Monday, October 21, 2019

Recent Action- Mapletree NAC Trust

I added 5,000 shares of Mapletree NAC Trust on 1st Oct at $1.31 and another 5,000 shares on 15th Oct at $1.26 against the backdrop on the current situation in Hong Kong. It’s a share counter that I had been wanting to add for a long time but couldn’t manage to catch the price and the current unrest in Hong Kong gave me the opportunity to buy on weakness.

It used to be known as Mapletree Greater China Commercial Trust (MGCCT) and got its new name after acquiring Tokyo freehold properties in May 2018. Despite having a portfolio of properties in China and Japan as well, 62% of its Net Property Income comes from Festival Walk, a suburban shopping Mall in Hong Kong which explains the drop in share price recently.

While the protests in Hong Kong continues with no end in sight send many Hong Kong shares tumbling, especially hospitality sector, and property counters; yet I see it as an opportunity to explore some defensive counters which are beaten down and MapletreeNAC Trust is one of them. Here are some of my thoughts and I will be focusing more on the Retail side of Festival Walk.

Resilient in the face of economic headwinds
Before Festival Walk was listed as a REIT, it was owned by Mapletree Investment since 2011. During the SARS incident in 2003, Asian Financial Crisis in 2008 and Occupy Central Movement in 2004, it managed to register revenue growth year on year, and I think management deserves a lot of credit for that. Its occupancy ratio stands at 100% since 2000. While Festival Walk isn’t immune to the political instability, its occupancy ratio track record and its ability to grow its sales and revenue during times of economic slowdown indicates its stability and resilient through economic cycles. Personally, I believe that the current political unrest in Hong Kong will be resolved eventually though recovery may take a long time. Hence, when bearish sentiment emerges, the sell down of this REIT presents an opportunity for me to ‘buy on weakness’.

Not so Touristy

Tripadvisor's customer review of Festival Walk

Festival walk is located near Kowloon Tong MTR station which caters to the daily needs and lifestyle of locals – Supermarket, F&B, cinemas, and a massive ice skating rink. Regular visitors to Hong Kong will be well aware that Kowloon Tong is a residential area above Kowloon City, and there is actually not much tourist attractions along the area. It serves as a heartland mall, a neighbourhood shopping centre that caters more for the locals. While locals would exercise more caution out in the streets, life still has to go on. They would still have to do their groceries in supermarkets, replenish their personal care products in Watson/Mannings and catch the latest movies during the weekends.
According to the news, recent protests are prevelant in CBD and touristy areas like Mongkok, Tsim Sha Tsui, CauseWay Bay and Central. The only incident I recently came to know about in Kowloon Tong is where protesters shone laser pointers at PLA Barracks. This should point to the fact that Festival Walk has limited impact by the protests.

Because the sponsor is Mapletree

Mapletree North Asia Commercial Trust also has the advantage of a strong sponsor, Mapletree Investments with aligned interest with unitholders. Its alignment is evident in its management fee structure, which consists of a base fees- 10% of distributable income for financial year and performance of 25% of difference in DPU in the preceding financial year instead of Net Property Income (NPI). In instances where fees are pegged to its NPI, there may be incentive for them to acquire more properties to artificially boost its income to earn a higher fee. Such structure only incentivises the manager to grow its assets rather than improving its distribution per unit.
 In the case of Mapletree NAC’s payout structure, the REIT manager will earn a higher performance fee by acquiring more properties which are yield and DPU accretive.

One of the hallmarks of having a reputable and good sponsor also its potential to grow its portfolio by acquiring properties from its sponsor through its right of first refusal. Having a credible sponsor also eliminates the possibility that the REIT is seen as a dumping ground for the sponsor to divest their unwanted properties to raise additional cash. While there’s certain degree of concentration risks with 62% of NPI derived from a single country, the REIT manager has diversifying the risks over the years by actively acquiring properties from China and Japan, which are yield accretive and improving the DPU at the same time; Not to mention a pipeline of properties from the sponsor that could be injected into the Reit to further diversify the portfolio.

Distribution and Risks- Foreign Exchange Risks and Regulatory Risks

I have done up the above charts for its quarterly distribution since 2013 till present. Unfortunately, unlike Mapletree Industrial Trust, there are some quarters which DPU was lower than its previous quarter year-on-year. The lower distributable income was attributed to a lower gross revenue and higher property expenses: lower gross revenue due to a weaker HKD and RMB, and higher property expenses due to additional property tax from Gateway Plaza imposed by local authorities with effect from July 2016. This affected the 3Q DPU as well, due to a higher property tax of $3.2mil.

For the FY2017/18 4Q, there was a significant dip in DPU compared to its previous year which is mainly due to reversal of VAT payable in 4Q FY2016/17 which was assumed a higher rate hence giving that previous quarter a slight boost in DPU.

You may notice that SGX listed Reits with majority of assets in Singapore are traded at a premium compared to their peers with more overseas exposure (i.e. higher yield, lower p/b) as the market perceives them to be safer and subject to lesser risks i.e. currency risks, regulatory risks and political risks. In the case of Mapletree NAC Trust:

From a layman’s perspective, because a Reit that higher exposure to overseas market is riskier than a domestic reit, you need a higher return to compensate the risks you are taking.

I have skimmed through many news articles about hospitality sector in HK experiencing sharpest downturn since 1997/SARS. The slowdown in tourism is one thing, but the actual consumer spending and impact on Reits are hard to guage. The earnings season is up and as Mapletree NAC REIT will be releasing its 2Q financial results on 25th Oct, I will be keeping an eye on its earnings as this will be the first quarter where we will be able to gauge the extent of Hong Kong protests affecting its rental income and to decide my next move.

If you are keen to follow my posts or get updates, do like/follow my FB page here where I will update it when there's a new post and when I buy/sell shares.

Monday, August 12, 2019

Personal & Portfolio Update


It’s been so long since I blogged! Since my last post, I kept telling myself I should start blogging soon but procrastinated about it all the time and 1.5 years like passed like that. Part of the reason why I stopped blogging for awhile was that I committed most of my days at work, including many weekends and I just wanted to do nothing when I reach home and just wanted some rest.

Though I stopped blogging for awhile, I regularly kept myself updated on the stock market: particularly in SG, HK and US, but lacked time to do research on individual stocks. (more macro then micro) I have been watching the HK updates like weather report these days, since I loved HK and it's my favourite holiday destination with no jet lag and good food. Another reason why I have been keeping up with the HK news was that I also invested in HK shares which started well this year but underperformed recently due to protests. The local market didn’t fare well either these few weeks due to the uncertainty in US China trade war. There’s a saying to be greedy when others are fearful; hence I have been trying to identify good stocks which were sold off steeply.

Since it’s 1.5 years since you last heard from me; I shall start off with personal and portfolio updates.
There isn’t much personal changes; I am still staying at the same place, same job, same hobby, same height and weight etc. The only change is that I have bought a car last month. I used to take public transport for meetings and take cab/grab when I am in a rush. However, as my business grows, it makes more sense to own a car. It’s an investment to my business, in a sense to trade money for time. With a car, I can go for more meetings, contact my clients and reply some emails along the way. During the weekends, I can explore nice food places which may not be easily accessible by public transport. 

The drop in COE also gave me another reason to purchase it at the point in time. I bought Hyundai Avante 1.6S, with a 27k COE. My initial plan was to get a Toyota because Japanese cars are always known to be reliable; which costs about $97k but what stopped me from going ahead was the prerequisite is to take a 5-year loan. A car loan uses the Flat Rate method, the interest you pay is fixed based on the original principle. Hence, I suggest not to be fooled by its low advertised interest rates but focus on the effective interest. You can read more here: I went ahead with Hyundai Avante 1.6S with a two-year loan of $30k (because that’s their min loan size) and paid off $50k. 

As for portfolio updates, there has been much transactions in my portfolio as I took profits/partial profits on Singtel, SATS, First Reit, SGX, MicroMechanics, M1, ComfortDelgro and 800Super.

SGX Portfolio with CDP
Total Value= $285,034

I added HKLand, Mapletree Industrial Trust, Parkway Life Reit, and UOB and increased my position in three local banks over the months. I still see much value in local banks as they are traded 1 to 1.3X book value, with dividend yield around 4% with less than 50% payout ratio.

Along the way, I came out with an investment strategy for my equity portfolio. Moving forward, I will be focusing on US and HK stock market for growth stocks and SG stock market for dividend income. For SG dividend stocks I am referring more to Banks and REITS.

Low interest rate environment and Federal Reserve's decision to lower interest rate gave REIT a boost and had a good run this year. With the tightening yield spread, I don't see much value in local Reits and many investors are exploring Reits with property overseas with higher yields such as Sasseur REIT, Prime  REIT or Business trust such as ARA and Eagle Hospitality.

I have opened a DBS Treasures Accounts to enjoy lower trading fees (no min charges) and since then transferred some of my SG shares which I planned to sell in the next 12 months.

DBS Treasures Securities= $84,129

I have changed the monthly purchase of ST Engineering to Singtel late last year. I then sold away the shares which I bought, (yet I still hold STI ETF). Now I am setting aside $1,000/month in DBS shares. At. It is paying a dividend of, and with a payout ratio of, it is attractive in my opinion compared to Reits.

ShareBuilder = $1,945

I started buying US stocks early this year via StanChart Online Trading with more focused on growth companies with long term plans to own about 15-20 US stocks. Most of them are trading at high pe ratio, or no pe ratio at all as they are in their stage of growth but loss making. Hence, I invested in small amount each time, and plan to add them in batches during market correction.

StanChart Portfolio Value= $52,219

The Standard Chartered Statement is updated as of 31 July. I have added 3,000 shares of Champion Reit and 10 more shares of Twilio.

I have closed my MayBank KimEng account as some of you may know they stopped the monthly investment plan. I transferred my Tencent Holdings Shares to Standard Chartered and the staff are kind to waive off the transfer fees.

For Nikko AM STI ETF under POSB InvestSaver, not much changes so far. I decided to keep it that way.

As for my HK portfolio with HSBC, there has been no changes too other than adding Xiaomi and PingAn Insurance. Looking at current situation in Hong Kong, I am having second thoughts if I should continue investing in 2800.HK. I will update this again in the next post.

POSB InvestSaver= $12,634

HSBC Portfolio= $35,749

80 Shares of Tencent 0700
600 Shares of Xiaomi 1810
250 Shares of Ping An Insurance 2318
4,102 Tracker Fund of HongKong 2800

One of my favourite shares in my watchlist is Hang Seng Bank. If you have been to Hong Kong, you will see Hang Seng ATM machine like you see POSB/DBS ATM in Singapore. It's actually HK's local bank, and owned by HSBC. 

I briefly looked through their financial statement and I thought that their results were more impressive than DBS. Their managed to achieve a higher ROE of 16%,vs DBS of 12.1%, Cost/Income ratio is 36% compared to DBS of 43%. Common Equity Tier 1 Ratio if 16.% and 13.9% for DBS. The only reasons which stopped me from investing is it's high valuation in terms of pb ratio of 2 times and pe ratio of 16. Recently the pe ratio has eased to 13 due to higher quarterly earnings reported and the sell down of it's shares but with the situation in HK I am having second thoughts now to invest.

Cash Available for investment= $57,000

Total= $528,710

I am sorry if this post doesn't really add much value other than showcasing my portfolio. Reason being that I hadn't been doing much stock research these days due to lack of time. I am trying to restart the blogging momentum. Will update when I find interesting stocks to invest.

If you are keen to follow my posts or get updates, do like/follow my FB page here where I will update it when there's a new post. 

Thursday, February 1, 2018

Portfolio Update

It's been 6 months since I last updated my portfolio. I realize time flies so quick once working life started. I told my church friends about it and they said it will get even faster after I turn 30. On top of just updating my portfolio, I also wrote about Stock Monthly Investment Plan (SMIP) for those who wish to do dollar costs averaging in HK and also my goals before hitting 31.

Before that, here's my portfolio for Poems Sharebuilders Plan. (commitment of $2,000/ mth)

I increased the monthly commitment from $1k to $2k a month since Sept last year after getting more disposable income. I also found that valuation for ST Eng and STI pretty attractive. 

Based on Motley Fool's article on 16th Jan here, PE ratio for Straits Times Index (STI) is 11.6. Compared to Hang Seng Index at 16 and Dow Jones Industrial Average at 26.57, STI still has long way to go. I have thoughts of reducing the monthly commitment to $1,000 a month as I applied for Kim Eng Monthly Investment Plan and SMIP with HSBC HK but will consider scaling down when STI goes above pe ratio of 15. For ST Engineering I am still sitting at a loss but I believe will do just fine for long term investment.

What I like most about Sharebuilder Plan is dividend reinvestment. As I am in my stage of building my wealth, I would rather maximize my return my reinvesting my dividends for a small fee.

POSB Invest Saver (commitment of $200 monthly)

I signed up this plan back in Apr 2014, when I was a university student and working part time. It was the time when my parents officially handover all my Angpow proceeds to me and it has been sitting on very little interest in that bank account. Since then the plan has been on GIRO. I last checked in Oct 17 and the bank account has started to dry and I decided to continue funding that account via my salary account. I could have merged it with Share Builder to save costs and so but decided to keep it that way for sentimental reasons.

Maybank Kim Eng monthly investment Plan (commitment of $500 monthly)

It's the only investment plan in Singapore that allows me to do dollar cost averaging for overseas stocks. Hence, I signed up to invest in Tencent Holdings. The stock price has been going upwards after a small dip at 300 HK$ levels. It's hard to do valuation and calculating it probably won't make much sense too, especially pe ratio is at its 57. To me, its safety margin is its ability to accelerate growth and I continue to believe in its growth story.

HSBC HK Stock Monthly Investment Plan (commitment of 6000 HK$ monthly i.e. $1,000 monthly)

I opened this account in Dec last year when I made a trip to HK for Christmas. Back then, I was searching for an investment plan which allows me to DCA for Hong Kong Index. Turns out that HSBC and a many HK banks allow me to do so. The stock code for it is 2800, Tracker Fund of Hong Kong. You can check out the Fund Factsheet here .It tracks the index pretty well with only tracking error of  0.0514%. I invested a lump sum of 5,000 HK$ and monthly investment of 6000 HK$, i.e. 1,000 SGD/month . As a non-HK resident, the only downside is the inconvenience to convert and transfer money to HK$. For those who are keen to invest through HK banks, also do note that most Singapore banks charge a transfer fee and foreign transaction fee hence the best way for me is to change HK$ in local money changers and deposit into HK bank account. My relatives and I travel to HK often so won't be much of an issue.

Here is the list of HK banks which offer monthly investment plan, or 月供股票 they call it. Currently, HSBC is undergoing a promotion where handling fee and brokerage fees etc, are waived and only charge a monthly Custodian Fee of 25 HK$ (note that dividend handling fees/ corporate action fees do apply). I did up a comparison table on the plans offered by banks and brokerage firm. On top of banks, I included Chief Securities because they are the only firm which offers DCA for US ETF- Vanguard S&P 500 ETF (3140). Another way to DCA US ETF is to open a Standard Chartered Priority Banking account with brokerage fee of 0.2%, no min brokerage fee.

Comparison chart for banks/brokerage firms offering stock monthly investment plan.
Do note that the promotions , fees, and securities available for investment may change with time. If you are viewing this few years after this post was published, kindly refer to their respective website for more updated info.

After account opening, I added 80 Tencent Holdings shares 0700:HK in 2 batches: 40 at 436.60 HK$ and 40 and 457.40 HK$. This is in addition to the Maybank Kim Eng Monthly Investment Plan. For those new to Tencent Holdings, its owns a popular messaging app, WeChat and it started listing at 3.7 HK$ in 2004 and current price of 460 HK$ has been adjusted for 1 to 5 shares split on 2015. It's PE ratio of 57 seems very rich, but richly priced stocks can actually defy gravity and continue to rise for a prolonged period of time. When a stock is hot and everyone is clamouring to buy, the stock can continue to sustain lofty valuation. After all valuation is a guide, and if there is any safety margin to talk about, it would be its strong growth. 

SG Portfolio

As we all know, 2017 is one of the best years to invest and stay invested, with STI returning 22.08%. My portfolio main drivers are OCBC and DBS shares bought during at 2014 and 2015 and I still remained committed to holding them. Back in 2016, I sold most of my shares for property investment which didn’t materialize and managed to buy back subsequently to ride on the bull run. Due to much work and travel, I have not been actively managing my portfolio but I am quite blessed with banks and property stocks boosting my overall portfolio returns. 

There are many different strategies to build wealth and my investing approach is more of a buy and hold. I do my best to pick stocks with good fundamentals and invest for the long haul i.e. companies which have economic moats that I can hold for many years. In times when the stocks or general market seemed overvalued, I may continue to hold them. Over the years, I realized that I have made more money holding on to the winners that cashing out on my early profits.

In my opinion, great companies are actually rare to find, and if I were to sell away a stock and my expectations about future lower valuation does not actually materialize, I might have missed one big boat. One example would be Riverstone. I bought them at $0.485 and sold at $0.585, and the feeling was great until it went to $1.10 after 1 for 1 bonus issues and many rounds of dividends. Similarly, I am certain that there are times Coca Cola shares are overvalued but if one continues to hold a share of Coca Cola trading at $40 in 1919 is now worth $9.8mil. Check it out here

Secondly, if I exit my long-term investments in anticipation of a lower valuation to come, it equates to leaving a business that I know well; or business with developments which I can interpret with some levels of confidence. If the price continue its upward trajectory after selling and I am unable to re-enter, I may have to find new companies and opportunities, and that means spending additional time to do research and bring the understanding of the companies to a similar level.

That would also mean that I will not invest in down and out companies with poor fundamentals selling at dirt cheap price expecting a turnaround situation. The time that I will sell my stocks is when the company's fundamentals starts to deteriorate, especially when free cashflow becomes negative or a dividend cut.

I have always been net buyer of stocks and for 2017, my only sell transaction is Sanli Environmental after the release of half year results. It was a stock which I got it during IPO. The prospectus showed growing revenue trends, increased FCF, experienced management and overwhelming support from institutions. However, the results reported lower revenue, decrease in net profit and even negative FCF. The only saving grace is lesser debt. Though the lack of price movement after earnings release suggested that the price must have factored into the earnings prior to the report, I felt that I don't really understand the company well enough. So, I divested to lock in some small profits.

By the way, don't get me wrong. I am not against anyone who trades or does short term investment. It's just that buy and hold suits me better especially when I have very limited time to monitor my portfolio. Everyone should find their own investment strategy which suits them best.

Buy/Sell Transactions & dividends collected since June 2017 (CDP portfolio)

Buy/sell Transactions
Dividends Collected (page 1)
Dividends Collected (page 2)

Also, I divested all my US stocks and invested in 37 shares of Robotics and Automation ETF at US$37.20.

Some stocks in the red

I am still holding on to 8,000 shares of ComfortDelgro. Its recent tie up with Uber has drawn much mixed reactions but whether it will yield positive results is anyone's guess. For now, I will continue to hold for its dividends and I am pretty sure they can sustain its dividend with payout ratio of about 0.7. At the price of $2.08, its yield is close to 5%.

Raffles Medical
I continued to accumulate Raffles Medical on price weakness for the long term. The reason for its underperformance was due to its stagnant growth coupled with softening medical tourism. Its catalyst for growth is in the opening of Chongqing and Shanghai Hospitals. In my view, till they began operation, profit will continue to stay muted. Even when they began operations, it will also take few years for its business to breakeven. Hence, it is not a stock for short term. Its price of $1.12 translates to a pe ratio of 28 which is attractively priced in my view considering that it is a defensive sector and serves as a good hedge for rising healthcare costs.

Total Portfolio Value= $415k 

Poems Sharebuilder Plan = $18,795
POSB Invest Saver =$10,292
MayBank Kim Eng Monthly Investment Plan=$468
HSBC SMIP =$10,365
SGX Portfolio 1= $224,263
SGX Portfolio 2= $119,195
Standard Chartered Online Trading Acc=$2,220
Cash= $30,000

Goals before 31... a portfolio of $1mil 

If a ship leaving its harbour without destination, no wind is favourable. At best, the crew can navigate to stop crashing into things, but the ship could just be mindlessly floating in the middle of the ocean.
The same can be said of human mind. If we do not have a goal in mind, or any targets to achieve, we will behave like a ship which floats through life but goes nowhere in particular. 

There are two schools of thought (or more) for goal setting. The first one is about setting S.M.A.R.T. goals: Specific, Measurable, Achievable, Relevant and Timely. Then the goals can be broken down into small steps which can be achievable daily so we can track our progress. Another school of thought believes in setting goals which can be unachievable or unrealistic through visualizing your success daily that you have achieved your goal. This will trigger your creative subconscious mind which will generate ideas and means to achieve your goal. It makes you more motivated, energized and looking forward to every new day. This is not unproven or merely daydreaming as Michael Jordan had always visualized himself taking the last shot before he ever took one in real life and Muhammad Ali had also imagined himself victorious in life even before the fight began.

I am leaning more towards the latter way to set goals but that being said, there is no right or wrong ways and you can also use a combination of both methods.

Since this a blog on investment, I will share my financial goals. Currently, my stocks portfolio is about $400k and my goal is to reach $1 million before hitting 31. Assuming dividend yield of 5%, that would generate about $4.2k/mth of passive income, which will cover about 80% of my monthly expenses (see below). It's also an easy number to remember and a good 7 digit target to look forward to.

I will be turning 29 in Nov this year so I have about 34 more months to go. I can work hard to earn a more income, do more research for better stock picking skills, or be more disciplined with money but the rest would be up to how the stock market performs. I can’t eliminate systematic risks or predict the next financial crisis. 

Hence, other than hard work, my returns will also depend on how STI performs or the indices of the countries I am investing in.

My average monthly spending:
Food/Transportation/Tithe/Parental allowance = $2,200 mth
Income Tax/ Medisave contribution= $1,100 mth
Insurance premiums (Protection and savings & investment plans)= $1,500/mth
Travel= $3,600/ year i.e. $300/mth

Total = $5,100/month.

Moving Forward

Buy more each transaction
When my stocks perform well, my total profits aren’t substantial because I only bought 2000 or 3000 shares. Since I spent much time to do research on a particular stock, I should be more confident about it. I bought 5,000 shares of MicroMechanics at $1.035 in April with 120% till date. However it only consisted only 2.75% of my overall portfolio and my hard work resulted in insignificant gains. I had a writeup on Micromechanics which you can check it out here.

On top of the returns, buying more also reduces my transaction costs as a percentage of total value.

Investing more Aboard
To improve my returns further, I will be increasing my position in US and Hong Kong shares to have more exposure to growth stocks, especially ETFs tech companies.  Last year, Hang Seng Index achieved gains of 35.99% compared to STI returns of 22.08%. Its stellar performance was partially due to gains from Tencent, which constitutes 11.57% of index(before 1st Dec 2017), returning 124.91%  over a year. Subsequently, it had a quarter rebalancing and the stock weighing on Hang Seng Index dipped to 10%.

It’s almost 10 years since our last financial crisis and US market has been on a bull run since then, with Dow Jones Industrial Average (DJIA) exceeding its previous high of 15,000 points by 70%. In comparison, local markets are still having a hard time matching the performance. Hence, having exposure to foreign markets helps to boost my portfolio when local markets are facing downward pressure or any possible geopolitical risks.

There are definitely risks to investing overseas, such as currency volatility, or even taxes on dividend gains, but my view is that the benefits in general outweigh the risks.

If you would like to join me in my journey towards a $1mil, you may follow/Like my Facebook page here. I will update my Facebook on any new posts.

Smart Goals

Visualization Success Technique:

STI Returns