Month: April 2014

Cash: Can one have too much?

One need to ask why the money is not being put to better use? Cash could be there because management does not know how best to deploy it, missing out on investment opportunities and in some ways can be said to be inefficient.

Having so much cash is expensive in the sense that when cash is sitting there idling, there would be opportunity cost, measured by the difference between the interest earned on leaving it in the bank and price paid having the cash measured by the company’s cost of capital. That said, I am not implying that companies should invest in a new project just for the sake of not holding onto too much cash. Management should be discipline in its spending, spending when opportunity arises and keeping cash when it views that there are no opportunities around. However, for Lion AsiaPac, the huge amount of cash has been sitting there has not just been a year or two but several years.

To sum it up, I believe that while investing in Lion AsiaPac definitely gives you the safety that you are buying a company that is undervalued with a extremely huge margin of safety, one has to note that such excess cash tells you something about management. I have sold my whole stake in Lion AsiaPac and realised the losses as a lesson learnt.

Disclosure: The author is no longer invested in Lion AsiaPac

SG Value Fund NAV Update April 2014

Image

Initial Net Asset Value (per unit): $10,000

Net Asset Value as of April 2014 (per unit): $12,386

Image

For the first quarter of 2014, the fund has returned 3.91%, translating to an outperformance of the STI by 4.84%. Going forward, I would not be including the holdings here but rather create a separate page for my current holdings. Within the first quarter, I have sold my stake in Silverlake Axis at $0.92 and ComfortDelgro Corporation at $2.01. Having identified new undervalued stocks, I have deployed the cash into buying HupSteel at $0.21 and New Toyo at $0.305. I believe 2014 would definitely be an interesting year for the fund.

Given how KTIS (An associate of KingWan Corporation) has finalised its IPO date (click here), it has resulted in King Wan’s price to start normalising. Furthermore, with the owners of New Toyo indicating interest of selling their stake in the company, I believe value would be able to be unlocked this year.

For this period, unless there is any significant chances in the fund, I would be taking a break from blogging given how my university exams are around the corner. 🙂