The difference between SPH REIT and CMT's response tells a lot

Retail REITS have this huge overhang for years - online shopping. Naturally, REIT managers have to consistently address this "disruption" or risk their business falling behind.

One could simply look at how different REIT managers respond to these questions to tell you if you should be confident about their management skills or not.

SPH REIT recently concluded their AGM and Business Times reported the following:

As for questions on the rise of online shopping and e-commerce, Dr Leong said while this trend is getting more prominent, brick-and-mortar stores are still relevant, given that consumers still prefer to feel and look at the actual product before purchase.

Contrast this with Capitaland Mall Trust's respond back in 2015:

The mall has a two-prong approach: Loyalty program (CAPITASTAR) and testing online delivery platform at Raffles City. 
Also, their redevelopment of Funan is aimed at being a "experiential creative hub in a technology-enabled environment"

Also, the up and coming SingPost Centre by SingPost is not your typical run of the mill mall. 

It will be a mall that combines both online and offline shopping. For instance, a consumer could browse in-store, purchase the product and arrange for delivery of the product directly to their home. The consumer could then continue shopping, watch a movie or have a meal in the mall without having to carry bulky shopping bags. The retailer, on the other hand, could save on storage space in the store as fulfilment would be done at the backend of the warehouse

You could easily tell that which management is still deceptive of the fact that change is real, and which are the ones that accept the challenge, and uses this as an opportunity and not a threat. 

And it's no secret that if I feel that management is not doing as good as a job as they should be, then no matter what moat they might possess is kind of useless.

Good businesses + great management = great businesses to invest and hold.

For example, I blogged about how one company I used to be vested in seems to be in a defensive mode and trying to pacify shareholders instead of owning the issue at hand and tackle it.

Need hints?

Divested on StarHub as their Management skills are not as strong as before.

Divested

I've divested StarHub before their 3Q16 results announcement after considering various points and thought it'll be a good time to do so before their announcement.

Weak outlook on Mobile

Mobile segment outlook is very weak, and especially so for StarHub and M1. This is affirmed by their 3Q announcement vis a vis Singtel's announcement.

Pricing pressure from the impending 4th Telco arrival has took a toll on M1 and StarHub.

Defensive Mode

StarHub's management has been on a defensive mode with regards to their earnings call.

They attributed their fall in Mobile earnings to 

1. IDD and International Roaming calls (as usual) 
2. Not pricing pressure from their data upsize point of view. 

An analyst even questioned on their need for such aggressive move on the data front, given that the fall in voice revenue is larger than the data upside.

Management's response was that their move was not aggressive. They even attempted to assured investors by saying that what they're seeing is that consumers are not downgrading their plans but instead, increasing their subscription to the Plus 3 option due to increase in data consumption.

Now, these are all nice to hear. But it's essentially useless if their revenue does not show otherwise.

Singtel, meanwhile, has managed to stabilised their Mobile revenue despite falling voice revenue with strong data growth. They've put their money where their mouth is.

Weak PayTV vs Singtel

StarHub's and Singtel's PayTV subscribers are lowering quarter on quarter. However, the similarity stops here.

Singtel has managed to increase their revenue while StarHub's PayTV revenue is falling together with its smaller subscribers' base.

In response to analysts' question, StarHub is again on the defensive mode saying

1. Working hard on content
2. StarHub Go is there
3. Netflix and other illegal options are there all along

Again, these are nice to hear until your revenue shows otherwise.

Meanwhile, Singtel has somehow managed to increase their PayTV revenue even when excluding BPL subscriptions. 

Also, I remember them saying this on their previous earning calls in response to analysts

1. Cutting the cord in other countries will not be seen on the same scale here
2. StarHub has local contents that prevents consumers from cutting cords (as the OTT options do not have significant asian content)
3. Netflix via VPN is already available long before, together with illegal setup box, and StarHub has been unfazed.
4. StarHub Go will address the OTT options

Yet now, look at their PayTV segment. They must be eating their words.

Meanwhile, Singtel:

1. Partnered with Netflix
2. Has VIU, CAST to countered the OTT options
3. BPL is really helping their revenue (although their profitability on BPL remains questionable).

Hubbing (their Trump Card) is weakening as well

Even their Hubbing households (which Management has been trumpeting forever, is falling for the second or third quarter).

No competitive advantage left

In summary, why i decided to divest before their 3Q announcement

1. Unable to stem the falling of their PayTV business (unlike Singtel)
2. Unable to manage their Mobile revenue fall (unlike Singtel)
3. Enterprise growth seemed to have stalled
4. Price points are not the cheapest (vs M1), yet not the most expensive (for investor's benefit).

When you're neither here nor there, and have no clear competitive advantage, I'm not comfortable being your long-term shareholder as I've no confidence in your management skills. 

For now, I'm still closely monitoring M1, and will divest if need be. At least now, they're the "cheapest" in the market.

August has been a good month!

What changed?

• Monthly dividend at $338/month
• Dividend yield maintained at 4.40%
• No sale or purchase of shares

My star performers in percentage terms

Current month

• SATS @ +55.93%
• Sheng Siong @+46.25%
• Colex @+44.95%

Last month

• SATS @ +42.43%
• Sheng Siong @+37.89%
• Colex @+34.04%

SATS & SS soared during this month as evident above!

Next steps
Like DK, I will continue to "Future proof" my current holdings. I'm also continuing my focus on counters that will perform on good and bad times.

1. Healthcare (Plife, RMG)
2. Data and infocom (ST, SH, M1)
3. Supermarkets (SS)
4. Cleaning/Stewarding (Advancer, Colex)

Unfortunately, I was unable to accumulate Parkway Life when prices retreated early this week. It has since climbed back up. Hope to accumulate soon!

My under appreciated stock bore fruits!!

I last wrote about the company here
Here here and here. I mentioned that the growth in share prices have yet to reflect the growth in the company's earnings. Well, a look at the table above will show that share prices seemed to be at fair value now!

Solid 1st half results again!
As the results are rather stable quarter on quarter, I've annualised their 2016 results in the table above.

Although their earnings is expected to slow down to "only" 24% growth for 2016 (from mid 30%), it is still fantastic by any measure. This is especially so in such economic environment that see so many large caps and blue chips reporting bad results.

Is this one of the safer options for investment in this current economic climate?

Gushing Free Cash Flow with potential increase in dividend again
Management has a lot of room for growth in dividends. 

Low debt (almost no debt)
They entered in a finance lease arrangement for the purchase of their assets. Their total outstanding debt stands at $949k vs their cash pile of $10,394k.

Technically they can fully pay off their debt RIGHT NOW if they want.

In fact, their total liabilities is $9,389k vs the cash of $10,394k. Strong balance sheet anyone?

It's one of my STAR counter
Giving me a capital gain of 34%. Although Colex is not yielding "high" dividend, it was under appreciated back then and I love the fact that its business and balance sheet was so strong.

No longer attractive to accumulate more for now
YoY growth of 24% yet its share price soared 41%. This plays out when over a 5 year horizon though (30% CAGR of EPS vs 31% CAGR of share price)

It is fine if it continues to be unloved
It is fine if there are people who may think it's not a good business to invest in. The more Colex falls out of the radar, the better chances of its share price being unappreciated.

Remember how Raffles Medical started out, and became a monster now? 

In the long run, the Market will act like a weighing machine. Share prices will eventually reflect its earnings and results.

Stay strong when people try to dissuade you. Have patience, foresight and trust!

THREE YEAR ANNIVERSARY and I think I'm doing well

July marks my third year of investing
And I think I've done not too bad. Looking at the chart below, I can see that my dividends are slowly but surely growing exponentially.
Also, I've not panicked and sold my positions when I fell into unrealised losses.

3 year CAGR of 3.95%
Could be higher, but that's fine given that it has only been 3 years and my CAGR is also dependent on equity price movements despite my dividend income being my main focus.

Outperformed the index
Also, STI's 3 year CAGR is -0.47% and their 10 year CAGR is 4.71%. Given that, I'm glad I've beaten the index, if not I should have just bought the index right?

Relook at my portfolio after a 6 months hiatus!

What changed?

• Monthly dividend increased 19% to $328 (from $284 back in Jan 2016)
• Dividend yield maintained steady at 4.40%
• SOLD: SIIC and Old Chang Kee (previously small holdings)
• BOUGHT more DBS, Raffles Medical and Sheng Siong
• BOUGHT Accordia Golf Trust and Advancer Global 

What was my goal back then?

The goal was to increase my monthly dividend to $300. Seems like I've met it! Next goal, $500!

Basically, there was not much trading done

I managed to get Advancer Global during IPO as the fundamentals were good and valuations were cheap. 

Sold off for 70% profit during the first day and bought them again when prices started to fall. I'm now holding it for long term.

RMG was accumulated as the market wasn't loving it after the "lacklustre" results stemming from Holland Village's pre-startup costs.

My star performers in percentage terms

• SATS @ +42.43%
• Sheng Siong @+37.89%
• Colex @+34.04%

Colex earnings should be released in a few weeks time, and I'm looking to further accumulate before the earnings announcement if the price is right!

What I wrote about Sembcorp Industries then and how it differs now

The last article about SCI was written during May 2015 here

Then, I said that I believed SCI is a solid blue chip. The pipeline for the utilities is superb and I believe it'll rebound from this crisis.

Have I differed?
To say the least, yes. Yes not because SCI fell from $4.20 all to way to $2.50, but because developments happened and news emerged.

Sete Brasil has changed the fundamentals of SMM, a 60% owned subsidiary of SCI.

To be honest, this Sete Brasil thing has changed the fundamentals from May 2015 when I still had much confidence in a near term rebound in SCI/SMM price.

Why I changed my mind?
Firstly, Oil prices fell, and it fell hard. Additionally, the oversupply of oil doesn't seem to be disappearing anytime soon. That's different in May 2015 when people are still expecting OPEC to convene a meeting soon to cut supply. [no supply was cut, more supply was granted!]

Sete Brasil had to have that corruption scandal and face bankruptcy risk. Over 40% of SMM's book order is from Sete Brasil and this changes the fundamental of SMM.

Iran's sanction lifting wasn't announced back then.

Did I sell SCI then?
No. No and I'm not sure if I'm making the right or wrong decision. My decision is to not sell or buy SCI despite the current attractive price.

I'm doubting myself over not selling SMM because my motto has always been to "sell when the business fundamentals change materially". It indeed has, perhaps its the huge loss that's preventing me from realising the loss.

On the other hand, I like the utilities segment of the company. Also, I do not require these money in the short term and so I can afford to wait it out (hoping for a miracle I know).

In any case, should the utilities segment also face a structurally decline in business, I promise myself to sell out this position and serve as a reminder to myself in the future.

*fingers crossed*

Should you really brush off the Oil rout just because you're not invested in the sector?

Oil rout like never before?

Oil prices fell from $100 to sub $30, this I'm sure many know. After all, the Oil industry is known for its cyclical natural; rise and fall of the oil price is part and parcel of the cycle.

However, this time round, are things different?

Why the fall?
Oil prices fell due to 2 key reasons:

1. Over supply of oil
2. Slowing demand from China (the largest demand driver of oil)

China could very well turn their economy around by a stroke of luck or some incredible policy by CCP, but the over supply problem is really tricky.

I last wrote a piece on the falling oil prices here. In it, I mentioned how there seems to be no light at the end of the tunnel in bringing the oil supply back down in the near to mid future. Adding to the article, Saudi has just announced that it will not cut supply in order prop up oil prices.

I'm not invested in the Offshore & Marine industry, that's none of my business right? 
Perhaps that's true when oil fell from $100 to $50.
Yet, oil fell at the way to sub $30, and the rout lasted a tad too long.

I don't get it, cheaper oil boosts the economy right?
When oil gets ridiculously cheap, Oil majors like Shell & Chevron starts slashing projects and CAPEX. In turn, less headcount is required by the majors [read: less jobs]

Then rig builders like Keppel recently announced that they've cut close to 6000 jobs in 2015 to amidst the arduous outlook for their marine industry. [read: retrenchment].

Gearing ratio for these O&M companies starts shooting up, some even may fall into negative cash flow. Debt repayment ability starts becoming a larger and larger problem [read: banks starts having higher NPL, and touch wood, write off debts].

Countries with moderate inflation rates suddenly faces the risks of a deflation, like Singapore.

When more and more people get retrenched, either from the O&M sector or subsequently the Financial sector, the problem will start being more evident. I believe this will become a matter of "when" not "if" should the current oil rout continues and continues slowly, dragging out the pain.

Even the commonly defensive consumer segment like retail may eventually get hit if the situation plays out long enough to damage the economy.

Yet I believe somebody will eventually cry surrender and bring back the equilibrium.
As with any "crisis", things recover. Everyday when I see the market bleeding in red, I get more and more tempted to scoop up bargain chips.

At the same time, I'm wary to enter too soon, knowing that this situation could be a long and painful one. Friday's stock market showed a strong rebound in both the oil prices and share prices. But I'm still wary, because nothing fundamentally has changed: oil supply continues to be sky high, demand continues to be falling (at most stagnant).

Iran hasn't even started flooding the market with their massive oil reserves!

I'm staying patient. I'd rather miss a few cuts and still get the majority of the meat than to hop in too early and get killed by the butcher.

Will my CPF ever be enough when I reach 55?

2014

2015

Inspired by AK, I've decided to take a look at my CPF's interest for 2015 compared to 2014.

Key to note:

• I did not use any CPF sums for investments.
• I am using my CPF to finance my (co-owned, parent's) house currently.
• I transferred a small sum from OA to SA during 2015

Interest for OA and MA increased moderately year on year, but SA's interest exploded by 60%.

With $23k in my SA now, and a constant contribution from now until age 55 (assuming no pay increase or special bonus),

My SA will hit $205k when I am 55 years old.

If I compound the BRS at $80,500 at 3% increase annually, it'll be $165k when I'm 55.

If I compound the FRS at $161,000 at 3% increase annually, it'll be $330k when I'm 55.

Just my SA alone will allow me to achieve the BRS (not including my OA amounts).

And I'm expecting to withdraw at least $40k when I reach 55 years old. Wooaaahh.

So, what about the average Singaporeans? 

If you are a graduate (age 24) earning $3.2k, and buy a house after getting married (zero OA left), can you hit the BRS? Assume there's 1 month bonus and no pay increase.

At age 55, your SA will have $154k versus BRS of $165k.

Remember, this is assuming there is zero pay increase from 24 years old until 55 years old, and that you only get 1 month bonus until 55 years old.

I've also excluded the extra 1% interest in the SA amount for the first $60k. That and the effect of compounding should easily allow you to exceed the BRS at age 55.

I've also assumed you've stretched yourself and max out your OA for housing purposes.

It's not that bad after all

There're so many people misguided and think that CPF is a ponzi scheme. That CPF has a goal post that is ever moving away from commoners like us and we'll never see our money even when we die.

But think about it, is it that hard to achieve that sum? Perhaps so. But is the sum too excessive? If you think setting aside $161k now is too much, then perhaps you'll have to adjust your lifestyle to make sure you can live comfortably with a monthly payout less than $1,200.

Is $1,200 a month enough for you and your retirement needs? If not, then why are we saying that the sums are too high.

It's really not magic. It's math, and there's no running away from it.

If we don't constantly increase our retirement monies now, then be prepared to be gobbled up by inflation and regret when it's too late.

That's what they all SAY!

"XXX is now at 2011 levels. I don't think it'll reach 2008 levels. Can buy now!"

Low can go lower. There were many who said STI 3000 was a super solid support. Well, we're at 2800s now.

Many thought M1 will never go below $3 as it is not the GFC now, well, looked what happened. Mr Market never cared about what we think the support level should be. 

"Those who think the stock market will recover please buy the stock. Those who think there's more to fall, please short. Put the money where your mouth is"

Except, it isn't. Just because I support multi-racial marriage doesn't mean that I'll have to marry a person of another race now to prove my point.

I may wait on the sidelines despite the massive rout because:

1. I've yet to hit my planned levels to deploy my ammunition
2. I may not have enough war chest to deploy now
3. The stocks I'm interested in may not be attractive yet.
4. I may have hit my preferred invested percentage. Some may prefer to be 100% invested while others prefer some buffer in case shit hits the fan and they have more to average down.

Not buying any stock during this period doesn't mean I've to short. There're fifty shades of grey.

"XXX will never fall! Ah gong will definitely rush in a bail out. You think they'll let XXX fall?"

Yup, definitely, the possibility of some support from G may be high, but that doesn't mean that it's a good buy.

Sembcorp Industries may be saved by the G, but at what levels? What if G steps in and aid when the price falls to $1, but what about those who bought SCI at $3-4?

What if they didn't step in to help? There's no 100% assurance they will.

"STI fell 15% during 2015. Now 2016 began with an ugly start. See la, more kudos to the 70% who voted"

I'm sorry. You may want to make friends with Mr Ngeng. If you're having those mindsets, then perhaps the world of investment may be too daunting for you to comprehend.

"I'm buying whatever XXX is having now! They/He made money, I'll never go wrong!"

If you're following buy calls merely by mimicking others, then you may be in for a wild ride; one that may never bring you back safely.

Whatever someone buys may be a great company, but it may not be a great buy now (read: valuation).

You need to always, always do your homework. Following Temasek or any other bloggers may not necessarily be good calls. Your risk appetite is different from the rest, don't just follow blindly.

If you want to follow blindly, then don't blame anyone when the traffic lights turn red and you still follow blindly behind.

What stocks to look for and 2015 report card.

	Name	Portfolio %	Average price ($)	Div Yield on cost
1	Singtel	14.42%	3.70	4.73%
2	M1	14.18%	3.63	5.20%
3	Raffles Medical	9.11%	4.13	1.09%
4	SATS	8.57%	3.11	4.50%
5	Parkway Life	6.45%	2.34	4.83%
6	Sembcorp Industries	6.28%	4.56	3.51%
7	Colex	5.83%	0.321	1.56%
8	StarHub	5.58%	4.05	4.94%
9	Design Studio	5.44%	0.54	12.01%
10	CapitaMall Trust	5.36%	1.95	5.59%
11	Vicom	4.16%	6.04	4.35%
12	Sheng Siong	3.56%	0.68	4.48%
13	UOB	3.18%	23.05	3.90%
14	Perennial Bond	2.68	$1.00	4.65%
15	DBS	2.38%	23.06	3.38%
16	Old Chang Kee	2.32%	0.87	1.73%
17	SIIC Environment	1.34%	0.20	0%


Expected Annual Dividends: $3,407 ($284/month)

Dividend Yield: 4.43%

Actions during Dec 15:

Bought Parkway Life REIT when the price corrected slightly.

• Resilient: Will not be significantly affected by any global recession and the likes
• Gives me a piece of mind when I sleep!!

Others:
The STI fell to 15% during 2015 while my portfolio was down 0.03% (including capital gains and dividends received). January 2016 didn't start off too well, with many of the stocks falling drastically.

That just screams "BUFFET" to me. I'm standing on the sides, looking closely and waiting for my target price before pouncing onto some stocks.

Targets: 

• Singtel - for its resilient nature and stable dividends
• Parkway Life (again) - if prices fall even more
• CMT - I'll look at it if it corrects more. I've to factor in the loss of Funan contribution in 2016.
• DBS - ONLY if it shows sign of bottomming. Yes the valuations of DBS is very enticing now, but low can always become lower. Banks are the most hit when the commodity rout goes too force. Never be too complacent and always have sufficient margin of safety.
• Sheng Siong - It'll have to go lower than the band of $0.82-0.85 for me to scoop more. I love the defensive nature and growth story though.

Past performance is a good guide but never a representation of future performance. So don't say things like "P/B is now as low as 2011, it'll never go lower".