HLS Order Book

A fellow investor friend, Wan, pointed out an article in Kevin Scully’s blog on Hock Lian Seng’s order book and the potential for the order book to grow. A very big thanks to him for pointing out this article. The order book of HLS has been a concern for me ever since the release of FY 2010 results. The order book of HLS has been decreasing from around $460 million when I first researched into HLS to around $350 million as of Dec 31st 2010. So far, HLS has not won any contracts for the Downtown Line 3 construction and the order book has obviously decreased, partly due to this. In the article, it said that HLS is bidding for two MRT projects. They are for the Downtown 3 line (3 or 4 out of a total of 8 contracts) and Tuas extension (3 or 4 projects each worth $300 million). I have not confirmed this by counter-checking with LTA or HLS. I will keep a keen lookout for the next few quarters’ results to see how has the order book increased. I’m sure HLS will win a couple of contracts given they have a good track record with past projects. I will also have my eye on the profit margins of the contracts that may be won. For those interested to know what are the current tenders up for bidding, check out LTA’s website.

Tight COE supply bodes well for Vicom

I read an article in the Straits Times today that the tight COE supply might make the sales of used cars to hit a 10-year high in Singapore.

In the first quarter of 2011, 15,441 cars changed hands and this figure is more than twice the 6,896 new cars sold (click on hyperlink to see figures by LTA). The number of used-car transactions is likely to hit a 10-year high at this rate. Some industry players predict that the growth will continue over the next two years due to the short supply of COEs. This has driven up premiums and hence, the prices of new cars. The number of COEs is expected to hit rock-bottom between this year and 2013.

I feel all the above figures bode well for Vicom as they derive income from vehicle inspection of motor vehicles. Motorcars three to ten years of age have to go for vehicle inspection biennially. Looking at the age distribution of motor vehicles, the age of cars between three to less than six years makes around 53%, the bulk of the percentage. I’m sure this particular trend will continue to increase in the coming years with the tight COE supply. Vicom, having a duopoly in the vehicle inspection arena, is in good stead to capitalise on this trend.

Kingsmen’s 2010 Annual Report

I just received Kingmen’s Annual Report (AR) for FY 2010 yesterday. The cover design and the cover title are very artistic. In the right way up, the cover says “DIMENSIONS” with “MEN” in red with the letter “E” flipped to the left. When the AR is flipped the other way, it reveals the phrase “TOWARDS NEW” with a Central Business District backdrop. So, in unison, it reads “Toward New Dimensions” with a creative edge. This clearly reveals the artistic side of Kingsmen and this is also evident in the various quality projects undertaken by Kingsmen.

Thumbing through the AR, there were pages with colourful photos of the various business segments of Kingsmen. I was particularly looking for the financial statements as any value investor would do. To my shock, Pages 41 to 56 (consisting of the financial statements) were missing. I asked some fellow investors if they were facing the same plight but it seemed I was one of the very few facing this problem. On a side note, the purpose of this blog post is not to make a fuss out of Kingsmen’s “oversight” or mistake but to highlight Kingsmen’s excellent investor relations that actually followed. Everyone makes mistakes and Kingsmen is not an exception. Back to the topic, I posted my plight in the Valuebuddies forum and I was asked by a fellow forumer to email Andrew Cheng, the IR contact, regarding this issue. I emailed Andrew at 10.02pm yesterday and surprisingly, he replied at 10.27pm using his iPhone, even though he most probably would have knocked off work. He asked for my address so that he could send a new copy over. I thanked him for his excellent IR and for his prompt reply even though I’m only a minority shareholder.

This simple episode reminds me that Kingsmen has the interest of shareholders at heart and that they care for the minority shareholders like me as well. Andrew also added in his email that he’s looking forward to meeting me at the AGM if I’m going down. I felt very touched by his warm gestures. I have a more positive outlook towards Kingsmen now, all thanks to the missing pages in the annual report!

P.S. The soft copy of the AR can be found here.

Only invest with surplus cash

Investing should always be done with cash that we can afford to lose. We should always take care of our immediate expenses and only then should we invest with the rest. If we do so otherwise, our emotions will get in the way. When we invest with cash that we need urgently within the year, we would most probably brood over it and would not be able to sleep well when the stock dips.

Speaking from personal experience, to sleep well at night, always invest with surplus cash!

Golden Cross and Death Cross

I came across an article in this week’s The Edge magazine. The article touched on the technicals of the STI and I learnt about predication of long-term trends with the 50-day moving average and the 200-day moving average from the article.

When the 50-day moving average crosses above the 200-day moving average, a ‘golden cross’ is formed. This is a bullish signal for the long-term and the long-term trend is up.

However, when the 50-day moving average crosses below the 200-day moving average, a ‘death cross’ is formed. This is a bearish signal for the long-term and the long-term trend is down.

How can an investor use these signals? He can liquidate his positions when the death cross is formed and enter the market once again when the golden cross is formed.

I back-tested this strategy and I found that it’s quite reliably predicts the trend with extremely low occurrences of fakeouts. This can be seen from the chart below. A death cross was formed around early Jan 2008 and a golden cross was formed around mid-May 2009. Everyone knows it’s difficult to sell at a market top and buy at a market bottom. At least, with the signals, an investor could have cashed out before the market sell-off in 2008 and re-entered the market after the market bottomed in March 2009.