In a clear sign of the power of long real-life investing experience and academic training, Sebastian Chong remains unbeatable, extending his latest gain to 116%.
A winner in his portfolio is Sinotel Technologies which has shot up from 20.5 cents to 53 cents. That stock has also given neontet’s portfolio a big boost, propelling it to a 43% gain.
Sinotel is also a big part of Shuishui’s portfolio, which has gone up 39%. Meanwhile, Level 13 has gone into positive territory by shorting DBS - an unusual move and worth a close read.
Find out why:
| Securities | Number of shares | Purchase price ($) | Aug 31 closing price ($) | Value of holding ($) |
| Shares Yanlord | 10,000 | 1.76 | 2.30 | 23,000 |
| Straits Asia | 15,000 8,000 | 1.16 1.75 | 2.11 2.11 | 31,650 16,880 |
| Sinotel | 50,000 | 0.205 | 0.53 | 26,500 |
| Guthrie GTS | 30,000 | 0.28 | 0.37 | 11,100 |
| Warrants | ||||
| Yongnam wrt 121214 | 1,000,000 | 0.035 | 0.105 | 105,000 |
| Shares + warrants | 214,130 | |||
| Cash | 1,570 | |||
| Total value of portfolio | 215,700 (+115.7%) |
Sebastian Chong has invested actively in equities since the 1970s. He is managing director of Financial Info Analysis Pte Ltd, a company he founded after he retired as an accounting professor at the National University of Singapore. He now runs his popular investing website, www.shareowl.com
Sebastian says:
On the last reporting date Friday July 31, 2009, STI closed at 2,659.20. A month later, on August 31, 2009, the STI closed at 2,605.39 or down 2%. The portfolio value, however, increased by 17.8% during the month from $183.040 to $215,700. The portfolio has now appreciated by 115.7% from its seed capital of $100,000 when this round of Stock Challenge began on May 18, 2009.
No changes were made to the portfolio during the month. However, with hindsight, I should have sold off Yanlord at or near its recent peak of $2.85. The price of Yanlord has pulled back considerably in the month of August in line with virtually all China property stocks listed in Shanghai and Hong Kong. Investors were spooked by fears of the China banks continuing to tighten credit for the purchase of residential property.
The China government had expressed concern over the very sharp rise in property prices from February till June this year as well as the equally steep climb in prices of stocks in most industries in the Shanghai and Shenzhen stock markets. August saw a sharp correction (well over 20%) in the China stock indices. Yanlord should still enjoy good capital gains from the current price in the medium and longer term but probably not in the short term as housing prices could decline slightly and the pace of housing sales are likely to slow down from the peak reached in June.
Sinotel Technologies was the star performer in August. It announced a proposal to get a listing of an ADR (American Depository Receipt) on Nasdaq. But it was the announcement in mid-August that an American boutique fund had become a substantial shareholder (meaning a shareholder owning 5% or more of the issued shares) that triggered a continual chase after this stock in the last two weeks of August. On the last day of August alone, 112 million shares were transacted and the share price jumped 9 cents to 53 cents.
The American fund had expressed its confidence in Sinotel’s ability to grow its earnings strongly in the current and future years by tapping on the huge spending by the China government on the conversion of the mobile networks to 3G (Third Generation) and ultimately 3.5G and 4G etc. Even at 53 cents, the 2009 PE is only about 5.5. The leap in volume and price on August 31 itself was obviously helped by a report released by AM Fraser with a buy call and a 12-month target price of $1.04.
Yongnam warrant expiring in Dec 2012 continued to climb in price from 8.5 cents to 10.5 cents. This gem has tripled in value from its purchase price of 3.5 cents. The initial investment on May 18 of $35,000 is now worth $105,000. It is still far too early to take profit on this warrant since it will expire only in December 2012 and we can expect a steady stream of new contracts arising from spending by the Singapore government and overseas governments for steel struts and civil engineering services on infrastructure projects like mass transit railways, highways, flyovers and tunnels as well as large commercial and residential building projects.
Since I have missed the opportunity to sell Yanlord at $2.85, there is no urgency to sell it off at the current price of $2.30. Indeed it represents good value at this price. It is too early to decide whether I will keep the portfolio unchanged throughout September. We shall see.
*****
| No. of units | Purchase price | Aug 31 closing | Value | |
Oceanus | 100,000 | 22 cents | 33.5 cents | $33,500 |
| Oceanus | 50,000 | 31 cents | 33.5 cents | $16,750 |
| Sinotel Technologies | 100,000 | 22.5 cents | 53 cents | $53,000 |
Techcomp | 110,000 | 28 cents | 30.5 cents | $33,550 |
| Cash | $5,950 | |||
Total | $142,750 (+42.8%) |
Neontet is inclined towards high-growth small- and mid-cap stocks, preferring to stay away from most blue chips. He has had a good time investing in small- and mid-caps despite being burnt by some S-chips and Singapore companies with corrupt management.
He says:
The bullish stock market has greatly helped my portfolio as the core stocks have been recognized for their significant undervaluation and significant potential earnings growth. Since the last report a month ago, my portfolio’s gain increased significantly from 15.2% to 43% because a core holding – Sinotel Technologies – has done superbly. The 3G network rollout in China has raised investors’ expectations of Sinotel’s near-term financial performance.
At 53 cents, Sinotel looks like it has more upside still as its PE for this year stands at around 4.4X, based on AmFraser Securities estimate.
Another core stock of my portfolio in this Stock Challenge, Oceanus, has not moved in the past month, hovering at 34 cents. However, I am optimistic as this is a business whose potential is fast unfolding. Its 255-million abalone population is growing to maturity, its processing factory is coming on stream and its chain of abalone restaurants is beginning to take off.
Another stock, Techcomp, has delivered excellent 1H results recently and looks on track for record results in the 2H. Its stock price has lagged far behind the market rally although it is trading at my back-of-the-envelope PE of less than 4 for FY09.
*****
| No. of shares | Average price bought at | Closing price on Aug 31 | Value | |
| Celestial | 296,998 | 18.49 cts | 17 cts | $50,489 |
| Sino Techfibre | 167,000 | 15 cts | 16 cts | $26,720 |
| Sinotel | 116,000 | 21.5 cts | 53 cts | $61,480 |
| Total | $138,689 (+38.7%) |
Shuishui, who is in his mid-30s, has been a stock investor for many years. A Singaporean, he has close ties with China as his parents and relatives are living there. He has taught himself how to analyse financial statements.
*****
| Stock | Number of shares | Average Short/Purchase price ($) | Aug 31 closing price ($) | Value of holding ($) |
Techcomp | 200000 | 0.24 | 0.305 | 61,000 |
| STI 2200SGAePW091029 | 60000 | 0.245 | 0.045 | 2,700 |
| DBS | 7000 | 13.36 | 12.64 | 22,764 |
| Cash | 24,746 | |||
| Total | 111,210 (+11.2%) |
Level 13 says:
During this month I have added a short position on DBS prior to the earnings announcement on the belief that profit will not be up to expectation. The financial report, which was out on 5th August, confirmed some of the continuing problems that the bank will face in the near term.
The huge amount of shares outstanding after the rights issue, coupled with the loan impairment and compensation paid for the minibonds, are the main issues that will weigh down the share price.
Allow me to show how the value of my short position is calculated. I shorted 7 lots of DBS at 13.36 using CFD. Thus, my capital outlay is only $18704 (20% of full sum required). Since I have held onto the position past the dividend payment date, I need to deduct the dividends from my profit.
The dividends on the 7 lots totaled to $980 and my profit is $5040. As such, the value of my DBS holding is $22764 ($18704+5040-980).
For past reports on Stock Challenge, go to our archives.
