Sold 10,000 units of Lum Chang at a profit of 11% today.
I have to admit, I bought Lum Chang due to speculation. The 2014 annual report financial statement was difficult to digest and I couldn’t make out anything of it. I need to do more homework!
There is one part which I managed to catch though. That was that Lum Chang is subjected to currency fluctuations and interest rates hikes. A larger portion of the group borrowings are hedged at fixed interest rates while a smaller portion are at variable rates.
The Group’s and Company’s borrowings at variable rates on which effective hedges have not been entered into, are denominated mainly in SGD, RM and GBP. If the SGD, RM and GBP interest rates increase/decrease by 0.5% (2013: 0.5%) with all other variables including tax rate being held constant, the profit after tax of the Group and the Company will be lower/higher by $556,000 (2013: $371,000) and $58,000 (2013: Nil) respectively as a result of higher/lower interest expense on these borrowings. Lum Chang 2014 Annual Report
Although it has rewarded me with satisfactory dividends over the past 2 years, I am unclear whether it is a good dividend stock or growth stock.
Construction demand from the private sector is expected to fall to between S$11 billion and S$15 billion, compared with S$18 billion last year, as developers turn cautious amid a slowdown in private home sales and global economic uncertainties. TodayOnline.com
With the Singapore housing market slowing down, I believe this will have an effect on the construction industry. Thus, I decided to lock in the profits by divesting my stake in Lum Chang.