Friday 21 December 2012

Year End Review 2012~!

Hi guys! It is that time of the year again!

A time where we reminiscent and reflect on the the things we regret doing or not doing, what we have achieved, and most importantly the lessons learnt for the past year.


This year was a year where I experienced the loss of a loved one, met and fell in love with a wonderful girl, spent time rekindling old friendships and quality family time, picked up a new language, travelled overseas to see wonderful sights of nature, "gave birth" to my blog, and read many wonderful books contributing to my personal and spiritual growth.
Looking at the myself now, I feel more accomplished, fulfilled intrinsically than I was one year ago.
No major regrets this year was an additional sweetener. :-)

Looking forward in 2013, I strive to grow to become a more balanced person, while embracing life during this process.
Like what the late Zig Ziglar said before: " Be grateful of what you have, while in pursuit of what you want."




Wishing everybody a Happy and Prosperous 2013! Cheers!


Now for my stock commentary--->



Portfolio Commentary

Portfolio @ start of the year:














Portfolio @ end of the year:













2012 saw the largest increase in my portfolio size in a single year since the year i started buying stocks.
The total market value of my stocks increased from $260k to $384k.
This represents a paper gain of  $124k. Very tempted to take profits!
Albeit being paper profits, the performance was way beyond my expectations and I am happy that the hours/hard work I spent doing my qualitative & quantitative analysis paid off, plus alot of help from Mr Market, of course!


The amazing thing was this gain was primarily due to price appreciation and the reinvestment of dividends, as no leverage was used, and only a little savings was deployed (I injected only $10k additional capital from my cash holdings this year).


Nonetheless, stock prices are not as important as the value of the business behind the stock. I will be reassessing each company in my portfolio again on their own merits and decide in due course if there is a need for taking of some profits to recycle capital. Like what Peter Lynch said in his classic One Up On Wall Street, "Check the story periodically".

An intangible improvement in the quality and sustainability my portfolio also occurred this year, as I reduced my exposure in Australian Hospitality and suburban malls to diversify into businesses that does Engineering, Singapore Hospitality, Commercial Ppty, Property Development, Retail. It can be quite thrilling to know that you have a stake in businesses you can visually see.

 

Miscellaneous thoughts --->

A key concept I came across this year was the analogy of approaching stock investment as a business analyst.

It is a very apt concept and analogy that helps us simplify our thoughts in this chaotic financial world of ours. I find it a very good way to approach my future investments, as a Business Analyst.

I stumbled upon this in articles written in a couple of blogs that I follow regularly, namely Drizzt of Investment Moats (http://www.investmentmoats.com/) and Mr B of 3Fs(http://foreverfinancialfreedom.blogspot.sg/).



Since I discovered the world of blogging, other blogs I follow regularly and gained immense knowledge and opinions from are ASSI for investment philosophies and thought processes (http://singaporeanstocksinvestor.blogspot.sg/),
Dividend Warrior, for his drive towards regular passive income  (http://dividendsrichwarrior.blogspot.sg/), Singapore Man of Leisure for his fantastic outlook on life (http://singaporemanofleisure.blogspot.sg/), just to name a few.

These are very good investment blogs with quality posts on Value Investing which I learnt alot from as well. Thanks guys for sharing snippets of your lives and well written articles! Keep it up!
Readers might like to follow these good blogs.

I aim to continue on Part 4 Investment Philosophies thread with a writeup to share my views on a company's management. Stay tuned!


:-)




  



Portfolio: December 2012

The month of December saw a big jump in the market value of my portfolio.
 
 
 
This was mainly due to: 
a) 36% surge in share price of UE since my last post.

 
Actions taken in Dec:
Nil
 
My top 3 holdings are:
1) United Engineers, 4% yield, Holding for large % CAPITAL GAIN
2) Frasers Centrepoint Trust, 5% yield, Holding for stable CASHFLOW
3) Stamford Land, 4% yield, Holding for large % CAPITAL GAIN 
 

Strategy Commentary:  
Am in the midst of reviewing the valuations of the companies in my portfolios as it is the year end. 
However, as I do not see exuberance for these companies share prices yet, 
I guess I will just hold them for now.  :-)  



  

Tuesday 27 November 2012

Portfolio: November 2012

The month of November saw the market value of my portfolio drop.
 
This was mainly due to: 
a) Reduction in my FCT & Stamford Land holdings.
 
Actions taken in Nov:
A) Purchased 12 more lots of United Engineers. 
B) Sold 10 lots of Frasers Centrepoint Trust.
C) Sold 50 lots of Stamford Land. 
 
My top 3 holdings are:
1) United Engineers, 4% yield, Holding for large % CAPITAL GAIN
2) Frasers Centrepoint Trust, 5% yield, Holding for stable CASHFLOW
3) Stamford Land, 4% yield, Holding for large % CAPITAL GAIN 
 
Strategy Commentary: 
United Engineers is now my top holding for a few reasons
 
I took a walk at Changi Bizhub area last weekend and noticed a few things:
(a) Changi City Point was overflowing with Traffic. Both Human & Vehicles. 
     Traffic spilled over to UE Bizhub's NTUC & car park respectively.     
 
(b) Capri by Frasers, a business hotel nearby seem to be at full occupancy. 
     It is a great locality to build a business hotel, come to think of it. 
     One MRT stop to the Airport, close to a Big Shopping Mall too.
     UE's 300-room Park Avenue Changi should likely do as fine. 
     (http://www.parkavenueintl.com/changi)

(c) 2 Catalysts to Cashflow coming in 2013. 
     (i) Though UE Bizhub Changi is far from occupied, the income potential seems huge 
         from the setup there. 
         There will be steady recurring revenue when occupancy stabilizes next year.
     (ii) SPVs holding Orchard Gateway will be sold to OCBC next year. 
          This will likely help in its debt reduction. 

 

Monday 29 October 2012

Portfolio: October 2012

The month of October saw the market value of my portfolio increase significantly.
 
This was mainly due to: 
a) Frasers Centrepoint Trust price skyrocketting offsetting slight weakness in price of Stamford Land.
b) Buying in of more United Engineers.
 

 
Actions taken in Oct:
 A) Purchased 11 more lots of United Engineers.
 (note: year end results coming, Plus its developments like Changi Bizhub are nearer to completion)
 
My top 3 holdings are still:
1) Frasers Centrepoint Trust, 5% yield, Holding for stable CASHFLOW
2) Stamford Land, 4% yield, Holding for large % CAPITAL GAIN
3) United Engineers, 4% yield, Holding for large % CAPITAL GAIN
 
I am now still sitting on some cash, albeit lower quantity, to allow me to redeploy. 
Think will stop buying in the meantime and wait patiently for dips. 
Keeping my fingers crossed for value-unlocking in Stamford Land and United Engineers. :-)
 
  
 

Sunday 28 October 2012

Review of FY2012 results: Frasers Centrepoint Trust

Frasers Centrepoint Trust (FCT) announced stellar FY2012 results last week.



Picture of Causeway Point from Streetdirectory.com


FCT is a REIT that earns income primarily from the rental of the tenants in its suburban malls.

(1) Causeway Point       Occupancy: 87%
(2) Northpoint               Occupancy: 99%
(3) Yew Tee Point         Occupancy: 96%
(4) Bedok Point            Occupancy: 99%
(5) Anchorpoint            Occupancy: 98%


Some key numbers (based on FY2012 financial statement & presentation slides)

Number of shares issued (including treasury shares): ~824m
Current share price: S$2.00
NAV: S$1.53
Net Income + distribution from Hektar: $78.3m ($0.095)


I would like to take this chance to share my own experience on my decision-making process with FCT since its now my biggest holding


Background history on the purchase of FCT
---------------------------------------------------

In 2009 May, the REIT market was generally in the doldrums due to frozen credit facilities. This stoked fears that the property owners may experience inability to refinance their mortgage loans.
REITs usually trading at 4~5% yield were trading at abnormally high yields ranging from 10% to 20% then! It was a rarely seen opportunity .
Reality was, I can choose to take action and buy.
But the question was which REIT can best grow my money?
I chose retail malls as their income sources are the easiest to analyze and see. ( investment philosophy 2: http://sustainable-income-sg.blogspot.sg/2012/06/investment-philosophy-part-2-buy_13.html)

I was deciding between FCT and CMT. I ended up chosing FCT simply because it had malls situated near my home and i could study occupancy easily.
Also:
(a) It did not have major refinancing needs near term and unlike CMT, did not do any rights issue due to its prudent gearing levels.
(b) FCT's pipeline for acquisition was clear too, with Yew Tee Point & Northpoint 2 next in line.
(c) Though Northpoint 1 was undergoing intense AEI, FCT's  other malls were having healthy occupancy too.
(d) It had smaller number of shares outstanding compared to bigger REITs like Suntec/CMT. Thus, it implies future earnings growth will lead to bigger impact on EPS/DPU.

 
Probably i was lucky but looking back from now til 2006, the management performed extremely well. Since inception til now, FCT never once did a rights issue. And even when private placements were done for acquisitions, DPU for existing shareholders increased year after year! The existing shareholders never lost out.

My decision to enter FCT involved hours of homework, mall-walking to check on occupancy, speaking to investor relations, doing projections of future income (simple/common sense ones) versus current valuations.

I bought 100 lots of FCT since 2009 in various batches. My average price being $0.94.

My yield on cost (based on $0.10 DPU) is a cool 10.6% p.a.
Though I have sold 35 lots along the way to recycle capital (should have held on to them! but well, shouldn't be too greedy ya!), I am thankfully still holding on to 65 lots. 


My concluding thoughts & future outlook
------------------------------------------------

Frasers Centrepoint Trust continues to be well poised for future growth  via:
A) Organic -  Definite increase in occupancy in CWP plus stepped-up rentals
B) Potential Acquisition - Changi City Point (possibly debt + equity financing)

Caveats though, would be if:
A) Share price hits exuberant levels, causing yield compression to below 4%.
B) Rental price increases cause more vacancies.

For now, the growth trajectory for FCT is pretty clear and straightforward ---> DPU increment!

Saturday 22 September 2012

Portfolio: September 2012


Hi guys! Have not been updating my blog much as have been very busy with work and family matters recently.
Well, my granddad passed away recently. During this time, it led me to reflect on how important it is to spend time with your loved ones while they are still around.
Though financial freedom is my ultimate goal, it is important that along the journey, we do not neglect relationships with those we care. Relationships take efforts too.

I heard a phrase from Zig Ziglar many years ago which states "Be grateful of what you have, while in pursuit of what you want". I found it a very enlightening philosophy and have been subscribing to this ever since.
 
Looking back, I am thankful and have no regrets that during my sabbatical 3 years ago, I spent more time accompanying my grandad on walks on his wheelchair, listening to his WW2 stories and how he survived.  I got to know him better and I will remember his happy-go-lucky spirit and bravery for life. In short, in our hustling and bustling city life, do remember to take extra effort to treasure those around you, ya!

  
-----------------------------------------------------------------------------------------------------------------


Now for my portfolio commentary.
The month of September saw the market value of my portfolio increase.
This was mainly attributed to the 13% surge in the share price of UE & 11.5% for Wing Tai over the past month.




Actions taken in Sept:

 -Nil

Overall strategy: 

My top 3 holdings are still:
1) Frasers Centrepoint Trust, 6% yield, Holding for stable CASHFLOW
2) Stamford Land, 4% yield, Holding for large % CAPITAL GAIN
3) United Engineers, 4% yield, Holding for large % CAPITAL GAIN

The stock market is fairly valued in general, and I cannot predict if it will go up or down......well, even Buffett says he can't, who can? Most stocks are indeed more expensive versus at the start of the year.
I am keeping my small pile of cash aside as usual while waiting.


Nonetheless, a key fact, which is driving my investment hypothesis is that regulators around the world are clamping down on financial regulations and auditing standards. Just my feel from the ground, talking to various people, plus the news and reports around.
So in general, though the growth going forward might be curtailed, it is actually more solid and sustainable. That is the reason why I still have a substantial % of my portfolio invested.  

Saturday 25 August 2012

Portfolio: August 2012



The month of August saw the market value of my portfolio drop substantially.
This was mainly due to:

a) 2 of my largest holdings (Stamford Land & Frasers Centrepoint Trust) going XD.   [Substantial Dividends in!]
b) Reducing some of my exposure to Stamford Land.

The drop was slightly buffered by a pleasant dividend announcement surprise from Wing Tai holdings which strengthened its share price.
 

Actions taken in August:

 -Sold 50,000 shares of Stamford Land.
  I made the decision to reduce exposure to Stamford Land in favour of cash as I would want to have  more funds available to purchase higher yield stocks for cashflow. I do not foresee it able to pay higher than $0.02 dividend in the coming year. However, its potential asset value unlocking is the reason why I am still holding a substantial position.



Overall strategy: 

I did a relook at my excel sheet and replaced the "Proj. Dividend (2012)"  with "Proj. Annual Dividend" column instead. 
I hope this improves clarity as it better displays my philosophy of using recurrent income projection to judge the health of my stocks.
This gauges the sustainable cashflow of my portfolio as it is generated by the dividends of the companies I hold.
I have put in MY own projections of the annual dividends going forward. 



For my remaining top 3 holdings, I am holding them for the simplified reasons below:
1) Frasers Centrepoint Trust, 6% yield, Holding for stable CASHFLOW
2) Stamford Land, 4% yield, Holding for large % CAPITAL GAIN
3) United Engineers, 4% yield, Holding for  large % CAPITAL GAIN

As mentioned in my previous post in July, my goal now is to improve the overall yield of my Portfolio.
I am now sitting on a more comfortable amount of cash to allow me to redeploy them in companies offering higher sustainable yield (i.e CASHFLOW instead of CAPITAL GAIN) should the market fall.      


Review of FY2012 results: Wing Tai Holdings

Good day to all! This will be my first post on Wing Tai and what a time to post it~!
Coincidentally, Wing Tai just announced its FY2012 results and it was the last developer to announce results for the Apr-Jun quarter.

Wing Tai is a company with generally 3 core businesses.
(http://www.wingtaiasia.com.sg/Businesses/Retail/)


(1) High-end Property development
(2) Rental from Investment properties
(3) Retail / F&B 

Its largest shareholders are the Cheng Brothers at slighty > 50%.
 

Some key numbers (based on FY2012 financial statement & presentation slides) 

Number of shares issued (including treasury shares): ~794m
Current share price: S$1.51
NAV: S$2.69
Ppty development EBIT:$194.3m
Investment Property EBIT: S$33.9m
Retail EBIT: S$29.7m

TOTAL NET PROFIT : ~S$263m
Full year EPS: ~$0.31


My analysis

Truth be told, I only spotted Wing Tai in March this year and it is not a company I am very familiar with.
This explains why I do not have a large position in it yet.
Thus I prefer to give a simple and general analysis on it rather than a detailed one.

I bought it for only a few reasons. To put it simply:
A) Huge discount to NAV - high margin of safety
B) For a property developer, it gives a very high dividend protection versus my buy px of $1.28 
     (Historically gave $0.04 to $0.07 in recent years). Compared to others like CityDev/SC Global, it
     seems a value-for-money.
C) Its Balance Sheet is damn strong (Gearing 18%, flush with cash)
D) Its Cashflow Statement is damn healthy (Net Operations + investments + financing = +ve)
E) Diversification of income source including involvement in retail of major brands like G2000 and 
    Uniqlo (though not a high % of income, this segment had been consistently growing)
F) Key Risk factor though is if there is going to be a protracted downturn to the high-end property market. But given its strong balance sheet, Wing Tai should be able to weather any downturn due to its holding power, or even take advantage of it in a big way.

My concluding thoughts

This seems to be a very good company though and I initiated a small position purely on these glaring positives as it seems too good to be missed when I saw it at $1.28.
I will research more about this company in due course and just might add on if the price falls.

:-)

Saturday 11 August 2012

Review of 2Q 2012 Results: United Engineers

United Engineers just released their 2Q results on Friday.
Here are some figures --->


Key numbers (2Q2012 financial statement) 
Number of shares issued (including convertibles): ~321m
Current share price: S$2.32
NAV: S$3.97
Ppty development Operating profit: 0  (1Q also 0)
Rental Operating profit: S$9.5m (1Q  S$14.5m)
Engineering Operating profit: S$6.6m (1Q  S$2.5m)

TOTAL OPERATING PROFIT: S$16.1m
TOTAL NET PROFIT : ~S$10m
EPS: $0.025 this quarter


My analysis 
A glaring issue that I noticed was a drop in the Operating profit of recurring Rental income by S$5m QoQ. I was surprised by this as i expected at least an equal amount to 1Q2012.


UE Bizhub East (extracted from website of CPG consultants)

Regular readers should know I watch income from recurring assets like a hawk as I believe strongly in sustainability. The income from this segment is also the basis for my valuation of this company.
Thus, I need to reconcile the reasons for this massive drop.

A likely reason, I speculate, is it could be due to one-off maintenance expenses or staff bonuses.  
For now, I can't be certain.
I'll be watching the performance of this segment in the coming months.
Would like to hear from readers if they have any views on the possible reasons for this drop, though?

 Meanwhile, the list of recurring income assets for this company that I gathered is as follows:
1) UE Square + Park Avenue Suites
2) UE Bizhub Central
3) Park Rochester Hotel
4) Rochester Mall
5) UE Bizhub East  (Obtained TOP in 2Q2012, no significant contribution yet)
    http://www.cpgcorp.com.sg/CPGC/Project/Project_Details?ProjectID=1249


Overall, the catalysts for growth as explained in my 26th July post on UE are still intact.



Stock investing is never easy though, always having to make decisions with incomplete information~! Guess thats why they say it is part art, part science!

Thursday 26 July 2012

Portfolio: July 2012



July has been a month of positive surprises.
The market value of my portfolio increased mainly due to increases in stock prices of my 2 largest holdings (Stamford Land & Frasers Centrepoint Trust), plus the purchase of United Engineers.
 
Nonetheless, I am still concerned about improving my overall Portfolio Yield.

There doesn't seem to be any fantastic yielding stocks right now for me to recycle my capital as the entire market seem to do a mad-charge for defensive stocks.
Looks like I got to wait while accumulating dividends meanwhile.


Actions taken in July:
 -I accepted Wing Tai's offer at $1.39 for about 5,000 shares and retained the rest.
 -Added 17,000 shares of United Engineers for reasons explained in my previous post.



My Thoughts on United Engineers



United Engineers is a company with generally 3 core businesses.

(1) Property development
(2) Hospitality/Commercial Property rental
(3) Engineering

It is a 100 year old company and counts OCBC Group & Great Eastern as its major shareholders.
 

Some key numbers (based on 1Q2012 financial statement) 

Number of shares issued (including convertibles): ~321m
Current share price: S$2.25
NAV: S$4.06
Ppty development Operating profit: 0
Rental Operating profit: S$14.5m
Engineering Operating profit: S$2.5m

TOTAL OPERATING PROFIT: S$17.5m
TOTAL NET PROFIT : ~S$10m
EPS: $0.03 this quarter



My analysis based on earnings

I will be using 1Q'12 as a gauge for "worse case scenario" analysis as it is rather conservative, using  UE's profit from ONLY its recurrent income sources.
Let's assume the completion of UE Bizhub East and hotels, and the stabilisation of occupancy rates in Rochester Mall & Park Avenue Rochester.
The profit projection from these recurrent income would be S$15m/qtr or EPS S$0.045/qtr.
Based on current price of S$2.25, its PE based on its recurrent income stream alone would be an undemanding 12x.
This assumes ZERO profits from its Property Development & Engineering segments, and the sale of the SPVs to OCBC!

Orchard Gateway located beside Somerset MRT


My concluding thoughts

I have bought into UE at prices ranging from $2.20 to $2.50 and intend to collect more should the price fall below $2 in the upcoming 1 year due to a variety of reasons:
(1) Huge discount to NAV. (~50%)
(2) Near-term Catalyst of new streams of recurrent income from:
     -UE bizhub East (dec 2012)
     -Park Avenue hotel integrated with UE Bizhub east
(3) Near-term Catalyst of one-off sale of SPVs to OCBC. These SPVs were created to handle the
     development of Orchard Gateway & Hotel.
(4) Small number of shares issued will mean low liquidity but it'll mean strong EPS growth should
     earnings be boosted.

By buying at current price or even cheaper, i believe that i will be holding a company that will be substantially more valuable 1 year later due to its stronger recurrent income portfolio and its potential cash hoard.

On a side note, a hunch I have, is that by giving the big development project of Orchard Gateway to UE, plus UE's recent business direction towards generating more recurrent property income, OCBC might look at UE as a prospective "real-estate arm". Note also that OCBC no longer has a substantial stake in another real estate company now that it sold F&N.
I do recall that banks were directed by MAS to divest non-core assets since years ago.
If this still holds true, UE might get to purchase a stake in Orchard Gateway which will give it more recurrent income. It's just a thought though.



Wednesday 11 July 2012

Investment Philosophy: Part 3


                      "Invest ethically"



I met up with a friend over lunch last week and we somehow came to the topic of life philosophy.

She inspired me with her view that one should live their lives by passionately practising the core values that they hold dear.

That is because at the very least, after we have left this world, we would have made our mark by impressing on the people around us with these strong values we have lived our lives by. So much so that when people remember you, they will think of the strong values your life represented.

It could be integrity towards your job, keeping to your promises, love for nature, gratitude towards others, fidelity towards your spouse, being punctual at all times because you respect others' etc.....anything. Everyone of us definitely have something we believe strongly. Just that we have to recognise it and apply it mindfully. 
I felt it was a very meaningful way to live life.







Relating this to my core investment philosophy of ethical investing, I have always been a strong advocate of investing in enterprises that add value to the marketplace and people's lives.

For e.g I do not condone the act of directors/CEOs paying themselves millions despite making huge losses and destroying value. I will avoid these companies like plague. I will also avoid companies that produce tobacco, gambling, etc too.

Moving forward, I this will be a key factor I consider before determining the types of companies' stocks I buy.




It might seem radical to many people, but I personally do not advocate shorting a company's stock too. I have never shorted a stock and never will.

The basic premise of investing, i believe, is to buy into strong enterprises that create value in the long run.

What good does it do to profit from a company's fundamentals deteriorating terribly?

I do think that shorting is a something that is contrary to the statement "making the world a better place". It is destructive rather than productive, and I would rather spend the time hunting good companies that contribute positively to the economy. The satisfaction obtained from seeing a value-adding enterprise grow and knowing you have a share in it is thrilling!





Going forward, I aim to grow my portfolio based on this investment philosophy of investing ethically. How about you? :-)

Sunday 24 June 2012

Portfolio: June 2012




The month of June was a quiet one, the only key action I took was accepting the 15% Partial Offer for Wing Tai.

As shared in my previous post, my intention will be to increase my available-for-investment funds.
The Eurozone issue is generating alot of volatility and I am raising cash to purchase good companies on dips. 




Wednesday 13 June 2012

My thoughts on Wing Tai's 15% Partial Offer




Late May, the Cheng Brothers made an offer of 15% of shares in Wing Tai at $1.39.
This partial offer is a shrewd move to get a bigger share of the company at a cheap price (relative to RNAV) for them.

The recommendation in page 56 of the Offeree Circular summarizes the crux of it:
http://www.wingtaiasia.com.sg/uploadfiles/news/Despatch%20Announcement%20-%20Offeree%20Circular%20-%207%20June%202012.pdf

Excerpt --->
"Shareholders with a short term view or those that wish to partially monetise their holdings
should accept the Partial Offer and if they wish, tender excess Shares if they are unable to
obtain a price higher than the Offer Price on the open market.
 
Shareholders who are prepared to take a longer term view of the investment in the Shares and
/ or who are positive about the prospects of the Company may wish to retain part or all of their
Shares. Shareholders who wish to retain their Shares should note that the future performance
of the Shares is dependent on, the performance and future prospects of the Company, general
sentiment in the equity market and prevailing equity market conditions."

It truly depends on the investor's perspective in each case.

I will accept the Partial Offer.
Because it allows me to realise a 10% profit in 3 months on this counter.
Yet will still allow me to retain some holdings in Wing Tai too.

My overall aim now is to add to the cash component of my portfolio as I do sense a GSS coming soon, if it hasn't occured yet.
Will be watching the situation closely.  :-)

Investment Philosophy: Part 2

Was overseas for 2 weeks thus have not been blogging! Now for Part 2 of my series.

"Buy companies that you can see"
     
In 2006, a friend who studies Value Investing in-depth shared this philosophy with me over coffee.
He advocates that one can make money by simply paying attention to services, things and events that we encounter in our everyday lives.
You'll be surprised the number of companies we actually come across during our daily routine.
These encounters indirectly alert us about the financial pulse of these company's operations to give us an inkling on whether if its healthy or sickly.

For e.g,

If you want to buy SPH, see for yourself and ask around if more people are using internet advertising rather than print?
 

If you want to buy a REIT like CMT, walk the malls and see for yourself. Are there many empty shop spaces in their malls? 

If you want to buy AUSSINO/Breadtalk/Sakae's shares, take a look at their shops and merchandise before making a judgement.



If you like their sunday banking service, or their suite of products, you might be alerted to study OCBC in depth.  


Simple questions and observations for us to start off with.
Of course, additional "investigations" and efforts are definitely required to follow through. 
It is definitely a tool to increase your probability of a more accurate qualitative assessment of the company.
 
Now, to share some case studies I personally encountered with respect to application of the investment philosophy:

Frasers Centrepoint Trust
During 2008/09, I applied the philosophy on my purchase of this REIT.
REITs generally derive income from rental  income, and I believe by looking up occupancy at the malls, we can have a good feel if the rental space are really sought after.
I chose FCT as its bigger malls are found near my home in the North. It would be easier for me to do my research too.
At that time, many analysts were calling for SELL on FCT due to the Global Financial Crisis.
Its stockprice went to as low as $0.50.
However, reality seemed a little different because when I walked through its malls, it was business as usual. I noted that its 2 biggest malls Northpoint and Causeway point had high occupancies and business was bustling. Pedestrian footfall was good.
Only catch was that Northpoint had a major AEI ongoing. However, I called the investor relations dept and the officer confirmed with me that several shop spaces were actually preleased with 3 months rental deposit paid up.  
These findings, together with the necessary fundamental analysis on its financial figures gave me confidence to buy in bulk at the $0.80 to $0.90 region. I felt it was a calculated risk worth taking.
Today, its price is at $1.63. My yield on cost is in excess of  9%.



China Paper
A stock which i lost money in 2008 - 2010. Looking back, I totally ignored the philosophy of buying what I can see in this case.
China Paper was a profitable company with superb fundamentals......on paper. At that time, its NAV was at $0.48, Share price was at $0.185 and I bought in.
Only thing was its operations is located in the faraway land of China managed by an unknown PRC national, a small risk for the big discount to NAV, i guessed!
Share price fell over a period of 2 years and I sold off all at $0.125. Well, guess I paid the price for buying something I can never see/gauge in depth. A result of poor qualitative analysis.
Nonetheless, it got worse as company did 2 Rights issue subsequently and paid close to 0 dividends. Share price now at $0.037. Glad I bailed out.


------------------------------------------------------------------------------------------------

Further Reading:
The application of this philosophy is explained in detail with countless practical examples in high profile investment books on of which is COMMON STOCKS UNCOMMON PROFITs written by Philip Fisher. In his book, he calls this approach to investing "scuttlebutt".
Peter Lynch's investment best-seller  ONE UP ON WALL STREET  also has several examples of this approach to investing.





Both books were great reads and the lessons shared by the authors formed huge impressions in my mind. Worth a read. :-)

Saturday 26 May 2012

Investment Philosophy: Part 1


"Put all your eggs in one basket, but watch that basket carefully" - Warren Buffett
     

I first encountered this phrase when I was attending a Value Investing course conducted by a prominent stockbroker Mr Robert Tay in 2003.
I treated this phrase with some scepticism at first because till then, mainstream investing media always promotes diversification in order to protect your capital and prevent you from making a significant loss.
Now this philosophy is saying we should risk it all in one or two stock picks!?
Isn't it dangerous!?

SGX




In 2003, I spent hours researching this company analyzing its fundamentals.
It was a monopoly with great cashflow, management and prospects.
The current price was a steal!
Thus, I decided to buy SGX @ $1.10 and managed to sell at $2.20. A 100% gain!

But i only bought 1 lot, even though I could have bought more.
Looking back, my amount of research truly increased my probability of making a profit in the stock.
Shouldn't i have bought more to do justice to the hours spent on my research?

Thats when this philosophy came back to me.
Since then, I have decided to put a significant proportion of my net worth in an investment once I have thoroughly analyzed it.


SPC




One of the times I applied this philosophy was in 2006.
I put a significant % in SPC (privatised 2009).
Oil prices then were thrashed badly.
However, SPC's stock was sold down unjustly.
I bought in batches from $4 to $4.50.
Soon after, oil price recovered.
I sold all at $6.55 in 2008, making approximately a 50% gain.
Though % gain was lesser than my SGX trade, the amount I made was more!

This example, coupled with many others I seen over the years have convinced me that this philosophy has its merits if applied correctly.
Caveat here is you MUST HAVE THOROUGHLY ANALYZED the company.
Investing is ultimately hard work, not gambling.  :-)



Further Reading:
This same philosophy is repeated in an Investment Classic titled THE ZURICH AXIOMs written by Max Gunther.
It is located under the section "Always Invest for meaningful gains" - Minor Axiom I.
I would highly recommend this book for anyone who wants to start out investing.

Book Review --->
http://20smoney.com/2008/07/08/how-the-swiss-got-rich-the-zurich-axioms-part-1/




Review of FY 2012 Results: Stamford Land

Stamford Land announced their FY11/12 results last Thursday.
Chairman Ow announced the highest ever 4Q dividend of S$0.04 per share.
My annual dividend income from this co alone will reach five figures!
Based on my buy price of $0.50, it works out to be 8%. A nice bonus while waiting for ultimate value unlocking (my target price $1.00).
But this is likely a one off and i believe my analysis on its recurrent earnings in my previous post still stand.

Stamford Land's key assets on its balance sheet are now as follows:
1) 8 four/five star hotels in Australia, NZ
2) Dynon's Plaza in Perth
3) Unsold apartments from Stamford Residence Auckland & Sydney (the latter accounting for more)
4) Cash of S$87m (of which $35m will be paid as dividends)

Stamford Land's only key liability on its balance sheet now:
1) Bank loans of S$350m

*Stamford Grand Adelaide (picture taken from Stamford Land's website)

Outlook:
1) Potential listing of more Aussie hospitality assets(e.g Ascendas Hospitality REIT) in SGX might trigger a re-rating of Stamford Land
2) Weakening of Aussie dollar actually makes Aussie assets cheaper than 6 months ago. Hotel Buyers might take advantage of this and make an offer.
3) Possible writedowns in Stamford Residence Auckland should more apartments be sold below cost
4) Debts are much lower now. Profit margin might increase, ceteris paribus.
5) No big projects in the works

I will continue to hold out this investment over this year while enjoying the dividend.
That is, unless another more compelling investment that I can understand easily comes along.
Meanwhile I am working hard on discovering other discounted gems to add to/rebalance my portfolio. It is too skewed towards property.
Will update my blog in due course! :-)


Note to my readers:
I'll be starting a new series in my Blog titled: Investment Philosophies.
It is done with the intent to share my knowledge of some fantastic ideas I came across over the years which impacted my investing methods. Most of it came from books I read and courses I attended.
I will strive to give real life examples too to show that some of these good stuff works! :-)

Monday 21 May 2012

My thoughts on Stamford Land Corp.

Stamford Land Corp.

This company is my largest holding to date, which I acquired at S$0.50.


Qualitative Analysis:
-Family owned ~ 35%

-Willing to pay dividends regularly over the years

-Good track record of owner unlocking value in stable of companies like SG Shipping/Cougar Logistics

-Owner is a reputable businessman

-Unlocking of value might take indefinite years (opportunity costs)

-No visible catalyst moving forward


-Hospitality is a cyclical industry, though the shortage of rooms in Australia might mitigate the magnitude of falls in revenue.


Quantitative Analysis
(based on my estimation using financial statem data @ A$1 = S$1.25):

Cost of Hotel Portfolio: S$488m
Probable mkt price of Hotel Portfolio: ~S$768m (based on recent offers)

Recurrent Earnings from hotels and Dynons Plaza: ~ S$26m/yr
Projected EPS: ~ S$0.03/yr (based on 864m shares)
Projected sustainable dividend: ~ S$0.02/yr (excludes special dividends)

Note that my above analysis has a combination of assumptions, one of which is the recurring income are performing as per  2009/2010 (year when no ppty was sold)
Assumptions are necessary, and I do believe investing is an art, not a science, to a certain extent.

-----------------------------------------------------

Projected Dividend Yield is not fantastic @ 3.7%
I am holding it solely for the value of its hotel portfolio.
Its current book value is based on the cost price paid by the company in the 1990s to early 2000s. The market values of the hotels are substantially higher today.

Saturday 19 May 2012

Creating Sustainable Income


Have been wanting to document my Investment Journey in a Blog to both remind myself of the lessons I have made, as well as the accomplishments (i hope) that I have achieved in my life.
Finally took the first step today!!  :-)

Well, since my university days in 2004, I wondered why so many people in their 30s and 40s generally spend such long hours at work, to the extent of neglecting their family, while complaining about being stuck in jobs they hate.
I made a decision that I do not want to be like them at their age.


Alot of my observations over the years led me to conclude that if one has sustainable income to support their basic lifestyle, they would have more time to think about creative ideas to make a difference in the lives of the people around them, making our country a more harmonious and constructive place worth living.

One of the methods to get there I believe was to achieve proficiency in Stock Market investing.
Hence, in my early years, I read many books and attended seminars regarding Value Investing.
Most importantly, I took the plunge and started trading in the Singapore Stock Exchange.
Can still recall some stocks I traded in those days have become 10-, 20-baggers today whereas many got delisted because of company fiascos, privatisations, etc. Retrospectively, several lessons were learned. I got my fair shares of profits which made me feel "invincible", but also my fair share of losses that humbled me and brought me down to earth.

Since 2004, I grew my $20k capital to $300k (mkt value) today.

Today, my investment philosophy is long only, preferring to hold companies for years.

I will sell them only in 3 scenarios:
a) Times of irrational exuberance
b) There is a more compelling investment
c) The company's fundamentals deteriorate irreversibly

My strategy ultimately gears towards purchasing good quality companies' stocks that give sustainable dividends (5% to 8%).

I shall begin this first post by sharing my stock portfolio as well as my annual dividend income in 2011.

STOCK PORTFOLIO
                   
Frasers Centrepoint Trust (retail malls in SG)
Mapletree Commercial Trust (commercial/retail malls in SG)
Stamford Land  (australian hospitality assets)   
United Engineers (ppty developer/engineering/hospitality in SG)
Wing Tai (high end ppty developer/retail business)

Annual dividend 2011:   S$16,000 




Going forward, I will periodically do writeups on these individual companies, and share my views on the individual companies' prospects.
Your comments and views are greatly appreciated!
Hope I can find more bloggers/investors of similar mindsets through this avenue.  :-)