I’d normally write more than once a month but this has been a really hectic month for me. So I’ve decided my fingers are a bit itchy and maybe I should just log down what I’ve been up to as I take a quick break.
With the CFA Level III exams coming up in less than a month, I’ve been ramping up my studying hours and yet the feelings of inadequacy come to haunt me. To be honest, I’ve learnt quite a bit of useful concepts which I think will help me get a better understanding of my own/family’s financial status and even proper concrete steps to take it to the next level. So I’m definitely going to think about my own Investment Policy Statement and even try and work out how much insurance I actually need. Most insurance agents will just give a heuristic like “10x of annual income”, but have you thought about what life insurance is supposed to cover and whether what you have is adequate or even more than what you actually need? Because from what I’ve seen in worked examples, “10x of annual income” seems to suggest you need more insurance as you earn more, and that seems quite the opposite from what I’ve been working out. So yes, I will definitely convert these thoughts into a post one day. Stay tuned!
But I digress. Each time I finish one round of review of 30+ chapters, I come back to the first one feeling like it’s the first time I’m hearing some of the concepts or formulae all over again. Hopefully as I consolidate my learning with mock papers over this one last stretch, it will get better. If anything, it reminds me of the yesteryears of being a student, giving me some purpose while I mug hard for the exams around the corner.
On the other hand, life cannot wait for an exam to be over and done with. So even as I eke out time to study, I’ve been making business trips to Johor and KL this past couple of months. I’m hopeful our efforts will see some fruition but it will take some time still before a formal launch is confirmed. I don’t want to jump the gun but will look forward to sharing more in time to come.
The other thing that we’ve been busy with is planning for the wife’s official launch as a real estate agent. We’ve thought long and hard about our own post-MOP plans and can’t wait to execute them towards the end of the year. Since we have done the homework ourselves, we might as well share it with those who want to learn about structuring their property portfolio too. As an investor, I would be remiss to ignore the property side of my investment portfolio, especially since it actually takes up quite a large proportion – as it would for most middle-class investors. So having an understanding of the trade-offs we are making when it comes to property, even if we don’t intend to view the property we live in as an investment is quite important.
Finally, things are starting to pick up on the investment front. My YTD figures look amazing although I don’t know how much this rally is going to last. Most people have been spending 2022 H2 saying that recession is definitely going to hit and inflation does not look like it is abating yet. That said, I’m still on the lookout for good stocks.
For this year, I thought maybe I would spend a bit more time talking about certain stocks that I’ve decided to pick, and build my confidence from there. But before I go on – a little disclaimer: Please do your own due diligence and don’t just fully rely on what I write here. This does not represent financial advice but really about how I went about thinking whether to take a position.
So the first one is Samudera Shipping (SGX: S56), which honestly came to my attention only after a Strait Times article (hidden behind a paywall though) was raving all about it earlier this month, mainly because of the impressive financial ratios. I’m not even sure whether this kind of publicity is allowed in the first place, and in all likelihood, the market would have priced in some of the considerations already (read: Efficient Market Hypothesis), but I still thought that it was favourable and went for it after checking it out a bit more on Simply Wall St. I like it for the appealing way they present fundamental information of the companies and in an easy-to-digest manner. On the free plan, I get view 5 companies a month, so I looked at the Samudera page for one of them this month.
The snowflake analysis looks great from the get-go, but it still pays to have a harder look at the risks they have highlighted. So let’s start with that.
The main reason that there is an unstable dividend track record is because of the high dividend payout of 28.5% in 2022 and that’s because they were rewarding their shareholders due to a strong growth in their earnings. Otherwise, looking at the chart, it has been quite low but stable. So to me, this risk is not a cause of concern unless you’re on the looking for a dividend counter, in which case Samudera might not be suitable.
I’m not so concerned about the old financial report issue because a quick check on their website shows that they have the 2008-2021 reports on their website. I think it’s just a matter of time that the 2022 report goes up.
Next, I verify the financial ratios touted in the ST article. P/E, P/S and P/B compared to its peers all look great. You can even compare against industry average and the same picture appears, except for P/B at 1.1x being slightly above the industry average of 0.9x. Given the gap in almost all the ratios apart from this one, it’s not a deal breaker for me.
Earnings growth has been quite amazing in the past 5 years, and both ROE and ROA have been way about industry average while overall financial health and position has been improving in recent years.
Overall, it ticks many boxes and I agree with the ST article that this share has been underpriced. Since I bought in at $0.95 on 6 Jan 2023, it is now $1.16 as of the time of writing and coming close to the 52W high of $1.21. On the same day I bought, the company also announced the acquisition of two container vessels although it is not expected to have any material impact on the net tangible assets and earnings per share for financial year 2022. I think there is still more headroom and I’m already looking forward to the next report.
In terms of exit strategy, I would start to take notice once ratios come close to being above industry average and on par with peers. The 52W psychological barrier seems like it will easily be surpassed during this market rally. A bit too early to tell when I need to putting it on my sell list at the moment.
So that’s it for my first stock pick of the year. I’d probably come back in a years’ time to review this and see whether I got this one right.
Making Cents 