Falling knife for EZRA investors?

One of the victims of the global oil crisis, EZRA Holdings announced a set of terrible 2nd quarter financial results on 14 April 2016. Losses after tax came in at USD282.6 million for 2nd quarter and USD336.4 million for the first half of the financial year. This is a massive financial loss and there are not many companies in Singapore which can withstand this sort of impact. If EZRA investors are thinking of dollar-cost averaging and buying EZRA shares on the cheap, they need to be careful of catching a falling knife.

The company is actually biting the bullet for 2QFY2016 and realized the impairment losses from all front – loss-making joint ventures, losses on fixed assets and bad-debts. Given the depressing market conditions for the oil and gas industry, it is still unknown whether there is any more impairment to be made for EZRA Holdings further down the road.

Many investors thought that dollar-cost averaging is a good strategy to buy more shares at a lower price. But many of them don’t understand the difference between price and value. This technique, if applied wrongly, can cause massive wealth destruction to an investor’s portfolio, especially if the business fundamentals of the company are shaky. Investors of EZRA need to be honest with themselves and question whether this is the time to cut loss or pump more hard-earned monies into this stock. After all, EZRA’s share price fell from a mighty high of $3.90 per share in 2007 to the current $0.07 per share.

stock market

Another aspect to highlight is the falling revenue, which decreased 14% year-on-year for 2QFY2016. This reflects the challenging period for EZRA as the industry witnesses massive cuts in spending across all value chain. In light of the falling global demand, one way for EZRA to weather this storm is to streamline its portfolio to focus on its core business. This means unlocking its investment in its joint ventures and associated companies but under the current climate, such a move could result in huge investment losses.

In my point of view, EZRA is simply living on borrowed time. The company has USD243 million of secured debts and USD256 million of unsecured debts to settle within one year. With this sort of debt obligations, EZRA’s financials is under huge pressure and cash-flow might be a concern if things don’t improve significantly in the short term. Take for example, net cash flow from operating activities is negative USD54 million in 2QFY2016, a reverse from positive USD58 million in 2Q2015.

Investors of EZRA are at a cross-road because at the current price of $0.07, EZRA is trading below the Minimum Trading Price (MTP) of $0.20 set by SGX. This means that EZRA is a candidate for SGX watch-list and if it fails to exit from the watch-list within 36 months, EZRA will be forced to delist from the SGX Mainboard. On the other hand, some of the EZRA investors might have bought the shares at its high, so it will be suicidal for them to sell at current prices. The only thing that they can do is to pray hard oil price will recover within the next few years and improvement in business performance for EZRA.

Are you one of those investors losing sleep over your investments? If so, then you need to review your portfolio. The hard truth is that investing should be all about making money work hard for you and not you working hard for it. If an investment requires you to actively monitor or manage its performance on a daily basis, then you need to question yourself whether its worth the effort. Instead of wasting your time and effort on Singapore-listed shares, start to diversify your wealth in gold and silver bullion.

In Singapore, you can choose to buy physical gold from BullionStar, one of the largest online bullion dealers with a store-front shop at 45 New Bridge Road. With BullionStar, you can choose to buy gold or silver bullion online and have them delivered to your home or put them into ‘My Vault’ storage in BullionStar’s secure vault storage facility. Alternatively, you can choose to walk in and buy gold and other precious metals at BullionStar shop and showroom premises.

gold and silver

Setting up an online account is pretty simple and you can choose to pay in different currencies, including Singapore dollar and Bitcoins. In addition, the price is very transparency as BullionStar’s website displays the price premium and spread for each bullion. This allows buyers to make price comparisons online before making the purchase.

BullionStar also offers customers their own minted gold and silver bars with zero spread. They have commissioned world-renowned LBMA-approved Swiss gold refiner Argor-Heraeus to produce these stylish and unique minted 100 gram 99.99 % purity gold bars.

Below are some gold bullion offered by BullionStar that are worth buying:

  1. PAMP Gold Bar – 1kg
  2. American Gold Buffalo Various Years
  3. BullionStar Mint Gold (No Spread)

Singaporeans who still think that they can win the stock market should wise up. The matter of fact is that the odds are stacked firmly against retail investors and those who did not diversify their portfolios are taking on big risks. Just one market correction and their wealth would be gone. Instead of risking your hard-earned money on speculative shares, start buying real physical gold from a trustworthy bullion dealer.

Join me in my investment journey and read my financial adventures for free! Through the sharing, my vision is to improve and change people’s lives. In school, we don’t learn how to budget, manage our finances, build wealth and invest our money. Instead, we are taught useless subjects which we would never put to use most of the times during our working lives.

Yet, managing our money is an important life skill that is critical to our survival in the society. Many people start to realize how it is importance of managing money only when they face the prospect of financial ruins, by then which would be too late for remedies. Thus, I started this blog to share articles on finances which I aspire to make a positive impact in others’ lives.

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Magically yours,

SG Wealth Builder

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