Saturday 31 July 2021

Invest In US and China Stocks- Singapore SGX Is Dead?

I decided to pen this post after having a recent chit chat with my old friend from University as well as a "war buddy" during our younger days doing battles with auditing field assignments together (day and night) for almost 2 years. Well, yup, I mentioned "our younger days" as we are now old men with lower energy (岁月不饶人) and have since moved on to our respective jobs in the commercial sector. Anyway, we were talking about the latest topic in the market, that is, the bloodbath in China Tech and Education stocks due to the regulatory Big Brother coming in to smash and end the party. From there we also touched on something contentious, that is, the investing philosophies of my old friend and I are as different as day and night which I will elaborate more below. 

1. Invest and hold for long term or hit and run?
Those who have come across my blog will know that I am an overall income focused long term investor. The reason why I am so fixated on building up a passive income sum (instead of embarking on a capital growth investment strategy for retirement) is that I do not think job security exist in the current job market right now- anyone can be retrenched anytime (even if you work hard)  especially if you unknowingly say the wrong words and offended your Boss...haha. So, most of my investments are into higher dividend paying REITs and stocks on SGX which helped generate a side income.  

My old buddy on the other hand thinks that it is silly to be investing long term in the market as one would be subject to market ups and downs like the recent pandemic recession last year which lead to market crashing in March 2020. For him, investing is about being a sniper by finding the right opportunity to strike and then exit as soon as possible to minimize market risk. Hence, he will will buy stocks and then sell off once he made some money. I argued with him that such approach is akin to "Trading" and is extremely risky. But the funny thing is, he quoted a few examples which silenced me totally and seems that he is in fact doing a lot better than me in terms of returns on investments. Also, this will only work in US stock market and not our local SGX. Let me provide more details of what he argued upon.

2. Invest in US Stock Market- Singapore SGX is Dead?
The one thing super unique in the US stock market is that it swings wildly. Let me quote an example: Sentage Holdings (Financial Service Provider) IPO on Nasdaq. Its IPO price is US$5 per share but on debut day, it roared to US$52 (10 times) at one time but then after a while dropped down to US$4.60. The daily fluctuation can also be absurd. So you get the idea on how different US stock market is from our local SGX (dearth of growth stocks with business that has the potential to grow exponentially) 
In the recent China Big Brother crack down on Didi Chuxing, my old buddy told me he bought into it and asked me to also do it. I looked at Didi Chuxing current conditions and politely told him I will not be investing into it due to home-based regulatory woes as well as that Didi Chuxing also just turned a profit recently (previously all losses). Turns out he had the last laugh as he mentioned that he made a cool US$30K in just a few days (this is more than what I earned in 1 year for my pathetic dividend income)-bought10 lots at US$7.50 and sold it when market got wind of news that Didi maybe looking into privatization and it went up to US$10.50 per share.  

To sum it up, my buddy told me he spread his money on various US stocks and as long as 1 of them happens to be an outperformer, it would cover the losses (if any) from the others. 

I think a lot of folks have made a lot of returns such as from holding Tesla which has increased in value 6 times over since 1.5 years ago. So US market seems to be filled with more potential growth businesses than our local SGX which is mainly made up of the old industries. But as for my buddy's investment philosophy, I am not sure what to make out of it. I called it luck but he called it his set of unique investment skillset. To each his own I guess as long as one makes money. 

Sunday 25 July 2021

SPH REIT- Why One Should Invest In It Today In View Of SPH "Divestment" of Media Segment.

The million dollar question is what has SPH REIT got to do with the divestment of the upcoming Media segment from Singapore Press Holdings ("SPH")? The short answer to that is that we are now seeing the conversion of SPH to a true property management company (and to a smaller extent a developer like Capitaland and City Development from its development of Woodleigh Residences). There are 2 interesting developments arising from the ripple effect, that is, the (i) up and coming Student Accommodation business being injected and (ii) the possibility of new shareholders in the future mounting a takeover of SPH and merging its properties portfolio into their own REITs currently listed on SGX. I will elaborate a bit more on the above 2 points later in my post below. 

1. Misconception that Retail REITs is dead given that Pfizer and Moderna vaccine cannot prevent COVID infection as mentioned by some "analysts".
First and foremost, let me address this strange misconception by some of the "analysts" out there that lockdowns will be frequent and it will disrupt retail malls operations and hence huge plunge in rental income again. This is totally nonsense. We have seen from statistics present in Israel and also our local Singapore that both mRNA vaccines are extremely effective in stopping severe illness from COVID for those fully vaccinated. Yes, there is a chink in our current amour that even with 2 shots, a person might still become infected with COVID. But the difference here is that it has been scientifically proven that the incidents of moderate to severe illness for those fully vaccinated have gone down dramatically.  This means that our medical facilities will not be overwhelmed with rising COVID cases which is gradually becoming more like the normal flu.

It is also no secret that based on what the ministers have said, once the vaccination rates start to get to over 67% by 1st week of August'21, we will be moving on to a gradual opening up of our economies and targeted/selected closure of COVID clusters instead of the previous draconian closure measures. In addition, there is no doubt that we will need a 3rd shot booster soon by next year. Pfizer and Moderna are already working on a mix of current vaccine with a new Delta Variant vaccine combined to put an end to this dominant and infectious strain. 

2.  Government paying for wage subsidy and rental relief of retail tenants affected by "Heighten Alert"
 One piece of good news with recent restriction of dinning and movement is that the government has again took out money amounting to a S$1.1 billion rescue package for partial rental relief and wage subsidy. Retail REITS are thus spared from granting painful rental relief packages like last year. Although rental collected component has a small part that is dependent on retail sales of tenants, the effect will not be as drastic as the previous Circuit Breaker in 2020. 

3. SPH REIT performance has improved drastically with distribution yield being partially restored to an annualized 5.41% distribution yield. 
Gross revenue generation for SPH REIT for Q3 FY2020 has been remarkable across all its Singapore and Australian malls and improved by 22.2% year on year with a huge drop in required rental relief to eligible Singapore and Australia tenants.
The high occupancy rate of 98.4% of SPH REIT is driven by the resilience of its sub-urban malls with 100% occupancy at The Rail Mall and Clementi Mall. Also WALE of 5.4 years by NLA. This speaks volume of the strategic locations of all its Singapore and Australian malls situated at strategic locations with dominant catchments. 

Distribution yield has gradually recovered to 1.38 cents for Q3 FY2020. If we were to annualized this (remove 0.13 cents one -off non-recurring deferred prior year income)  based on S$0.925 per unit, this will be a distribution forward yield of 5.41%. If it recovers higher to pre-covid, then the distribution yield will be at least over 6.2%.
4. SPH After Divesting Media Segment- Ripple Effect on SPH REIT
As mentioned earlier, SPH will become a de-facto Property Investment and Management Group after the transfer of its Media business into a not for profit entity. There are 2 interesting ripple effect on SPH REIT here. 

(a) The student accommodation business in future maybe be injected into SPH REIT. While there is also a possibility of SPH spinning this into another REIT, there is a real possibility that SPH might just pump them into a single REIT for synergy purpose and compliance cost savings from another listing.

(b) Market talks these days have been rift that there will be new investors coming into SPH and these could include Keppel Corp, Capitaland or Mapletree Investments. This is not surprising given that these entities are ultimately owned by the Singapore Government. With the transfer of the media business out of SPH totally, there is actually no longer any good reason for there to be another property group in Singapore. It makes more sense for either Capitaland or Mapletree to come in and buyout the investment properties and then bundle them into their own existing REITs. Economies of scale and much cost savings is thus the logical future step going forward. For example, personally, I see no reason why we need to continue to keep the current CEO of SPH when there are other CEOs in Keppel Corp, Capitaland or Mapletree with the appropriate and more relevant industrial knowledge. There has been enough "umbrage" going around....time to move on and extend a golden handshake.
Parting Thoughts
What a year it had been for SPH REIT. From my last posting on SPH REIT on 23 December 2020 where I have mentioned that SPH REIT is severely undervalued by as much as 30% from its pre-COVID peak, one reader has disagreed vehemently on my valuation projection. Its current price is now at S$0.925 per unit as at 23 July 2021 with restored annualized distribution yield projected at 5.41%. 

As alluded to point 4, I think that eventually, it makes more sense to merge the entire SPH group with Capitaland, Keppel or Mapletree Investments. My personal thoughts is that it is an inevitable eventuality given the benefits of economies of scale. Personally, I will take umbrage if future corporate actions do not materialise.

Saturday 24 July 2021

Strategy Of Owning Multiple Properties- Opportunity to Grow Very Rich?

Back in August 2020, I mentioned that I have been haunted by Germaine Chow whenever I watched You Tube Videos. Recently when I was watching Facebook videos, to my utter horror, Germaine Chow appeared again. Personally, I think this is an overdose and over-exposure for her. I actually prefer her hubby who explains technical stuff better and carries himself better in terms of investment offence but this is just my personal preference.

Why is "Principal Paid" a profit?

Why is "Positive Cashflow" defined as a Profit?

Anyway, I am extremely puzzled by Germaine's assertion that property investment doesn't just have one way to make profit but a total of 3 major sources, namely, (i) Capital Appreciation, (ii) Principal Repaid and (iii) Positive Cashflow. As an accountant, I think what was posted seems a bit strange in terms of basic Singapore Financial Reporting Standard definition. While I agree that "Capital Appreciation" is a profit (fair valuation increase), I am not sure why she asserts that Principal Repaid and Positive Cashflow are profits? That is a blatant flagrant foul from accounting technicalities.

Principal Repaid is actually just a repayment of bank loan liability from cash assets generation. This item is never a profit component by itself and is already part of the previously mentioned capital appreciation (if any). 

As for "Positive Cashflow", this is actually another totally different creature altogether in any business and to argue that cashflow is the 3rd way of making profits is a gross misrepresentation of basic accounting. What I think Germaine is trying to say, maybe, she is referring to renting out your investment property and earning a rental income. One should not be confused over "Positive Cashflow" and " Rental Income". The latter (rental income) is a profit item but never Cashflow. Let me elaborate more, you may record a profit from rental but if the tenant delays paying up, your cashflow will be affected. "Positive Cashflow" is thus not the same concept as profitability assessment.

Actually, the above new advertisement is considered not too bad already. My personal worst dread is the other advertisement whereby Germaine Chow is doing make up in front of a mirror putting powder on her face while she does a Q&A on property investing with a camera following her from her make-up room to another room upstairs. Can iQuadrant perhaps try to change model or switch to a guy instead?  In Economics, there is a concept known as the Law Of Diminishing Marginal Utility. That's all for my post today. If you guys know of any way to customise Facebook showing Germaine Chow from suddenly showing up, please let me know ya. 

Thanks for reading! 

Sunday 11 July 2021

Please Stop Campaigning Against COVID-19 Vaccination- Ignorance is Bliss Or Just Living in One's Own World?

I have a University friend who has for months been ranting against COVID-19 vaccination in Singapore via her Facebook, let's call her "SY". SY cited the one off side effect cases as examples of why everyone should avoid taking the vaccines. Most importantly, SY mentioned that the main reason she has against worldwide COVID-19 vaccination is because Pfizer is affiliated with Satanic forces and this goes contrary to her religious beliefs. I was simply flabbergasted. Now, since when did religion now comes into the topic of mass vaccination to contain COVID-19?

Due to the rapid spread of the COVID Delta variant, many countries healthcare system are on the verge of collapse. We all have seen what is happening in India. Recently, my Indonesian friends have mentioned how dire the situation is also becoming in Indonesia. Many seriously ill people are unable to find a bed or oxygen in hospital for treatment. People are dying from COVID in other countries. I was further shocked when my friend SY posted and argued that Singaporeans do not need COVID vaccine as evident from the low death statistics in Singapore and that contracting COVID is nothing much to be feared. Has she been living in her own world for the past year? Highly educated people I thought are trained to think critically and to keep an open mind on opinions.

I do respect individual rights on not getting vaccinated due to the uncertain long term health effect. But the least one can do is to respect others and not try to force one's own draconian views on others. Stop publishing anti-COVID vaccination on social media. My personal thoughts on vaccination is simple, it is necessary to achieve herd immunity and prevent loved ones from dying tragically if they contract it. Without vaccination, we cannot open up our economy fully and our airline industry and hospitality sector will be perpetually in doldrums.

Saturday 3 July 2021

Investment Portfolios Updates (2 Jul'21)- Added Alibaba Group Holdings And SingMedical Group

Overall Outlook 
Retail REITs bounced back strongly with the announcement of allowing dining for 2 at F&B outlets and Singapore targeted vaccination rate of 67% by National Day (9th Aug'21) which will bring us closer to herd immunity and avoid future lockdowns. The confirmation of delivery of new supplies by Pfizer and Moderna are great news indeed for our national inoculation programme. 

Both SPH REIT and Lendlease REIT are now at an all time high since the COVID-19 outbreak. In addition, SPH REIT and Lendlease REIT are among some of the potential list of Singapore REITs to be included in the FTSE EPRA NAREIT which will no doubt boost allocation by international fund managers into them hence an increased in their demand. 

1. Portfolio 1- CDP held stocks
I made a rather silly blunder here. I was using my own CPF funds to invest into Mapletree Industrial Trust ("MIT") but forgot that there is cap on the amount that can be used. Under the CPFIS-OA, you can only invest up to 35% and 10% of your investible savings in stock and gold respectively, also known as the CPFIS stock and gold limits. As a result, 700 MIT units need to be paid for in cash. The other 200 I got it from the recent rights issue of MIT.

2. Portfolio 2- Margin purchased securities
Not much changes here except for taking up rights issue of MIT and also accumulating Ascendas REIT when its price drop below S$2.94. Ascendas REIT went on a buying spree recently to increase its high-tech data centers properties as part of its new strategy going forward.

Prime US REIT also went on an acquisition exercise recently via a private placement. This new office acquisition is expected to be yield accretive. 

3. Portfolio 3 (with Tiger Brokers)- Venture into higher risk as well as capital growth stocks here
I bought a small number of Alibaba Group stocks here when its price dropped below HKD220 per share. I think its cloud computing services will continue to grow on top of its e-commerce platform business. 

I also started re-investing into SingMedical Group. Its Vietnam clinics are expected to perform well. Not sure why SingMedical PE ratio remains so much lower compared to other medical groups. Recently, there was talk of corporate action with a 3rd party to purchase the shares of SingMedical. Unfortunately, it did not materialise and price dropped from S$0.415 in Feb'21 to S$0.305 as at 2nd July'21. Problem with holding on to SingMedical shares is that its share price can be stuck in doldrums for many years. 

I have also acquired more shares in Oceanus Group. I find their business intriguing- please refer to the previous Oceanus post here

Parting thoughts
Many of the above companies will be reporting their half year results soon and I am looking forward to the half yearly dividends payout over the next 2-3mths. My overall strategy is still an income focused one while diverting some resources into capital growth stocks.