Investment Portfolio Updates- 18 April 2019 (Allocation of New Funds To More Defensive Investments)

Due to the US Federal Reserve keeping a dovish inflation outlook, interest rates have been maintained at the current level and no further interest rate hike is expected for 2019. This is actually a sign that the US macroeconomic condition is weak. But strangely, the stock market, in particularly, REITS rallied in valuation.

However, my thoughts are that if one is investing mainly for income generation, then short term fluctuation does not have much meaning unless one is doing frequent buying and selling of stocks for allocation of funds to the most undervalued assets. One would need to overcome the issue of lack of diversification too. In addition, timing the market is actually very challenging unless one has a crystal ball that can peek into the future.

Key Highlights since my last updates on my portfolio

I have injected additional funds of approximately S$10K into Netlink Trust (S$5K) and Keppel DC REIT (S$5.2K) which are slightly more defensive in nature in view of my pessimistic economic outlook. Being in the supply chain industry, I am seeing a contraction in the volume of shipments moving in and out of Singapore. Oil and Gas business segment is in particularly bad shape and in doldrums in spite of the recovering oil prices to USD70 to USD 80 per barrel range which were way higher than the USD40 a few years back in 2016.

Also sold off Singtel and Parkway Life REIT and did a bit of asset re-allocation to First REIT, Mapletree Industrial Trust as well as Mapletree NAC Trust.

1. Netlink Trust

I actually do not like Netlink Trust due to the uncertainty over its future cash-generating ability over the threat of 5G technology implementation in Singapore. The key issue here is the effect of the gain in 5G base stations connecting fees over the loss in consumer/corporation subscription upon the switch to 5G. Have parked some funds into Netlink Trust for now due to the short term stability offered while waiting for more details on the charging mechanism.

Please refer to my previous post on "Upcoming 5G Network Technology and Imminent Threat to Netlink Trust Business".

2. Keppel DC REIT

The WALE is 8 years. This is a high technology business support segment on data hosting. Also, once tenant shifted in, much setting up cost would have been incurred. Any exit or migration to other DC requires very detailed planning and extensive resources. Overall low yield but relatively stable based on its historical performance.  

3. Singtel

Have sold off my stakes in Singtel. I do not like the recent rights issue which Singtel took part in for its India market Bharti Airtel associate. Singtel is also fighting a bruising battle with its competitors in Singapore market and Australian market. These are 3 key markets where Singtel derive most of its profits. I do not see how the profit margin will improve in view of the tight competition in this 2-3 years. Fundamentals of Singtel is good but my preference right now is to sell off and re-deploy to other stocks.

4.  Mapletree NAC Trust
The property management team has been diligent and disciplined in growing the asset under management.

5. Mapletree Industrial Trust
The reasons I bought into Mapletree Industrial Trust are listed in my previous posts here. Mapletree Industrial Trust has demonstrated earnings resiliency over the years and I like its new strategy of going into high tech data centre segment to exploit on cloud and internet of things. Please also refer to Pt 2 Keppel DC REIT with regard to the defensive attributes of a data centre business.

6. Parkway Life REIT
Sold off and took profits. Reinvested most of the proceeds into First REIT.

7. First REIT
Added more units for First REIT. First REIT is currently trading below its NAV. It has fallen more than 40% from its peak of S$1.42 per unit. Institutional investors and other retail investors have been busy selling of First REIT. 

The key risk in holding on to First REIT is that Lippo Karawaci will default. However, this is unlikely given that Lippo Karawaci has won approval from shareholders at the recent AGM held on 18th April 2019 to proceed with the rights issue. USD730Mil will be raised. Also sales of asset expected to bring total fundraising to USD1 billion dollars which will shore up its balance sheet and improve credit ratings.

Please refer to my previous post on "First REIT- 5 Key Risk Factors".

If one believes in the long term prospects of healthcare services given the aging population, then I believe First REIT has a rather good growth storyline in place.

8. Thai Beverage
Took profit by selling additional units in view of the surge in stock price. Will wait for the announcement of the recent quarter performance in May'19 to decide on further action. Jan'19 to Mar'19 quarter results are expected to be even better than the preceding quarter due to the general election in Thailand.

"Winter is coming."
~House Stark