On 4 December 2014 (a year back), I wrote a blog post stating that I had confidence in Keppel Corporation, SembCorp Industries and SembCorp Marine. I was wrong on this optimism.
Since 4 December 2014, share prices of the three counters continue to slide, no thanks to plunging oil prices.
|Counter||4 Dec 2014||Current Price||Change|
|Keppel Corp||$8.44||$6.57||– 22.1%|
|SembCorp Ind||$4.20||$3.15||– 25.0|
|SembCorp Marine||$2.91||$1.88||– 35.3|
Oil explorations took a major hit and capital investments in oil related industries were curtailed because of low oil prices. The offshore and marine businesses of three companies suffered as a result. SembCorp Marine warned about possible quarterly loss in the last quarter of this year and a significant reduction in whole year profit. Not good news at all.
I have not sold these shares to reduce exposure in the declining businesses. My book losses as at end November 2015 were:
|Counter||Book losses (%)|
It was a bad decision. These book losses made up 42% of my total losses in my whole Singapore equity portfolio. In dollar term, I can still stomach the paper losses of the three counters. So I am still holding on these shares for the long haul.
What have I learned from this episode? One cannot think that the impact of global event such as plunging oil prices will not be so great for well-known brand names such as Keppel Corp and SembCorp. We must bear in mind that companies thrive on orders from customers and profitability of these customers. Without customers there can be no sustainability of businesses.
Copyright © 2015, limkimtong for Living Investment
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