Uneven waters - New entry - Pestech

The ballooning trade volume in the stockmarket for the past few days is beginning to strike fear in me as the number of lossers consistently outnumbers the gainers. In times like this traders will thrive. A good trader must monitor the screen all the time and also act swiftly. That is too exciting for me though. So I added a boring new member Pestech to the Huat Fund instead. This blog entry is two days overdue due to my slight fever. So why Pestech?

Pestech is a leading regional electrical solution company that provide comprehensive power system engineering and technical solutions for design, procurement and installation of HV (high voltage) and EHV (extra-high voltage) substations, transmission lines and underground cables. Pestech started as a trading company that sells electrical products in 1991. Under the leadership of Paul Lim, the current CEO, who joined in 2000, the company became an established home-grown integrated electric power technology company in the power transmission and distribution business with operations locally and abroad.

The pulling factors:
1) Overseas exposure
Not many local company dare or can venture outside of Malaysia but Pestech not a typical malaysian company. It has had projects in Singapore, Australia, Mali, Ghana, South Africa, Tanzania, UAE, Sri Lanka, Iran, Papua New Guinea, Laos, Cambodia, Myanmar and even North Korea (I wonder how). So Pestech targets mainly the developing countries that have been underinvesting in their power infrastructure. As these countries develop, their demand for electricity will rise. However, by venturing into these countries, the risk of receivables is something that must be considered. Pestech had this covered by undertaking projects are sponsored by ADB and japanese funds and also making some good risk analysis of each projects so far. And Pestech is also starting to build reputation of its own in Cambodia by delivering its first project there 8 months early. Expect more projects in Indochina area.

2) Leadership under Paul Lim
I have read a lot of directors, CEOs and Chairmans' profile before and have never seen such a rapid rise. He practically became a GM from fresh grad in 6 years. With such a talent leading the company, sky is really the limit for Pestech.

3) Fast growing SCORE projects
The high energy industries that are located in Sarawak Corridor of Renewable Energy (SCORE) will need many more substations.

4) Collaboration with ABB Group
Pestech basically signed Technical Cooperation Agreements with ABB Group to get technical support, technical drawings and OEM products so that it can start produce some of its product as its own product from 2017. Getting an international group to do that is not the easiest task in the world! But I suspect there will be more tie-ups like this soon.

Risk:
-Forex risk due to overseas projects
-Fluctuation in project earnings due to project stages billings
-Changes in government policies


So, Huat Fund looks like this today after the addition of Pestech. I bought only 1000units to keep the cash level above 10% level.

Fund Portfolio at 20.08.2014
	Name	Purchase Date	Average Purchase Price	Current Price	Unit	Current Value (RM)	P/L ex Dividend (%)	Dividend (RM)	P/L inc Dividend (%)
Cash	Hle-Broking			11665.21
Stocks	Sunreit	04/10/13	1.40	1.460	5000	7300	4.5	282.75	8.5
	Inari	24/02/14	2.45	3.280	12000	39360	34.0	270	34.9
	Jaya Tiasa	24/04/14	2.74	2.270	2000	4540	-17.3		-17.3
	Hovid	14/04/14	0.38	0.415	40000	16600	7.9		7.9
	Westport	09/05/14	2.75	2.940	2000	5880	6.7		6.7
	QL	07/07/14	3.60	3.450	3000	10350	-4.1		-4.1
	Pestech	20/08/14	4.04	3.980	1000	3980	-1.5		-1.5
Total value of current Stocks				88010.00	88.3	%		552.75
Total cash in Hlebroking				11665.21	11.7	%
Total Fund Value				99675.21
Original Capital				50000.00
Addition to original capital				20000.00
Total Fund Capital				70000.00
Current paper gain				10431.78
Total dividend				1105.10
Total profit including current paper gain				29675.21	42.4	%

Side stories - Seeking improvement in fund management

As I am not a professional fund manager, I am always on lookout for tips to manage a fund professionally. In the Personal Money edition this month, I found something interesting in an article by Tho Li Ming which goes by the title "Different Approach to Managing Funds".

The article is basically about a boutique fund management company called Golden Touch Asset Management. So, the interesting parts of this article are:
1) high net worth individuals are defined as those who have assets between RM 250k und RM 5mil
2) the fund targets returns of 15% to 25% for the high net worth clients.
3) the fund has 1% annual management fee and 10% profit-sharing fees. This profit-sharing fees ensures that the company's goals are aligned with those of their clients. (this is worth implementing for Huat Fund once the size of Huat Fund reaches 200k)
4) no call warrants as it is deemed to be too risky.
5) in a positive investing climate, the fund holds between 60% to 70% in equities and carries 15 to 20 stocks.
6) stock selection is not the top priority for the fund. The weightage and timing of buying and exiting stocks are just as important for them. The stock selection are done through judicious buying and selling. "We dont want to be the first ones into a stock, but rather the second or third because we know there will be interest in the stock by then. We dont pick stocks we love but stocks we know everybody else will."(Something new worth considering for future transactions)

In Anticipation of Inari Rights

As announced in the this post, I have used the proceeds from Cypark to average up on Inari shares. Today i bought additional 2000 units of Inari shares @ RM3.19.  With total 12000units I would be entitled to 1500 Rights share. In my humble opinion, the money raised through this Rights Issue will be well spent. To recap, the money will be used to fund new plant as the capacity of current plants are fully optimized.

The Huat Fund looks like this today!

Fund Portfolio at 04.08.2014
	Name	Purchase Date	Purchase Price	Current Price	Unit	Current Value (RM)	P/L ex Dividend (%)	Dividend (RM)	P/L inc Dividend (%)
Cash	Hle-Broking			15706.7
Stocks	Inari	24/02/14	2.45	3.16	12000	37920	29.1	270	30.0
	Sunreit	04/10/13	1.40	1.42	5000	7100	1.6	282.75	5.7
	Jaya Tiasa	24/04/14	2.74	2.43	2000	4860	-11.4		-11.4
	Westport	09/05/14	2.75	2.83	2000	5660	2.8		2.8
	QL	07/07/14	3.60	3.46	3000	10380	-3.8		-3.8
	Hovid	14/04/14	0.38	0.455	40000	18200	18.3		18.3
Total value of current Stocks				84120.00	84.3	%		552.75
Total cash in Hlebroking				15706.7	15.7	%
Total				99826.70
Original Capital				50000.00
Addition to original capital				20000.00
Total Capital invested				70000.00
Current paper gain				10583.27
Total profit including current paper gain				29826.70	42.6	%
Total dividend				1105.1