Portfolio - April 2018 + What is Ezion W230416?

Happy Labour Day everyone! This week will be a very short week for those people that took Monday off :) Our portfolio increase by 4.01% to $336,021 - $7,767.24 of capital injection and $5,180.91 of capital gain.

SOLD
- Ezion (9,900 units) @ 0.225

I blogged about it last week - Ezion - Bleeding Stopped! In short, I am really glad that I sold it off on day 1. My total capital was $6,167.70 and I manage to get back $2,222.26 after ~ 4 years. I lost in total $3,939.30 including commisions which translate to a total loss of -63.9% and an annualized loss of -37.9%!

BOUGHT
- STI ETF (1,000 units) @ $3.40
- Lion-Philip S-REIT ETF (1,000 units) @ $1.006
- Parkway Life REIT (2,000 units) @ $2.78
- Ezion W230416 (5,940 units) @ $0

We bought 1,000 units of STI ETF when the market was throwing a tantrum early April and bought 1,000 units of Lion-Philip S-REIT ETF as part of our new strategy - New Singapore Budget, New REIT Strategy!

I blogged about the possibility of using leverage to increase our return - Leverage - A Double-Edged Sword. The initial plan was to use it to purchase a relatively stable stock giving 5% dividend, use the dividend to pay off the cost of borrowing/interest at 3% and earn the difference. That relatively stable stock is Parkway Life REIT. Having said that, we have yet to use any leverage because we still have money "idling" in our bank account.

Using the above illustration, it makes sense for us to "borrow" from ourselves (KPO Expense Fund) instead of borrowing from the bank. I know it may sound complicated/illogical to some of you but that is how we are managing our money. You can read more about it here - Managing Finances As A Couple.

Last but not least, there is Ezion W230416. As much as I would like to get rid of Ezion totally, it continues to haunt me. So what is W230416? It is a warrant/baby share which allows the shareholder to convert the warrant/baby share into the actual share/mother share before the specified expiry time at the specified conversion price. There are many reasons why a company would issue warrants but I will not get into that.

As you can see, Ezion issued 3 warrants for every 5 shares, the exercise price is $0.2487 and the expiry date is 5 years later on 2023-04-16 (derived from the warrant name). I had 9,900 shares before it was suspended so I was allocated 5,940 warrants (9,900 / 5 x 3) for being a loyal shareholder who did not sell the shares from 8th August 2017 to 16th April 2018. You can refer to this for more information.

Unfortunately, this warrant is not listed and cannot be traded/transferred unlike W200424 which is listed as BSHW with an exercise price of $0.50. Based on the current price of $0.121, both warrants are useless/worthless now because no one in the right mind will pay more to exercise/convert them to actual shares. Having said that, W230416 could be a sign that the management is confident that Ezion's business will recover and the share price will be higher than $0.2487 by 2023. However, existing shareholders do be prepared to be "diluted" in the event when Ezion's share price rise above these 2 exercise price (although I highly doubt that it will happen).

Dividends
The total dividends collected this month is $546.04. The breakdown is as follows:

Company	Symbol	ExDate	Shares	Total
CapitaLand Mall Trust	C38U	26-Apr-18	7,000	$194.60
First Real Estate Investment Trust	AW9U	23-Apr-18	7,109	$152.84
Soilbuild Business Space REIT	SV3U	20-Apr-18	15,000	$198.60

Total dividends collected for 2018: $2,697.52
Average dividends per month for 2018: $674.38

StashAway

Capital: $7,000.00
Current: $6,956.62 (IRR: -1.5%)

Health - KPO Needs to Lose Weight
Date: 2018-05-01
Weight: 72.4 kg (Gain weight! It seems that I have hit a plateau/natural weight of ~71-72++)

BMI: 24.1

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Ezion - Bleeding Stopped!

I blogged about Ezion a few months back - Bleeding Stocks - Ezion [Part 3] after it was suspended on 8th August 2017. It has resumed trading last week on 17th April 2018, opened at $0.245 and even reached a high of $0.255!

CZM was asking me what would be my plan when Ezion resumes trading. I told her confidently that day 1 will be a bloodshed as I foresee everyone will be dumping and selling their shares. My plan was to hold it, be hopeful and see how things go. Surprisingly, it was beyond my expectation and it actually traded higher! Without any hesitation, I submitted a sell order and sold all of it at $0.225.

Investing in stocks is never easy and one does not always make money. My total capital was $6,167.70 and I am pretty glad that I manage to get back $2,222.26 after ~ 4 years. I lost in total $3,939.30 including commisions which translate to a total loss of -63.9% and an annualized loss of -37.9%! It could have been much worst - the latest closing price is $0.152 on 25th April 2018.

Looking at their 2017 Annual Report, the shares are now worth a lot lesser than it was one year ago. The equity attributed to shareholders is just US$304,826,000 as compared to US$1,315,384,000 partly due to the ridiculously large impairment losses of US$697,322,000 in their Plant and Equipment among other things. Furthermore, the decrease in cash is not proportionate to the decrease in liabilities too!

NAV has decreased by 76.8% from US$0.6343 to US$0.1470 (~SG$0.1940 using an exchange rate of US$1:SG$1.32). Regardless, the US$1.6 billion debt is an exceptionally huge one that will probably stick around its balance sheet for a long time and I am not too optimistic about it with a gross profit of US$1,804,000. Even if Ezion successfully multiplies its gross profit by 10x or even 100x, it will never be the same again.

Screenshot from https://sginvestors.io/sgx/stock/5me-ezion/target-price

Do not make the same mistake as I did when I first started investing 4 years back - buying based on analyst's report recommendation. Look at what DBS has done again with a BUY recommendation and a price target of SG$0.29 where the valuation is done at 1.4x FY2018 PB?! It is just so wrong! After all the drama, why would anyone still value/price Ezion at a premium?

One can either continue to be hopeful or cut loss, take whatever there is now. Assets can be impaired but liabilities will definitely remain. Good luck to the remaining shareholders!

Do like any of the following for the latest update/post!
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Bleeding Stocks - Ezion [Part 3]

This is the third and final series of "Bleeding Stocks" where KPO will be looking at 老鼠屎 (rat shit) dragging down the overall performance of his portfolio. Do check out the rest if you have not :)

Bleeding Stocks - QAF [Part 1]
Bleeding Stocks - Raffles Medical [Part 2]

I was wondering if I should rename this to dead stock instead of bleeding when Ezion made an announcement to suspend trading. lol.

Based on the last closed/suspended price, that is a -68% loss! I am guessing it will be even more when Ezion resumes trading. How did KPO even end up in this state? He was once a clueless investor that did not have any investing/financial knowledge and made many mistakes along the way.

This is a record of my past transactions. There was a bonus issue of 1 for 5 stocks, hence the free 200 shares on 18th Sep 2014. The above shows that I was trying to average down but ended up catching a falling knife >.< This was one of the stocks which I had bought simply based on banks' analysts' reports when I first started out.

i3investor.com used to be one of my favourite sites to hang out. It provides a list of analysts' reports, their target price, possible upside/downside and other information. If you were to head over to Ezion page, it will look like below:

The average target price is $0.44 and there is a possibility of it increasing by 123.35%! KPO, do not give up hope! Let me continue to deceive myself, I have yet to look at its last quarter earnings/report. lol.

Let me bring you back to the past, to the year of 2014 where I first bought this stock to show you what I was looking at. When people say what is on the internet stays on the internet, it is pretty true. Introducing the WayBackMachine which lets you travel back in time on the internet given an URL. You can try using it on facebook/google to see how they looked when they first started.

Welcome to 2014 where the whole world is making "BUY" call on Ezion. lol. Do note that this is before the oil price tumbles. Let's travel to 2015 now.

The price has already fallen to $0.69 and the oil price was at a 10/11 years low but the analysts are still making "BUY" call with target price > $1!

Enough time traveling, let's come back to reality where Ezion just reported its second quarter on 14th August 2017, 7am and 30 minutes later, request for trading suspension before the market opens. Well played.

The latest update on 23rd August 2017 states that it is "arranging a series of informal meetings with its lenders and holders of securities issued by the Company pursuant to its S$1,500,000,000 Multicurrency Debt Issuance Programme"

Looking at its balance sheet, Ezion has US$2,910,775,000 of total assets and US$1,609,835,000 of total liabilities. Given that there are 2,073,843,405 shares in the market, its NAV is US$0.6273 and S$0.85  (assuming an exchange rate of 1 USD = 1.36 SGD). Ignoring the fact that its EPS has been negative since 2016, it is currently trading at a PB of 0.232, isn't that a huge discount?! Anyone interested in joining me to become a shareholder? lol. I hope not. Simply looking at the PB ratio does not give a sufficient context.

A good example would be Rickmers Maritime which has wind up the business and liquidated its assets to repay the debts. It has a NAV of US$0.21 based on its 2016 annual report (the total asset of US$531,862,000 and total liabilities of US$348,389,000). However, the assets are usually not liquidated/sold at book value (usually at a significant discount). As a result, the bondholders got back a small amount (12% of capital) while the shareholders lost everything.

What is more worrying apart from its huge amount of debts is that its operating cash flow has gone negative this quarter. This means that the business is no longer making sufficient money just to be operational, not to mention paying off debts. Hence, the need to suspend the stock for further discussion.

On the bright side, Ezion has not defaulted on any of its loans unlike Erza, Swiber, etc and its CEO/founder Chew Thiam Keng has never sold any shares since 2014 but continued to buy more/average down over the years. His last purchase was 500,000 shares at $0.22 on 31st August 2016; 500,000 shares at $0.235 on 30th August 2016 and 500,000 shares at $0.255 on 22nd August 2016, $0.29, $0.602 and more. He is currently holding on to 217,583,440 shares (10.49%) and he certainly has a lot more to lose (based on last closed price, that is S$43 million) as compared to my 9,900 shares. lol.

KPO will not be showing any chart. $0.197 is already at an all time low and that is a very weak support that will definitely be broken >.<

CZM has been asking me to sell but I continued to hold on to it hoping that one day something magical will happen. After all, cutting loss is easier said than done. What would you do?