Cory Diary : SEMBCORP MARINE LTD

I feel history today and do a quick study. Is like a review after a great battle. I am not vested in Oil and Shipping Industry directly but that doesn't mean I should not read up on it. So whatever I find and understand is subjective and conclusion could be wrong.

Started with an article from BT dated FEB 16, 2016.

http://www.businesstimes.com.sg/transport/sembmarine-cosco-buffeted-by-s1-billion-in-combined-q4-losses

"THE strain of low oil prices on the offshore and marine sector was in full display on Monday, as two heavily-exposed Singapore-listed companies reported a combined S$1 billion in fourth-quarter losses."

"The losses were partly the result of the reversal of profits already recognised for the construction of oil rigs and ships that might now never be delivered."

Next, reading latest reported AR. 

Profits for 2Q 2016 is $10,737 ('000). Down from 2Q 2015 $113,167('000)

So will we see even a larger crawl back later ?

Debts
And their debts reported increased quite significantly.

Then, i check other announcement and realised they still do Share Buyback. This doesn't feel good when we clearly know the market is not working and if we are using debts to push up prices. What are they thinking ? 

http://infopub.sgx.com/Apps?A=COW_CorpAnnouncement_Content&B=AnnouncementLast3MonthsSecurity&F=LYPA1524Z2VRQH6X&H=776398d18e8e71d5142d62155ee307be6b3ba12f8d4ccc813ae7660cfa29046b

Final check on the chart, and I can't help thinking is this industry boosted by loose monetary policy which like Shale Oil build up from debts and more debts except differ in cost foundation and which later pushes it further down the road.

Will it get worst ?

See the chart below.

http://www.bloomberg.com/news/articles/2016-06-28/singapore-s-millionaires-humbled-in-local-bond-restructurings

Conclusion

NAV is $1.2029. Share Price is $1.32. Considering the risk and returns, does it make sense ? Compare to another industry like Property which is still earning quite ok are at 30% discount to NAV. Opportunity cost is not my cost today when it can be really toxic.

Cory

20160807

Cory Diary : Misleading CAGR

Smoothed return

It assumes a smoothed return over the period that’s measured. In reality, investments experience significant short-term ups and downs. Be careful when you are sold with 1 Year to 8 Years performance. On 7-8 years, there's a low due to GFC that time in 2008 on crash and huge recovery. All monkeys able to perform. Fine ! Not all monkeys just "99.5%".

Size of fund

What this means is that a fund manager can work on multiple small funds, and then select the few that happens to wins over the measured period and present them to you. Which will convince the most sceptic their performance. 

Ins and Outs

It doesn't work on personal equity investment which has multiple transactions. 

From Investopedia,

"CAGR is very straightforward when there is a beginning and ending value, and set period of time. But in reality, investments, such as mutual funds, have continuous cash inflows and outflows and are required to report monthly, quarterly, annual, and even daily returns."

Cory

20160802

Cory Diary : Did DBS got SWIBER'ed

The Swiber collapse put a possible dent of $350 M into DBS after secured. Unsecured asset to me doesn't mean no value, just much lesser especially during a poor market condition. Even then, I am surprise the total loan exposure is in the tune of $700 M. In my previous reading just 2 weeks ago on Q1 DBS result, it has a profit on $1.234 B. It has an allowance in the report of $170 M.

If is a one-off thing, it could a good thing to buy on dip. However is it ? DBS has to put it whole segment of this portfolio under review again. Q2 may be exciting to read if they allow !

Another question in my mind is whether the Market has fully downgrade Banking from last year level. If so, what we are seeing now is just market sentiments. What we do know is that Oil Price doesn't look like recovering anytime soon. Shale Oil is there as check and balance to the "Evil Cartel". To put it simply, Shale Oil could possibly be the product of QEs. An industry build up from debts and more debts. And once is build up, it put a lid on the cartel every time the oil price attempt to go up.

What this simply mean is that it is going to be a long winter for the oil and gas industry. Question is how long ? For a start, the cost structure as i mentioned previously is not right for the industry. They need to re-size their cost not just the headcount. Anyone want to order offshore rig must be insane.  Are we hoping Keppel and SBM at the mean time be able to do an "Apple Magic" ? Supporting industry like MTQ has a strategy to buy time while company like Swiber attempted a too big to fail stunt.

During this time who will benefits from low oil price ? Start thinking.


Cory
20160731

Cory Diary : Fascination with XIRR

XIRR is a feature use in Excel to measure rate of returns. Best for measuring irregular returns such as stock transactions. XIRR is also the formula we enter in Excel spreadsheet to measure investment performance in a compounded way.

Just type in a single cell in the Excel "XIRR(" and a help note will appear "XIRR(Values,Dates,[guess])". Values is the value of your trade transaction. Date is the day transacted. Typically we can ignore "[guess]".Basically we only need to care for "XIRR(Values,Dates)". If you have weird answer, then "[guess]" needs to be use but this is rare and is due to mathematical solution which has more than one answer.

We know through common sense that for $1000 investment in $1 stock price of a company, if we are able to sell at $2 after holding for a full year, the return will be 100%. If we use XIRR, it will shows 100% too as table 1.

Table 1 on 100% return exactly a year

1-Jan-15	($1,000)	Invested Amount
1-Jan-16	$2,000	Take Profit
XIRR	100%

What if I am only able to sell my stock at $2 on 20th Feb'16 instead of earlier 1st Jan'16 date. This will get complicated in calculating my performance mentally but not with XIRR as in Table 2 below. The performance is 84% which make sense since we take longer to achieve the same profit as in table 1 above.

Table 2 on 100% return more than a year. Time is money !

1-Jan-15	($1,000)	Invested Amount
20-Feb-16	$2,000	Take Profit
XIRR	84%

What if I am able to sell my stock at $2 within  7 months time. The answer is in Table 3 below.

Performance shoot up to 230%.

Table 3 on 100% return in just 7 months

1-Jan-15	($1,000)	Invested Amount
1-Aug-15	$2,000	Take Profit
XIRR	230%

In Summary

We are use to think how we earn last year compare to this year. The problem is this year has not ended. Is only 28 July today and we have 5 more months to go before we know how we perform in 2016. Therefore using today performance measured will skew a lot higher in % if you make an interim profit but much lower in % if is an interim loss of the year.

Thus, Table 3 performance is only for interim reference and not the final result till the year ended. To maintain 230% return at year end, your profit needs to be able to scale to $3300 as shown in Table 4. Which is why performance will decrease over time as chances are, we will not be able to hit $3300 profit from a single trade.

Table 4 To achieve 230% for a full year period

1-Jan-15	($1,000)	Invested Amount
1-Jan-16	$3,300	Take Profit
XIRR	230%

Over the years with consistent performance measured in all your trades, if we are able to achieve strong XIRR results, It will likely reflect your performance capability. The longer the better. I would say 5 years minimum so that a single good trade in your earlier trading days will be properly "amortised" in a compounded way. This is lifetime XIRR measure and a key portfolio measuring tool.

Final Final !

Another thing to watch is the weight-age. The bigger investment you make the larger the impact too on XIRR. This is especially so in later years since with growing income and returns, your investment will get significantly larger that will minuscule your XIRR performance in your earlier years in comparison.

Thus, be aware of fund manager which market their performance using short period and low fund amount to jack up their performance. Only to see their performance flatter after you have subscribed to them.

Cory

20160728