Dividends by Month

I was talking to my broker today. She asked why I have so many counters but not a lot for each. Hahaha .. not that loaded (I was thinking).

Anyway, not really a problem, but she just told me to be careful not to sell shares that I do not have (and not to be confused). Will be penalised for doing that.

selective-focus-photography-of-two-gold-rings-1253289

Well, actually my thought was to have a diversified basket of stocks so that I can have dividend for each month. Tiny ‘drops’ per month.

Did a quick table based on what I can find in Stockscafe and Dividend.sg.

Capture1

Seems like I have dividend payouts for every month except for June.

I would not be surprised if dividend payout amounts are reduced in the near term.

Well, HSBC and Standard Chartered announced today they would cancel their dividends and not launch any share buy-backs in 2020 after a financial regulator in the United Kingdom asked the country’s biggest lenders to suspend payments to investors and not pay cash bonuses to senior staff in light of the coronavirus pandemic roiling economies worldwide.

DBS has announced that their Annual General Meeting (AGM) originally scheduled for 31 March 2020 will be deferred to a future date to be determined. Accordingly, the announcement of the payment of the proposed final dividend of S$0.33 per ordinary share for the financial year ended 31 Dec 2019 will be postponed.

On 27 Feb 2020, Sun Hung Kai Properties reported profit and reported earnings per share attributable to the Company’s shareholders were HK$15,419 million and HK$5.32 respectively, compared to HK$20,469 million and HK$7.07 for the corresponding period last year. The company declared an interim dividend payment of HK$1.25 per share for the six months ended 31 December 2019, the same as the corresponding period last year.

On 11 Feb 2020, Sunlight REIT reported that their revenue and net property income registered 2.9% and 2.1% year-on-year (“YoY“) growth to HK$437.1 million and HK$345.7 million respectively. Distributable income for the Reporting Period was HK$233.5 million, up 0.8% YoY. They declared an interim distribution per unit (“DPU“) of HK 13.2 cents, which is unchanged from the corresponding period last year and represents a payout ratio of 93.6%.

Dairy Farm, on 5 March 2020, announced an unchanged final dividend of US¢14.50 per share, giving a total dividend of US¢21.00 per share for the year, which is in line with 2018. Interestingly, Dairy Farm’s 2019 profits skyrocketed 281.84% to $448.53m.

CK Asset reported on 19 March 2020 that underlying profit for the year ended 31 Dec 2019 increased by 19 percent from the year before, and will have a final dividend of HK$1.58 per share in respect of 2019 (a total of HK$2.10 per share for the year), a steady increase over the years.

 

Posted in Dividend & Yield, Portfolio | Leave a comment

Portfolio Update

I haven’t been updating in my blog for some time. There are just too many things going on at the moment. Both in the markets and at work.

To say that the market this month is volatile is a big understatement. Work-wise, I was working from home for the past week. Next week will be back at the office. Still, it was a hectic week.

I think the COVID 19 outbreak is beginning to turn out to be more serious than what I have initially thought. It is now a pandemic and many countries are in lockdown.

There was a mini-rally over the past couple of days and many are questioning if we have just witnessed the bottom of the crash or if it is a dead cat bounce. For me, that really is not the right question to ask. I know I will never know until the whole crisis is over.

There are many questions online about whether if it is the right time or shall I say the best time to invest.

Countless discussion in Facebook posts, Telegram groups, Investing Note posts, Blog posts etc…. At some stage, there is no point discussing or being an online warrior, just invest.  Oh yeah, second-level thinking is important, but beyond that (third-level, fourth-level, etc), I think I would be over-thinking.

However, is this the RIGHT question to ask in the first place?

To this, I think Howard Marks puts it succinctly, “Oaktree explicitly rejects the notion of waiting for the bottom. We buy when we can access value cheap. Given the price drops and selling we’ve seen so far, I believe this a good time to invest, although of course it may prove to have been not the best time.”

  • Covid-19 crisis proves there is no ‘magic potion’ in investment: Howard Marks (read here)

I think the Irrelevant Investor puts it simply as this: “Looking through this, one thing is crystal clear to me. It doesn’t matter when you buy, only that you buy.”

  • When Is the Right Time to Buy Stocks? (read here)

We will never know if it is the best time to invest. However, I do believe like Howard Marks, that over the long term, this is a good time to invest. Sure, things may get much worse before it gets better. Every crisis is the same. When we talk about the rising yield, due to the falling stock price, people will say that earnings and dividend payout will drop in the near future and yield will drop…. isn’t that the same in all the other crashes…end 2018, GFC, etc? In hindsight, even if you buy too early, and have set aside some money that you need for emergencies, in the long term, it will be alright.

I am not reviewing the companies based on their cash flow this year or even the next. I am imaging a situation when things get back to normal. When? I do not know.

Actually, that is not hard to do that now eg. to imagine when things get back to normal. For instance, when MRT trains are packed again, when we go back to the office to work, when children have schools every weekday and enrichment classes are open every week, when airport terminals are full of people and people go for holidays and hotels are packed, when supermarket shelves are packed and there is no panic buying, when there is no social distancing measures, no countries in lockdown mode.

That is NORMAL.

What we have now is NOT NORMAL. Just by going back to normal, companies’ cash flow will increase (some from 0% to +++++%).

If you ask me to imagine how the economy would be much better last year or early this year and how much higher the US markets can go. I find that harder. Sure we have the US-China Trade war… but we are also in the longest bull market ever (and Tesla stock price going ballistic). It is harder to imagine.

Currently, to imagine normal going forward is much easier (it’s a no brainer).

“You look at a company, you figure out what it could make in a normal environment and you figure out what that company would be worth to a strategic buyer, once its problems are largely resolved and once the capitalization has been restructured. Then you think about how that value will be divided up among the various classes of claimants and you figure out what a piece of a claim is worth and you see if you can buy it for less. And if you can make those judgements on the basis of conservative assumptions and still end up with good room for profit, then that’s a source of margin for error.” Howard Marks

However, I do believe in having a cash cushion and to break up the buying in portions. And I really really believe that I can’t time the bottom for nuts!

  • What If You Buy Stocks Too Early During a Market Crash? (read here)

Personally, for me, this crisis has been a long time coming. For the past couple of years, I have been looking at low single-digit yields in bonds & money market funds. And I have been dipping into the market. Hence, it really does not make sense to be doing blog posts nowadays, as my portfolio proportions kept changing.

Basically, I have been “shopping” for stocks.

pexels-photo-346751

Below show the proportion of stocks vs war chest proportion. The dividend stocks proportion has increased to 54%. It is still a sea of red FYI.

111

I have a simple strategy to create a dividend stock portfolio first. I like to think I get paid while waiting…hahahaha…

And strong growth stocks almost never ever or seldom goes to fair or below value.

And if have read my previous posts, I created a Hong Kong centric one last year in view of the HK market crash due to the Hong Kong riots. Now with the worldwide market crash (literally the fastest crash ever), I have expanded my Singapore stock portfolio and started a mini Malaysia stock portfolio (just one stock at the moment).

I have also started a growth US stock portfolio (just one stock at the moment).

333

In case the above font size is too small, I have listed the stocks below.

Capture

Long story short:

Other than Colex and Golden Agri, sometime late last year I started with the HK centric portfolio. Many banks, property counters / REITs (commercial & retail & hospitality), consumer staples, aviation and transport stocks were beaten down.

Then beginning of this year, we start to see China-related stocks get beaten down due to the Coronavirus outbreak. Basically, we start with the same sectors being hit again. With cities in China undergoing a lockdown, Singapore is affected. In early Feb 2020, the Singapore Ministry of Health stepped up their risk assessment from DORSCON Yellow to DORSCON Orange. Inevitably the Singapore market is affected (again same sectors start being hit again.. dragging down others not directly hit). Which led to me dipping into aviation, hospitality & retail-related stocks in the Singapore market (eg. Sats, Ascotts Residence Trust, MCT).

Now within a few short months, the whole world is having a pandemic & many countries locked down (including Malaysia), stock markets everywhere are crashing. And we start seeing defensive stocks getting beaten down (eg. DBS, ST engineering, Ascendas Reit….SGX not as much).

Not to mention the wild swings in the US markets. I do not think the FAANGs or BAT stocks are exactly cheap or fair value now… but they sure were a lot cheaper than what they were at a few months ago. Many heavyweight stocks are.

And the global economy just went into a recession. Singapore will be in a deep recession

  • IMF head says global economy now in recession (read here)
  • Singapore: A deep recession (read here)

The amount I invested in each stock is not big. It is a way of setting up the portfolios (and trying to set up a system to get dividend income almost monthly). I guess the next stage is to slowly add to each of the position, and get some strong growth stocks if markets continue downwards.

Basically, I see the dividend portfolios (consisting of Singapore Portfolio, Hong Kong Portfolio & Malaysia Portfolio) as cash cows. The projected dividend for this year for me should increase by a lot (however, I won’t be surprised if some of these companies cut their dividend for 2020). I am not really into growth stocks at this stage, but given the US market crash, many fundamentally strong growth stocks are looking very attractive.

I think the portfolios are called dividend portfolios (not capital gain portfolios) for a reason. And I try not to focus too much on the unrealised loss. I invest (not speculate for short term price gains), hoping that these stocks will provide me with long term recurring income.

For some of these stocks, I have been eyeing them for years, and have even written about them. I have dreamt about owning them for years but always felt that they are too expensive. The crisis (don’t know how long it will last) provided me with an excuse to purchase some of them. And I like to think quite a few of them are quality companies or REITs holding quality properties.

Timing-wise I reckon I could have done better. However, in retrospect, if I was to live through the scenario again, I would have made the same decision. My decision to start a small HK centric portfolio late last year would probably be the same if I am to go through it again. Knowing that valuations in the US were high at that time.

In hindsight, looking at the sea of red in my HK centric portfolio, it might have been better to invest now as compared to then, but I would have made the same decision then if I am to relive it. In HK’s case, it is not just one Black Swan, it is like a triple Black Swan event eg. HK Riot, COVID 19 and the Oil crisis

Hence the need for a cash cushion because I may be wrong again, and it allows me to continue buying.

Others on my watch list include Parkwaylife Reit, Nestle and Mastercard, and some others… still mulling. Who knows maybe I have already missed the boat.

 

“What we do now echoes in eternity” Marcus Aurelius 

 

Posted in Portfolio | Leave a comment

Game Plan: Shifting Gear but not full throttle

pexels-photo-248539

Context

First I will start off by stating the obvious: My portfolio is a sea of red. And it is getting redder by the day. Having been through the 2007-2008 Great Financial Crisis, I think sooner or later I will see this (if I stay in the market long enough).

Having said that, my personal thoughts are that with every crisis we start seeing flaws in the system that we were not aware of. With the current COVID 19 outbreak, it led to the collapse of the fragile oil-exporting alliance between Saudi Arabia and Russia after almost four years. On Monday, oil prices had their worst day since the 1991 Gulf War, falling 24 percent to around $34 per barrel.

A crisis begets another crisis. Will there be another? And why not?

After all, we do not know what we do not know. I am sure the system is not perfect. Given such a long bull run, I am sure there are inflated assets and bubbles waiting to pop.

Many are worried about the US Fed’s impotence in the face of further economic risks. Interest rates are now set in a 1 percent to 1.25 percent range, how low more can it go? Is negative rate a good solution to start with? Look at the European countries and Japan with negative interest rates, how are their economies faring a few years after that? Could have been better…

Ok.

I did not think I would be giving so much thought on my Game Plan for this year in such a short span of time. We are still early in the year 2020 (mid-March to be exact). However, given how things have quickly developed from late last year to today… with the US markets in bear territory, Hong Kong in recession, Singapore flirting with recession with the Singapore market at a record low, etc… I reckon it is inevitable that I need to give the plan some thoughts.

  • Singapore shares hit 10-year low over COVID-19 fears (read here)

Investing Principle

Firstly, my principle so far has not changed. I intend to create a stream of dividend income from my stock portfolio. A bear market incidentally offers a chance to accelerate this process.

To be more detailed, the strategy is:

  1. To have a cash cushion or war-chest. I am not 100% invest in stock. To have bonds or cash as a counter-balance. In times of crisis to utilise the war-chest.
  2. To diversify my stock portfolio (Unless I think I am Warren Buffett, and I am not, there will always be a chance that I would be wrong. And I have been wrong on many occasions).
  3. To invest in quality companies and hold for the long term.

Secondly, I would like to highlight that I think this principle actually works … well, not in the monetary reward sense (not yet I reckon). I actually felt quite at peace with myself while we are going through this ‘turbulent’ period in the stock market.

 

What Changed

Before I talk about my plans moving forward. I would just highlight a few points. I think our experience in the past kind of affect how we think (or shall I say mould our thoughts). We like to think we are rational beings who are unbias … but for me, I think my past experience influenced my decisions from time to time.

I have been through the 2007-2008 GFC. And I am aware that the stock markets can wreak havoc to my savings and it can change from green to red (with no amber in between) in a flash. So yes, it still haunts me. The difference between the then me and the now me…..more than a decade later, is back then I do not have a significant war-chest. I did not have much then, so didn’t have much to lose anyway. Now I do. Back then, I have a mortgage to pay and planning to have a child.

I recently reached the net-worth milestone I have been aiming for, for a long time, only to see it dropped shortly due to the market crash.

Another point is.. I kind of completely missed the 2018 market drop. I guessed I procrastinated too long and though the market will continue trending lower longer. I did not invest a lot during that time.

Nevertheless, many things are still the same now. I still do not know how long the current downtrend will be. Will it be as severe as the 2007-2008 GFC? I hope not and think it probably won’t. I started a Hong Kong centric stock portfolio in late last year in view of the recession in Hong Kong not knowing that we will have the current crisis now, so soon. Still, I reckon that although there might be dividend cuts in some of the stocks I am holding to… the projected dividend income should be higher than the year before.

I am not that affected or hoping for capital gains via stock prices. Although I do hope that the stock price drops don’t go beyond my pain threshold (>50%). I view my stocks as assets that would pay me dividend and to do that, they and the industry they are in need to be fundamentally sound. The market can change … but at least I get paid while waiting for the market to turn.

Game Plan

Occasionally I came across people who are shocked, sadden, angry by the crash. Some are 100% invested in stocks prior to the crash and are now staring at massive losses. My hearts go out to them. In fact, many of my stocks are not performing well.

Stwalkerbluelanterns

Personally, I think the blue ring (Hope) is a much stronger ring than the red ring. Especially when it (blue ring) is combined with the green ring (Will).

However, I think we all need to have a plan before we invest. With the US markets at multi-year high only not too long ago… there is always a possibility of a crash. We can’t escape the pain (to quote Kyith from Investment Moat). Is this crash any surprise to begin with? The US market has had the longest bull run in history. Since 2016 -2017 onwards I have been reading more and more articles about the impending crash. What were their plans then (if things suddenly turn ugly)?

Then there are another group of people who are thrilled by the crash (probably been waiting for it since 2016 and have huge war-chests).

  • 2020 – Game Plan (read here)

My original game plan at the start of the year is to use my excess cash (leftover from my salary) to purchase Hong Kong centric stocks. While not really touching my war chest. The proportion of stocks to war-chest then was around 30% to 70%.
Back then, I felt that the Sg REITs is not undervalued (given the run-up in 2019). And I mentioned that I probably won’t be taking a stake in it unless it is for diversification. On the other hand, there are still values to be found in the HKEX and some local dividend stocks are looking not overvalued.

Sector-wise, back then I was eyeing bank stocks, HK property & Reits, local dividend stocks. I felt that bank stocks act as a counterbalance to other stocks which tend to drop when interest rates rise (typically REITs, properties and generally stocks with more debts on their balance sheets). Bank/finance stocks although technically, not at rock bottom price-wise, have not soared as much.

Some of the local dividend & growth stocks then were starting to look attractive again price-wise.

Now…today, situations call for a rethink…

 

Amount Spent

I have recently ramped up slightly the amount I spent per month purchasing stock. It isn’t much. The proportion of stocks to war-chest now is around 28% to 72% (despite what the amount I spent on stocks, the drop in stock price cause the stock proportion to drop).

Capture1

111

I reckon what I have spent so far on the stock can be further increased. However, I do not want to go crazy. A bear market typically lasts for 12mths to 18mths. And as it goes lower, the amount spent on stocks should increase. Of course, I have no idea if it will trend lower or higher moving forward. And I hope it won’t be a repeat of late 2018 for me (too slow to take advantage of the drop).

In Jan, Feb, Mar 2020 … I have been unable to keep to my budget (eg. just spending the leftover from my salary). I reckon in Jan I used my bonus to purchase some stocks. There has been a slight increase from Jan to Feb. I think given the situation since the start of the year, it is ok…. buy more if there is are values to be found. The market drop this month is drastic.

Amount wise: I am still not aggressively pumping in money yet. Yes, I have taken some from my war chest to buy stocks and converted part of my short term bond to cash. But still, I am not crazily pumping much into stocks. The US market has rebounded sharply on Fri (13 March 2020). I have no idea if it is a dead cat bounce or the start of an uptrend. Nevertheless, I will increase the amount I spend. Minimally, I need to at least keep the 30% to 70% ratio. Even this ratio seems a bit too conservative now.

I don’t want to “let this crisis go to waste”.

Look I am going to be adding into my stock portfolio for a very long time…and as much as I don’t want to miss the upside (if it does happen), I reckon I still need to have some dry powder for the years to come. And I don’t think I will ever be 100% invested in stocks even if I am in the midst of the next GFC.

Someone advocated doing dollar cost average in a downtrend and doing lumpsum purchase in an uptrend. But given the wild swings in the US markets… the trend is not obvious. Things have been developing very fast.

However, with the current forward economic environment, I would probably factor in a 20% to 30% dividend cut this year. And if I am ok with that payout long term, I should not be afraid to invest in the company, provided I have confidence in the stability of the company and its industry as a whole. Yes, I will probably see paper loss right after I buy and would be staring at it for months to come.

And anyway, does it matter if it is a dead cat bounce or further downtrend or uptrend. As long as I am comfortable with the projected payout (given the anticipated cut), the valuation, then should just invest.

 

What to buy

For the month of Feb 2020, I have bought stocks of BOC HK, Sats, Hongkong Land and Ascott Trust.

For the month of Mar 2020, I have bought stocks of DBS (only) so far. I have been busy at work and did not spend much time putting in orders. Hope I can purchase some on Mon. To be frank, I haven’t not been paying too much attention to buying stocks.

Moving forward some of the more defensive dividend stocks in the Singapore stock market are starting to be affected (by the market sentiments).

I have been eyeing them for some time. Although the drop in their share prices is not much (relatively speaking), and some of them I feel are still overvalued eg. Industrial REITs – Mapletree Industrial Trust, Ascendas Reit, SGX, ST Engineering, Vicom, Parkwaylife Reit, etc.

The non-Singapore market stocks in my radar consist of Heineken Malaysia Bhd, Carlsberg Brewery Malaysia, Nestle (Malaysia) Berhad, Dutch Lady Milk Industries Bhd. Dutch Lady, by the way, was beaten down by quite a bit though (the odd one out)… probably fair value.

They may offer some diversification, as I do not want to be too heavily invested in banks (further Fed rate cuts seem likely), Hospitality Reits, Retail Reits, Transport related stocks, etc.

Hope their stock prices will drop more. That is also probably why I still need my war-chest (to be not depleted so fast).

Nevertheless, those beaten down are now even more beaten down (eg. Straco, Mapletree NAC, Sats, Ascotts Trust, DBS, OCBC, Hong Leong Finance, etc). I will still like to add to my HK centric portfolio. Yes, Hong Kong, you are down and out for now, but I still believe in you!

Many stocks there are beaten down even more now.

That’s it for now.

Posted in Portfolio | 10 Comments

Thoughts on my Game Plan for year 2020

Not too long back, on 16 Jan 2020, I wrote about my game plan for the year 2020 (read here). Today at the end of February 2020, I would like to have a quick stocktake of my thoughts.

pexels-photo-212286

As I progress through my investing journey, there is one constant lesson which I learnt over and over again. No matter how confident and right I think I am about the market or any particular stock or company, there is always the possibility that I will be wrong.

When people mention about the current Coronavirus outbreak and the market reaction to it, they often refer back to the Sars crisis in 2003 (see below chart from this article). They talked about how the market quickly rebounded after the crisis then and how it was a V shape recovery for the economy and the market.

ltsti14anew

Personally, having read about the Dot.com crash, Sept11 attacks, invested through the Sars outbreak and Global Financial crisis and China-led global slowdown, there is always this question in my mind. Will it just end with the Coronavirus outbreak now?

In the case of the Hong Kong stock market, people might have thought that the Hong Kong protest was the black swan event for these few years. It started around mid 2019.

Without doubt, if I view it just from the Hong Kong market angle, in isolation…it is a huge event after a long time. It is a big deal from that angle.

Personally, I have never doubt that a bigger crisis could occur later. Yes, I do not know what it might be… but yes, in all possibility it might not happen. Even though many articles talk about the fire sale in HK property counters, tourism/retail sector counters, financial counters…I believed it could drop even more (more pain before we see any sort of recovery).

capture222

The HK protests started sometime in June last year. By late Oct 2019, Hong Kong entered a recession. Its first recession after a decade. By Dec 2019, many analysts and bloggers were talking about the low valuation of HK stocks.

I started a Hong Kong dividend portfolio sometime in late 2019. I think I started nibbling in late Oct 2019 (Income Investing and Hong Kong, read here). By 1 Dec 2019, I have a small portfolio consisting of HK centric stocks (Hong Kong Dividend Portfolio, read here). In late Dec 2019, equities only occupy a small percentage of my net worth (15%) (Income Streams, read here).

I remember one of the readers of my blog (probably much older than me) commented that I was conservative for my age (given my low portfolio allocation to equities). How successful investors take big concentrated positions in just a few stocks. He just left it at that, as an observation.

Knowing myself, I don’t really trade a lot or enjoy selling losing counters (unless there is really something fundamentally wrong with the industry or company), I guess, in retrospect, it is for the better.

I actually thought I was late in investing in view of the development of the Hong Kong protests. Many Chinese investors were quick to take advantage of the big price drops in Aug 2019, and the market sort of rebounded after that.

However, as we all know now, the events affecting the HK stock market did not just centre around the social unrest. It was subsequently rocked by the Coronavirus outbreak.

The question now is: Will we ever going to be at the lowest point, even now when WHO has raised the coronavirus threat assessment to its highest level?

Nobody will ever know.

  • WHO raises coronavirus threat assessment to its highest level: ‘Wake up. Get ready. This virus may be on its way’ (read here)

Capture444

Currently, equities still only occupy a small percentage of my net worth (~15%) – despite me injecting cash in every month (probably due to the drop in stock prices). I reckon the capital depreciation in the stock prices is greater and faster than my cash injection. And I have not sold any stocks (only buying bits every month).

11122

So back to the ques: Will it just end with the Coronavirus outbreak now?

My own personal opinion is that it will not. (But again I could be wrong). If I am to relate back to history, I could simply swap the current Coronavirus outbreak with the year 2000 Dot.com crash… and subsequently, we might see 2 or 3 more crashes in the Singapore market before things actually start to rebound for the long term.

  • Dow falls 1,191 points — the most in history (CNN) (read here)

With the headlines screaming about the drops in the US markets, the market valuations are still technically above the mean & median values.


Capture1111

In the case of the Singapore Stock market, the SPDR® Straits Times Index ETF (ES3) does, however, look cheap. However, the Singapore market has been underperforming the other major indices for ages. Note: The STI’s average PE ratio from 1973 to 2010 was 16.9. The current P/E of ES3 is now 10.93.

capture2

Capture234

So am I going to avoid stocks altogether? Nope.

Ok, I am going to be totally frank with you. It is not easy for me to be investing now. There are times I literally have to mentally force myself to press the buy button. But I will continue and slowly up my monthly purchase of stocks. Now with the wider array of stocks down trending, I will start to nibble on more Singapore listed stocks. And the losses have been piling up. I can buy the stock today and the next day it dropped by 4% to 5% (and that is not considering all the accumulated losses + new losses on my current holdings). The anticipated dividend has also been piling up but at a much lower rate, but I see it as a longer-lasting factor.

I have a habit of ‘low-balling’ the prices when I bid. I will typically put in a bid on the stock I have been eyeing for a while for the past week or weeks (a shopping list so to speak) in the morning. The price will often be below the trading price then, probably a few cents lower (lower than the lowest trading price for that day at that point in time). Very often, my orders don’t get carried through for the day.. and I am fine with that. However, these days, there are many “motivated” sellers (stock prices for many stocks are falling), and I don’t need to put in many orders … just one for the day and it will be filled by the end of the day. Of course the next day, I will find that the opening/closing price is often lower than my purchase price.

At one time, it used to be finance & property counters, retail/tourism counters & hospitality or retail REITs, hospitality counters, aviation & transport counters in the Hong Kong markets that are falling, then we have their Singapore and China counterparts falling.

Now even those seemingly not directly affected counters in the Singapore market are falling (eg. ST Engineering, SGX, CapitaLand Commercial Trust, Ascendas Reit, Parkway Life Reit etc). Although for some of these counters, percentage-wise, given the big run-up in prices, the fall isn’t that big relatively. Yeah, I still think they are not fair value or cheap yet. Sure these companies / REITs will be affected in some way or others if Singapore as a whole does not do well economically.

It is like people in a cinema rushing for the exit when there is a fire, and the exit is still that small.

Below is my current list of stocks in my portfolio as of today. For the month of Feb 2020, I have purchased shares of Sats, Ascott Residence Trust, BOC Hong Kong and Hongkong Land. From the earlier pie chart on my net worth, it seems like I did not do anything for the past few months… but I have been slowly nibbling into stocks. Just that the value of the stocks kept falling in recent times.

Capture4

For the coming month of March 2020, I am expecting dividends from Lam Soon, Sun Hung Kai Properties and Sunlight REIT.

Although I don’t think we are anywhere near the extreme low of the markets, I will still do some monthly purchase. I do not believe I can ever correctly time the bottom anyway.

Not too long ago on 20 Feb 2020, I did a post stating that I have reached the next milestone in my net worth (read here). I did not state the exact amount as I felt that this amount only materially matter to me only. Anyway, it is just a psychological thrill, and with the correction in the markets, and despite receiving my salary for this month, my net worth today has dropped below this milestone amount. Haha.. oh well.

Nevertheless, my focus is to build a steady stream of income and I think that this is more important long term.

Posted in Portfolio | 5 Comments

Interesting Charts on China and Hong Kong

With the Novel Coronavirus outbreak still not subsided, Hong Kong social unrest unsettled and US-China trade still unresolved, there seems to be plenty to worry about.

It is turning out to be an eventful late 2019 and early 2020. Interesting times to say the least.

pexels-photo-106344

I have found some interesting charts.

  • Crowd Size of the Hong Kong Protests (see below. Source: China’s Year in 10 Charts – read here)

Capture222

 

  • Auto sales in China plunged 92% during the first two weeks of February 2020 (see below. Source: Ironically, It Needs To Get Worse – read here)
    47439673-15824018397481952_origin

 

  • Preliminary visitor arrivals data for February show average daily traffic to the city plummeted to fewer than 3,000 people, according to the Hong Kong Tourism Board. That’s an almost 99% decline from just shy of 200,000 a day during the same period last year, data compiled by Bloomberg show. (See below. Source: Hong Kong Arrivals to Plunge 99% in February on Virus – read here)

111

 

  • Retail sales in protest-ravaged Hong Kong fell 23.6 percent in November 2019 on an annual basis, the tenth consecutive month of decline, the Census and Statistics Department (C&SD) of the government of China’s Hong Kong Special Administrative Region said on Friday. (See below. Source: Hong Kong’s November retail sales down 23.6% – read here)

2bb8698102b9457489966184f65c987f (1)

 

  • The Hong Kong economy contracted 2.9% year-on-year in the last quarter of 2019, following a downwardly revised 2.8% fall in the previous period, due to weak domestic and external demand amid violent anti-government protests and the US-China trade war. (See below. Source: Hong Kong GDP Annual Growth Rate – read here)

Capture1234

 

  • Rates for giant Capesize ships, typically used to carry raw materials such as iron ore, plunged 90% from a September peak to less than $4,000 a day based on an index that tracks their earnings. (See below. Source: Commodity Shipping Costs Fall 99.95% After Virus Slams Market– read here)
    Capture111

 

  • The 6.1 percent rate is a sharp drop from the 6.6 percent the year before and marks the third straight drop …(See below. Source: Chinese economic growth hits three-decade low – read here)

Capture123

 

  • New apartment sales crashed 90% in the first week of February over the same period last year. Sales of existing homes in 8 cities plunged 91% over the same period. (See below. Source: ‘Worse Impact Than SARS’ – China Home Sales Crash In First Week Of February – read here)

china credit impulse feb 2020_0

Posted in Hong Kong Shares | 1 Comment

Reached the next milestone!

I remembered in late April 2018, I did a post about aiming to reach the next milestone in net worth, but did not (read here).

Well, just want to write a short note here. It has been a difficult journey, littered with misses (and poor stock performance). My stock portfolio still looks bad, given that sentiment is generally low with the Coronavirus situation and low growth forecast in the near future for Hong Kong, Singapore and China.

Nevertheless, for some time now, I have decided not to rely too much on stocks and just grow my net worth base on my active job income (and bonds).

Finally today, with the latest update from my CPF account (and this month’s contribution), I finally reached my targetted financial Milestone! And that is excluding the value of the property I am staying in, which is fully paid for.

This amount may not be much for some people, but that is not the point.

pexels-photo-941693

Just want to drop a short note to me.

Look forward to celebrating my daughter’s birthday next month. 🙂

Yeah!

Posted in Portfolio | 5 Comments

Straco: What happened to the Growth Story?

Among some of the worst-hit Singapore listed stocks due to the Novel Coronavirus outbreak, I reckon Straco Corporation Ltd is undisputedly one of them.

download

I have been reading ‘A Path to Forever Financial Freedom (3Fs)’ articles about Straco with interest. Yes, thank you Brian, for constantly bringing this stock to my attention.

This stock has been in my radar for years. I am sure, many would remember it as a rock-solid stock.

  • Straco Corporation Ltd (read here)

From a quantitative perspective, Straco is a gem. Heartlandboy has wrote a great post about it on 15 December 2017 (see below).

  • STRACO CORPORATION: INITIATION REPORT (read here)

It is to me, a cyclical stock, which I reckon, many a time, it holds me back. The thing about this company, it has many events happening from time to time. And the tourism-leisure sector which it is operating in is extremely volatile, ever-changing and heavily influenced by the economic outlook.

fabien-bazanegue-rTpsIAfXxDI-unsplash

Back in 2016, I felt that the stock was undervalued. However, subsequently, its stock price continued its downward trend.

aaa

Nowadays I hardly see any analysts’ coverage on this stock. The latest analyst report I found was one dated 15 June 2016 by DBS Research (see below).

  • Straco Corporation: Small MId Cap Explorations (read here)

What has happened since then?

Prior to the opening of the Shanghai Disneyland (in June 2016), there were doubts as to how much the Shanghai Ocean Aquarium will be impacted. Turns out that Shanghai Ocean Aquarium is able to benefit from the positive externality of Shanghai Disneyland.

However, subsequently, issues cropped up with the Singapore Flyer.

On 25 Jan 2018, operations were suspended due to a technical issue. All 61 passengers on board were brought to the ground safely when the incident occurred. Operations resumed two months later on 1 April 2018. This weighed on Straco Corp’s full-year earnings, which fell 12.4 per cent to S$41.8 million for FY2018.

Shortly after, the Flyer was again suspended on 19 Nov 2019 due to technical issue involving one of the spoke cables. And it has not opened yet.

However, it is not just the Singapore flyer that is not performing well.

In Aug 2019, Straco’s Executive Chairman, Mr Wu Hsioh Kwang said:
“Singapore Flyer reported higher visitor numbers this quarter compared to 2Q18, however, both the Shanghai and Xiamen aquariums registered lower visitor numbers.”

In Nov 2019, Straco in its 3Q Earnings highlighted the following: “Lower revenues contributed by Shanghai Ocean Aquarium (‘SOA”) as visitor numbers declined amidst a challenging economic and operating environment; while revenues from Underwater World Xiamen (“UWX”) and Singapore Flyer increased marginally.”

As a long term investor, it is hard for me to extrapolate the way forward for this company.

Now with the Novel Coronavirus outbreak, all Straco’s attractions are temporarily closed. In the case of Straco, this is without a doubt a ‘Black Swan” event.

Personally, to me, for the overall stock markets, I don’t really see the Novel Coronavirus pandemic as a ‘Black Swan” event (yet). There has been much worst crisis.

In 3F’s recent article titled, “Being At The Right Place At The Right Time” read here, Brian mentioned: ” With all attractions temporarily closed for now, I think it is safe to say that almost all the bad events have played out. The only thing I can think of is if this crisis were prolonged which means extension of the closure (third level) but hopefully we won’t come to that.”

Actually, I was thinking the only thing that is actually still lacking (to make matter worse), is a recession in the US or worldwide, and a sudden market crash in the US markets, in the next few months. Technically, that is not a remote possibility. Or the Iran-US war actually plays out (just trying to be creative here).

Nevertheless, things are really quite bad at Straco.

I was reading through Straco’s past earning reports and Annual reports. The thing that strikes me is, when it is bad, it is really bad, but when things turn around (eg. flyer get fixed and reopen), good again, it is really good (like the emotions of a teenage girl).

One quarter, the management was pleased to announce 20+ percentage increase in profit YoY, recovery of the Flyer and stated the steady growth in tourist arrival etc. Next quarter, management highlighted lower earnings from the aquariums. With no much details provided.

Are you kidding me? Seriously?

If you are someone who prefers to invest really stable and boring companies, this company probably isn’t the one for you.

What Now?

Ok, in the short to mid-term, I agree that the upside is pretty clear. That is playing the capital gain part. Nevertheless, if I am buying now, I probably have to be mentally prepared for further pain ahead (stock price drop). Like holding on to a falling knife or riding an angry bull. Well, just ask those people who bought the stock in mid-2016, holding it till now (and compared to those REIT investors who had a ball in 2019). However, fundamentally, the company is still alright.

“When stocks are attractive, you buy them. Sure, they can go lower. I’ve bought stocks at $12 that went to $2, but then they later went to $30. You just don’t know when you can find the bottom.” Peter Lynch

The below figures are from Morningstar:

  1. Price/Earnings: 11.51 (5 yr P/E at 15.53)
  2. Price/Book: 1.69 (5 yrs P/B at 2.91)
  3. Dividend Yield: 4.39% (5 yrs dividend yield at 2.84%)

If I think it was cheap in 2016, it is still cheap now (if now cheaper).

For long term income perspective, however, be prepared for fluctuations as the revenues are really heavily dependent on visitor numbers. And not forgetting that the US markets are still at an all-time high. The cyclical nature of its business is what I dislike.

Darn, at this time, I am probably telling myself I should just invest in Fu Yuan Shou or Singapore Saving Bonds. Suddenly, as compared to Straco (the once growth stock darling), these don’t look so bad.

“Most investors would be better off in an index fund.” Peter Lynch

However, I believe the overall growth story of Straco is intact and there is no fundamental issue with the company or industry as a whole. The Chinese tourism sector as a whole will grow supported by the burgeoning middle class.

Back in Sept 2016, in my post, I mentioned the following:

“Yes, it would perhaps be a good buy at this moment. However given the cyclical nature of this stock & US markets at all-time high, I would want to wait a little while for markets to become depressed to pick this up at a lower price.

Nevertheless, I will be keeping an eye on this stock in the meantime.

I am still in the “building up my war-chest” phase.”

Still on my watch list.

Well, I never ever did say stock investing is easy.

 

Some are especially excited about the fall in Straco’s share price (or the share prices of Genting or Mapletree NAC Trust or CapitaRetail China Trust or SATS or EC World, etc… the list goes on).

Currently, my approach to investing is kind of mundane.

I  have this monthly budget for investing (be it stocks or bonds — seem to be more towards stocks recently). It isn’t awfully lot, normally what is leftover from my monthly salary. Sometimes it is not even enough to purchase the min allowable lot for certain stocks. So yeah, well, it does in a way reduce some of the volatility (as compared to investing large sums) on a month to month basis, but it also guaranteed no sudden big rise. I don’t do leverage, my war chest is still much bigger than my stocks holding (but that stock percentage is rising slowly). Just slowly chipping at it.

The thing is above it all, the US markets are still at all times high. That is the constant never ever-changing story for me since 2016 — yeah it did drop by a double-digit percentage in late 2018. It is like this huge thunder cloud with no storm yet.

This method does not really set my adrenaline racing. It is far less interesting, more mundane. Occasionally, it becomes a drag… (kind of transactional), and there are times I have no ideas what to do.

Even if I have a sure idea (which I don’t), I won’t invest big at one go. Occasionally I may go over budget in some months… but try not to do that. There is always next month.

However, on the flip side, I spend less time worrying and more time with my family. (Eg. The more important stuff in my life). I have some dividend income from my stock & bond holdings, which would come in useful for the family spending (if not recycle back to my investing portfolio). I tend to view this method as slowly building up my dividend income.

Although I believe that reading and researching is important in investing. However, beyond a certain point, nobody can predict. I can do all the quantitative and qualitative analysis… but many things are just beyond my control. It is important to take action and also important not to do too many trades. And yes – there is NO perfect stock.

Recently what I have written is probably some of my ideas for next month (March 2020) or for what is left for Feb 2020 (probably a small sum). Maybe I will miss the boat… I don’t know. Who knows, maybe my idea for that same stock would change next month, or another stock might pop up in my mind.

What we thought is a black swan now could turn darker, who knows.

Anyway, I think this works for me at the moment.

 

Note: I am not vested in Straco.

Posted in Straco | 2 Comments

What is happening to the STI Index?

From time to time I would read articles and watch video clips talking about how overheated the US markets are.

In the above video, Phil Town is basically advocating that we increase our war-chest (specifically putting in a Money Market fund), wait at the sideline and to invest when the markets crash. To be patient. Investing at the lows will make up for the time waiting.

For someone who doesn’t really track the STI Index, I might be mistaken that the Singapore stock market is also overheated.

A while ago, I was trying out the Index charts in Yahoo Finance.

List of stock market indices

I started with the Hang Seng and iShare MSCI China ETF. I wasn’t surprised by the plunge in recent years for both Hang Seng and iShare MSCI China (given the US-China Trade War, Hong Kong Protest & Recession, Novel Coronavirus outbreak, etc).

FYI, iShares MSCI China A ETF seeks to track the investment results of an index composed of domestic Chinese equities that trade on the Shanghai or Shenzhen Stock Exchange.

Then I added in the Dow Jones and S&P500. The divergence (between the China/Hong Kong markets vs the US markets) in recent years is glaring.

What is even more surprising is when I added in STI Index. Looking at the charts, I was wondering what happened to the Index / Singapore stocks…? It was way off both sets of charts.

SPDR Straits Times Index ETF (ES3.SI) was at $3.22 in Nov / Dec 2010, it is now around that price in Feb 2020. Almost a lost decade (of going no-where).

It used to be simpler, years back. When the indices are more or less correlated. Now I don’t know. No doubt when US sneeze, the whole world would feel catch a cold.

China can have a Coronavirus outbreak, with Chinese cities being locked down, and the US markets are still running up all times high.

 

Capture

Capture1

So is the Singapore Stock Market (STI) expensive or cheap right now?

The long-term average PE ratio: The STI’s average PE ratio from 1973 to 2010 was 16.9. On 13 Feb 2020, the PE ratio of SPDR Straits Times Index ETF (ES3) is 11.95., and it is way off the historical average PE.

It is cheap, viewing it from this angle.

Capture111

 

What about the Hong Kong Stock Market (Hang Seng)?

Hong Kong SAR (China)’s Hang Seng P/E ratio on 13 Feb 2020 is 10.84, below the historical average of 12.5 times but slightly higher than the 10.5 times following the global financial crisis. The ratio reached an all-time high of 24.481 in Oct 2007 and a record low of 6.519 in Oct 2008.

It is cheap, viewing it from this angle.

666

In terms of valuation, as of mid-Feb 2020, the Straits Times Index is going at around 12 times its historical earnings while the S&P 500 trades at a price-to-earnings (PE) ratio (eg.  25.43) that is more than double that of the Singapore stock market benchmark. HSI is selling at a PE ratio of around 11.

Actually, the only thing stopping me from going heavily into stocks is the overheated US markets or shall I say a market crash or recession in the US.

So what will I do in the meantime?

I’ll carry on positioning my Singapore and Hong Kong stock portfolio for income. Looking to buy fundamentally strong dividend-paying stocks on dips, buying small amounts each month.

Nevertheless, I won’t increase my stock proportion much going forward (keeping it around 30% stocks and 70% war chest), trying to keep it as it is.

Posted in Hong Kong Shares, Portfolio | 1 Comment

Mapletree North Asia Commercial Trust VS CapitaLand Retail China Trust

I have exceeded my monthly budget for the purchase of shares this month. Recently, I have added small portions of SATS, DBS and BOC HK.

Not too long ago last year, I started a dividend portfolio basically focusing on more Hong Kong centric stocks. This is in view of the HK protests then (still have not died down). With the Wuhan Coronavirus outbreak, which is starting to affect more and more nations (including Singapore), some of the stocks in the Singapore stock market is starting to look attractive.

A

This provided me with an opportunity to expand my dividend portfolio further.

I have been contemplating CapitaLand Retail China Trust (CRCT) and Mapletree North Asia Commercial Trust (MNACT) for some time. Basically, I tend to think long term rather than the short term price volatility. Neither do I try to aim for some term capital gains. I would be hoping this stock/REIT continue to grow its earnings and provide me with dividend income in the future. So if you are not into this, then you probably won’t want to read further.

I have been hoping and waiting for someone to write something about comparing these 2 REITs. Unfortunately, I have not read any recently. So I decided to do a post.

In my portfolio, I have a few HK listed REITs, such as The Link Real Estate Investment Trust, Sunlight Real Estate Investment Trust, and HK centric property stocks such as Hongkong Land Holdings Limited & Sun Hung Kai Properties Limited.

image_2_capitamall_saihan

CapitaMall Saihan in Hohhot (CRCT), above.

FW

Festival Walk (MNACT), above.

From mid-last year to today, it has been an eventful period, esp. for Mapletree North Asia Commercial Trust. Its stock price has been battered since early July 2019, managed to increase a bit, before being knocked down again in Jan 2020 (due to the virus outbreak).

333

In normal situations, it would be useful to look back at the annual report and past financial performance of the company to make a judgement call. However, as I have said earlier, events have unfolded pretty fast over the past few months, making the extrapolation harder. Nevertheless, to many seasoned investors, this is after all the ‘norm’ as volatility is a fact of life, and we ought to embrace such volatility which offers plenty of opportunities.

fire

The closure of Hong Kong’s Festival Walk mall due to the HK protest exposes the flaw of Mapletree NAC Trust (closed since 13 Nov 2019, and re-opened on 16 Jan 2020, a total of 64 days). For the mall, rental collection resumed, on 16 January 2020.

The office tower was closed from 13 to 25 Nov 2019. During that period, rent was also not collected from office tenants.

While the loss of retail and office revenue, as well as property damage, are covered under the insurance policies, the assessment of the quantum of revenue loss and property damage recoverable by insurance claims is currently underway and the timing of receiving the claims has yet to be determined.

On 17 Jan 2020, MNACT announced that its 3Q FY19/20 DPU Declined 13.3% Year-on-year (read here). This was primarily due to lower revenue from Festival Walk as a result of rent relief granted and the closure of the mall since 13 November 2019, lower revenue from one of the Japan Properties due to expiry of the single tenancy for the building and conversion into multi-tenancies, and lower revenue from Gateway Plaza due to lower average occupancy. There was also lower average rate of HKD and RMB, partially offset by a higher average rate of JPY.

  • Hong Kong’s Festival Walk mall to remain closed after damage during protests: Singapore REIT (read here)
  • Hong Kong’s Festival Walk mall working towards 2020 reopening after protest damage: Singapore REIT (read here)

The mall’s closure highlights the vulnerability of MNACT’s credit quality because of its reliance on a single asset for some 60 per cent of its revenue and net property income for the 12 months ended Sept 30, 2019.

Subsequently, probably in response to this flaw/vulnerability, MNACT announced in Dec 2019 that it will acquire 2 Tokyo office properties.

11

22

With the HK protest on-going, there are ample opportunities to find stocks at bargain prices, in view of the uncertainties going forward. However, as I have mentioned earlier, I do have an HK centric portfolio, and in my opinion, there are bigger, better, more diversified (less retail-centric) REITs in the Hong Kong stock exchange. And also I might not want to be even more HK focus since now I have an even wider selection given the Coronavirus outbreak. Consequently, I may not even need to invest in stocks listed in the Hong Kong stock exchange.

So that brings us to CapitaLand Retail China Trust (CRCT).

Both CRCT and MNACT have heavyweight sponsors (CapitaLand and Mapletree being household names in Singapore) and capable managers.

And frankly, even though some may say the current HK protests and Coronavirus outbreak have inevitably created a permanent dent in the outlook for both these REITs, I personally believe that looking at their past records (prior to the protests and outbreak) might be useful in some ways.

In addition, even if there are no big events, it is really hard staying status quo in this business. By just looking at the news, I see multiple sale and acquisition of properties (eg. malls or office buildings) for them (esp. for CRCT).

CapitaLand Retail China Trust has 13 malls in China. In view of the coronavirus outbreak, CapitaMall Minzhongleyuan in Wuhan is closed and will reopen when local conditions permit. Nevertheless, the mall represented less than 3% of CRCT’s portfolio value as of 30 September 2019 and contributed approximately 0.5% of CRCT’s net property income for the first nine months of 2019. The remaining 12 malls located in various cities such as Beijing, Shanghai, Guangzhou and Chengdu are operating shorter hours, in line with local government guidelines.

  • CapitaLand’s China REIT shuts down Wuhan mall amid coronavirus outbreak (read here)

Its share price has dropped from $1.69 on 20 Jan 2020 to $1.52 on 7 Feb 2020. An approx. 10% decline. Not as bad as MNACT share price decline (since it is basically double whammy for MNACT).

4

So here we are in Feb 2020, 2 REITs whose share prices are under pressure.

I do not know much about the properties as I have not actually been to these properties, and to be frank, you probably know as much as me on what they are.

I have briefly read through both their recent Annual Reports. And frankly, if I just ignore the HK Protests and Outbreak for a second. There are actually quite a few things I like about MNACT, just base on a number of factors (purely numbers).

And IF you believe that these too will pass (distractions for some) and that there will come a day when it is business as usual for these REITs, then why not take a quick glance? After all, what doesn’t break the REIT, might make it stronger. In the future, we can look back and decide if we have made the right judgement call.

 

1) Distribution Income / Distribution per Unit / Net Asset Value per Unit

Extract from MNACT FY 2018/2019 Annual Report (See below)

5

Extract from CRCT FY 2018 Annual Report (See below)

6

  1. Distribution Income: If you look at MNACT’s figure, FY14/15 to FY18/19, there is a consistent uptrend and in the latest year, there was a 14.1% YoY increase. On the other hand, for CRCT, there was a dip in 2016, in the latest year, there was only a 9.4% YoY increase. And MNACT is a much bigger beast, with S$240.7 mil income vs CRCT’s S$99.7 mil income.
  2. DPU: Again MNACT demonstrated consistent uptrend for a 5 year period. In the case of CRCT, I find it rather flat, and it actually dropped in 2016.
  3. Net Asset Value per unit: Again MNACT demonstrated consistent uptrend for a 5 year period. In the case of CRCT, it appears to be in a downtrend from 2016 to 2018.

2) Land Use Right Expiry / Remaining Term of Land Lease

There are many freehold properties in MNACT’s portfolio. The shortest Remaining Term of Land Lease in its portfolio belongs to Festival Walk mall & office (@ 28 yrs).

Extract from MNACT FY 2018/2019 Annual Report (See below)

7

8

In the case of CRCT, the Remaining Term of Land Lease of the properties in its portfolio are typically 20 odd years (some probably 30+ years, but I see a number of properties with 2 dates… so I am using the earlier date).

CRCT’s retail malls are leasehold properties where their land-use rights would be expiring mostly between 2040 – 2050, which is some 20 – 30 years from today.

Extract from CRCT FY 2018 Annual Report (See below)

111

Of course, in the case of MNACT, Festival Walk still represents 58.1% of its revenue and net property income, and its Remaining Term of Land Lease in the Annual Report is 28 years. With the “One country, two systems” constitutional principle in Hong Kong set to expire in 2047, there are many uncertainties. What will happen then is a big question mark.

3) Portfolio occupancy rate

The other metric to assess is the occupancy rate.

The occupancy rate for MNACT is really high (at least that is what I can see from the Annual Report). The lowest being the occupancy rate at Sandhill Plaza at 99.3%. Many are at 100% occupancy.

The overall occupancy rate is at 99.6%.

Extract from MNACT FY 2018/2019 Annual Report (See below)

3333

10

Extract from CRCT FY 2018 Annual Report (See below)

The occupancy rate for CRCT is not as good as MNACT’s (at least that is what I can see from the Annual Report). The lowest being the occupancy rate at CapitaMall Qibao at 95.3% (if I ignore those malls under stabilisation).

There is YoY improvement for most of the CRCT malls, which demonstrate the exceptional capability of the management, but still not as good as MNACT’s occupancy rate.

And not many are at 100% occupancy. The overall occupancy rate is at 97.5%.

99

8888

In Gist

These are just a few metrics which I have highlighted. There are many ways to slice and dice, and interpret.

Of course, these are all history. I can’t predict the future. In the near to mid-term, these REITs will be without doubt impacted (and I am not talking about the share prices). How much will their revenue, Distribution Income, DPU and the NAV of the properties be changed in the future is also a debate.

However, in life, very few businesses are immune to disruption and changes. Many a time, we can only look at the past to predict future performance. And it is normally not a good idea to just purchase and hold without reading the Annual Reports.

Of course, you may be right that after what had happened, nobody would want to think about these REITs. And yes, there are always better REITs/stocks around.

As to which (MNACT or CRCT), it is a bit of a debate here. If there are no protests and social instability in Hong Kong and the uncertainties come 2047, MNACT would be a clear winner. However, with the massive disruption to Festival Walk (and the on-going unrest in Hong Kong), I would slant towards CRCT.

For an outsider like me looking in, I do question the confidence level of the (current and potential) tenants (and shoppers) towards this mall. However, I believe in the long term, MNACT will stabilise.

On another note, CRCT to me is pretty one dimensional. It is basically just about retail malls and they are all in China. That itself poses a (concentration) risk.

While in the case of MNACT there are retail malls and office buildings in various north Asia countries, offering more diversification (only bear bug is the over-allocation to Festival Walk mall).

  • Can You Find Yield Like CapitaLand Retail China Trust? (read here)

The less than perfect occupancy rate of CRCT is also another concern. As mentioned by ValueInvestAsia (for CRCT)- see below extract:

Wuhu & Minzhongleyuan
The two shopping malls continue to have below 90% in occupancy rate and bringing in insubstantial amount of income presently as both malls are impacted by ongoing tenant mix adjustments. Combined, they have contributed S$ 6.6 million or 3.0% in CRCT’s gross revenue and incurred S$ 0.2 million in net property losses in 2018.”

Nevertheless, for some, there is always a reasonable price when it just negates all the negatives. I am personally still quite open – if prices continue to trend down, the risk would be minimised and margin of safety bigger. Hence, things might change (and the balance tilt towards MNACT). The valuation of CRCT is not drop dead cheap as well (its share price did not tank by a lot despite the coronavirus outbreak and closure of its mall). MNACT is cheaper.

See below figures from Yahoo Finance.

MNACT

  • Trailing P/E: 6.13
  • Price/book (mrq): 0.84
  • Forward annual dividend yield: 5.62%

CRCT

  • Trailing P/E: 9.62
  • Price/book (mrq): 0.98
  • Forward annual dividend yield: 8.13%

Also, I might go for other more stable and cheaper Singapore listed dividend stocks or I might just add on to the stocks in my current portfolio. With the on-going coronavirus outbreak, we are starting to see value emerge from tourism-leisure related stocks, aviation-transport stocks, hospitality-related REITs or stocks, and even bank stocks. Some of which are fundamentally stronger. A wider array of stocks and REITs as compared to the Hong Kong protests episode.

After all, when it comes to retail malls, there is the elephant in room that some may not want to point out. There is always the constant worry of disruption by e-commerce.

To put in another way. When there is a crisis, not every drop in share prices is an opportunity. Shares of good, not as good and bad stocks drop.  After the crisis, the on-going issues (be it company-specific or industry-specific) will remain for these (not as good and bad) companies.

No hurry really. I am just sharing what I have read. Coming from someone who invested last year in HK counters.

Just don’t invest due to the FOMO mentality. We see that in the 2019-nCoV situation here. Don’t be like the ‘kiasu’ Singaporean rushing to Sheng Siong supermart on Friday (7 Feb 2020) to grab as many packets of toilet paper or rice bags as possible. That is upon knowing that the Government has stepped up risk assessment from DORSCON (Disease Outbreak Response System Condition) Yellow to DORSCON Orange on that day.

Not to mention hand sanitizers and face masks.

Note: I am currently not vested in Mapletree North Asia Commercial Trust or CapitaLand Retail China Trust.

 

Do remember to like this post on my blog if you enjoy reading the article. Thanks!

Posted in Hong Kong Shares, Portfolio, REITS | 2 Comments

Stay The Path, Keep Investing

Just penning down some of my thoughts.

 

Investing vs Speculation

Ah yes, the age-old question about the difference between investing and speculation.

To quote Warren Buffett:

On Investing:
“When I buy a stock, I don’t care if they close the stock market tomorrow for a couple of years because I’m looking to the busin\ness – Coca-Cola, or whatever it may be – to produce returns for me in the future from the business.
Now, if I care if whether the stock market is soap tomorrow, then to some extent I’m speculating because I’m thinking about whether the price is going to go up tomorrow or not. I don’t know whether the price is going to go up.”

On Speculation:
“Speculation, I would define as much more focused on the price action of the stock, particularly that you, or the index future, or something of the sort,
Because you are not really – you are counting on – for whatever factors, because you think quarterly earnings are going to be up or it’s going to split, or whatever it may be, or increase the dividend – but you are not looking to the asset itself.”

It is not easy to differentiate between the two.

m-b-m-ZzOa5G8hSPI-unsplash

Well, often the first thing I see when I check my stock portfolio is the stock prices. After all, these change every day, every hour… while the business itself doesn’t change much. The returns (as in dividend income) takes a long time to accumulate.

Think of the analogy of the guy walk the dog with a leash. See explanation by Joshua Brown in the video below (fast forward to 0.55).

To quote:

“There’s an excitable dog on a very long leash in New York City, darting randomly in every direction. The dog’s owner is walking from Columbus Circle, through Central Park, to the Metropolitan Museum. At any one moment, there is no predicting which way the pooch will lurch.”

“But in the long run, you know he’s heading northeast at an average speed of three miles per hour. What is astonishing is that almost all of the dog watchers, big and small, seem to have their eye on the dog, and not the owner.”

I use this analogy all the time to help people understand how the economy and stock market play off of each other. One of the hardest things to do as an investor is to entertain two opposing thoughts in our minds at once, and find a way to keep them despite the cognitive dissonance this can produce.

One of the most ironic aspects of investing is that the greatest gains lie ahead at times when things are bad, but not quite as bad as everyone suspects, and slowly, almost imperceptibly getting better. This is the moment when assets are selling at discounted values and the opportunities are laying at our feet, there for the taking.

Conversely, the worst time to invest is once everyone agrees that the environment is terrific and that the gains will continue as far as the eye can see. It is at this moment we find ourselves paying up for assets and competing with lots of other buyers.

 

Psychologically, it is hard not to be swayed by the prices. Just when the Hang Seng is recovering from the HK Protests, it was hit again by the Wuhan coronavirus outbreak.

  • Wuhan’s viral outbreak knocks the stock markets of China and Hong Kong off their paces, just as a rally is building momentum (read here)

I had just started a portfolio consisting of Hong Kong-centric stocks last year (prices of many stocks were knocked down then given the long-drawn protests and recession).

At one time, many of the prices of these stocks have increased beyond my purchase prices… before they were dragged down due to the Wuhan coronavirus outbreak…

Metaphorically, the green shoots were washed away by the Wuhan heavy downpour.

…and it might get much darker before we see the end of the tunnel. There will definitely be volatility.

The Lunar New Year holiday in China was initially set to run from Jan. 24 to Jan. 30, with work resuming on Jan. 31. Nationwide, the Chinese government has extended the holiday so that businesses would not reopen until Monday, Feb. 3.

  • Massive sell-off expected when China’s markets reopen (read here)

It is interesting to look back at how STI reacted in the past over turmoils. I have found the below 2008 FSM article. During the SARS outbreak in 2002-2003, the index dropped by approx. 33% over a year period.

  • The Singapore Market Is Nearing A Bottom (read here)

Capture

333

As I looked at my portfolio (sea of red), my only thought (burning question) was……. what should I buy next for Feb 2020?

Look at market fluctuations as your friend rather than your enemy; profit from folly rather than participate in it.” Warren Buffett

My goal was, after all, to slowly accumulate and increase my dividend income (won’t exactly call it passive). Well, stocks aren’t exactly dirt cheap at the moment, and the protests in Hong Kong aren’t exactly over. Amid the growing discontent fuelled by myriad social and economic problems, the Wuhan virus outbreak only adds to the issues.

  • Wuhan virus fears become new source of unrest for battered Hong Kong (read here)

It is easy to be affected by the news. In recent days, the news headlines are nothing but the Wuhan coronavirus outbreak. Singapore and HK economy will probably be affected. And about how the stock markets are affected.

No way we could avoid the news. On a daily basis, I see more people wearing masks on my commute to and from work.

Not too long, the headlines were nothing but the Hong Kong Protests…

However, (on a long term perspective) I believe both Singapore and Hong Kong will recover.

Currently, in the Singapore and Hong Kong stock markets, many travel/tourism & leisure-related stocks, retail/hospitality REITs, transport/aviation-related stocks are looking pretty battered. Not drop-dead bargain prices though.

 

Portfolio

Ok, some updates on my portfolio. I have moved more of the funds from the Money Market Fund to the Short Term Bond Fund. And also added part of my bonus to the Short Term Bond Fund. Good to see regular interest payment from the bond funds (including SSB).

Given the drop in stock prices, the percentage of stocks in the overall portfolio did not really increase (although I did add small amounts in Jan). See portfolio breakdown in end Dec 2019 here.

2

Percentage of Stocks vs my Warchest (consisting of cash, SSB, Money Market Fund, Short Term Bond Fund) is still relatively small. It is not even 30%.

It is still in a very defensive mode. I don’t intend to go in big-time on stocks just yet. And will stick to my monthly regime of buying small portions of stocks.

1111

I have started purchasing a small amount of Singapore listed shares (eg. DBS and Sats) in Jan. All of the stocks I purchased are giving me some sort of dividend yield.

Hence, the anticipated dividend payment is inching up compared to last year.

1

So far I have received the dividend for Link Reit in Dec 2019, and IH Retail in Jan 2020.

It will be a drought in Feb 2020. No dividend income except for bond interest payment. The next dividend payments will be in March 2020, from Sun Hung Kai Properties, Sunlight REIT and Lam Soon.

That’s it for now.

Posted in Portfolio | Leave a comment