1. Creation of new portfolio using margin financing
About 3 months ago, I went down to Maybank Kim Eng ("MKE") to apply for my first margin trading account. It was quite a daunting experience as I had given a CDP account number with typo and it took very long to resolve the administrative complications. Later on, I opened up another margin trading account with my usual trading broker, UOB Kay Hian as my trade representative mentioned that her brokerage firm can match the lower financing rate of MKE.
After trying out MKE platform, I was very impressed with their newest trading platform which allows one to customize the views to make it more intuitive with what you want to see. You can even divide up a single screen into multiple screens and add in the Widgets/Apps to choose what information to display. Personally, I thought that this was way better than UOB Kay Hian and hence decided to use MKE instead.
The use of margin financing is a double edged sword. Most essential part I think is not to get caught into forced liquidation of your holdings during times of recession whereby your portfolio may fall by 50% to 60% and you get a margin call from the brokerage. I have crafted out a separate investment portfolio "number 2" for this purpose.
2. Some quick highlights of the changes made to my portfolios:
(i) Frasers Centrepoint Trust
My intention is to hold on to Frasers Centrepoint Trust for a longer term as the growth story is still intact with many M&A opportunities from its sponsor. However, the prices went up to a ridiculously high of S$2.87 per unit at one time and I decided to sell off 10,000 units (around half of my current holdings) at an average price of S$2.85 per unit. One week later, managed to buy back the 10,000 units at S$2.71 per unit. Decided to use part of the realised proceeds to buy a good dinner treat for my family at Swensen.
(ii) Sing Medical Group
I have lost S$10K plus on Sing Medical Group ("SMG") albeit being unrealised losses. Prices dropped from S$0.400 per share recently to a low of S$0.275 per share before stabilising at around S$0.300. I have since made some additional purchases during this all time low period to boost my holdings in SMG. Results have improved but as usual, whenever there are capital raising exercises (be it rights issue or granting of convertible loans to shareholder), the market will slap SMG hard-left right and center- to punish it despite the better financial performance.
Please refer to to the enigmatic case of SMG write-ups.
I am still holding on to SMG despite the heavy opportunity costs suffered as I believe in the black and white quarterly reporting numbers until I am proven otherwise. Upcoming end Sep'19 report card will determine whether to cut losses. Also, the proposal mentioned by the Managing Director to consider implementing a dividend policy in FY2019 has not been executed. An announcement of new M&A or dividend policy implementation may act as a catalyst to boost up the much undervalued share price.
(iii) Frasers Commercial Trust
I have sold off all my units in Frasers Commercial Trust under my CDP account at prices of S$1.63 per unit (half-10,000 units) and S$1.68 (remaining half-10,000 units). However, under my margin account, I have bought back half (10,000 units) of my previous units held when its price dropped recently.
Overall, reduced holdings due to concern over whether it can maintain its current distribution.
Please see "Frasers Commercial Trust DPU May Not Be Sustainable Even With New Tenant Google Coming On Board".
(iv) Netlink Trust
This is no longer in my direct cash purchase portfolio as I have sold them off for a slight profit. The sustainable dividend yield is actually only around 4.023%. The current 5.5% distribution means that part of it is being financed through bank borrowings. Nevertheless, I think that Netlink Trust can still maintain the current financial results and distribution for the next 1-2 years. For the short term, the pay out will still be sustainable but for the longer term, surprises may spring out from the risk of upcoming 5G technology rollout which may adversely affect the business of Netlink Trust. Vigilance will be the key strategy to hold on to this counter.
(v) Mapletree Industrial Trust and Mapletree NAC
Both have risen too fast in valuation which depresses the rate of return.
For an industrial Trust, my required rate of returns need to be higher than what is being offered.
As for Mapletree NAC, HK riot and weakening RMB in trade war with US all weighted on my mind.
Have thus decided to recycle the capital from these 2 holdings into other stocks.
(vi) Starhill Global REIT
Took profit and sold off Starhill Global at S$0.78 per unit. The properties under Starhill Global are too overly dependent on foreign tourists at Orchard Road. Starhill Global is also unable to get positive rental reversion from its key master tenant Toshin which occupies most of the retail areas of Ngee Ann City.
Last but not least, I have increased my holdings in SPH REIT via my margin account as I believe that the upcoming potential M&A being announced will be the acquisition of the much long awaited Seletar Mall from SPH.
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