Tuesday, February 19, 2019

Starhub cutting dividends - will it shine again?


(Source: Starhub)

Starhub has announced its FY2018 results on 14th February 2019. Besides a decline in its business, it has also announced a change in its dividends policy. Where it had given out 20c per share from FY2010 to FY2016, and then 16c per share in FY2017 and FY2018, it will be revising the dividend policy to at least 80% net profit. This is estimated to be 9c per share assuming Free Cash Flow stays constant.



Investors who have done their due diligence will have flagged out the unsustainable nature of its dividend (it was consistently above their free cash flow (FCF) - they were essentially funding part of the dividend from debt.)

With the change in its dividend policy, they will finally be giving out less dividends than their FCF. In my opinion, this is a step in the right direction and it piqued my attention. Will it shine again?
  • Starhub's borrowing currently sits at $1028.5m, and perpetual capital securities at $199.9m. As a result, they need to pay out about $38m (combination of interest and payout to perpetual capital securities holders) yearly. This unfortunately means they need to further improve free cash flow such that it equals 20% of net profit or it will still remain unsustainable.
  • Keeping in mind the current state of increasing interest in financing, it would be wise to de-leverage.
  • For one to add position of Starhub, the company need to show at minimum, proven signs of recovery - stabilised Free Cash Flow and Revenue. The right time to enter will be if it is oversold relative to its fundamentals. Value play so to speak.
Will be monitoring Starhub closely for this year.





Note: The above should not be used as a decision to solicit buy/sell activity. Use all information at your own discretion and DYODD.

Sunday, February 10, 2019

How your career is like investing in the stock market


(Source: https://www.timeshighereducation.com/books/review-a-culture-of-growth-joel-mokyr-princeton-university-press)
Your career actually shares so much similarities to investing in the stock market.

It is after all, also an investment - one where you trade in your time, existing experience and skillset (capital) for your salary, networking and further growth and development of your experience and skills.



You go to school to develop your education (reading up on investing in the stock market from the basics) and mentality (what is your target for investing into the market). The next step then entails internships and/or interviews. Your internships are akin to your initial foray into the stock market. You get a taste of your first professional experience relevant to your studies (research and/or playing with demo account).

Applying for the right jobs and then preparing for your interview after being shortlisted is similarly akin to studying market returns, screening for the right stocks to shortlist and then doing further due diligence.

When you land that job? Congratulations! That's you putting your time and skillset (capital) into your new role (becoming a shareholder) with that employer (stock).

It also goes without saying that investing your time in the right company throughout your career is crucial, to ensure you are at least adequately renumerated and developed for your time and effort (making positive and decent returns from the market). Kudos to you if you are getting above average or amongst the best renumeration (outperforming the market)! As you get your monthly paycheck, your time and effort becomes your "realised gains". And as the company grows, so do you. You get your increments and promotions (growth).

For some of you, you may end up working overseas (investing in foreign stocks and/or markets).

Given the age of globalisation, staying mobile - new role or employer every few years - has become a norm and even a necessity in some instance. Moving to new employers in your career are also more likely to pay better rates than existing employers even if your career progress is keeping pace (there are exceptions). This is akin to rolling over capital from one stock to another when your research tells you that will generate you higher returns.

When the company does well, and gives you bonuses? That's your "special dividends/bonus shares" right there!



Things are not always rosy, however. Recessions, downturns or cycles do occur as well (Market crash, bear market / corrections), as do your company facing headwind (Underperformance of the stock from rightfully realised decline in fundamentals). Perhaps for some, they are not being rightfully renumerated (market manipulation causing the stock to be priced down). Worst still, you may be retrenched (the stock being suspended). From a personal side? You may face issues which causes a need to additional spending in health or otherwise. You hedge against that by developing alternate incomes (diversification) or insuring yourself  with accident plan, life insurance or hospitalisation plan (erms... shorting? 0.o).

And at the end, when you retire - that's when you draw down on your savings and investments (exactly the same in this perspective). Your professional experience as your capital is drawn down in the form of your accumulated wealth to live out your golden years.

Ok, enough rambling - time to go to bed. Haha. It's the 6th day of Chinese New Year, and I have yet to wish my readers, so happy belated Chinese New Year to you guys! Let's huat together!

Thursday, January 31, 2019

Alliance Mineral share price getting wacked - Day low of 0.177

The last few days has been harsh on the share prices of Alliance Minerals Asset Limited (SGX: 40F / ASX: A40) - dropping to a day-low of 0.177 on SGX. I am now in the red. -_-

(Source: Alliance Minerals website, https://www.allianceminerals.com.au/)


(Folks, this is one of the reasons why diversification is needed. Having mentioned that, it was a risk I was ready to accept.)





This could be attributed to the following:
  • Sentiment in Lithium Sector
  • Uncertainty after revision of offtake
  • Outcome for ineligible holders
  • Unclear ongoing shipment from Esperance
Most investors will have at least be caught by such events in one or more of their portfolio holdings. The silver lining is that it really tempers your guts to weather through this.

In some ways I am glad I have went through this when I first started trading.

While the saying "Never fall in love with a stock" always holds true, I have faith the future of Lithium is still there (especially for Alliance Mineral) and this is a short-term thing going on due to lack of information. Think about it - where's the credibility of Morgan Stanley buying into Galaxy AFTER releasing a pessimistic outlook for the sector? Pfft.

Keep in mind Alliance is a producer now, not an explorer.

I'm keeping close eye on the quarterly report to be out tonight or tomorrow morning, and then we will see how things goes.

Saturday, December 29, 2018

2018 - The Year In Review

So 2018 is finally coming to an end, and it has been a pretty trying and eventful year filled with ups and downs for Mr. Market as well as myself.

Personal
  • Getting (legally) married - Have not done my customary marriage yet
  • Attending a couple of workshops to learn more on trading/investing 
  • Drew down on half of my portfolio
  • Bought my own home, moved in and then renting common rooms out for income
  • Recently my wife had been hospitalised on Christmas Eve, and then discharged on Boxing Day. Thank goodness for having a hospitalisation plan and OCBC Cashflo card.
  • And of course, the birth of this blog.



Market
On the broader market, stocks all around the world has been getting trashed and volatility is still high. The drops recently presented once again another opportunity to pick up stocks at a bargain and I hope our fellow investing community has picked up some.

Portfolio
As with many out there, my portfolio value overall was not spared either, although I am still in the green based on the price of the position I have taken up.

(1) I added 10,000 units in Alliance Mineral Assets Limited in 1Q2018, which unfortunately was not bought at a better price.

(2) I drew down on my portfolio, selling Cache Logistics, CapitaMall Trust, Fraser Logistics and Industrial Trust in 1H2018 mainly to fund my home, which also helped me to lock in a small amount of realised profit from capital gain. (I also briefly bought and then sold APTT in 1Q2018 after having second thoughts about its prospect - thank goodness).

(3) I then ended the year by subscribing to Cromwell European REIT's rights issue, managing to snatch up 2000 units to treble my position. I am expecting to earn between $190 - $210 in distribution for the full year of 2019 depending on the performance of the REIT and the exchange rate.

If I include this drawdown towards my home, my portfolio has dropped ~58% in value from  4Q2017 to 4Q2018. Take the drawdown out of the picture, IMO I have weathered the storm to my expectation (-15% YOY) - it could have easily been much worse (see APTT for instance). This does not include the dividends collected.

Oh, and by the way, I recently registered myself on StocksCafe so you can reach out to me over there too. Pretty useful portfolio management tool.

Moving forward
I have reasons to believe Year 2019 will be a better year ahead for investors - Corrections are healthy to keep valuations more in checks you know. At the very least, I believe 2019 will be a better year for myself, mainly due to optimism towards Alliance Mineral Assets Limited, especially now that the merger with Tawana is completed and the new management team has taken over (in ASX, the merged entity is trading with stock ticket A40).

A useful source to follow up on news or sentiments by other retail investors of Alliance Minerals is here.

Additionally, one of the sector I am keeping a close eye on is the Semiconductor Sector, which is known to be a cyclical sector. I believe they will probably continue to face headwind and bottom out in 2019 and already I have some stocks on my target board.

Other than that, I foresee difficulty in entering the market (save the rare moments like rights issuance) as 2019 will probably weigh heavily again on my finance as my wife and I will continue to return borrowings and trying to plan the customary marriage towards start of 4Q2019.



Plans for Self-improvement
I have been reading up on technical analysis during this year. Not much progress has been made as I am still trying to catch balls at how to use it. The biggest reason for me to pick TA up would be to compliment my ability to adding positions of stocks at better price.

I also hope and plan to earn some extra money from trading and some side gigs as the income

And last but not least, I hope to contribute more useful reads to the community when I am not just documenting my progress as an investor.

Here's to wishing everyone a Happy New Year and fruitful 2019 in advance!

Friday, December 21, 2018

Cromwell European REIT - Got all the rights unit I applied for!

So I managed to get all the excess rights unit I applied for on Cromwell European REIT! As a shareholder having a measly position of only 1000 units from the IPO, I was entitled to 380 rights unit. I applied for 1620 excess rights units and got them all.

This brings my total holdings to a grand total of 3000 units - still small but significantly larger position. I estimate this bringing up indicative dividends up by about... 2.3x - 2.5x while they are distributing 100% of distributable income up till end of FY19 (as per their policy shared in prospectus back then).

* Calculated based on 1 EUR = 1.57 SGD



This came as a pleasant surprise for me as I do not expect to get all 2000 units. My last rights issue purchase was for Cache Logistic Trust, and even that was oversubscribed by about ~100%. It seems that this particular rights issuance was only ~5% oversubscribed.

Despite the increasing interest rate environment, DPU-dilutive effect of the purchase and the need to focus on paying off my borrowings or building up my emergency funds, I felt this was too necessary of an opportunity to pass up. It is icing to the cake that I get to pay $2 instead of $30 in commission to re-build my income portfolio. Heck, if I was in a better financial position, I would apply for a few thousand more excess rights units.

With that, although the this quarter has yet to come to an end, I update my portfolio for 4Q2018.




Income Portfolio





Counters
Units
Market Price (SGD)
Overall Value based on market price (SGD)
Allocation
1
Cromwell European REIT
3000
0.667*
2001
13.80%







Growth Portfolio





Counters
Units
Market Price (SGD)
Overall Value based on market price (SGD)
Allocation
2
Alliance Mineral Assets (AMAL)
50000
0.25
12500
86.20%







Cash and other Assets





Counters
Units
Market Price (SGD)
Overall Value based on market price (SGD)
Allocation
3
Warchest
1
0
0
0.00%

Total SGD


14501
100.00%

* Calculated based on 1 EUR = 1.57 SGD

 Wishing everyone a Merry X-mas (or otherwise Happy Holidays) in advance!

Sunday, December 2, 2018

Are Business Trusts bad?

Shockwaves are still reverberating from Asian Pay TV Trust's crash down after announcing the large cut in their dividends. A lot of investors out there have steered clear of it and never bought into it in the first place; some others have bought in by acceptance of risk-for-reward either before or after the crash. I bought it in a past, and sold sometime soon after getting 1 quarter worth of dividends (net gain of $150 - I lost pocket change in capital loss).

I recalled how it was in essence Macaquire passing on debt by marketing the IPO of APTV, after unsuccessful attempt to divest. (Link here)





This incident also made me thought of Hutchinson Port Holding Trust, another counter I had been monitoring since a couple of years ago. Yield seemed nice at that point but the outlook and the share's performance just seemed abysmal.

This left a bad taste in my mouth based on observing the destruction of shareholder values. Then I had a thought, a wandering question in my mind:

"Are Business Trusts bad?"

This piqued my curiosity and of course, I have to cross-check and verify this.

There are some business trusts currently listed in SGX and I will be touching on them in my write-up.

Singapore Listed Pure Business Trust
Accordia Golf Trust
Ascendas India Trust
Asian Pay TV Trust
Dasin Retail Trust
Hutchinson Port Holdings Trust
Keppel Infrastructure Trust
Netlink NBN Trust
Religare Health Trust

There are also stapled securities that are a hybrid of Business Trust and REIT. My article will not be covering them beyond listing of the listed trusts. (3-Dec-2018 - just added CDLHT - thanks Relac 1234!)

Singapore Listed Stapled Securities (REIT + Business Trust)
Ascendas Hospitality Trust
CDL Hospitality Trust
Far East Hospitality Trust
Frasers Hospitality Trust
OUE Hospitality Trust
Viva Industrial Trust

What is the difference between REIT and Business Trust? They seem similar and they have "Trust" in their name, causing confusion in the distinction between them. I tabulated a summary of some of the key differences between them as well as share the structure of Business Trust and REIT.



REIT
Business Trust
Business
Involved in Real Estates
Can operate in any field
Gearing
Up to 45%
No borrowing limitations
Distribution of Profits
Paid from accounting profits. Min 90% of taxable income in dividends (to stay tax-exempt)
Declared out of Surplus Operations Cash flow. No minimum payout.
Management of Entity
Separate entities for:
- Ownership of Assets
- Manager running operations
Owned and Run by Trustee-Manager
Change of Trustee-Manager
Min 50% unitholders to remove manager
Min 75% unitholders in favour to remove manager
 
Source: SGX

Source: SGX





So have shareholders benefitted from investing in business trust in general?

At the very least, there's not many in which investors who have participated in their IPO and still held on have benefitted, and where there is, the net benefits have been marginal (to be fair, there is a couple of them like Dasin or Netlink which are still early days to be judged as good or bad). Here's a summary of their performance and charts since IPO. (Note - in my summary, this is a bit outdated; Current Price was as of 25-Nov-2018.)

* Additional Note - HPHT declares dividends in HKD and my summary has also converted them to SGD although there will be slight inaccuracies in the conversion.

Summary of Business Trust Performance


Source: Yahoo! Finance
The results are shocking (at least to myself) - I feel bad for the IPO participants who have held on.
  • RHT emerges as the only true winner if you participated in their IPO. 
  • While it is early days for Dasin Retail Trust and Netlink Trust, there is some gain to be had overall
  • APTT and HPHT are guilty as charge of wanton destruction of unitholder values
  • The remainders are generally lackluster, and only saved or partially salvaged by dividends.
Digging into the share performance and finding out the root cause to declines or raise will make for good case studies to build up one's knowledge base and improve our decision making as investors.

A closer look at the charts shows that in certain scenario, one can either average down (as investors of the business trusts who are still holding on) or enter (as investors who have not taken position yet) to benefit from investing them. Kudos to investors who managed to right-time, go in at those key points and made returns.

So what is the verdict?

Unfortunately, I feel my questioning of the benefit of investing in business trusts remains valid, although deciding to do this write-up has better built in me ability to assess the business trust on an individual basis. At the very least, the rewards most of them has got to offer do not seem in-line for the risk they expose the investors to. For APTT, I do hope this is the turning point to be worthy of being in one's portfolio.

Readers, what are your view towards Business Trusts? Feel free to share your view!

Thanks for reading.