Wednesday, 6 June 2018

Parted Ways with Tai Sin Electric

Examples and stocks quoted in this article do not constitute financial advice and/or buy/sell recommendation. Opinions expressed are personal view and do not take into account your investment objective, financial situation and particular needs. 

I sold Tai Sin Electric after some un-inspiring results. This is one of my longest holding so I decided to pen down this short article as a record.

I first bought Tai Sin in Sept 2012. It is the leader in the field of manufacturing and supplying of cables to the construction players. I expected the demand for electric wires and cables, being a necessity in buildings and infrastructures, would grow with the increasing infrastructure spending by the government. In worst case i would expect it to remain constant.

The good dividends played a part too in prompting my purchase. Based on dividend of $0.0225 and a purchase price of 25.5 cts, its dividend yield was a juicy 8.8%.

Subsequently I added another batch of Tai Sin in Dec 2014.

Reasons for Selling
Tai Sin's FY17 results did not match up to my expectation and it alerted me. I wrote a piece about its FY17 earnings here, and decided to monitor its quarterly reports closely since.

The subsequent 3 quarters of earnings up till 31 Mar 2018 were not satisfactory. I summarise its key figures extracted from quarterly announcements in table below.

Source: Tai Sin Q1, Q2, Q3 quarter reports, 6 Jun 2018

Year on year, its revenue has increased. But the gross and operating margin have been compressed. I deem this worrying as it seems that the company, in order to compete, has to sell at a lower price with thinner margin. It is most likely subjected to rising costs base too, most probably cost of raw material, selling distribution expenses, and admin expense.

The management did not have a positive take on industry prospect too. Looking at past 3 quarters commentary, it has been the same narrative that is cost pressure and challenging business environment.
Source: Tai Sin Q1 FY18 Quarterly Report

Source: Tai Sin Q2 FY18 Quarterly Report

Source: Tai Sin Q3 FY18 Quarterly Report

Sell Transactions
My first partial sale actually took place last year at $0.42. Reason for the cash out back then was more to re-balance my portfolio as Tai Sin's price has ran up quite a bit. 

More recently from end May till early June, I have sold all my shares due to the fundamental reasons shared above. 

Due to Tai Sin's low trading volume, I queued for $0.39 for a few days and managed to sell the remaining shares over three transactions.

I am happy with the returns. Taking into account the total dividends received , my Xirr turns out to be 15.05%.

Xirr of Tai Sin and dividend records over holding period

As one of the oldest member in my portfolio, I appreciate its service and dedication in dishing out stable dividends twice yearly. So the cashing out gave me a tinge of sadness yet concurrently I am satisfied with the returns.

So now its back to drawing board to identify the next investment candidate. But I think it will be much harder given that market is now much higher and there are way less cheap and good companies compared to 2012.

Would you like to learn about how I select good quality shares? How can bonds, such as the recent Astrea IV Private Equity Bond by Temasek, help build a resilient portfolio?

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  1. Can the Astrea IV bonds be traded in the stock exchange ?

  2. Hello Chun, thank you for sharing your experience. Your returns are quite good, but you can make it better with the daily stock signals. Wishing you luck for the happy trading.


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*All examples and stocks quoted in this article are for education and sharing purposes. They do not constitute a buy/sell recommendation . ...