Tong's Value Investing Portfolio as of May 17, 2018

The perception and consequences of rent seeking 
 
The Malaysian stock market reacted far better than initial prognosis by most market analysts, on the heels of the shocking – though not wholly unexpected, if the mini rally for certain stocks earlier last week is any indication – defeat of the long ruling coalition, Barisan Nasional in the 14th general election. Even the ringgit is holding up fairly well, especially considering the external backdrop of strengthening US dollar and rising Treasury yields.
 
To be sure, the Bursa saw increased volatility when it resumed trading on Monday. There was a huge 79-point swing intra-day but market breadth was broadly positive on the back of brisk trading volume of 6.62 billion shares. The FBM KLCI ended the day 3.9 points higher.
 
We attribute this show of confidence to the swift, decisive actions taken in these early days, including the setting up of the 5-member Council of Eminent Persons to guide the crucial 100-day transition period. The council is tasked with drawing up and recommending institutional and economic reforms to the new government. One of its first moves has been to set up an Institutional Reforms Committee.
 
Confidence was likely further bolstered by the quick announcement of three key cabinet ministers, for the Finance, Defence and Home ministries. A functional cabinet of key ministries is expected by the end of the week.
 
Despite the inevitable uncertainties, the smooth transition of power and quick actions has clearly earned our government the benefit of the doubt.
 
Having said that, we did see heavy selloff in a handful of stocks. Construction stocks, in particular, were heavily sold off across the board given that the new government has promised a review of all mega infrastructure projects – that should include the ECRL, KL-Singapore HSR, MRT 3 and Gemas-JB double tracking rail project.
 
Of note though, shares for companies that are perceived to be more professionally run – the likes of Gamuda and Econpile – steadied quickly after the initial selloff. Should these mega projects be delayed or aborted altogether, prospects for orderbook replenishment may be negatively affected. So their share price drops are rational and reasonable. But at the end of the day, it would not undermine the companies’ underlying strength that is based on expertise and experience.
 
In fact, the worst affected stocks are those perceived to be closely linked to BN and had benefited (or will benefit) from lucrative government concessions and contracts.
 
At the worst, proprietary day trader and intraday short selling activities for My EG, George Kent, Excel Force and Gabungan AQRS were suspended (on Tuesday). On Wednesday, Bursa went further, freezing the lower limit price for My EG and George Kent after both stocks traded limit down for the previous two consecutive days.
 
We also looked at the other end of the spectrum, at the stocks that had rallied. Since we are quite sure that their underlying businesses have not changed drastically overnight, the only explanation is that the perception of close inter-relationship between politicians and businessmen – despite everything that has happened – remains well and alive.
 
Going forward, with the promised reforms and endemic corruption practices addressed, it is hoped that rent seeking would no longer be promoted.
 
We made several transactions for the Malaysian Portfolio this week. On one hand, we halved our holdings in Choo Bee, given the prevailing uncertainties in the construction sector.
 
On the other hand, we recycled the proceeds and put all our remaining cash balance to work – by acquiring shares for Maybank, Pantech, Panamy and SCGM.
 
Maybank, Panamy and SCGM should benefit from rejuvenated business and consumer confidence as well as consumption spending once GST is reduced to zero (starting June 1, 2018).
 
Meanwhile, Pantech is a good proxy for rising oil prices. Brent crude is now hovering just a shade below the US$80 per barrel threshold, compared with the average of US$55 per barrel last year.
 
After taking into account all the above, the portfolio is now, once again, nearly fully invested. This is our vote of confidence to the new administration.
 
Total portfolio value gained 4.2% from the last update (May 3, 2018), performing better than the FBM KLCI’s 0.1% advance. 
 
The gains lifted total portfolio returns since inception to 66.8%, again, well ahead of the benchmark index’s 1.4% increase over the same period.
 
We acknowledge that short-term earnings could still be weak but we believe that market will be driven more by positive expectations for the longer-term.
 
The country has never been happier, more united and confident.
 


Performance Comparison Since Inception (%)

  • Tong's Value Investing Portfolio
  • FBM KLCI
 
SHARES HELD QUANTITY AVERAGE COST COST OF
INVESTMENT
CURRENT
PRICE
CURRENT
VALUE
GAIN /
(LOSS)
GAIN /
(LOSS)
SCGM BHD 66 1.208 79.7 1.620 106.9 27.2 34.2%
AJINOMOTO (M) BHD 1,500 12.278 18,417.5 23.800 35,700.0 17,282.5 93.8%
PANASONIC MANUFACTURING MSIA 400 24.955 9,982.0 38.020 15,208.0 5,226.0 52.4%
SUPERLON HOLDINGS BHD 12,000 1.175 14,100.0 1.360 16,320.0 2,220.0 15.7%
KERJAYA PROSPEK GROUP BERHAD 11,000 1.025 11,280.0 1.670 18,370.0 7,090.0 62.9%
Y.S.P.SOUTHEAST ASIA HOLDING 10,500 2.483 26,075.0 2.580 27,090.0 1,015.0 3.9%
LUXCHEM CORPORATION BHD 16,500 0.717 11,825.0 0.700 11,550.0 (275.0) (2.3%)
CHOO BEE METAL INDUSTRIES BHD 8,000 2.190 17,520.0 2.450 19,600.0 2,080.0 11.9%
FORMOSA PROSONIC INDUSTRIES 18,000 1.540 27,720.0 1.580 28,440.0 720.0 2.6%
HONG LEONG INDUSTRIES BHD 2,000 9.276 18,551.0 11.420 22,840.0 4,289.0 23.1%
OKA CORPORATION BHD 12,000 1.541 18,488.0 1.310 15,720.0 (2,768.0) (15.0%)
WILLOWGLEN MSC BHD 10,000 1.010 10,100.0 1.070 10,700.0 600.0 5.9%
HOCK SENG LEE BHD 14,500 1.534 22,243.0 1.450 21,025.0 (1,218.0) (5.5%)
Total     206,381.2   242,669.9 36,288.7 17.6%
         
Shares bought        
MALAYAN BANKING BHD 3,000 10.820 32,460.0 10.820 32,460.0 0.0 0.0%
PANTECH GROUP HOLDINGS BHD 43,000 0.580 24,940.0 0.595 25,585.0 645.0 2.6%
PANASONIC MANUFACTURING MSIA 200 36.000 7,200.0 38.020 7,604.0 404.0 5.6%
SCGM BHD 11,000 1.760 19,360.0 1.620 17,820.0 (1,540.0) (8.0%)
         
Total shares held     290,341.2   326,138.9 35,797.7 12.3%
         
Shares sold        
CHOO BEE METAL INDUSTRIES BHD 8,000 2.190 17,520.0 2.440 19,520.0 2,000.0 11.4%
         
Cash Balance         7,452.6    
Realised Profits / (Losses)         97,793.8    
         
Change since last update May 3, 2018        
Portfolio             4.2%
FBMKLCI       0.1%
         
         
Portfolio Returns Since Inception     200,000.00   333,591.5 133,591.5 66.8%
Portfolio Returns (Annualised)             18.5%
         
Portfolio Beta             0.642
Risk Adjusted Returns Since Inception             104.0%
         
         
Performance Comparison At Portfolio Start Current Change Relative Portfolio Outperformance
FBM KLCI 1,829.7 1,854.4 1.4% 65.4%
FBM Emas 12,700.4 12,894.0 1.5% 65.3%
Footnote:
*Current price is as at May 17, 2018.
*Portfolio started on Oct 10, 2014 with MYR200,000.
*This is a personal portfolio for information purposes only and does not constitute a recommendation or solicitation or expression of views to influence readers to buy/sell stocks.

STOCKS SOLD IN THE LAST 12 MONTHS (Currency: MYR)
 
SHARES SOLD DATE BOUGHT DATE SOLD QUANTITY AVERAGE
COST
COST OF
INVESTMENT
PRICE SOLD SALES
PROCEEDS
GAIN /
(LOSS)
GAIN /
(LOSS)
BATU KAWAN BHD 15-Feb-17 03-May-17 200 19.500 3,900.0 18.960 3,792.0 (108.0) (2.8%)
BATU KAWAN BHD 15-Feb-17 04-May-17 400 19.500 7,800.0 18.900 7,560.0 (240.0) (3.1%)
UNITED PLANTATIONS BHD 13-Feb-17 08-May-17 500 26.150 13,075.0 28.420 14,210.0 1,135.0 8.7%
UNITED MALACCA BHD 08-Feb-17 09-May-17 1,000 5.800 5,800.0 6.200 6,200.0 400.0 6.9%
UNITED MALACCA BHD 08-Feb-17 11-May-17 1,000 5.800 5,800.0 6.190 6,190.0 390.0 6.7%
WILLOWGLEN MSC BHD 23-Nov-16 30-May-17 13,000 0.768 9,985.9 1.720 22,360.0 12,374.1 123.9%
YEE LEE CORPORATION BHD 12-Jan-17 29-Jun-17 6,000 2.500 15,000.0 2.487 14,924.0 (76.0) (0.5%)
CLASSIC SCENIC BHD 26-Jan-16 13-Jul-17 4,000 1.413 5,651.3 1.815 7,260.0 1,608.8 28.5%
MIKRO MSC BERHAD 01-Dec-16 27-Jul-17 42,000 0.331 13,920.0 0.545 22,890.0 8,970.0 64.4%
CLASSIC SCENIC BHD 01-Dec-16 27-Jul-17 4,000 1.413 5,651.3 1.790 7,160.0 1,508.8 26.7%
PANASONIC MANUFACTURING MSIA 21-Jan-16 27-Jul-17 400 26.125 10,450.0 37.100 14,840.0 4,390.0 42.0%
ELSOFT RESEARCH BHD 30-Mar-17 24-Aug-17 8,000 1.844 14,750.0 2.650 21,200.0 6,450.0 43.7%
JOHORE TIN BERHAD - WA 12/17 04-May-17 24-Aug-17 17,000 0.655 11,135.0 0.680 11,560.0 425.0 3.8%
FOCUS LUMBER BERHAD 03-May-17 30-Aug-17 6,000 1.660 9,960.0 1.530 9,180.0 (780.0) (7.8%)
WILLOWGLEN MSC BHD 23-Nov-16 30-Aug-17 7,000 0.768 5,377.0 1.430 10,010.0 4,633.0 86.2%
WILLOWGLEN MSC BHD 23-Nov-16 28-Sep-17 7,000 0.770 5,377.0 1.180 8,260.0 2,883.0 53.6%
LII HEN INDUSTRIES BHD 14-Dec-16 28-Sep-17 5,000 2.820 14,100.0 3.720 18,600.0 4,500.0 31.9%
COMFORT GLOVES BERHAD 28-Aug-17 08-Dec-17 25,000 0.960 24,000.0 0.930 23,250.0 (750.0) (3.1%)
JOHORE TIN BHD 08-May-17 08-Dec-17 9,000 1.600 14,400.0 1.180 10,620.0 (3,780.0) (26.3%)
THONG GUAN INDUSTRIES BHD 12-Dec-16 08-Dec-17 5,000 4.243 21,215.0 4.100 20,500.0 (715.0) (3.4%)
KERJAYA PROSPEK GROUP BERHAD 12-Jan-17 15-Mar-18 11,000 1.025 11,280.0 1.540 16,940.0 5,660.0 50.2%
KERJAYA PROSPEK GROUP BERHAD - WARRANTS B 2018/2023 08-Mar-18 15-Mar-18 3,000 0.000 0.0 0.330 990.0 990.0 -
LUXCHEM CORPORATION BHD 30-Aug-17 15-Mar-18 16,500 0.732 12,072.5 0.720 11,880.0 (192.5) (1.6%)
WILLOWGLEN MSC BHD 14-Dec-17 22-Mar-18 20,000 1.010 20,200.0 1.260 25,200.0 5,000.0 24.8%
MUAR BAN LEE GROUP BERHAD 26-Oct-17 22-Mar-18 13,500 1.240 16,740.0 1.170 15,795.0 (945.0) (5.6%)
CHOO BEE METAL INDUSTRIES BHD 07-Sep-17 16-May-18 8,000 2.190 17,520.0 2.440 19,520.0 2,000.0 11.4%

A Note to Readers

It is my pleasure to share with you my Value Investing Portfolio. However, I must emphasize that it is by no means a recommendation or a solicitation or expression of views to influence you to buy or sell any stocks. I am just sharing openly on what I am doing with my stock portfolio.

Further, I like to remind all investors that investing is not just about the profits or returns. You will inevitably suffer stock losses too. You need to understand your own investment objective, risk appetite and the amount of loss you can afford to bear. So, while many investors talk only about absolute returns, I am also sharing the computed risk-weighted returns of my portfolio.

Tong Kooi Ong