Sunday, 28 April 2013

Starhill Global REIT

Starhill Global REIT ("Starhill") announced its Q1 results on Friday.

The Company announced a Q1 results DPU of 1.37 cents per unit, much higher than previous year by 28%. If i striped out the one time adjustment from the Toshi lease, the DPU is around 1.18 Singapore cents, which is about 10.3% higher than prior year. This will translate into an annualized yield of around 4.9%.


YTL has probably been a good manager where the DPU is increasing every year. I will probably expect this year to be better than the last as well. 

This will explain to you why REIT is a good inflation hedge. The rental and parking at shopping malls in Singapore has been increasing "non-stop" since REIT was introduced here. Isn't it a great feeling that you own part of Ngee Ann City and Wisma? It certainly feel relatively "less painful" when i pay $8 for a short shopping spree at Takashimaya, knowing that i am getting a "rebate" in one way or another via the distributions. ^_^

Happy REITing.

Nera Tel - Pulling a rabbit out of the bag?

I wanted to do a brief portfolio update on companies that have announced Q1 results in my SRS portfolio but ended up getting stuck at Nera Tel where it "deserves a post" by itself.

NeraTel Q1 results



This is the first set of results under the new owners and i "don't like it". The revenue and profit has declined, operating expenses has increased even though margins has improved. The "write back" of completed project costs also masked the improvement in margins. I will probably give it one more quarter to "prove" that this decline is temporary as Q2 and Q4 are traditionally slower months. 

Based on current results, the LTM EPS is around 5.18 cents and that translate into a LTM PER of around 13x. Not exactly "good valuation" already. I would say it is trading at fair value currently.
If i assume the full year profit drops by 10% from prior year, the EPS will drop to 4.82 and that will translate into a "forward PE" of 14x (even worse). The positive side of this counter is the high dividend payout it makes each year under the old management. We shall see if this trend will continue under the new management. Do note that the new management is a private equity firm and they will seek to exit the company in the next 3-5 years. The question is whether you believe they will do a good job or not.

Restructuring

Interestingly, at the same time as the Q1 results announcement, they also announced that Nera Malaysia has now become an wholly owned subsidiary after a restructuring where the company acquire 70% of the company it doesn't own. The consideration seemed to be too "cheap" to be true to me but in any case, it will be EPS accretive where on a pro-forma basis, the EPS will increase from 5.36 to 7.31 has the acquisition been completed last year (for illustration). While this is a very positive news, it is also quite confusing and raise questions as to why the 2 directors were previously holding the shares and why are they selling so "cheaply" to Nera Tel now?! 

Assuming EPS drop 10% for FY2013 using this revised figure, EPS will potentially hit 6.58 cents and the PER will drop to 10.2x which is now "attractive" again. Anyway, the above is just my "back-of the-envelope" computation. I will let the analysts come up with reports and see what they have to say.


Technically, we are in for a possible correction but it has had a good run up post my entry. There will be a 4c dividend to be paid in May which still translate into an attractive yield of 6% at current price and post Q1 acquisition, we will probably see a better Q2-Q4 onwards than prior year. 

Let's see how the share price reacts to the Q1 results tomorrow. A bad Q1 results was "offset" by a positive restructuring where the management took great length and pains to explain to shareholders why the acquisition is a good one. It is like a magician taking a rabbit out of the hat but never tell you why they managed to get the rabbit so cheaply and begets more questions than answers to me.

Happy Nera Telling...


Saturday, 27 April 2013

Value Approach to Income Investing


One of the sources where I get investing ideas is reading the Edge magazine. The website is here. I get it on Fridays, read it leisurely over the weekend and through the following week.

Sometimes, there can be interesting ideas which you can generate yourself reading through the interviews with fund managers.

Last week, they interviewed Daniel Roberts who manages the Fidelity Global Dividend Fund. This is the list of stocks he liked (which i put it here so that i can reference it in future).

Kimberly Clark - US
Sanofi - France
Astellas Pharma Inc - Japan
Shimano - Japan
HSBC - UK
Reed Elsevier - Netherlands
Wolters Kluwer - Netherlands
Novartis - Swiss
Mattel - US
Unilever - US
Microsoft - US
Scor - French
BB&T - US

Maybe it will form part of my global retirement fund next time, which has made its first investment in Apple this week.



Happy investing and have a good weekend.

Thursday, 25 April 2013

Apple is cheap?



I finally made my first purchase of a global stock listed on NASDAQ last night. I also made a few decisions as well. Further to my earlier blog post, I decided not to have a separate "US stocks" blog as i am too lazy. Creating a new blog requires a lot of time inserting the codes and making email subscriptions available and i am going for a business trip next week (will send you a picture if i have the time). As such, i will blog about my 'global' purchases here since it is for the same purpose - the pursuit for financial freedom.

I bought 10 shares of Apple at $398 (nice number) despite the uncertainties around it losing market share to Samsung and the people around me all carrying Galaxy phones. Here is an interesting article from the Motley Fool on Apple for your reading pleasure.  According to this article, Apple has cash of $154/share and excluding the cash, it is trading at 6x earnings. This is much cheaper valuation than many of our local stocks ah? hahaha. In addition, it has also announced its intention to increase its dividend payout.

Anyway, in my view, i am getting a bite of one of the most innovative company in the world (still remember the time when iPhone 3GS was first launched?) and i am happy with my entry price. It is a a place where the support is (around $300-400). 

Chart forApple Inc. (AAPL)

I am going to build up my portfolio of "world class companies" gradually. It seemed pretty exciting actually to own a piece of them. Perhaps i should buy some LVMH stock for my wife or some BMW stock for myself instead of buying those physical goods as mentioned in one of my earlier post?  ^_^

Happy global investing! 

Tuesday, 23 April 2013

Anyone wants an Apple?

I am contemplating "setting" up a fund that invests in global stocks. I am not sure how many of my readers invest outside Singapore but i thought it may be time for me start doing so.

Many years ago, i used to have an Ameritrade account trading options but over time, i realized that US timing is really not conducive for trading and i am worn out doing short term options trading. In addition, one reason for shunning overseas stocks is that i didn't want to bear the forex exposure due to the strengthening SGD.

However, the idea of investing in global stocks becomes more appealing to me in recent times as i take a longer term approach. This has also been made easier with a global trading platform such as Saxo Markets. 

What prompted me to "think" about investing globally recently is the "fall" of Apple. The rise and fall of Apple share price has been nothing short of dramatic. 

Chart forApple Inc. (AAPL)

It went from being the "largest cap company" in the world when it breached the $700 mark last September to the current <$400 in less than 7 months.  I thought the current price looks attractive although i have not done a detailed analysis on it yet. I have always wanted to own a portfolio of global stocks that i like and perhaps i should really start doing so. Companies that produces things which you use in your every day life. Examples i can think of include....

1. Google
2. Apple
3. Disney
4. Starbucks
5. MacDonald

I think the list can go on and when you think about global companies, they are usually listed in USA. 

Let me think about it further. In the meantime, you may want to drop a comment to tell me if:

(1) Global/US investing is of interest to you; and
(2) Whether i should blog about it in a separate "US stocks blog"  ^_^


Happy global investing. 




Sunday, 21 April 2013

Invest in knowledge

I visited the library today. It is actually not difficult to borrow investment books from the library. You don't have to buy them.

This is a source of free books where you can increase your knowledge without spending a dime.

Reading is important. A lot of people don't bother to read. Reading can speed up the learning curve. Of course having someone who can guide you in your investing journey is helpful if you can find the mentor.

The whole reason why I set up my blogs is to share with you the investment journey so that you can speed up your learning journey and the little homework you need is to read the blog postings. :-P

Happy learning. Invest in your knowledge and reap bountiful returns.

Wednesday, 17 April 2013

Singapore Press Holdings ("SPH")



The SPH chart looks downright ugly this week after it announced its Q2 results which was below expectations. The run-up in the prior month was due to the announcement of a REIT but that has soon fizzled out post the results announcement.

I have bought this stock for a few years already and has received $680 worth of dividends since i started tracking my SRS account so technically if i less off the dividends from my cost, my investment cost is "reduced" to $3,088. 

 The Company announced an interim dividend of 7c per share which will be paid on 23 May 2013.


The Company is facing a few "crisis" of sorts where the property cooling measures and the car cooling measures is giving it a double whammy as advertising revenues will decline. This coupled with strong competition from alternative media such as website and free newspaper will continue to make it challenging for SPH.

SPH has no choice but to expand into new media such as the recent acquisition of online sgcarmart and i don't think the acquisition is "cheap" at all. 

In my view, the Company should quickly spin out its property assets and distribute the units in specie to shareholders and let the REIT has a life of its own to create more value for shareholders. At this juncture, while the intention is announced, no timeline was given.

The Company is currently trading at a valuation of LTM PE multiple of 21x and is over-valued. In any case, i will continue to hold on to the stock since i have only 1 lot for now but i may not rule out cashing out of this counter when it trades beyond its fundamental value next time or after i receive my dividend.

After accounting for the recent price decline, the portfolio is still up by around 19%, so perhaps a diversified portfolio is useful. This is how the SRS portfolio looks at this juncture.


Happy SRSing

Friday, 12 April 2013

China Merchant Holdings Pacific Ltd ("CMH").

Yesterday I added 6 lots of CMH to my SRS portfolio.

China Merchant Holdings is an investment holding company that operates tollroads in China. The company has a long history, established since 1981 in Singapore and its parent is listed on Hong Kong Stock Exchange (SEHK: 144).

I last mentioned CMH in a blog post on 18 Sep 2012. At that time, CMH was trading at 71.5c, versus my entry price of 88c yesterday. I have lost "23% upside" by not taking action earlier, somewhat similar situations to the many good quality stocks which i have spotted in the past, hahaha, including Hutchison Port which is in the same post @ 90.5c (now trading at 1.055c). ^_^


The Company has committed to pay out at least 5.5 Singapore cents (if i remember correctly) each year and that translate into a yield of 6.25% based on my entry price. While i don't like Chinese stocks, i like the China economy and companies with good management. CMH is definitely not a 'fly-by-night' company. DBS has given it a $1.20 price target in a research report dated 28 Feb 2013 but in an updated report dated 8 April, the price target is now $1.12. (I don't have the latest report)

I have to warn you that i am not entirely convinced that this is a good entry price except that 88c is a nice number and i have a weakness for nice numbers. 


The chart is for reference only. As you can see, the price is at an all time high and can drop badly during the financial crisis. Perhaps 70c is a better entry price. In any case, the decision has been made.

Happy SRSing.

Wednesday, 10 April 2013

Annual Reports - How to read it?

I received 3 hard copies of annual reports recently. What insights can you gain from the annual reports?

Let's use a simple annual report on Riverstone as example. The link to the soft copy is here and can be found on the SGX website.

Company's Vision

It is important to know what the Company's vision is and whether the vision has changed from prior year. In this instance, the vision is as follows:


Profitability Trend



You can also see at one glance the profitability trend, financial ratios and the dividends declared. In this instance the revenue is growing nicely and the company has zero debt but the net profit is not growing as quickly, probably due to decline in margin.

Milestones

You can also read about the various milestone reached by the Company and in this instance, the Company commissioned 6 production lines in Dec 2012 and the production capacity has increased to 3.1 billion gloves (from 2.5 billion). This will spell increased profits if the company continues to be in a position to sell all its products.

Letter to shareholders

I would regard this as one of the more important piece of information to read. It tells you about the CEO's vision for the company and its outlook.


He will give you a quick download on the past year as well as what he believes the key challenges and the outlook of the company will be.


The key message here: despite the intense competition, Riverstone will be able to sustain its financial performance for 2013 due to increased capacity and rising demand for its gloves.

Financial Statements

Last but not least, read the financial statements and the notes. A lot of information can be found in the notes to the accounts but this will also be the time where most will fall asleep. If you have to sleep, read at least one item - the cashflow statement. It will give you a good hint if the company is in good financial health. A good company will have a high positive cashflow from operations. In this instance, Riverstone generated RM63m from its operations in 2012!
Valuation Matrix


The valuation as of today still looks reasonable at 10.4x PE and yield of 4.9%. 

Happy investing.

Tuesday, 9 April 2013

SRS portfolio as of 31 March 2013

I received the 31 March 2013 SRS statement. The month of March had 2 investments transactions made in Overseas Education and 2nd Chance Properties.


There are 2 dividends received during the month. They are:
$196 - Perennial China Retail Trust and
$104.50 from Far East Hospitality Trust.


I also received the above 3 annual reports for bedtime reading. Some of the bigger companies such as Far East Hospitality Trust and M1 Limited sent me CD Roms containing their Annual Reports. This is perhaps more cost effective than printing the hard copies.

Happy SRSing

12 Timeless Investment Rules

This is an interesting article..... enjoy. 
1. An attempt at making a quick buck often leads to losing much of that buck.
  • The people who suffer the worst losses are those who over-reach.
  • If the investment sounds too good to be true, it is.
  • The best hot tip I've found is "there is no such thing as a hot tip."
2. Don't let a small loss become large.
  • Don't keep losing money just to "prove you are right."
  • Never throw good money after bad (don't buy more of a loser).
  • When all you're left with is hope, get out.
3. Cut your losers; let your winners ride.
  • Avoid limited-upside, unlimited-downside investments.
  • Don't fall in love with your investment; it won't fall in love with you.
4. A rising tide raises all ships, and vice versa. So assess the tide, not the ships.
  • Fighting the prevailing "trend" is generally a recipe for disaster.
  • Stocks will fall more than you think and rise higher than you can imagine.
  • In the short run, values don't matter.
You can download the rest of the rules here. Happy investing.

Tuesday, 2 April 2013

Overseas Education

It has been an extremely busy period for me in terms of work and a short vacation to celebrate a new "milestone" in my life where i am officially kicked out by the armed forces.

I am now considered too old to protect our nation but perhaps that few extra glands of grey hair will serve me well in my investment journey.

I will not review my SRS portfolio today as i haven't been monitoring much honestly. I quite enjoy not monitoring my portfolio except to glance at it every now and then. 

One of my "worst" heartache is not reaching the milestone in my life but missing out on buying something which i had wanted to in August last year. It was Breadtalk! I always frequent the place for coffee, buy the bread for breakfast and eat the xiao long bao.  I have also seen it expanded overseas successfully in places like China and Korea but my inaction proved to be costly. The red box signify where i was contemplating it around 55-58c but i held back for one reason or another.

Breaktalk


Overseas Education

Luckily i haven't been lazing around or i will kicked myself for not buying Overseas Education. My entry post was here at 58c.

It has done pretty well since my purchase (up 22%) though it is showing signs of weakness yesterday.  Not sure if any of the readers followed but i have 2 friends that purchased the stock around the same time as me.


Happy SRSing.


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