A Strategy for the effective use of my War Chest

Mindful of the possibilities of corrections and economic crashes, I have decided to devise a strategy to create disciple and control over the use of my funds (War Chest for Investment)

1. Individual Stock Dips                     use up to 5% of War Chest
2. Market Correction of 10%              use up to 10% of War Chest
3. Market Correction of 20%              use up to 20% of War Chest
4. Market Crash of 30%                      use up to 25% of War Chest
5. Market Crash of 40% or more        use up to 40% of War Chest

Okie, now the job is to stick to the plan, probably the hardest part haha

Update on Core Portfolio

28 Apr	Lots	Cost Price	Market Price	Paper Gain/Loss
FCL	6	1.5	1.7	13.33%
Naratel	15	0.67	0.785	17.16%
CM Pacific	12	0.88	0.97	10.23%
Saizen	14	0.865	0.905	4.62%
FCT	7	1.64	1.8	9.76%
Hock Lian Seng	40	0.265	0.285	7.55%
Total		63.8	70.2	10.03%

No Selling, only the addition of Hock Lian Seng (previously holding a very small position).
Am impressed with Hock Lian Seng ability to maintain their profit margins, and the fact that they have clinched a number of significant projects recently that will provide earnings visibility over the next couple of years.  Coupled with the company's excellent track record in giving out generous dividends makes me decide raise my stakes significantly in that company. 

Stable earnings and Generous dividends =)

Hock Lian Seng

Added some recently and my average purchase price becomes SGD0.265.

Despite construction stocks being in a cyclical sector, HLS is somewhat mitigated by taking on government projects with the status of being a grade A1 contractor in the BCA civil engineering cat (I see this as a kind of economic moat for HLS where their "favoured status" should assure them a fair share of the pie for the foreseeable future). 

Recently it just clinched a 100 million Changi Airport project.
And only just over the weekend, it added to its order book a 220 million MRT project.
Cool... These news gives me some assurance over its earnings predictability for coming few years.

I also like HLS's strong balance sheet, wide gross profit margins (seem quite good at controlling their costs, especially in the difficult construction sector, rising labour & other costs can be quite tricky) and its high & consistent dividend pay-out. This year a DPS of 1.8 cents was declared.  This translate to a close to 7% dividend yield and the dividend pay-out ratio is less than 40% (likely sustainable given its track record).

With PE at 6 (should be less than 6 if we consider the two new projects) and at around NAV, while this is not a growth stock, HLS looks undervalued at 26.5 cents and an excellent income generator over the long term.  I am also hopeful for a bump up to 2 cents DPS in near future if they continue to do well.

Challenger

Added a little at SGD 0.59, making my average purchase price 50cents.

On Economic Moat:
Challenger is something that is probably familiar with most of us.  A retail play specialising in IT products, it has branches all over Singapore and still expanding (e.g. the latest store just opened in Tanglin Mall).
I like Challenger over its competitors such as Harvey and Courts for its more focused approach.
I also like the "membership" strategy which gives it a more consistent customer base.
I see the Valore brand products as a potential growth catalyst.
Its financial numbers support the above narrative with consistent & growing earnings and a strong balance sheet.

On Margin of Safety:
Current PE is close to 12 based on approx. 5cents earnings.  This being a growth company and anticipating some further growth to this company I think fair value is probably closer to PE 15.

My average purchase price 50cents gives me more than 20% margin of safety which is good enough for me.

Dividends & Debts:
This is what I like about this company, I am getting about 5% dividends and expecting further dividend growth.  It is also net cash.  =)