Increased stake in Manufacturing Integration Technology (MIT) on 11 October 2010

In the midst of the global recession brought about buy the financial crisis, orders for semiconductor equipment almost grind to a halt. This is when MIT show their resilience by translating that semiconductor know-how to produce laser scribers to make solar panels. Since then, semiconductor equipment orders started to improve and their expansion to renewable energy seemingly began to bear fruit with their first major order announced on 30 September. The future for MIT is never brighter.

Acquired Metro Holdings on 1 November 2010

This is one of the most controversial business I acquired. Metro is known for its retail business but its stellar business performance is actually attributed to its property business in China. Metro enjoyed strong cashflow from the rentals it derived from the properties currently under its management and from another perspective, it is basically a REIT but a very different beast, net cash and trading at nearly 50% book value.

Acquired Hour Glass on 24 November 2010

One thing that caught my eye about Hour Glass is its strong balance sheet (nil debt and trading at discount to book value) and good business recovery (~57% increase in yoy 2Q profit, ~38% in yoy 1H profit). With the increased well heeled gamblers the two integrated resorts bring to Singapore, I see that the luxury segments (including watches) should stand to benefit. Wish them good luck!