Monday, 24 April 2017

Dividend Knight Income Portfolio Update (April 2017) - Rebalancing Mode Activated


No.
Company
No. of Shares
1.
DBS
3, 000
2.
Singtel
15, 000
3.
AIMS AMP Capital REIT
30, 000
4.
Frasers Centrepoint Trust
15, 000
5.
SATS
6, 000
6.
OCBC
3, 040
7.
Raffles Medical Group
20, 094
8.
Mapletree Logistics Trust
20, 000
9.
ParkwayLife REIT
8, 000
10.
Keppel DC REIT
12, 800
11.
Frasers Logistics & Industrial Trust
13, 000
12.
Mapletree Commercial Trust
8, 000
13.
Frasers CentrePoint Ltd.
5,000
14.
Starhub
3, 000
15.
CapitaLand Commercial Trust
5, 000
16.
Straits Trading Corp
3, 000
17.
Sheng Siong
7, 000

 
Dividends received in April 2017: S$0

Total dividends received since Jan 2017: S$3, 635.02


Average dividends per month: S$302.92


Average dividends per day: S$9.96


Total portfolio market value: S$395, 755

Unrealised Profits: S$47, 276 (+11.95%)

Despite not receiving any dividends/distributions in April, it had been a rather hectic ‘portfolio rebalancing’ month for me. The percentage paper gains of some REITs in my portfolio have entered double-digits territory in recent weeks as another result season approaches. I was in a dilemma, torn between taking some profits off the table and just holding onto my current positions. In the end, I decided to fully divest Ascendas REIT & CMT. My capital appreciation in Ascendas REIT is equivalent to 2-year worth of distributions. Furthermore, the current price of Ascendas REIT is a huge premium over its NAV. CMT reported flat results last week due to the redevelopment of Funan Mall and negative rental reversions at Bedok Mall & WestGate Mall. I shall revisit CMT again closer to the completion of the new Funan next year when there should be new catalysts for DPU growth again. Besides, similar to Ascendas REIT, I get to reap the capital gains of nearly 2-year worth of DPU from CMT too.

A guru once said ‘when you see a quality company selling at a fair price, don’t be afraid to bet big on it.’ Well…..I spotted not one, but 4 such targets over the last two weeks, the ‘juiciest’ one being Singtel. Lucky me!

I made the biggest single trade in my entire investing life (serious >_<) by buying 5k shares of Singtel at $3.73. The price dip was caused by fears of increased competition from TPG in both the local and Australian telco markets. The remaining funds were then funnelled into smaller (but still significant) new positions in Starhub, Straits Trading Corp (STC) & Frasers Centrepoint Ltd. (FCL) I have been eyeing both STC and FCL for awhile now. After doing my homework, I decided to pull the trigger when they went Ex-dividend. I believe STC will reap the long-term rewards by investing in real estate ventures together with ARA & Warburg Pincus as strong strategic partners. Remember, the legendary John Lim is still leading ARA. As for FCL, I like the way it is steadily transforming into the next CapitaLand or even a ‘mini-Mapletree Investment’. FCL is expected to get higher recurring income from its significant stakes in FCT, FCOT & FLT, which brings me to my next point.....


Taking A Leaf From Mapletree Investments' Playbook
Last month, Mapletree Investments has closed a private trust to hold US$1-3 billion in student accommodation assets in the UK & US. It plans to close a series of private trusts and potentially launch Singapore's very first IPO of student-housing assets when the portfolio reaches $4b-$5b in the future. This trust is expected to pay an annual yield of 6% -7%, which is comparable to the 4 SGX-listed REITs sponsored by Mapletree.

Mapletree's strategy is to acquire assets on its balance sheet before seeding them into private trusts. Once the assets in the portfolio reach a large scale and stabilised, there is an option of launching an IPO. A private property trust is more cost-effective to set up and run. Maintaining a listed REIT also requires higher compliance costs due to recent stricter financial regulations. Mapletree's entire $40b-$50b AUM consists of properties in the office, retail, logistics, industrial, residential, corporate housing, serviced apartments and student-housing segments.  In my opinion, John Lim probably has a vision of transforming ARA into another Mapletree with the backing of Warburg Pincus & Straits Trading Corp. I want to ride on this opportunity by being vested in STC.

As small-time retail investors, I believe we are still able to emulate Mapletree by gathering stable income-producing real estate assets in the form of REITs over the long-term.



The expert in almost anything was once a beginner
DK

Friday, 24 March 2017

Dividend Knight Income Portfolio Update (Mar 2017) - A Peaceful Rate Hike


No.
Company
No. of Shares
1.
AIMS AMP Capital REIT
30, 000
2.
DBS
3, 000
3.
Mapletree Logistics Trust
20, 000
4.
Singtel
10, 000
5.
Frasers Centrepoint Trust
15, 000
6.
OCBC
3, 040
7.
Raffles Medical Group
20, 094
8.
SATS
6, 000
9.
ParkwayLife REIT
8, 000
10.
Ascendas REIT
7, 000
11.
Keppel DC REIT
12, 800
12.
CapitaLand Mall Trust
10, 000
13.
Frasers Logistics & Industrial Trust
13, 000
14.
CapitaLand Commercial Trust
5, 000
15.
Sheng Siong
7, 000
16.
Mapletree Commercial Trust
8, 000

 
Dividends received in March 2017: S$831

Total dividends received since Jan 2017: S$3, 635.02

 Average dividends per month: S$302.92

Average dividends per day: S$9.96

Total portfolio market value: S$376, 663

Unrealised Profits: S$43, 975 (+11.67%)


For the month of March, I had collected S$831 in distributions from AIMS AMP Capital REIT.

Year-On-Year Quarterly Review
My portfolio’s market value grew 25.2% from S$300.9k in 1Q2016 to S$376.6k in 1Q2017. Most of this increase is attributed to a combination of fresh injection of funds (from savings) and re-investment of dividends. The bearish market last year (especially in the banking sector) made my stocks ‘shopping spree’ easier. Looking back, I was actually being greedy when others were fearful in 2016. My total dividends received also grew 12.9% from S$3, 219.50 in 1Q2016 to S$3, 635.02 in 1Q2017. Well on track to meet my 2017 passive income target.
There was a lack of knee-jerk reaction from the market after the US Fed hike rates this month. Evidence that time in market is better than timing the market. Fortunately, a short window of opportunity opened up this week that allows me to fully divest Suntec REIT while adding SATS, Raffles Medical (RMG), CapitaLand Commercial Trust (CCT) and DBS.


SATS
SATS has been leveraging on technological innovations to boost earnings despite stagnating revenue in recent quarters. For instance, its ground-handling crew at Changi Airport are equipped with customised smartwatches and bone-conductor headsets to boost productivity, bidding farewell to the ‘walkie-talkie’ era. At its massive, centralised inflight kitchens, robotic arms are humming away to arrange airline meal trays & autonomous guided vehicles carry bulky containers of goods


Source: The Straits Times

Automated machines wash, pack and sort cutlery. These machines are more energy-efficient, labour-efficient, and use less detergent, which is also better for the environment
Source: SATS

An automated facility called the SATS eCommerce Airhub would provide airmail-handling services to Singapore Post. This should form a seamless combination with SingPost’s recently-completed Regional eCommerce Logistics Hub to create a more robust e-commerce logistics network. This could give Amazon a run for their money if their possible entry into Singapore this year does indeed come to fruition. If Amazon wants to muscle in, it would need well-located, modern logistics facilities which MLT has in abundance. It is rumoured that Amazon has already leased an entire logistics warehouse from MLT.
According to SATS’ President & CEO, Mr Alex Hungate, 1.8 million people in Asia are expected to do air travel for the first time by 2034 due to a trend in rising middle-income consumption. SATS is investing now to boost its capacity to meet this future demand.
Its perishables handling facility, Coolport, has secured the International Air Transport Association’s endorsement for pharmaceuticals handling & storage. SATS has a firm grip on the local leisure cruise industry. It partnered with Creurs del Port de Barcelona to manage & operate the Marina Bay Cruise Centre.
All the above-mentioned business segments require huge initial capital outlay & a large-scale operation with experienced management. Furthermore, SATS is a trusted brand in these areas. This should provide a strong economic ‘moat’ & competitive advantage against potential rivals.


DBS
My top pick in the banking sector would be DBS. It started investing in digitalisation earlier than OCBC and UOB. I believe this has a future multiplier effect, especially on its already huge and growing private wealth business. With a large scale, DBS can use digital tech to raise productivity & efficiency,  thereby mitigating the rising costs of compliance. This should help DBS remain competitive. A rising rate environment should benefit DBS as its earnings are expected to be sensitive to rates.

 
CCT

CCT has a solid 5-year track record of raising DPU & NAV in a challenging office leasing market.

CapitaGreen would provide full-year rental contributions, thus boosting DPU in 2017. The total upcoming office supply in CBD is expected to peak in 2017. The small amount of new Grade 'A' office supply between 2018 to 2020 should help CCT seek positive rental reversions. Hopefully, the management is able to get all the necessary regulatory approvals from the authorities on the redevelopment of the Golden Shoe Car Park as soon as possible.


'Strategic Review' In Vogue

Lately, doing a strategic review seems to be the trend for major local companies. It is like a intelligent way of saying 'we want to take profit on some non-core assets on our books'. Let's take a look at a few potentially blockbuster ones. Time for crystal ball gazing!

- SPH, Keppel T&T & Axiata are considering a sale of their huge stakes in M1. This is a tricky one. Who would pay a premium to buy a controlling stake in struggling M1? The financial performance of M1 had been on the downtrend for 4 consecutive quarters - falling earnings & deep dividend cuts. Worse still, the threat of the 4th Telco (TPG) is already looming at the horizon. IMDA's vision of having 4 telcos in Singapore would rule Singtel out as a potential bidder too.

- Back in January this year, OCBC and its subsidiary, Great Eastern announced that they had appointed Credit Suisse to review their combined stakes in United Engineers & WBL Corporation. If a sale does indeed go through, there is a possibility of a one-time special dividend from OCBC.

- Back in December 2016, Global Logistics Property (GLP) undertook a strategic review of its business options after a request from its largest shareholder, GIC. Maybe Warburg Pincus, e-Shang Redwood & ARA can consolidate GLP, Cambridge Industrial Trust and Sabana REIT into one mega logistics company!

- Singtel should do a strategic review of its stake in SingPost. Even though SingPost is no longer a dividend powerhouse, once the new CEO gets the house in order and ramp up its e-commerce & logistics business, SingPost is still a reasonably attractive logistics play in my opinion.



The secret of getting ahead, is getting started
DK

Thursday, 23 February 2017

Dividend Knight Income Portfolio Update (Jan & Feb 2017) - Was Budget 2017 a Non-event?


No.
Company
No. of Shares
1.
AIMS AMP Capital REIT
30, 000
2.
DBS
2, 500
3.
Mapletree Logistics Trust
20, 000
4.
Singtel
10, 000
5.
Frasers Centrepoint Trust
15, 000
6.
OCBC
3, 040
7.
Raffles Medical Group
15, 094
8.
SATS
4, 000
9.
ParkwayLife REIT
8, 000
10.
Ascendas REIT
7, 000
11.
Keppel DC REIT
12, 800
12.
CapitaLand Mall Trust
10, 000
13.
Frasers Logistics & Industrial Trust
13, 000
14.
Suntec REIT
6, 000
15.
Sheng Siong
7, 000
16.
Mapletree Commercial Trust
8, 000


Dividends received in Jan & Feb 2017: S$2, 804.02

Total dividends received since Jan 2017: S$2, 804.02

Average dividends per month: S$233.67

Average dividends per day: S$7.68

Total portfolio market value: S$353, 768

 Unrealised Profits: S$42, 243

For the months of January & February, I had/would be collecting a total of S$2,392.02 in dividends and distributions from my income portfolio.

·         Singtel: S$544

·         CMT: S$201.60

·         FCT: S$433.50

·         Suntec REIT: S$155.76

·         Keppel DC: S$358.40

·         MLT: S$607.56

·         MCT: S$91.20

·         PLife REIT: S$336.60
·         Ascendas REIT: S$412.02 (*Advanced distribution)

Latest Portfolio Re-balancing:
Completed a partial divestment of MLT and a full divestment of MGCCT after their respective XD. Although MLT’s DPU has been steady over the past few quarters, I find it a tad too stagnant for my liking. MGCCT’s DPU took a small hit for 2 consecutive quarters due to a change in property tax regulations in China and unfavourable forex movements of the Chinese RMB against Singapore dollar. I feel my funds can be put to better use in other counters with brighter growth prospects.

The funds from the divestments were promptly utilised in building my positions on MCT, CMT, Singtel and DBS. The recent acquisition of Mapletree Business City Phase 1 had given a considerable boost to MCT’s DPU. The recent trend of businesses shifting their backend operations outside the CBD to cheaper business parks should benefit MCT in the long run since it still has Mapletree Business City Phase 2 (where Google is a major tenant) waiting in the wings. The management is also competent in achieving strong positive rental reversions from lease renewals/new leases.


 

The accumulation of CMT is more of a ‘buy on dip’ decision. Besides, I like the new retail concept at the Funan mall redevelopment, which I expect to provide future growth catalyst in 2019. The new Funan will feature an indoor cycling path, rock climbing and other sports facilities and a new cinema experience when it reopens. is being redeveloped into a mixed-use complex that will comprise two office towers, serviced residences and six floors of retail stores. Three tenants have already signed on: movie operator Golden Village, food court operator Kopitiam and rock climbing facility Climb Central.




Apart from indoor cycling lanes, there will also be bike shops, bike cafes, lockers and shower facilities for cyclists. While a floor of the mall will be dedicated to IT products, it will also incorporate workshops and other interactive elements. Other new concepts include a drive-through for collection of products ordered online, and a 4,000 sq ft urban farm.

The accumulation of Singtel was largely based on its latest set of resilient results compared to the truly woeful results from its competitors (Starhub & M1). Furthermore, the management finally officially stated that they are preparing the blockbuster IPO of NetLink Trust in 2H2017, widely expected to be worth $2.5b. I am hoping a one-time juicy special dividend payout from this IPO. Fingers-crossed. The statement made by Mr Heng Swee Keat, Finance Minister, in his Budget 2017 speech, was a confidence-booster for me too.

With increased digitalisation, data will become an important asset for firms, and strong cybersecurity is needed for our networks to function smoothly.”


Light at the end of the tunnel for the banks?
No surprise from the latest results of DBS, OCBC and UOB. Earnings were down y-o-y and provisions for O&G related NPLs increased. I believe the worst of the O&G crisis is behind us. We are looking  at a slow recovery in 2017. Moving forward, major players like Keppel Corp and SembMarine should be on stronger footing. For the love of God, no more ‘Swiber-like’ fallouts this year (Please!).  So I asked myself, when the market eventually recovers (and it will), which bank will be the best-positioned to grow fast again? OCBC’s insurance arm (Great Eastern) has been a drag on its earnings in recent years and UOB has always been relatively conservative in my opinion. That leaves DBS as my top choice because I like the looks of its ‘crown jewel’. DBS’ wealth management fees climbed 19% to a new high of SGD 714 million from stronger bancassurance income. The ‘Wealth Management’ customer segment income increased 19% to SGD 1.68 billion with assets under management growing 14% during the year to SGD 166 billion. Earning more fees from ultra-high-net-worth individuals in Asia? Hell yeah!


Raffles Medical Group (RMG) – Expansion plans still in gestation period
RMG’s topline and bottomline were weak as operation costs intensify due to the recruitment of staff and procurement of medical equipment. Weak medical tourism and rising expansion costs have hit its hospital segment’s profit margin. ISOS is taking longer to turn profitable. I am expecting earnings growth to be minimal this year. Even though I am confident of the new Raffles Hospital extension and Shanghai International Hospital in providing long-term growth, I am only willing to consider adding current holdings if PE comes down to 28 times.

 
Patience is not the ability to wait, but the actions you make while waiting
DK