03 May 2015

Investment Lessons from Unpredictable Events in 2014~2015: PJ DEVELOPMENT HOLDINGS BERHAD (1945)

As an investor, even though my portfolio of around 15 companies has achieved a positive double digit return in the last five years, I must admit that few of the 15 companies did bring some losses. Since one of ways to enhance our investment skills and knowledge is through revision, I am going to share my experiences from these losses in my portfolio in last 12 months - MALAYSIAN BULK CARRIERS BERHAD (5077) and PJ DEVELOPMENT HOLDINGS BERHAD (1945). Hopefully, this record can remind me those mistakes from time to time.


Summary: PJ DEVELOPMENT HOLDINGS BERHAD (1945) – Warrant Bought RM0.98, SOLD RM0.77, Loss ~23%

The reason for me to buy PJDEV (1945) was its valuation was relatively cheap. With PE was around 5 only, I believe the risk was relatively low in this deal. Suddenly, a news of “offer acquisition” from a major shareholder with a price less than 20% from the market price that I bought caused its market price dropped sharply until RM0.60. I was not ready to cut loss because this kind of news should not have any correlation with a company’s intrinsic value. Nonetheless, Mr Market were agreeing with the news and “adjusting” the market price accordingly to price around RM0.60. Consequently, I suffered a paper loss of around 40%!!

Action - Swapping to reduce risk
Luckily, after a few weeks, Mr Market re-adjusted his valuation and the price of the PJDEV warrant reached RM0.79. I immediately swapped my PJDEV-WC with price of RM0.78 to its shares with price around RM1.62 to reduce the risk.

One of Lessons that I have learnt is we must always ready for worse case and unpredictable events. Although my valuation on PJDEV might be correct, re-evaluation is needed to reduce risk. Swapping PJDEV-WC to PJDEV (1945) is going to reduce the potential profits of this deal. However, this decision and action position my portfolio to avoid bigger loss if Mr Market “re-considered” the offer price of RM0.60 from the major shareholder.


I am still holding PJDEV with relatively low risk and some paper loss based on its present market price of RM1.50. With a total of RM0.065 dividend, my average cost on PJDEV (1945) is RM1.55. The price of PJDEV-WC returned to around the offer price of RM0.60. The prospect of PJDEV appears to be good, and thus, I will just keep PJDEV until my valuation indicates this investment is no longer worthy in the future.

That's all for today. In the coming post, I am going to share my experience in MALAYSIAN BULK CARRIERS BERHAD (5077). More fascinating articles and sharing will be updated weekly in Xaivier Blog. So, you are welcome to subscribe our feed to receive our weekly updates.

Written by: Xaivier Chia

P/S: The above sharing is solely based on personal insight and information that believed to be reliable. Your valuable feedback are very welcome.


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