Feb 2021 Update

Feb 2021

Portfolio Value after market close

S$130,363.45

Purchase

None

Sold

ISOTeam @ 50,000 shares

CapitaLand @ 4,000 shares

Dividends

 

Suntec Reit @ $90.44

Short-Term Transactions

SPCE, NAKD, CHMA, SOS, SCKT, LODE

Summary

01 Feb 2021 STI Open: 2,896.32

26 Feb 2021 STI Close: 2,949.04

 

STI closed above its opening this month though we saw dips across the broad market for the last couple of days. 

 

I sold ISOTeam and CapitaLand at net 67.5% loss and 19.3% profit respectively. 

Reasons for selling will be explained below. 

The funds will mostly likely be redeployed to either Ascendas Reit, CapitaLand China Trust or

Mapletree Industrial Trust. 

I have made my pick if yesterday's closing price is anything to go by.

This is part of my portfolio rebalancing which I have wanted to adopt a more active approach this year.  

I also intend to open a Syfe Equity100 portfolio with a small portion of the funds for managed investment in the overseas markets. 

However I understand Syfe will be introducing a new product early next month so I'll wait for that to see how it compares to the existing offerings. 

I continued to dabble with the US market this month with my initial small amount which is one that won't make me lose my sleep and which is something that I can afford to lose. 

I consider this portion as my fun account / portfolio. 

Little to no due diligence are done for this account. The trades are mostly based on momentum and price actions. The trades are also mainly intraday with tight stop losses. 

ISOTeam

Sold it on 23rd Feb 2021 at $0.125 with a 67.5% net loss after dividends.

Surprisingly, I don't feel pain at all. It's like a mechanical, 'has to be done' move for me. 

ISOTeam purchase was initiated about 4 years ago. The government was pumping billions into the construction industry which was already doing quite well.

My reasoning was that since I do not fancy investing into construction companies with their lumpy earnings (although I did contemplate about HLS for quite a long period due to its juicy dividends back then), I will invest into ISOTeam as a proxy to the industry. 

ISOTeam is an established player in HDB and town council projects with constant project wins. As such I thought their recurring income would be more attractive to investors. 

Unfortunately I was proven wrong. 

This counter has became more illiquid over the years. 

As a testament on how illiquid this counter is, I set sell order for nearly a week before my shares finally got sold.

There are several reasons that prompted me to sell. 

Firstly, when the broader market is recovering from the March lows this year,  ISOTeam's share price is still languishing near a 5 year low. 

Even the slew of contract wins failed to catalyse the share price. 

It just doesn't move in tandem with the market which likely points to company-specific reasons as per point 2 below. 

Secondly, deteriorating fundamentals. The continual compressed gross profit margin (GPM) which hit below 5% in the latest concluded FY makes me wonder whether the business is sustainable. 

A low margin might makes sense for commodities trading business which goes by higher volume. I.e. low margin high turnover. 

But being in the engineering projects business myself, a 5% GPM is certainly a cause for alarm and I don't think it is sustainable for an engineering company. 

One of the criteria I use for my stock screening is a net profit of minimum 10%. In this case ISOTeam is far off the mark (the GP is not even 10% let alone the net profit).  

In fact they made a net loss in the FY ended June 2020.

And if I remember correctly, operating cash flow went in the red last year. The management explained that it is due to ageing of the accounts and upfront payment of project expenses. 

Again, being in the engineering business myself, I don't find this normal at all. 

Thirdly, opportunity costs are mounting. With the local market gradually recovering from the March lows and the US market hitting record highs recently, I felt the need to capture the upswing of the markets. 

I'm pretty sure it is a good move to cut loss and move the funds to other growth stocks or dividend counters for my income portfolio. 

The sale of this dead wood also fulfilled one of my investment aims set earlier this year.

Lastly, poor outlook. The company has guided that the near term is going to remain challenging for them and I am of the same view.

Although their order book has >$100 million worth of projects to be delivered over the next 2 - 3 years, I believed the margin is in single digit.

Cost of sales is also likely to increase as per my personal encounters in the industry. If ISOTeam didn't take steps to lock in vendor prices, margin might be further hit.

The integration of Pure Group into ISOTeam also didn't turned up as well as anticipated with the former likely to be loss-making in 1H FY21.

With no dividends declared for last year and I expect it to be the same for this year, there is no incentive to wait for the share price recovery which I feel can only happen in either of the following ways - 1) Acquisition by another company or 2) Drastically improve on its fundamentals.

But for now, I'm off this counter.

CapitaLand

Sold it on 24th Feb 2021 at $3.15 with a 19.3% net profit after dividends.

CapitaLand is another one of my long held counters.

Over the years it has been providing me decent dividend yield (4% against cost which is my minimum criteria) while I wait for the share price to hit my TP.

Couple of years back it nearly hit $4. I attribute that to the strong management team led by the capable Mr Lim Ming Yan.

I decided to sell it this time after it reported its first full year net loss in almost two decades, although that is partly contributed to revaluation losses. 

Despite that, it upped its dividend payout ratio to pay a 9 cents dividend for 2020. This is lower than the 12 cents paid in previous years though. 

As such my yield has fallen to 3% against cost. Sell, and transfer the funds for an easy 5% yield elsewhere is the logical move for now.

I have no qualms to buy the shares again if the price is right. Hint: Oct 2020.

August 2020 Updates

August 2020

Portfolio Value after market close

S$133,500.27

Wifey's Portfolio Value after market close

S$95,740.27

Purchase

None

Sold

None

Dividends

CapitaLand @ $480

Suntec Reit @ $61.32

CapitaLand Commercial Trust @ $133.60

SingTel @ $436

Ascendas Reit @ $363.50

Total: $1,474.42

Short-Term Transactions

None

Summary

03 Aug 2020 STI Open: 2,522.53

31 Aug 2020 STI Close: 2,532.51

Market closed higher than its opening for the month of Aug which is contrary to the prior month. 

Perhaps this is the start of the bull run locally?

But why locally? 

Because the volatility index VIX, otherwise known as the fear index has been rising recently. This implies a higher level of uncertainty in the U.S. market which is extremely exuberant at the moment.

This may present trading opportunities for traders but for long term investors, perhaps it's better to wait for pull backs as share prices have been hitting all time high. 

It will be interesting to see the trend for the next two weeks and for the month of September. 

Dividend Counters with Potential Growth

I have always used fundamental analysis be it the top-down or bottom-up approach for any addition of dividend counters with good growth potential to my income portfolio. 

Although it works well so far, I have been wanting to qualify my analyses with a mathematical model to justify them.

Maybe it's due to my engineering and science background. I don't know.

I found what I wanted some time last year from a fellow member on one of the online platforms that I frequent.

Apparently there is a finance formula called Dividend Yield + Expected Capital Growth (DYG).

This formula uses the expected annual dividend, dividend payout ratio and ROE as the metrics for gauging whether a particular counter is a good income-paying one with long term growth.

I created a spreadsheet with formulas for easy calculation as shown below.

 

The ROE is calculated by dividing the EPS by the NAV per share.

The dividend payout ratio is calculated by dividing the dividend per share by the EPS.

I obtained the EPS, dividend amount and NAV from the companies' annual and quarterly reports instead of third party websites for accuracy sake. Just a personal preference.
 

Coming from a non-finance background I have never heard of this formula prior to this. And being a skeptical person (guess it's just my nature, I don't usually take things at face value.), I did some searches online but couldn't find any results on this formula.

So I did the next best thing. Using the formula on some counters in my watch list and monitor them for couple of months, including their latest quarter reports.

The counters identified back then as good counters (DYG >10%), largely performed well so far.

So I decided to do a new round of calculations for selected counters in my watch list today.

The latest DYG results are as follows.

The top 3 counters I've identified in my previous round of calculations some months back are still the same with this latest set of calculations.
 

I also did a little stress test to mirror the current macro situation by factoring a 30% reduction in expected dividends.

Interestingly the DYG value of some counters went up while the others decreased. There is no fixed pattern.

I'm still trying to analyse why but one thing for certain. Even after factoring the 30% dividend cut into the calculations, the top 3 counters are still the same. The change in the respective DYG value is insignificant, not even 1% difference.

Lastly I have appended below the raw data for your reference if it's helpful to you.

Most investors who have read enough annual reports will roughly know where to find data such as EPS and NAV.

Nonetheless it is still quite a chore to download the various AR and run through the pages for so many companies. I wouldn't wish anyone else to do it if you have a choice.

So here it goes.

Conclusion

Personally I find the DYG method complementary to my current stock selection methodology. Moving forward I will probably add it as one more step as a justification to my FA.

For sharing purpose I have summarised my methodology as follows.

1. Use stock screener to sieve out potential counters. Personally I use P/B, P/E and debt/equity ratios, net profit and dividend yield.

2. Use FA to narrow down the counters.

3. Use DYG method as a double check.

4. Purchase counter(s).

5. And enjoy the passive income.

P.s. Decided to use another font type and font colour for this post. Please feel free to let me know if it's better for viewing compared to previous posts. Thanks.

Summarised Review of My Portfolio Holdings

Since it's the reporting season recently, I found couple of hours to do a low level review of the result highlights of the various companies in my portfolio while baby daughter is asleep.

Decided to pen down my thoughts as a record for reference and for sharing purpose.

Not doing any side by side comparisons with past results as these can be easily found in the highlights presentations and financial statements.

While I can write a full post for each of the counters in my portfolio, that is not the objective here.

This is after all just a summary of my reviews and thoughts, in particular the areas of concern to look out for.

It is also not fair to the readers if I simply do some tables and extend the writing to make it a full post without doing a high level review of the figures.

Most of the content written below are garnered from the reports. Some are from my memories and some are my personal opinions.

Ascendas Reit

Good set of results in my opinion.

Healthy portfolio occupancy at 91.7%, low gearing at 36.2% and best of all, an 8% positive rental reversion.

The relatively low gearing means that Ascendas still has about $3.8 b for further growth before they hit the new 50% regulatory limit. Pretty huge head room I would say.

Really nothing major to complain about except to look out for the coming quarters on the macro environment where Singapore is expected to enter into recession.

Might add more at $2.60.

CapitaLand Commercial Trust

CCT is one counter that I have held for many years now. I liked it for the quality of its assets and I still do.

The latest set of results is a mixed bag.

While gross revenue and NPI increased slightly, distributable income and DPU fell by 23% and 25% respectively. This is due to the retention of part of the income for prudent sake during this Covid-19 period, similar to most Reits.

If I annualise this reduced DPU, yield against my cost and current share price is 4.8% and 4.4%.

However I'm not worried about this lower yield as I don't think the cut in DPU will be more than two times. And the retained income would most likely be distributed back to unitholders in time to come.

Latest portfolio occupancy stands at a good 95.2%.

Gearing stands at 35.5%. Still comfortable.

Debt maturity at 3.5 years. Average.

Cost of debt at 2.3%, interest coverage at 5.7 times and WALE by NLA at 5.8 years. Nice.

While it's nice to see the contributions starting to come in from the new acquisitions, I noticed Six Battery Road has quite a drop in revenue and NPI.

This is due to the expiry of Standard Chartered's lease in January 2020 and the start of AEI which is expected to complete in 3Q 2021.

That, together with CapitaSpring which is expected to be completed next year and which has only secured committed occupancy of around 35%, is a bit of a concern to me.

I suspect it would be challenging to secure tenants during this period due to the current situation. I hope I am wrong though but this is a point I have to take note of.

CapitaSpring will be a drag to the overall financials if not improved by next year.

Another point to take note is that 21 Collyer Quay will be closed for two quarters starting from 2Q 2020 for upgrading works. Half a year of income there.

Top 10 tenants are contributing 37% of monthly GRI. I would prefer if it is around 25% or less.

Probably will add another 6,000 shares to bring up holdings to 10,000 to avoid odd lots for CICT.

CapitaLand

Good but nothing to be excited about. Unlike previous few times where I remember I was 'Wowed' by what I saw.

Average debt maturity of 3.4 years, 7 times interest coverage.

Gearing stands at 0.64 times. Slight increase compared to last FY but still pretty low as compared to its peers like Frasers Property.

My concern here is its new developments.

CapitaSpring which is expected to be completed next year, has secured committed occupancy of around 35%.

(CapitaLand has 45% interest and CapitaLand Commercial Trust has another 45%)

This is quite worrying as moving forward the economy is expected to worsen. It would probably be more challenging to secure tenants.

Same for 79 Robinson Road which obtained its TOP last month. This development fared better with around 70% committed occupancy but it's still far from ideal.

Hopefully the management can give further update to the above occupancy rates in the near future.

Hold on to current holdings. Will add more only if I have surplus funds.

CapitaLand Retail China Trust

All malls have reopened since 2nd April 2020 which is a good sign.

Gearing and cost of debt are low.

I also like the management's proactive approach of early refinancing of the term loan due this year. This brings the debt maturity to 3.16 years.

Average occupancy rate is high at 95.4% but is dragged down by CapitaMall Minzhongleyuan (Mzly).

In fact Mzly's occupancy rate has a steady decline QoQ from 62.7% in Mar 2019 to 52.8% in Mar 2020.

Another area of concern is that around 50% of the lease by total gross rental income is due to expire within these two years.

For the above 2 points, I have written to their IR in-charge and have gotten the following replies in blue (My email was replied within half an hour after it was sent around midnight. Kudos to them).

This counter is one of the 3 that I have identified to load on during this bear period with two batches added so far.

To follow plan and continue adding in batches.

DBS

A good set of results in my opinion.

Same as my thoughts for OCBC below. Important to look out for 2Q onwards as that's where the full effect of interest rate cut comes in which will likely depress the NIM.

Effect of Covid-19 and crude oil prices will also ripple down the next few quarters.

Already, NPL and NPA has increased to 1.6% and 14% respectively in this quarter. The latter has risen sharply, almost 50% from the previous quarter.

Quarterly dividend maintained at 33 cents is confidence-inspiring and management has guided that current earnings generation is expected to be sufficient for maintaining dividend at 33 cents.

Current virus situation presented a good opportunity for me to buy into DBS. Since March 2020 I have bought in twice in small batches.

To follow plan and continue adding in batches.

ESR-Reit

Revenue, NPI and distributable income all dropped YoY in double digits although the DI is due to setting aside potential rental rebates to support tenants.

While the easy way out is to attribute these to the Covid-19 situation, I think it would be prudent to delve deeper into the financials when time permits.

Gearing is pretty high at 41.7%, limiting growth. That being said, MAS has increased the regulatory limit to 50% recently but that gearing is still discomforting.

Cost of debt at 3.81% is also relatively high when compared to the other Reits where the metric hovers around 2+%.

Another downside is the negative rental reversions albeit at -0.1%. That suggests the management might have problem negotiating with tenants.

On the plus side, portfolio occupancy is still doing fine at 90.5% (as compared to Ascendas's 91.7%).

WALE is acceptable at 3.6 years.

I also like their mix of asset class which is quite well spread.

ESR Reit is also one of the highest dividend paying Reits around. Whether that is sustainable or not needs a deeper look into the financials.

Taking the latest 0.5 cents DPU and annualise it against current share price, the yield is still attractive at 5.6%. But if I calculate it against my cost the yield is 3.8% only.

That being said, with the exception of the next quarter I don't think the rest of the quarters will be paying 0.5 cents DPU only as the latest reduced DPU is due to income retained for prudent cash flow management.

With the AEI of UE BizHub expected to complete next year, improved rental reversions and hence income, is possible.

There has been talks about potential M&A with Aims Apac Reit since ESR Reit's sponsor ESR Cayman, has been increasing their stakes in Aims Apac Reit.

I do see pockets of positivities lying ahead of ESR.

Might add more to average down.

Possible turnaround and privatisation play.

ISOTeam

The group has not released its results yet as its year end is in June but it has been giving regular updates about the impact of the Covid-19 situation has on its business.

The latest update was released last Friday.

Unfortunately due to the nature of ISOTeam business, the control measures such as travel restrictions and safe distancing have impacted the business and operations.

Project tenders have slowed down.

Supply chain of raw materials have been disrupted.

Work of sub-contractors and outsourced partners have also been disrupted.

I can reconcile with these as I am facing the same set of issues with my business.

Financial performance of the current FY ending 30 June 2020 is expected to be materially impacted based on unaudited management accounts and estimates.

On the positive side, the impact to the financials is not expected to affect the group's ability to continue as going concern and its ability to fulfil near term obligations.

Order book also remains intact.

It's a pity Covid-19 struck this year. I was looking forward to ISOTeam's results this year due to its record order book and integration of Pure Group into its umbrella with profit guarantee.

Share price has been beaten down by about 50% as compared to the period before Covid-19.

I guess the negativities have been factored in already. ISOTeam has been doing some share buybacks recently too.

With the price being supported at $0.12 and a P/B of 0.6, it is beginning to look ever more attractive.

Only con is that this counter is comparatively illiquid.

Continue to hold and monitor. Might average down at $0.105.

Possible turnaround and privatisation play.

Mapletree Logistics Trust

One of the rare Reits to increase its DPU. What more to say?

Gross revenue, NPI, distributable income and portfolio occupancy all increased. The occupancy rate of 98% is one of the highest if not the highest among local industrial Reits.

Long WALE by NLA at 4.3 years. Positive rental reversion at 2%.

Debt maturity at 4.1 years and gearing at 39.3%.

Pretty nice figures to me.

What I like most is that MLT has been actively looking for yield-accretive assets along the One Belt One Road regions and other developed countries.

This to me, is well played.

If done nicely it would stand to benefit from the growth of both sets of economies.

On the downside, the prolonged Covid-19 situation might eventually affect the income and ultimately the DPU.

If that happens I would keep a keen eye for any drop in share price to scope up more.

Only complaint here is that the previous time MLT offers DRP is also its first and last time. I ended up with odd lots because of that.

Notwithstanding that, MLT is one of the few counters that I would welcome DRP anytime.

To add more if share price hits previous purchased price or below,

Mapletree NAC Trust

As expected results are not pretty mainly due to the double whammy of Hong Kong protests and Covid-19.

It's good that the management has taken steps to reduce the concentration risk of Festival Walk (FW) by buying the Japan properties. However FW still contributes 55% and 54% of gross revenue and NPI respectively.

It would be better if the ratios can be reduced to 25% or lower but I rather they take their time to do due diligence instead of rushing to buy properties for the sake of buying.

Well, at least FW re-opened earlier than envisaged and average rental reversions are both positive for the retail and office segments.

Occupancy also remains high at 99.8%.

Another plus point: When the insurance claims proceeds are received for FW, any amount which may exceed the Distribution Top-Ups will be paid to unitholders.

Excluding the latest FY, the preceding four years actually seen yearly increase in the gross revenue, NPI, distributable income and DPU.

Since this counter is part of my long term portfolio, I am not too concerned about the current headwinds.

Hold and monitor.

Netlink NBN Trust

Good set of results. Top line and bottom line went up albeit by single digits which is only expected due to the nature of business (boring but stable).

Bottom line could have been even more stellar if not for the one-time write off of a project.

Residential connections makes up more than 60% of their revenue. With more housing developments such as BTOs coming up in the foreseeable years ahead, I don't see any major risks for this company.

Short term wise, next couple of quarters might see its numbers being affected due to the Covid-19 measures implemented which should affect their installation of residential connections.

To add more if price hits previous purchased price or below. 

OCBC

When Great Eastern announced the 94% drop in income days before OCBC announced their results, I have been prepared to see the effect on the latter's performance.

That, coupled with provisions in allowances for the non-impaired assets contributed heavily to the latest results where revenue and net profit went down 7% and 43% respectively.

The amount of allowances to me is actually a reflection of how OCBC has been operating for these years - prudent.

Despite the drop in profit, the share price held up quite steadily to my surprise because I was looking at this chance to add more OCBC shares to my long term portfolio.

Moving forward the effect of the rate cuts, Covid-19 situation and crude oil crisis will be more accurately reflected in the NIM and NPL for the next few quarters hence there might be chances to pick up the shares again.

One thing that OCBC is doing to mitigate the low interest rate environment is the shift to longer tenure loans.

No news on the dividend yet but I suspect it won't be cut at least for the coming round.

To follow plan and continue adding in batches.

RHT Health Trust

Results will be released on 30th July 2020.

Based on an earlier announcement, net assets attributable to unitholders currently stands at $16.89 million.

SingTel

Results will be released on 28th May 2020.

Suntec Reit

A below average set of results.

Gross revenue, NPI, income from JV and distributable income all dropped YoY.

Gearing increased to 39.9%. Debt maturity increased to 3.36 years.

Financing cost is acceptable at 2.92% and it would be good if interest coverage can be higher than the 2.7 times currently.

Singapore office WALE at 3.26 years, retail WALE at 2.66 years and Australia assets WALE at 4.9 years.

One plus point is that Suntec City office and mall has achieved 8 and 11 consecutive quarters of positive rental reversions.

For the latest quarter the rent reversion achieved 13.1% and 16.1 % respectively.

Moving forward we might see negative rent reversion for the mall as the retail segment should be badly hit with weaker market demand.

DPU dropped 27.7% YoY to 1.76 cents for this quarter due to lower distributable income from operations, 10% retention of distribution, absence of capital distribution and enlarged unit base.

The first two reasons are related at least partly to the Covid-19 situation so it's understandable.

While I like that Suntec is diversifying from Singapore and is still doing so, it is primarily doing it in the Australian market.

I'm not an expert in the Australian property market but one obvious risk to me is the weakened aussie dollar. With only 20% of the AUD income hedged for 2020, it is not something I like to see.

Hopefully moving forward the income-accretive properties can more than offset this risk.

Suntec has acquired another freehold Grade A office in Sydney last month. The metrics look good on paper: 5.5% initial yield with 3 to 4% annual rent escalation and a long WALE of around 10 years.

While the occupany is 66.5% currently, there is a 3 years rent guarantee on unlet spaces.

The previously announced Olderfleet is also scheduled to be compeleted this year.

93.7% leases has been committed and WALE is long at around 11 years.

Suntec convention is proving to be a drag on the financials as its revenue contribution dropped nearly half compared to the same period last year. It has reported a loss for this quarter.

Number of events postponed and cancelled due to Covid-19 amounted to nearly half of the number in the same quarter last year.

I guess it should be the same case for the rest of the quarters. Again I hope I'm wrong.

To be prudent here, I think it may be realistic to assume the DPU trend for the rest of the quarters will follow the current one.

I do see the upsides (Aussie properties and Suntec office) which are valid for the longer term outweigh or at least will be able to balance out the downside (Suntec convention and mall) which are facing more of a short term head wind.

To hold existing lots and add more at $1.28 subject to fund availability.


P.s. Original intent is to write no more than 2 to 3 paragraphs per counter. Seems like I ended up being more long winded than intended!

CRCT-MNACT REIT Maybe?

I was thinking last night that with the flurry of M&A among REITs recently, would we see a merger between CapitaLand Retail China Trust (CRCT) and Mapletree North Asia Commercial Trust (MNACT)?

Afterall CapitaLand bought over Ascendas-Singbridge not too long ago.

The portfolio of CRCT and MNACT are similar in nature to an extent. They are synergistic geographically and in the type of properties - retail. 

Some basic metrics of both counters

CRCT

Market Cap (based on $1.53 share price) : $1.84 B

No. of Properties: 13 (China) 

Property Value: $3.8 B

MNACT 

Market Cap (based on $1.16 share price): $3.7 B

No. of Properties: 9 (China, HK, Japan) 

Property Value: $7.6 B

I couldn't find any information on market capitalisation from CRCT's report but a quick calculation got me $1.84 B. 

So if a merger does occur, we are looking at a REIT with about $5.54 B market capitalisation and 22 properties in North East Asia worth $11.4 B thereabout.

I also did a quick comparison against some of the REITs among my portfolio for curiosity sake. 

MLT Market Cap: $6.15 B

CCT Market Cap: $7.9 B

Suntec Market Cap: $5.2 B

Anyway the above is just a wild thought on a boring night. Just read and forget.

---------------------------------------------------------------------------------------------------------------------------------------------------

On a side note, I drove my bro to a certain bubble tea shop just now.

Despite being a Tuesday afternoon, I saw streams of youngsters going into the shop.

That got me curious. After that I found out this shop is actually a franchise by a local mini celebrity. And a really famous singer once said this is his favourite tea shop in Taiwan*. 

(Not going to name names as I don't want to advertise for them and more importantly, I seriously find the tea so so only. Haha.. But some of you might recognise from this bottle.)

The busybody me did a quick back-of-the-envelope calculations. 

Their tea costs between $4 - $7. And they already sold nearly 500 cups by 2 pm. 

Basing on $5 a cup and a sales of 1,000 cups per day, their annual revenue is easily $1.8 M. 

With a 50% margin (easily for a F&B product like bubble tea), they are earning close to a million every year. 

Cool.

Lessons learnt: 

1) Power of networking

Especially if you know famous people. 

2) Power of celebrity endorsement

Just a simple one sentence remark by that famous singer can make this shop people mountain people sea.

Really power.

* Edited some information. 

Annual Donation 2019

Just did my annual personal donation via giving.sg.

Every year I try to choose different causes for my donation but generally I tend to gravitate towards the young and elderly.

Though the amount is not big I hope it helps in some way.

Equally important is that I hope this post can inspire others to help the less fortunate too.

While we collect our dividends or make money from the market, let's not forget those who needs some help.

On a side note, I've also decided to do some CSR for my company. Taking a leaf out of CapitaLand, I am thinking of donating 0.5% of my operating net profit after FY ends in Feb.

Let's see how. The ratio might change but the deed will be done.

Moving forward I hope this can be an annual event.

Cheers! 

May 2019 Portfolio Update

May 2019

Portfolio Value after market close: S$93,485.52

Wifey's Portfolio Value after market close: S$44,737.55

Purchases: Japfa x 10,000 shares

Sold: None

Dividends:

CapitaLand: $480

Japfa: $150

MNACT: $78.24
Suntec: $129.20*

Comment:

Japfa

Saw the price weakness and added 10 lots to the existing 10 lots in holding. 

As the often quoted saying goes: when people are fearful you must be greedy..

Hopefully it turns out right for me.

I like their vertically integrated business model though a combination of the swine flu and poor 1Q results affected the share price by quite a bit.

Japfa share price is still consolidating between 0.545 - 0.57. I reckon 2nd half of this year might see better results from them due to higher poultry demands in Ramadan month.

Meanwhile I will continue buying their Greenfields brand for my milk supply which is really one of the cheapest in the supermarkets : )

ESR and MLT

Opted for DRP for both. Will include in next month's update.

*Updated with Suntec's dividend. Forgot to input in the original post. 

April 2019 Portfolio Update

April 2019

Portfolio Value after market close: S$90,017.44

Wifey's Portfolio Value after market close: S$45,681.02
 
Purchases: None

Sold: 5,000 shares of CapitaLand

Comment:

CapitaLand

Balanced 4,000 shares of CapitaLand at $2.98. Will continue to keep for its ~4% dividend while waiting for its breakthrough.

Cash has been growing with my recent sale of M1 and CapitaLand. Intend to put it back into the market but most of the reits and income stocks in my watch list are overpriced at the moment.

Not going to buy for the sake of buying. Will continue to monitor the market for entry opportunities. Meanwhile the cash will stay in my OCBC 360 account for the 2% interest.

RHT Health Trust

RHT Health Trust is making some interesting movements in the past couple of months with the name change and appointment of a new chairman and directors, some of whom came with healthcare management background.

I don't think these are done for fun. I'm looking forward to the possible good news ahead. Hopefully the new CEO will inject some attractive new assets for the shareholders.

Will continue to hold onto my shares.

Japfa

Japfa still seems to be affected by the swine flu news though fundamentally nothing has changed. Will be monitoring the share price with a view to add more.

Taking Stock of 2018

Leaving 2018 and entering 2019, time for a quick roundup of my 2018 and my little wishes for the new year ahead.

Work

This year is my company's 2nd year of operation. 

Results so far are a tremendous improvement over last year in terms of revenue, profits and scale of projects secured.

Although revenue is still about $75,000 shy of the target I set for myself, I have two more months to 'chiong' before end of my financial year. Hopefully I can close the FY even more beautifully.

In terms of business offerings, I have added the Design, Installation and Maintenance of Solar Photovoltaic (PV) system to my products and services recently.

This is actually synergistic to the other portion of my business which is environmental engineering, particularly in pollution control systems.

As I mentioned before, one of my investment guidelines is to ride along with the macro trend.

I believe Solar PV system is the way to move forward especially in a country like Singapore. Hence I made a deliberate effort to take up a course in this field and graduated from it recently.

This also means I have achieved my aim of adding a new capability to the company by this year.

Moving forward, my focus continues to be growing the business and if possible purchase an office space as part of my recurring income plan.

Other Incomes

Previously I have set a target of achieving S$7,832.88 for my side and passive incomes in 2018.

Actual passive income achieved for 2018: S$6,069.08

Actual side income achieved for 2018: S$3,042.86

Result achieved for 2018: S$9,111.94 (Target met)

For 2019 I am going to target another 20% growth in my dividend income as I will probably be drawing down a portion of my portfolio for some expenses.

For the side income in 2019, there is actually a much higher room for growth. I am in the midst of discussing a venture which if materialised, will contribute a significant amount to this category.

However I do not want to count my chickens before they hatch. Hence targets for 2019...

Targeted passive income for 2019: S$7,200

Targeted side income for 2019: S$3,000

Equities and REITs

My holdings as of 31/12/2018:

With the exception of M1, all the counters in my portfolio closed at a lower price this year end compared to last's.

In 2018, I've added another 5,000 shares of CapitaLand, added another 4,000 shares of Netlink Trust and bought 4,000 shares of Mapletree NAC Trust. Total capital injection is $25,820.

Excluding the capital injection, my portfolio value returned -13.7% compared to last year. A loss of more than $15k.

I really ought to read more, learn more and relook into my investment style especially in the technical analysis to time my entries better.

What a humbling experience. It shows how much of a fool I am in the stock market.

In summary,

1) Yield of Portfolio 2018: 4.30%

2) Cumulative Yield of Portfolio: 8.10%

Similarly, wifey's portfolio also dropped in value ($41,431.98) compared to last year ($41,919.78) if capital injection is excluded.

 

Personal

Baby M who arrived on Father's day 2018, never fails to bring a smile to our face. She is making lots of funny sounds and lots of movement nowadays.

Really a different kind of joy.

Our biggest wish is for her to grow up happily and healthily.

I always believe we should not forget to help others if we can.

Though my investment portfolio performed less than admirably, I donated $550 to a selection of charities in 2018. This is on top of my monthly Giro donations to Community Chest and NKF.

Thanks to giving.sg, it is so convenient nowadays to make donations and volunteering.

Last but not least, I wish everyone a happy new year ahead. Good health and good wealth!

Review of CapitaLand 3Q18 Results

CapitaLand has just released its 3Q18 results this morning.

All in all it is a good set of numbers as expected.

PATMI increased by 13.6% to $362.2 M.

Due to higher operating PATMI and assets recycling.

Operating PATMI increased by 13.3% to $233.7 M.

Due to contributions from newly acquired and opened investment properties.

EBIT increased 0.2% to $796.3 M.

Due to recurring income from investment properties and contributions from development projects, fair value uplift and portfolio gains from divestments.

Topline for the quarter fell 16.9% to $1.26 B.

Due to lower contributions from development projects in China and Singapore, partially mitigated by higher rental revenue from newly acquired and opened properties as well as consolidation of revenue from three entities.

$4.0 B of assets are divested YTD and recycled into $6.1 B of new investments including higher yielding assets that are immediately incoming producing.

Gearing stands at 0.51x (2018 YTD)

Notable Points

1) RMB6.36 B and more than S$71.2 M of sales will be recognised in 4Q18 from China and Vietnam markets.

2) CapitaLand / GIC JV's acquisition of Shanghai's tallest twin towers along the north bund. This iconic landmark will be CapitaLand's 3rd Raffles City in Shanghai and 10th globally.

Property construction is expected to be completed by next June.

3) There is 44% drop in portfolio gains comparing YoY. I need to spend some time to further understand this. Nonetheless is still a gain not a loss.

Thoughts

No matter how I look this is a decent set of results from CapitaLand. However it does not seems to provide the catalyst for the uplift of its share price. Same as with previous cases.

In fact CapitaLand was among the top institutional selling last week.

Perhaps the big boys deemed this to be not good enough. Or perhaps there is a deliberate attempt to push down the share price.

My feel is that CapitaLand is always on the radar of the institutional players and therefore will always be subject to the effects of the big boys trade.

With a slew of developments in the pipeline (e.g. new acquisitions, malls management, coliving, coworking, dormitories, etc) the outlook for CapitaLand is exciting to look forward to.

At this point of writing, CapitaLand is trading at an attractive level. Will continue to add.

May and June 2018 Updates

Dividends Received

CapitaLand: $480.00
OCBC: $4.25
Mapletree Logistics Trust: $141.40
Netlink Trust: $129.60
RHT Health Trust: $114.00
Suntec Reit: $97.32
Viva Industrial Trust: $91.90

Total: $1,058.47

Counters Purchased

CapitaLand: 5 lots

Counters Sold

Nil

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!

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.

Goodbye 2017 Hello 2018

Happy New Year everyone. Hope you had a good 2017 and may you stay healthy and happy in the new year ahead.

Actually I have written this post halfway through to take stock on the different aspects of my life in 2017 and to start 2018 with some goals. 

However I was simply too busy to finish it before end 2017. Nevertheless it's meaningful to post this on the first day of the new year I guess.

Here it goes..

Work

On the work front, there is major change in 2017. I have left my previous company in which I am also a minor shareholder, to strike it out on my own.

Business has been not bad so far. Customers have been supportive and I am thankful for that.

My focus remains on growing the business and working on adding a new capability to the company by this year.

Other Incomes

Previously I set a target of doubling my side and passive incomes of S$2,712.86 by 2017.

Result for 2017: S$6,527.40 (Target met)

Moving forward I have to set a more modest target for this year due to a number of reasons. There is no point setting an exorbitant target and failing to achieve by year end. Also it's not my style to set an easy target to bluff myself when I achieved it later.

Hence the target for this year will be 20% growth in this category.

Equities and REITs

My holdings as of 29/12/2017:

Most of the counters in my current portfolio belongs to my long-term income holdings with the exception of CapitaLand, ISOTeam and RHT Health Trust.

CapitaLand is meant to be a trading stock. However it might turn into part of my long-term holdings if the dividend continues to grow which is the case for the past four years. Based on my purchased price, the yield is 3.36%. Below my target of min. 4% but still not bad actually.

Currently sitting on 17.9% paper profit.

ISOTeam is a loss-making counter for me so far. However I will continue to hold as I believe in it's growth potential and strength of the management team.

Unless something fundamental changed drastically, I intend to hold it till at least the next AGM. I'm pretty confident this year's results will be glowing for ISOTeam.

The share price has hit $0.42 some time last year. I don't see why it cannot happen again in the near future.

And the bit of dividend helps to cushion the paper loss so far.

RHT Health Trust is a pure punt on the Fortis buyout. Results of the deal (or no deal) should be finalised by this month if I remember correctly.

If the deal pans out this should leads to a small capital gain for me. If not I'll have to see what's the future plans from the management and of course the future dividend trend for the trust.

In summary,

1) Yield on Total Amount Invested 2017: 1.48% (Drag down by couple of trading losses)

2) Yield of Income Portfolio 2017: 3.62% (No dividend from Netlink Trust and Viva Industrial Trust yet)

3) Cumulative Yield of Income Portfolio: 5.42% (No dividend from Netlink Trust and Viva Industrial Trust yet)

2017 was also the year where wifey started her passive income portfolio. Her holdings as of 29/12/2017:

Personal

Last but not least, I also wish to share a piece of good news. I'm going to be a dad soon. Yeah!
 
My wife and I are expecting our first child this year and coincidentally he or she shares the same zodiac sign as me! 😄