Frasers L&I Trust preferential offering results

Greetings from Tianjin! I’ve been busy these 2 weeks as I’m currently on a work trip, so no regular content last weekend. Chilling in my hotel room at the moment so I decided to give a quick update on my portfolio.

Frasers Logistics & Industrial Trust

The Frasers Logistics and Industrial Trust PO results are in! As expected, I didn’t get all the excess rights I subscribed to:

  • Total units applied:
    • Entitlement: 1,500 units
    • Excess application: 6,100 units
  • Excess Units received: 1,500
  • Total units received: 3,000 units

Based on today’s closing price of $1.04 and rights issuance price of $0.967, that’s an automatic 7.5% gain. Sweet 🙂 The reason why I’m growing to love rights issues for REITs.

Yup that’s it for now. Stay tuned this weekend for a exclusive investment article about my time in Tianjin 😀

Happy Hunting,
KK

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Portfolio @ May 2018

May

Before I begin with my regular portfolio review, I would like to welcome the 7 email followers who subscribed after my last post on CPF Hacks. That single post garnered over 10k views, almost doubling the blog’s lifetime views over the course of a few days. Thank you for your support of this tiny blog and letting me know that I’m writing something worth reading.

Here’s my portfolio as the end of May 2018:

SG StocksUS Stocks

Portfolio Value

Committed cash relates to funds used for the Fraser’s L&I Trust PO

Performance Indicators / Dividends

  • YTD Time weighted return: 0.33%
  • Dividends collected: $917.76
  • Upcoming Dividend Receipts:
    • Frasers Logistics & Industrial Trust: SGD 645
    • SingTel: SGD 652.70
    • Bank of America: USD 16.80

Commentary

Sell in May and go away

This age old investor adage proved true this year. With increasing geopolitical risk thanks to the Trump circus and their crusade against world trade, and Italy’s government (or the lack of it) woes, we face another sad month in the markets with losses largely driven by declines in Keppel Corp and Singtel. That said, that didn’t stop me from making big moves this month. After all, stocks do get cheaper in a downturn. Will June be better? Or will the market decline during the World Cup (apparently that’s a thing)? We shall see.

Transactions for this month

This was another transaction heavy month as I continue my pivot towards income and bidding farewell to more US stocks.

Purchases:

  1. Bought 15,000 units of Frasers Logistics and Industrial Trust (SGX: BUOU) ahead of the preferential offering as mentioned previously. Subscribed my 1,500 unit entitlement and applied for excess 6,500 units. I personally don’t expect to get much excess units, if any, given the intense interest in the REIT. Going forward this REIT will be a substantial driver of my passive income.
  2. Bought 1,000 shares of SingTel (SGX: Z74) after yet more selling pressure from institutional investors after earnings. The earnings itself was ok in my opinion, given regional associate troubles. The commitment to maintain a 17.5 cent dividend for the next 2 years was welcome too. Where the bottom is, I do not know. All I know is I’m buying a best in class telco with a decent yield. Will look to add again if it reaches the $3.00 – $3.10 range.
  3. Bought 80 shares of Micron (NASDAQ: MU) as a small speculation. Analysts are signalling doom and gloom for NAND and DRAM prices, I’ll take the contrarian trade as I feel with demand for chips should still be strong. The company also upped guidance for the year and instituted a monster buyback.

Sell transactions:

  1. Sold Frasers Commercial Trust largely to fund my Fraser’s L&I purchase. Trading in a sub par commercial REIT for a better quality one makes sense to me. That said, those who have a greater patience than I can consider FCOT at its current price as it has crossed the 7% yield threshold recently.
  2. Sold Lockheed Martin and Raytheon largely due to poor price action. I remain bullish on the US weapons manufacturers as a whole, but short term this sector should be under pressure due to confusing guidance and trade war related issues. Divested also mainly to concentrate funds in more important positions.
  3. Sold Walt Disney. This one pains me, as I really love their Marvel and Star Wars films, but this has been a big time under performer for me and with the continued uncertainty over the Fox deal, I really don’t feel like waiting around for this stock. Should I have sold sooner? Probably. I kept this around largely for diversification and love of the company, but at the end of the day, stocks are just pieces of paper.

Here’s to a better June.

Happy Hunting,
KK

Information presented in this post is for general information and educational purposes only. It does not constitute a call to buy or sell any stocks. Do your own due diligence, invest carefully and wisely my friends.

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Portfolio @ April 2018

April

April PortfolioApril Portfolio Value

Performance Indicators / Dividends

  • YTD Time weighted return: 0.66%
  • Dividends collected: $388.69
  • Upcoming Dividend Receipts:
    • Frasers Commercial Trust: SGD 92.80
    • Capitaland Mall Trust: SGD 105.64
    • Starhill Global REIT: SGD 109
    • Keppel Corp: SGD 182
    • Raytheon Co.: USD 15.19
    • Activision Blizzard: USD 14.28

Commentary

After suffering a pretty horrendous March, the chase is on to recover all those paper losses. In that sense, it was a decent month with month-on-month gains of about $3k driven largely by gains in Amazon and Spotify, offset by losses in my defence stocks Lockheed Martin and Raytheon on strange earnings guidance, Macron’s efforts to retain the Iran Nuclear deal and yesterday’s North Korean denuclearisation declaration. To say I’ve been very lucky with geopolitical and random news these months has to be an understatement 🤣 All I can say is that fundamentals are strong and I’ll stay the course.

Portfolio changes made this month has been more for diversification purposes given the volatile environment. They are as follows:

  1. Divested some Keppel Corp and rotated the cash into Capitaland Mall Trust to keep for the long term.
  2. Partial divestment of Amazon and full divestment of Facebook into Spotify and Visa respectively.

I’ve mentioned previously that I would buy into Spotify at the right price and I was presented with an opportunity early in April and it has been a decent performer since my purchase. As for Visa, I’ve always wanted to be involved in the payments space and went for a household name to limit the volatility in my portfolio, compared to if I had gone for sexy names like Square or Paypal. As for CMT, it was trading at a decent price. Although it was not the best yield of 5+%, with future growth opportunities in the Funan redevelopment, organic dpu growth and capacity for acquisitions, I’ll hold this for at least the next 2 years.

Earnings season has started in April and companies have been reporting great earnings so far. Only the counters with known flaws (FCOT and Starhill) were slightly disappointing to me. Will continue to observe these 2 REITs and rotate into better quality REITs if the market presents a chance.

For now, I’m just going to save and build my warchest in preparation for more volatility.

Happy Hunting,
KK

Portfolio @ March 2018

March.jpg

March Portfolio

Performance Indicators / Dividends

  • YTD Time weighted Return: -2.26%
  • Dividends collected: $244.20
  • Upcoming Dividend Receipts:
    • Bank of America: USD16.80
    • Activision Blizzard: USD14.28
    • Keppel Corporation: $322

Commentary

March has been another volatile month in the markets. With trade war fears, Facebook’s woes and Trump’s war on Amazon, it was a pretty bad month for me. All in all, I’ve round tripped my 2018 gains and then some. That said I’m looking to build more income into my portfolio using my newfound knowledge from the Dividend Machines course, so I’m continuing to save and build up my cash reserves.

Transactions-wise, other than those previously disclosed, I’ve sold ATVI as it was not acting well and I wanted to move away from high multiple tech stocks. If the chip stocks continue to tank, I’ll be interested in shifting my money over from FANG stocks. I have my eye on Intel and Micron at the moment, just waiting to pull the trigger.

Here’s to a better April 🙂

Happy Hunting,
KK

Recent moves: Amazon.com, Starhill Global REIT

Recently, I made some adjustments to my portfolio – I swapped out part of my Google position into Amazon.com; and bought into Starhill Global REIT. Am I breaking up with Google? Isn’t Amazon.com’s valuation insane? Isn’t Starhill Global REIT’s DPU falling?  Here are my thoughts.

Amazon.com

Amazon (NASDAQ: AMZN) has been one of those stocks that I’ve been eyeing forever but due to traditional valuation metrics I’ve put to one side for a long time. It all started when I was contemplating buying either Amazon or Google (now Alphabet (NASDAQ: GOOGL). I ultimately chose Google over Amazon purely due to valuation.

he-chose-poorly.jpg

AMZN proceeded to provide a more than 150% return since then. Admittedly, Google provided a not too shabby 50% return since, but you can see the relative under-performance. I’ve come to realise that Amazon cannot be owned based on valuation. They are seeking to dominate the world, so they need to spend and spend in order to get there first. Sure, they can rest on their laurels and immediately turn a profit by cutting spending. But that is not Jeff Bezos’s goal. What’s more he is executing on his strategy like clockwork – no. 1 e-commerce platform in the US, best Voice Assistant in Alexa, most widely used cloud platform in Amazon Web Services (AWS), the list goes on.

As such, to invest in AMZN was not because the stock provides value, but in your belief that Jeff Bezos is the Messiah that will bring you to the promised land of ecommerce, cloud services and AI, among the insane number of initiatives and moonshots going on at that company.

After yet another blowout earnings report by AMZN and another good but not great quarter by Alphabet, I decided to take the leap from GOOGL to AMZN on weakness. Which I promptly did last week thanks to Trump’s tariffs and Gary Cohn’s departure. I still retain 5 shares of Google purely for “diversification purposes”.

Will I crash and burn at the altar of overvaluation? Only time will tell so watch this space.

Starhill Global REIT

My continuing effort to build yield into my portfolio probably reached its end (for now) when I purchased Starhill Global REIT recently. This is a name that I don’t think people outside the investing community would know about so here’s a brief introduction.

Portfolio of Properties

Portfolio Overview

Source: Starhill Global REIT

The Singapore, Australia and Malaysia properties account for 62.5%, 22.1% and 13.2% of revenues respectively. This means that the fortunes of Ngee Ann City and Wisma Atria greatly determines the DPU of the REIT. Do note that they do not own the entire Ngee Ann City and Wisma Atria. Judging by the strata title plans, they own the whole of Wisma Atria excluding Isetan. As for Ngee Ann City, they own Office Tower B and the retail shops excluding Takashimaya department store.

Key Metrics

  1. Occupancy for SG retail and office space: 98.6% and 89.4% respectively
  2. Weighted Average Lease Expiry (WALE): 6.4 and 4.8 years (by Net Lease-able Area (NLA) and Gross Rent respectively)
  3. Price to Net Asset Value (NAV): 0.78
  4. Gearing: 35.3%
  5. Weighted average debt maturity: 4.0 years

The above set of metrics seems rather attractive to me because:

  1. Relatively high and stable occupancy for SG retail, however a lower occupancy for SG office space due to oversupply in office segment. With the anticipated recovery in office rents, the impact of lower occupancy might be offset partially.
  2. WALE being 4.8 years by Gross Rent means great DPU visibility over the next 5 years.
  3. The REIT is trading at 22% discount to NAV, which can be a buffer to further downside in the REIT price
  4. Gearing of 35.3% gives the REIT some room to lever up for acquisitions, if any, to increase future DPU (REITs are prevented from gearing up beyond 45% by MAS)
  5. Weighted average debt maturity of 4.0 years means the REIT doesn’t have a large amount of immediate debt obligations to service. With that said, the REIT has maturities in FY 2021 – FY2023 for a significant portion of the debt (approx 50-60% of the current debt). I guess they’ll figure it out then.

My Hypothesis

The main reason why DPU has been falling over the past year is a combination of factors:

  1. Lower office occupancy
  2. Lower Orchard Road traffic
  3. Threat of E-commerce
  4. Ongoing Asset Enhancement Initiatives (AEIs) and renovations
  5. Weakening of AUD and MYR

For point 1, as noted in the latest Q2 earning results, office occupancy is expected to recover in Q3 as committed occupancy only commences then. As such, Q2 drop in DPU is likely to be an anomaly.

For point 2 and 3, unfortunately there is little they can do beyond moving towards a more experiential mall concept rather than traditional retail concepts. The upside is that with Singapore tourist arrivals continuing to boom, Orchard Road traffic might recover as a result.

For point 4, AEIs are great for REITs as they usually result in increases in NLA and thus more revenue when the area is rented out. However, while the AEI is ongoing, that portion of the property has to be shut down, resulting in a short term decrease in DPU. The Wisma Atria food court only opened for business after renovation in November 2017. With a full quarter of operation, it should contribute more to DPU in Q3. Also, there are ongoing AEIs at Plaza Arcade (Australia) and Lot 10 (Malaysia) set to complete in Q3 and open in Q4, which is definitely accretive to DPU.

For point 5, the Manager has partially hedged their Forex exposure but this will continue to be either a headwind or tailwind.

Going forward, given the above discussion, I feel that there is potential for DPU recovery at least in the 2nd half of 2018. Further potential catalysts of increasing Singapore Office occupancy and average gross rents will further drive DPU growth. The market has already punished it for its relative under-performance to the big boys like Mapletree Commercial Trust, Frasers Centrepoint Trust and Capitamall Trust. Given that it is yielding a relatively attractive 6.8% yield and trading at a multiyear low, it is worth a punt despite the potential headwinds.

Conclusion

With the latest changes I made to the portfolio, I have a 3+% projected yield from my entire portfolio based on StocksCafe projections. I’ve also roughly split my portfolio into 50:50 SG and US stocks, with my SG portfolio focused on undervalued yielding stocks and REITs, while my US portfolio is focused on growth. Looking at it, I’m very happy with where my portfolio is at the moment and don’t expect to adjust it by much for the rest of the year (unless something drastic happens).

Happy Hunting,
KK

Disclaimer: The information I present are for general information only and does not constitute a call to buy or sell any shares. Individuals should consider the suitability of the information presented in this blog to their own specific situation before acting. Invest carefully my friends.

Portfolio @ February 2018

February

 

It’s the end of a topsy turvy month so it’s time to take stock!

Portfolio 1Portfolio 2Portfolio 3

Performance Indicators / Dividends

  • YTD Time weighted Return: 3.03%
  • Dividends collected: $244.20
  • Upcoming Dividend Receipts:
    • Keppel Corporation: $322

Commentary

Market volatility brought about a correction in early February, prompting me to put more capital to work this month as seen in the graph. This is offset by the decrease in unrealised gains for the year as a result of the correction.

It’s been a month of significant transactions. Other than those previously disclosed, I built a stake in Frasers Commercial Trust as a contrarian investment. As the HP Inc overhang over the REIT is gradually lifted, with a potential catalyst of the office space rental recovery going into 2019, it looks like a decent speculation. It pays a decent yield as well at the moment, fitting into my shift towards an income strategy.

Here’s to a better March! Huat ah!

Happy Hunting
KK

Everyone picnic!

Let me dust off a Hearthstone related meme.

The end is coming.jpg

Everyone panic! Run for cover! Sell everything! The markets are collapsing!

World Indices 06022018

Sia la everywhere 满江红 on Monday

Over the 4 years that I’ve been in the market, there have been periods where everything seems so dark and the markets so bloody. I had the whole “catching the falling knife” situation with Keppel Corp thing, the periodic doomsayer of Apple, government shutdowns, debt ceiling battles, Greece defaulting, Brexit fears.

What I learnt from all these now familiar and frankly welcome kicks up the bum is this:

  1. Nobody ever made money panicking
  2. There is always a better time to sell. Never cash out in the depths of the selling
  3. Most importantly, this too shall pass.

Take a breath, assess your portfolio and your shopping list of stocks, and decide if you need to change anything. If you had chosen your stocks well, you shouldn’t need to make much adjustments. Once done, you pretty much can just shut down the computer and go to sleep. Keep track of the price movements, but largely ignore them. This is why we invest in quality companies, so that we can switch off and go on a extended holiday without feeling a need to do anything about the portfolio.

So what did I do?

Honestly I’ve been too unfocused and sanguine recently. I reassessed my portfolio, sold my non-core stocks and rotated some of the proceeds into stocks that are now relative bargains, namely:

  1. Sold Apple. It is a relatively small position, so I wanted to concentrate more in certain stocks. This is not to say it is a bad apple 😛
  2. Sold Domino’s Pizza. The impending exit of CEO Patrick Doyle coupled with it being a relatively small position pushed me to bid farewell to this great stock.
  3. Sold Frasers Property Ltd. Property stocks likely to be under pressure with rising interest rates. I’m now neutral on the property sector due to gains in the past year.
  4. Sold Keppel REIT. Management guided that DPU likely to fall this year, with a possible recovery in 2019. I decided not to stick around in the meantime. Plus, property related stuff likely to be under pressure.
  5. Sold Tencent. It came too far, too fast, so locking in profits while I can. Will relook to buy back if it goes below HKD 400 or when it bottoms out.
  6. Sold Valeant Pharmaceuticals. It has become a battleground stock (ie the bulls and bears are at war with each other) so I expect it to stagnate here for a while.
  7. Bought Raytheon. Patriot missiles, yea! Plays into the macroeconomic theme of the US pivoting away from their Global Policeman role, leading to increased global spending on defence from US allies. Plus they reported a great quarter a few weeks back, so you’re getting the quarter for free based on current prices. Also, I didn’t want to add to Lockheed Martin for diversification purposes.
  8. Bought SingTel. Like a significant amount of SingTel. 5% yield, strong balance sheet, what’s not to love? Plays into my desire for more yield going forward as well. Limited growth potential as it is essentially a utility, but the stable yield and overblown (in my opinion) recent sell off since paying out their dividend makes it attractive to me.

Wow thats a lot of transactions in the 1+ weeks since my monthly portfolio, considering I only did about 3-4 transactions last year.

Summary

Fear spreads in times of market freefall. Keep calm and carry on. I say Don’t Panic, Picnic (Bad pun I know). In the spirit of picnicking, let’s relax and imagine ourselves at a awesome picnic. 😛

Picnic

Happy Hunting,
KK