Investment Portfolios Updates (27 September 2024) - Net Investment of S$732K and Projected Annualised Passive Income of S$42K.

A rising tide lifts all boats indeed! Just 2 months back during my last portfolio review, it was still doom and gloom for our SREIT sector spiralling into a bottomless blackhole. Then suddenly, with the much anticipated rate cut by the US Feds finally materialising, all the SREITs counters started soaring. Considering that my REIT heavy overall portfolios makes up 66% of the entire investment, it contributed to a strong recovery. Coupled with the sudden China stimulus measures announced over the past few days, my China centric investments (Alibaba, Ping An, Link REIT and Capitaland China Trust) shot up by close to 25% which help rallied the overall gross investment value and investable cash balances to above the S$1 Million mark. Net investments after netting off margin loan stands at a record high of S$732K.

1. Portfolio 1- Stocks held in SGX Central Depository 
(Note: This portfolio is designed to provide immediate dividends for use as it is under my own CDP account and the dividends credited goes directly to my bank account.)

2. Portfolio 2- Margin purchased securities

(Note: My margin purchased securities has grown to a sufficient scale to sustain itself and can pay off annual financing charges as well as to gradually pay down the margin loan through dividends generated.) 

I think that the financing charges would have dropped to 4.75% or 5%- anyway, have not had the luxury of time to find out from my broker. So will just leave the financing rate at 5.25%. Interestingly, my wife offered to lend me funds at a lower by 1% rate to Maybank Securities but I rejected it as I told her that she can put her liquid funds to better use and a higher return.

For Keppel Pacific Oak REIT, I think that if interest rate continue to trend downwards, there will be a higher probability that the REIT Manager may resume distribution payout as soon as the 2nd half of 2025 instead of 2026. 

3. Portfolio 3 (with Tiger Brokers and MooMoo) 

(Venture into higher risk as well as capital growth stocks here)

I have added on to Ping An Insurance just before the huge rally in HKSE. Keppel Corp as well as a small tiny stake in Oceanus were added since the last update 2 months ago.

4. Portfolio 4 (Endowus Unit Trusts & Other Investments)

The Income Insurance and Allianz takeover deal continued to be in limbo. The Monetary Authority of Singapore has not officially given the deal a go ahead. In addition, new capital were injected into the different Endowus units trusts (picked those that are bonds focused with the exception of Fidelity Global Dividend Fund).

Summary

While the investment value of my underlying portfolios have went up significantly, the sad fact is that my projected annual passive income still remain the same as 2 months back which is a tad disappointment. I do look forward to exiting my stakes in Alibaba once it hits over HKD160 per share and then convert them into higher yielding income producing assets.

Why Dividends Are Irrelevant And Don't Matter!

The topic of "Why Dividends Are Irrelevant And Don't Matter" was posted recently by a famous local YouTuber which has once against stirred up lots of emotion online judging by the comments left on his video...haha.  He has over 100K of subscribers. What he says is true in theory but is just bullsh*** in reality as there is simply no stock market with perfect information in terms of valuation of stocks being traded by buyer and seller. This was also covered in my Accounting Theory module decades ago. According to one school of thought, dividends are irrelevant so that the amount of dividend paid has no effect on the valuation of a firm. Also share price will drop by the same amount after the dividends are being declared. 

1. MODIGLIANI AND MILLER ("MM") HYPOTHESIS:

The crux of the MM position on the irrelevance of dividend is the arbitrage argument. Arbitrage refers to entering simultaneously into two transactions which exactly balance or completely offset each other.

The two transactions here are the acts of paying out dividends and raising external funds. When dividends are paid to the shareholders, the market price of the share will decrease. What is gained by the investors as a result of increased dividends will be neutralised completely by the reduction in the market value of shares.

2. Why Dividend Strategy Adopters Are Always Presumed to be Stupid or Adopting an Inferior Approach?

First and foremost, I do not understand why people keep on posting such topics to whack dividend investing. Of course, all dividend investors know that fundamental of a company are important and that one cannot just invest in a company with the highest yield in dividends to determine good or bad companies. 

3. Thoughts on Dividend Investing

I will just write a short paragraph here as there are already many posts and online materials available on what are some of the good side of dividend investing. For example, the past 2 years of SREITs Bear market that hammered their prices to crazy low means that if you sell away your REITs to buy into other form of assets due to a change in your diversification & concentration review, you will not be able to enjoy the recent strong rally in their prices after the rate cut. The dividends being declared will help investors to use them for investment into other asset classes while retaining ownership of one's REIT holding to wait for a recovery from the bear market.   

Parting Thoughts

If you believe that growth investing approach such as investing in companies like Tesla that pays little or zero dividends, then go ahead. It's a free world...do what one likes lor. But don't discount another person strategy due to one's own blind spot.

This is not the first time I seen this kind of post by the above mentioned You-Tuber. He also has another group channel with other finance influencers (think it is called the "Bagholders Pod") which has also launched similar anti-dividend investing content this year to generate views. 

SREITs Maybe Overvalued Despite Jumbo Size Interest Rate Cut of 0.5% By Powell.

Wow, what a BIG surprise! The conservative Uncle Powell has finally announced not just a cut in US Federal Reserve rate but a giant size 0.5%. Current US rates now hovers at 4.75% to 5.0%. This is higher than what I was expecting. But still, the recent SREIT price rally maybe overdone. US interest rates will not fall back to the close to 0% in the past unless the US economy crash due to a severe recession. 

Assuming an eventual near term US Fed rate of 3.5% at equilibrium to fight against inflation and also to ensure adequate economy growth stimulation, returns from REITs required for most folks should be at least another 2.5% to compensate for equity risk of holding onto financially strong ones like Mapletree Industrial Trust ("MIT") and Capitaland Ascendas that are linked to Temasek. This will translate to an expected yield of 6.0%. MIT is now trading at 5.3% distribution yield as at 18 September 2024.

While I am still holding on to the SREITs in my current cash and margin portfolios, I have began selling off part of my CPF OA investments in MIT to lock in the recovery and the resultant capital gains at the S$2.50+ range.

Elite UK REIT Entering Into Student Accommodation and Data Centres?

Usually, I tend to stay away from writing any post on Elite UK REIT (“EUREIT”) as it can lead to personal attacks and persistent online hustling by disgruntled loyal investor who only wants to hear good points on this investment. Having a high concentration risk in mostly one government agency for over 90% of the entire REIT's revenue generation is extremely risky. What is there to stop the government from closing down or downsizing some of its agencies should it meet with financial constraint? EUREIT price has tumbled <-58.8%> from £0.68 per unit from its IPO days to £0.28 per unit (as at 9 Sep 2024) and has done 1 round of equity fund raising to par down leverage during the not too long ago debt crisis (current gearing is at a healthier 41.4%).  

Well, I came across an interesting video and post from Mystocksinvesting.com on an interview with the new CEO of Elite UK REIT, Joshua Liaw. In this interview, the new management team led by Joshua has mentioned that EUREIT is looking at entering into the student accommodation or Data Centre business. While there are question on whether EUREIT has the expertise and financial resources to enter into these segment, I personally think that this is the right step in a new direction taken by the new management team. Joshua has further mentioned that they intend to form a joint venture with those companies that has the right expertise to spearhead their foray into this new frontier. The vision to go into other business sector and diversification from a single major tenant is definitely a plus point. 

Saying that, execution risk of new joint ventures into student accommodation and data centres as well as UK forex losses are other key considerations going forward.

(Note: Another interesting point is that both Joshua and the new CFO, Micheal Tong, are formerly from Lendlease Group).

United Hampshire US REIT Amazing 17.7% Return to Unit-holders Since 30 June 2024.

United Hampshire US REIT ("UHREIT") has delivered an amazing return to unit-holders of 17.7% since 30 June 2024. I was initially extremely disappointed with the plummeting unit price and the ever decreasing DPU over the last 2 years especially during the high interest rate environment imposed by the US Fed. With the softening of hardcore stance by the US Fed Reserve as well as weak US economic data indicating that the US economy is running out of steam, an upcoming rate cut by 17th-18th September 2024 FOMC meeting seems imminent. UHREIT has benefitted from this latest news with a strong rally in its market price over the last 2 months. Please see my video for why I will continue to hold on to UHREIT for now. 

Please see my latest video on YouTube channel. Going forward, I will be posting various exclusive investment contents onto my YouTube channel only. Please subscribe to my YouTube channel also to get the latest content for sharing.

Oceanus Group Limited and Red-Flag on Strange Loan to External 3rd Party at Incredulous Interest Free Rate.

Oceanus Group Limited just released a very disappointing set of half year 2024 results on 14th August 2024 which revealed a loss of <S$1.17Mil >. This is a hefty 92% worsening of results relative to 1H2023 of <S$610K>. Having years of losses and a mere 5% growth in revenue is one of the red flag indicator that something maybe wrong with its management team. The list of queries from SGX on 22nd August 2024 further add to the uneasiness over its financial health.

Personally, I am a bit spooked by another weird transaction by Oceanus management team. From the SGX query 3, it appears that the management of Oceanus Group has given a S$1.268Mil loan to a 3rd party that is interest free which is honestly absurd. If this 3rd party is so weak financially, why did Oceanus choose to work with it? I am sure there are other vendors out there who can fulfil what they are doing. 

In addition, it is ridiculous to give an interest free loan to a 3rd party and to take up credit risk of default by the external non-related party. This does not make commercial sense at all. Also why not do equity buy-over instead if the platform technology is so unique that the survival of Oceanus Group depends on it?  I am not sure whether it is just me here but do anyone else smell a rat somewhere.... 

Parting thoughts

I am currently vested in Oceanus Group via a small stake of around S$1K as previously I like the growth story sold by its CEO. But seems that there are some "more than meets the eye" stuff going on here. Oceanus Group audit committee should come out to clarify on why their management team entered into something that makes terrible commercial sense.