Last Friday, 9th March 2018, the share price of Boustead plunged to S$0.76. The Company took opportunity and purchased 2,220,400 shares by way of market acquisition as part of its share buy-back programme. Today, the Company purchased a further 26,705,100 shares by way of market acquisition.
Today, Boustead Singapore said that a substantial shareholder has expressed his intention to make an exit. I am curious who this substantial shareholder is. From FY2017 annual report, the below shows the twenty largest shareholders of Boustead.
A quick google did not show any sudden bad news hitting Boustead. What a steal at S$0.76! At the point of writing this post, the share price of Boustead has recovered back up to S$0.80.
A year ago, I mentioned in my post that Boustead has a net cash position of S$165.6 million. At the end of 1Q FY2018, Boustead has a net cash position of S$212.2 million. This was an increase of 28.1%. Thus, I consider Boustead is still in a healthy net cash position. Net cash position is very important to companies in a cylindrical industry such as oil and gas. Only with sufficient net cash position, it will be able to ride through the storm.
Although Boustead’s 1Q FY2018 financial results do not look so promising, I noted that in its latest press release, it has mentioned that Boustead’s revenue is largely derived from project-oriented businesses and as such, quarterly results would not accurately reflect the full-year’s performance. Read More
The below quote was taken from Boustead’s chairman message in their annual report 2016. It got me into deep thoughts whether I am using my cash in the right way to invest.
“Investing for long periods in cash is not desirable. But in the short run cash is like an option over every asset class, with no expiration date and no strike price. Cash provides the option to sweep up a bargain when it becomes available and this must have some value above the fact it earns almost nothing. If the purpose of an investment portfolio is to grow as well as protect the wealth you’ve accumulated over the years, doesn’t it make sense, if you can afford it, to also hold an option?”
– Roger Montgomery
When analyzing companies, we sometimes look at the free cash flow. Hogging plenty of cash means the company is cash rich but may also means the management has no direction or strategy where to invest to grow the company.
Personally, I felt the free cash flow model can apply to individuals as well. If you have followed my blog since last year, you will have realize I have been making purchases every month. This has left me little cash on hand when opportunity arises.
After reading the quote from Boustead’s chairman message, I calculated my invested amount versus my cash on hand. I am 61% invested and have 39% cash on hand. Personally, I feel having 39% cash is too little when opportunity arises. Since the market is also expensive now, I hope to accumulate more cash for the next opportunity.
What do you think is the ideal ratio for investment versus cash on hand?