Takeaways from CapitaLand AGM 2018

CapitaLand AGM 2018

Date: 30/04/2018

Duration: 10.00 am - 12.20 pm

Turnout: ~40%

Even before the AGM starts, while people are still strolling in to get seated, the screen is already playing a video presentation with catchy music on CapitaLand's (CPL) developments.

And it's my first time seeing two rows of company representatives on stage for an AGM.

First row comprises of the board members while the second row comprises of CEOs of the various CPL business units.

 No wonder they chose Stars Theatre as the venue.

Great.

You know the AGM is a serious business when it starts with a briefing on the emergency evacuation route (I thought I am back to my army days).

That is followed by a presentation on the group's overview, business updates and what's looking ahead for them.

After that comes the usual Q&A. I took the questions and replies until my pen ink ran out.

Questions from the floor

Q: Is the group going global apart from the areas they are in now?

A: Yes. Ascott is now in Europe, USA, Australia, Ghana, etc.

For the retail unit, CPL is looking at managing beyond CPL's own portfolio. In other words they are expanding to manage other companies' malls too.

Q: Is CPL's operating platform not going for acquisition?

A: The operating platform will stay asset-light. Instead they will leverage on technology to deliver what the retailers and customers want.

But for the investment platform, yes they are looking out for suitable asset classes.

Q: How did CPL achieved the 50% gross profit (G.P.) and is that sustainable?

A: Consolidation of the trusts.

At the G.P. level there are many contributions from the associates and subsidiaries.

Q: CPL is currently undervalued and its share price seems to be under performing compared to City Developments's. What is the board's take on that?

A: CPL do share buyback to enhance share holders' value.

CPL cannot be compared to City Developments as the business profile is different.

Q: Can the dividend payout ratio increase from the current 33%?

A: CPL will give dividend on a sustainable basis.

Q: How does CPL defend itself against Wechat and Alibaba in China on the online space?

A: CPL wants to stay in both online and offline spaces. Currently they have 5.8 M users on the Capita Stars platform.

CPL works with Wechat and Alibaba as well to leverage on their payment system and to provide a seamless experience.

Q: Township development by CPL.

A: CPL has been doing that in China. Other than that CPL is also into master planning.

They will continue to do that and that is one way they acquire land bank in China.

And importantly this is a way they build up reputation and network with the who's who in China.

Q: What is the impairment on page 77 of the annual report?

A: This is actually a write back related to 2 projects with previous impairments but which are not used eventually.

Q: What is the chairman's feel about Singapore's property market?

A (by the CEO): The property market is a proxy to the economy.

Basing on the Q1 preliminary data, the market looks good. And going forward the next 3, 4 quarters are optimistic too.

Comment from one of the share holders: CPL is quite well covered in many areas and in recurring income streams. Hope the board can consider a more generous dividend payout than 33%. That will give confidence to the share price too.

Another share holder concurred and commented the board should give share holders the money and they do the share buyback themselves.

A: The board will take that into consideration.

Resolutions: All passed.

Observations

CapitaLand's AGM is one of the AGMs that I was looking forward to attend this year. And it didn't disappoints ~ in another way.

Drama unfolded early into the Q&A. Better than the Taiwanese soap operas on TV. Stars Theatre indeed.

Two shouting uncles wasted time by talking about irrelevant things and asking irrelevant questions so much so that they were booed by others from the floor with shouts of "Don't waste time" and "Get out" heard from several quarters.

One of them the legendary Mr Sunny, even turned aggressive this time when the security officers came up to him. I've seen him shouting at several AGMs before but this is the first time I have seen him on the verge of turning violent.

To be fair to him, he did gave a good suggestion which is for the board to implement a 'floating system' for directors' fees. In bad times board takes a lower fee or in the form of shares and vice versa for good times.

I find that worth consideration.

Summary and my thoughts

2017 is a record year for CapitaLand in several aspects.

Its total PATMI achieved $1.55 B. The highest since 2008. It's also a record year for them in Vietnam which is a very fast growing market. Malls in China achieved 8.6% NPI growth.

I am personally very looking forward to the opening of Raffles City Chong Qing in the near future.

Ascott is also on track to achieve 80,000 serviced residence units by this year. On this front they have also made their first foray into Africa, Ghana.

CPL is gunning for $100 B AUM by 2020. This is another mile stone worth looking forward too.

Previously I have also written about CPL's online mall on Lazada and their venture into e-payment which is their StarPay platform.

On the social responsibility front, CPL donates up to 0.5% of their net profit yearly to Capital Hope Foundation to help under privileged children.

You might recall I have mentioned in other posts that one of the aspects I look out for in a company is the quality of its management.

I have always been a fan of Mr Lim Ming Yan, Group CEO and President of CapitaLand.

In CPL's board of directors, quality is in abundance as well.

Chairman Mr Ng Kee Choe is the former vice chair of DBS. Few of the other directors are chairman-calibre in their own right such as Ms Goh Swee Chen (Chairman of Shell Singapore) and Mr Stephen Lee (Chairman of SIA Engineering).

It would be too long winded to write about the other board members but you can flip the annual report or go into CPL's website to read through their extensive experience.

With $6.1 B cash, CPL has sufficient head room to grow and to grow big. This will serve them (and the share holders) well in the years to come.

Despite all the good points stated above, there are aspects that I have reservations about CPL too.

It seems like the management is very cautious about acquisitions and expansion. So much so that it seems to be the limiting factor in their growth story. I have said many times that something seems to be stopping CPL from realising its full potential. Perhaps this is the reason.

However I'm not complaining since it appeared to serve them well so far.

Another aspect is the dividend payout which definitely has room to grow. However the payout amount has been growing for the past 5 years so kudos to them too.

If you aren't a share holder of CapitaLand yet, perhaps it's time to seriously think about it now considering it is still trading below its net tangible asset value of $4.20.

In fact half way through the Q&A I was already calculating my average price if I were to add more now at a particular price and the impact to my dividend yield against cost.

Good luck and cheers always!

Takeaways from ComfortDelGro AGM 2018

ComfortDelGro AGM 2018

Date: 26/04/2018

Duration: 10.00 - 11.55 am

Turnout: ~80% of the auditorium

Chairman Mr Lim Jit Poh opened the meeting with an introduction of the board and a speech on ComfortDelGro's (CDG) performance and business overview followed by a summary of 2017 financial results presented by the CFO.

Questions from the floor

Q: With regards to the current disruptions to the businesses, what are the approaches by the board to deal with these? So far CDG is using defensive moves. Can CDG be more proactive?

A: CDG is always actively looking forward though they did not say it publicly. Management and board are looking actively at autonomous vehicles and electric vehicles (EV) for now.

They are also talking to Singapore Power to set up electric charging stations.

In London their buses are already electrically charged.

They are also bringing new directors including one with artificial intelligence (A.I.) expertise to the board*.

* News of this have been announced publicly this afternoon

Q: CDG has acquired vehicle fleet from Uber. How does it impact CDG and what is the ROI?

A: The vehicles are not purchased yet. Money is not spent yet. The acquisition proposal is now at Competition and Consumer Commission of Singapore (CCCS).

CDG recognise that the sharing economy is here to stay and partnering with an existing player is the best and fastest way to go into this market.

Definitely CDG is moving into the private hire segment.

Q: What does the agreement with Uber entails?

A: Partnership with Uber app but this is ending on 7th May 2018.

Signed an agreement with Lion City Rentals (LCR) to buy 51% of LCR subject to regulatory approval.

Q: Since there will be no more Uber Flash after 7th May, what is the next step for CDG?

A: CDG will be using only CDG's own app after that. But they are actively looking around for partnership with other apps.

Q: Is Vicom ready for EV?

A: Yes.

Q: Why has CDG's inventories gone up?

A: Because of the rail business.

Q: Is CDG collaborating with Grab to put CDG's taxis on their platform?

A: Currently Grab is tying with other operator with 40% market share. If CDG also tie up with Grab, will CCCS agree? (this question is posed back by the chairman as a response)

Q: How much further will CDG push down the taxi rental fare to attract more drivers?

A: Drivers attrition rate has in fact gone down. This month might even see a net gain of drivers. So the answer to this question depends on the attrition rate.

Q: CDG has a large fleet of taxis idling. What is the current idling rate compared to last year?

A: To date the idling rate is 2 - 3% which is about 400 vehicles.

CDG downsized the fleet by swapping older taxis with newer taxis for the drivers. Scrapping older taxi is cheaper.

Q: What is the rationale for buying LCR when CDG is already trying hard to retain drivers?

A: If CDG buy LCR, they will only buy hired vehicles not unhired ones.

Q: What is the FX impact for this year?

A: 2017 FX positive impact from the AUD but pound and RMB dropped. For this year, it is the reverse so far.

Q: What is the chairman's comment on his recent interview on Straits Times about CDG having to contend with lower margin business in the future?

A: CDG has to be realistic about today's market. For example they lost the last two bus contracting model (BCM) contracts because they only dropped a little bit of margin.

Q: 9 year rule by MAS - Director who has served for more than 9 years is no longer considered independent director. CDG has 9 directors who have served for > 9 years.

A: CDG is renewing the board.

Q: Will CDG consider buying over Uber?

A: No. These tech companies are losing billions of dollars.

Resolutions: All passed.

Snippets

1) After the registration of my attendance, I had wanted to get myself a drink before going into the auditorium. However I was stopped by a lady.

I told her I just want some water but she replied if she allows that the floodgate will open. Ok reasonable enough.

Then I asked if they have bottled water inside the hall she said no as they are environmental-friendly. Ok fair enough too.

2) As for the buffet after the AGM, I did not queue for that as I did not want to join the snaking queue.

Summary and my thoughts

Chairman Mr Lim Jit Poh, is a former top civil servant and an experienced businessman whom I believe most of us would have heard of his name.

CEO and MD Mr Yang Ban Seng, is of course an old hand in the land transport business having joined the group in 1989.

I find both of them to be direct, jovial and candid when answering questions from the floor.

Both of them knows what they are saying and are sincere in doing so.

This is one of the best AGMs I have attended in terms of the Q&A.

Many good questions are asked during the AGM though many are related to the LCR acquisition.

Importantly I see the chairman took a keen interest in answering the questions from the floor. He also showed that he is a hands on person by the way he made the effort to personally explained what the individual resolutions are about instead of just reading from the notes on resolutions.

I like that.

What do I feel about CDG?

Business-wise, big challenges await CDG in the land transport sector. However they have not been sitting idly. This is evident in their aggressiveness on the M&A front with 3 acquisitions in 2017 and 8 this year so far.

From what I see, these are synergistic businesses. Whether these are profit-accretive, I'm sure the management would have done their homework.

Moving forward in the near term, the key is how they manage the private hire challenge and how they can turn that into an advantage instead.

On the longer horizon, we have to see how the recent acquisitions work out. Meaningful contributions might not take long I suspect.

Finance-wise, cash flow remains strong. Net cash position of >$590 M is no joke (though probably that has been reduced with the most recent acquisitions).

Dividend amount has been increasing every year with dividend payout from the net profit increased from 70.1% in 2016 to 74.6% in 2017. There is still room for growth.

Personally I am interested in adding ComfortDelgro at prices translating to at least 5% dividend yield for my income portfolio.

Takeaways from Viva Industrial Trust AGM 2018

Viva Industrial Trust AGM 2018

Date: 20/04/2018

Turnout: Full House

Time: 10 am

I was given a voting slip upon registration. That means the voting and counting of votes will be done manually. A rarity these days.

The AGM started with a presentation by the CEO followed by the Q&A.

Before the Q&A proper, the floor was requested by the chairman to refrain from asking questions about the merger with ESR. This is understandable considering the confidential nature of such deal.

I only captured some of the Q&A as follows.

Q: There will be a 10% vacancy to be filled at UE Bizhub next year. And the rental support will be terminated in Nov 2018. What does the board intends to do?

A: The management and board are taking steps to deal with the above. 10% vacancy sounds alot but it only represents 3 units of the property.

The current rental is $5/sqft. They are trying to increase the rental but need to find balance with trying to retain tenants.

Maximum rental in the area is $5.50/sqft.

Q: Will Viva Business Park still continues to contribute positively to the performance of VIT?

A: Going forward the management will continue to upgrade the park to make it attractive and relevant to tenants.

Regarding the relatively short land lease left, JTC has a policy to extend land lease and VIT's management is in talk with them regarding this issue.

One good thing about AGMs is that I always learn new things from attending these meetings.

So land lease expiry is not the end of everything for JTC property owners since JTC has a policy to extend the land lease if necessary.

Q (this question was asked by yours truely): Is there any plan in place by the management regarding Jackson Square since the remaining land lease for this property is only about 11 years left and the relatively low occupancy is causing a drag to the overall portfolio occupany rate?

A: The management is also discussing about this land lease issue with JTC. The plot ratio which can go up to 2.5 for this property, is still not maximised yet.

Jackson Square is still classified as a B1 zone.

Q: Is VIT planning to expand overseas?

A: Yes, they are looking at places such as Australia and Malaysia. But they need to find earnings accretive properties. Since their current yield is about 8%, this hampers their acquisition plans as they need to find properties that can match or enhance the yield.

Resolutions: I left before the results due to other appointment.

Summary and Observations

Both Chairman and CEO of VIT are candid and appear sincere when replying to the shareholders. I don't see any attempt to brush off questions asked.

In fact the chairman commented the questions asked are good quality questions.

I find it heartening that the board is looking beyond Singapore as the market here is really restrictive for growth as compared to overseas. And it is assuring to hear from the CEO that the acquisitions must be yield accretive.

Last year was a great year in terms of performance by VIT. I reckon it should continue this year.

Share price should return to the $0.9+ levels (at least) once the talk with ESR is a done deal.

I'm looking to add more to my holdings.

Last but not least, the additional 'dividend' from the AGM :  )

Takeaways from Suntec REIT AGM 2018

Suntec REIT AGM 2018

Date: 16/04/2018

Duration: 2.05 - 3.10 pm

Turnout: About 90% (At least half are whom I can call aunties and uncles despite me being an uncle myself. This is a testament to Suntec's popularity as a stable REIT among this group of investors.)

AGM started with a 20 min presentation of the REIT's results in 2017 and recent progress by Mr Chan Kong Leong, CEO and Executive Director.

Questions from the floor

Q: Regarding its overseas expansion, have Suntec consider the tax implications involved such as capital gain tax and withholding tax?

A: Suntec receive advice from experts and structure their business for the most tax efficiency. However certain taxes due to regulations, are unavoidable.

Q: The same unit holder also suggested using big data and artificial intelligence for future property acquisitions to stay ahead of the curve.

A: Suntec is currently using big data for business enhancements but not A.I. at the moment.

Q:What is the board's stance on improving tenant retention ratio to 80 - 90% as compared to the current 64%?

A: Suntec do not want that high of a ratio because they and the shoppers want something new and fresh regularly.

Suntec is guided by what they and the market wants at the end of the day.

Q: How much capital distribution is left and how will future distribution payout be affected once the capital distribution is exhausted?

A: More than $100 M is left for distribution. When this is exhausted, income from the new properties such as 9 Penang Road will comes in.

Q: Suntec's rental or occupancy (I didn't catch this properly. Apologies.) is lower than that of heartland malls. How is Suntec handling that?

A: Suntec is trying to improve the fundamentals. When the fundamentals are improved, rentals will come back. This can already be seen in the latest results.

Q: Why is Suntec not investing in China?

A: Suntec is choosing to invest in Australia because of the political stability, good returns, good quality of properties, etc.

Resolutions: All passed.

Observations

The last question in above Q&A was answered by the Chairwoman, Ms Chew Gek Khim. She only replied with the above one liner and when the questioner probed further, she just said a thank you and wanted to proceed to the next agenda.

I thought that was pretty rude and came across as insincere and impatient.

Sentiments from the floor seem to concur as the resolution to endorse the appointment of Ms Chew Gek Khim (Resolution 3) only garnered 50+% approval. In other words 40 over % voted against her.

This is the lowest I've seen in the AGMs that I've attended.

On the other hand, CEO Mr Chan answered well to the questions from the floor and he came across as being candid. I thought he did quite well.

Summary and my thoughts

In my opinion Suntec REIT remains an attractive REIT trading below its NAV.

Having office, retail and MICE elements in its portfolio, it is a good proxy to these 3 sectors for an investor wanting to invest in all three instead of either one.

Forward distribution yield should remain comfortably above 5%. Although this is not the best among REITs, I like the stability this REIT offers with its high quality assets in the CBD.

Distribution yield against my cost remains above 6%.

Another assuring factor for me is the quality of the REIT manager. I have happy memories with ARA previously when they were still listed.

Among the overseas properties, 177 Pacific Highway has a 100% committed occupancy with no lease expiring until 2023 onwards.

Most importantly there is earnings visibility coming in from the new properties namely 9 Penang Road and Olderfleet. Contributions from these two properties should be meaningful from 2020 onwards.

CapitaLand: To Sell or Hold

CapitaLand's dividend has been on the uptrend in recent 5 years, albeit in small incremental steps. Based on the latest dividend declared, dividend yield has surpassed 4% which is the minimum I set for a stock to enter my income portfolio.

Hence CapitaLand has officially join my income portfolio as its newest member. While it's nice to see the dividend growing, I actually consider CapitaLand as a growth stock too and I'm waiting to see its much delayed upward trajectory of the share price happening.

It has been doing so many things right such as the recent Ascott's deals, the launch of its own StarPay e-payment service, management deal for the Phnom Penh mall, etc.

Yet the share price doesn't reflect it.

This can probably be explained by the fact that the investments need time to reap the rewards. However the stock market is a forward looking one. I'm sure we will see a stunning run up of CapitaLand's share price soon.

I'm in no hurry to sell.

Why Say No to Free Money?

Recently someone asked me whether I have PayLah app and I told her no. After that I started to think why not? I have OCBC's 'Pay Anyone' for a long time so why not DBS's PayLah too?

I went ahead and downloaded the app. Registration is a breeze with only a few steps. And on the last screen we can enter a promo code if we have one.

So I googled for PayLah's promo code online to try my luck. Surprisingly there is indeed one that can be used. I will come to that later.

After I have completed the registration with the promo code, a $5 was immediately credited into my PayLah account. I was pleasantly surprised it's so fast. And apparently I have my own referral code as well. This is nothing new. Other apps also have this feature.

So if I may ask, you can use my referral code GTPJMM158 for your PayLah registration. By doing so both you and I can get $5 each.

If you don't want me to earn that $5, you can use another promo code STEADYLAH, which is the one I mentioned earlier. Using this code also earns you $5.

Take note that the latter code is limited to the first 40,000 successful new sign ups between 10 Aug 2017 to 31 Dec 2018.

So why say no to free money?

Disclaimer: This article is written on my own accord purely for sharing. I have not been approached by DBS or OCBC to write about their products.

Takeaways from M1 AGM 2018

M1 AGM 2018

Date: 11/04/2018

Duration: 2.30 - 3.55 pm

Turnout: Full house (I nearly couldn't get a seat until an M1 staff led me to an empty seat at the 2nd row.

Questions from the floor

Q: Explanation for the higher EBITDA and lower net profit.

A: This is due to higher amortisation* for new investments such as narrow band internet of things (NBIOT).

* rightfully EBITDA should be before amortisation.

NBIOT is largely for B2B. Earnings from this segment takes time as things like smart meterings, smart lamp posts, smart flood monitoring, etc takes time to develop.

Q: How will M1 defend against the new Telco entrant?

A: M1 will continue to invest in their Telco business. However they do not intend to engage in price war.

Q: Can M1 diversify from its traditional source of income to reduce its vulnerability?

A: M1 is actually quite glad that they are not in the pay-tv segment due to players such as Netflix.

M1's fixed services grew 24.5% and M1 is pushing on that area.

M1 is not sitting just on mobile. They are looking for opportunities such as acquisitions.

Q: Can M1 lower their CAPEX than that of TPG's?

A: TPG stated their CAPEX as $250 M. However M1 estimated the figure should be $500 M instead.

Moving forward M1's CAPEX will be around $100 - 120 M.

Q: How does M1 intends to deal with the ~$200 M spectrum fee paid?

A: Amortise it over 15 years.

Q: How will M1 handle the high cost of interest payments to avoid affecting the dividends payout?

A: M1 has short term facilities to use.

Rights issue is not likely unless it's a last resort.

M1 used bank loans as those have the cheapest cost among all options including bonds.

Q (interesting as it tells us the operational readiness of TPG): Status of TPG now?

A: TPG has 200 base stations now. Some of them are interconnected.

M1 has 2,500.

Q: M1 already has a $450 M bank loan. How does M1 intends to fund the new spectrum?

A: M1's gearing is still low compared to the Telco industry. They can still borrow from their short and medium term facilities.

Q: How does M1's board feels about M1's future in the next 5 years which are challenging?

A: Acknowledged that next few years are indeed challenging.

They will be controlling costs.

M1 also has avenues to increase revenues but these take times.

The suffering revenue from mobile segment can hopefully be covered by these new sources of revenues, which might even be more than that of the mobile segment.

Q: How does M1 retains customers instead of them porting around?

A: Through sunrisers for high spenders, sunperks points and multisaver discounts.

M1 is also the Telco of choice for MPA due to their superior 4.5G network.

Q (this is my favourite question among all): What is the growth plan of M1? Does M1 intends to venture overseas? There's only one new entrant and yet M1's share price has fallen by half from its peak.

A: M1 is apprehensive about the start up costs of venturing overseas.

Telco industry is high cost, not like setting up a bank overseas.

Telco industry is also a highly regulated one to enter.

M1 has to be realistic about their financial capability. To raise funds for overseas venture, M1 has to ask money from the shareholders and the 3 major shareholders have to agree first.

However there are many ways to expand abroad. One way is through partnerships. E.g. to bring M1's IoT capability to the overseas market.

Q: CAPEX is high last year. How does M1 intends to arrest that?

A: M1 is investing for the future. And that is reflected in the high CAPEX and acquisitions.

Moving forward, estimated CAPEX will be lowered to $100 - 120 M per year.

Comment from one of the shareholders: M1's website is old-fashion and doesn't appeal to the younger generation.

Resolutions: All passed.

The above are what I have garnered. I have probably missed out some questions as I was focusing on the replies from the board. I have also left out some which I feel is not that important.

Summary and my thoughts

M1 is reluctant to expand overseas to be a full fledge Telco like what TPG has done in Singapore. This is due to their financial capability.

This in my opinion, is a double-edge sword. 

By doing so they are limiting their growth as Singapore is only this big. However this also limits their risk to external environments of which a single mistake might wipe out all the cash generated so painstakingly especially since their financial capability is not big.

For M1, their focus now is controlling costs and continue to build on to their mobile base. Growth comes from their new initiatives such as the IoTs which I personally find promising in terms of being a new revenue driver for M1.

Personally I will continue to stay vested in M1 since the dividend yield is still attractive while I awaits the contributions from the new sources.

US and China Trade War

In an unsurprising move, China has published its own list of 128 US products on which it will impose tariffs ranging between 15 - 25%.

The full list can be found here.

This is obviously a retaliation against US which recently announced tariffs on US$50 billion worth of Chinese products - a true business man fashion by Trump.

The effect of this trade war between the top two economies in the world can be seen in the jitteries felt among the various markets in this week.

Our local STI has dropped 72 points to close at 3,339.70 at this point of writing after hovering around the 3,400 region.

While this has caused a drag on my portfolio, it has also presented opportunities to pick 'durians' cheaply. Some of my targets have already fallen to attractive prices.

So what does that spells for me?

For now I will continue to monitor the news on this topic which I don't think will end anytime soon. Staying on the side line before taking the plunge is my strategy now.