Portfolio Review 4Q11

One transaction completed:

PST

• Buy
  Counter is traded in USD but settled in SGD (see Taking advantage of the falling US dollar)
  Acquisition of non-container vessels (two Capesize Bulk Carriers chartered to Jiangsu Shagang Group Co., two Multi-Purpose Vessels chartered to Cosco Xiamen and five Supramax Bulk Carriers chartered to Glovis) -> diversification of fleet and widening of charterer base
• Sell
  Exit offer made by Pacific International Lines (offer price exceeded highest transacted price in the last three years and was at a premium of 15% over last transacted price of US$0.375 before trading halt) -> immediate realisation of capital gains
  USD rally against SGD during Sep 2011 (refer to chart below) -> additional capital gains from USD/SGD foreign exchange rate appreciation
  
  
  

Currently holding on to 7 counters (see Portfolio Review 1Q10 for 1-3, Portfolio Review 2Q10 for 4, Portfolio Review 4Q10 for 5-6 and Portfolio Review 1Q11 for 7):

1. FrasersCT
2. PLife
3. Starhill
4. Cache
5. First REIT
6. Sabana
7. Cambridge
   

Next portfolio review due after 31 March 2012.

Note to self: only simple P/L calculated


Importance of steady dividends
In their reports and articles, financial analysts and columnists have always stressed the importance of dividends in making one's stock selections. Thus far, I have subscribed to this as well. However, to ground my belief in facts and figures, I have tabulated my own portfolio's change in value for presentation in graphical form to fully assess the impact of a regular dividend stream.


* Note: % value calculated as (paper worth of holdings + cash for stock investments - cash injections) / original cash amount X 100%

Indeed, the slow-but-steady dividends can sometimes be under-appreciated in the face of quick and at-times spectacular trading gains. Still, the above does help to remind myself of some of the merits of going down this 'cashflow cum dividends' path.

At present, my portfolio is enjoying a blended dividend yield of 8-9% p.a. =) Hopefully this may continue, and happy new year to all!

Stock Portfolio Update Oct/Nov 2011

Continuing on from Stock Portfolio Update Aug/Sep 2011,

• 15 Nov 2010, 4 May 2011, 8 Aug 2011 - 6 Oct 2011
  Bought PST at US$0.35, US$0.36, US$34 (average US$0.35 @US$1=S$1.2539) and sold at US$0.43 @US$1=S$1.2993
• October 2011
  Added to Starhill existing holdings
  
• 8 Nov 2011
  Received advanced distribution from FCT due to private share placement
• 23 Nov 2011
  Collected dividends from Cambridge
• 29 Nov 2011
  Collected dividends from Starhill, Cache, First REIT and Sabana
• 7 Dec 2011
  Collected dividends from PLife

Portfolio Review 3Q11

Currently holding on to 8 counters (see Portfolio Review 1Q10 for 1-3, Portfolio Review 2Q10 for 4, Portfolio Review 4Q10 for 5-7 and Portfolio Review 1Q11 for 8):

1. FrasersCT
2. PLife
3. Starhill
4. Cache
5. First REIT
6. Pacific Shipping Trust
7. Sabana
8. Cambridge
   

Next portfolio review due after 31 December 2011.

Note to self: only simple P/L calculated

Remark: first quarterly decline in portfolio net value since inception (refer to spreadsheet) =(

Stock Portfolio Update Aug/Sep 2011

Continuing on from Stock Portfolio Update May/June 2011,

• August 2011
  Added to PST and Sabana existing holdings
  
• 25 August 2011
  Collected dividends from Cambridge
• 29 August 2011
  Collected dividends from FCT, Starhill, Cache, First REIT and PST
• 6 September 2011
  Collected dividends from Sabana
• 8 September 2011
  Collected dividends from PLife

REITs Performance II

Out of curiosity, I investigated how selected REITs performed against the STI during the recent market volatility this past week or so.

From the chart, it appears to me that:

• Ascendas and PLife were the top performers from this list during the reference period;
• Ascott, FCT, K-REIT and perhaps Suntec generally performed better than the STI;
• CMT and MLT more or less tracked the STI closely;
• CCT generally performed worse than the STI; and
• CDLHT was the bottom performer from this list during the reference period.

Hope this might be interesting to some =)

AUD / NZD Update July 2011

It has been some time since my brother and I started our AUD & NZD fixed deposits, more specifically we are just one quarter short of 3 years.

Despite being hit by the financial crisis worldwide interest rate cuts, the interest rates have stabilised at around 4% and 2% respectively (source: OCBC 3-mth tenure rates). Although these are not fantastic returns, AUD and NZD remain the highest-yielding foreign currencies.

The main risk for foreign currency investment of course is that the exchange rate with your home currency becomes unfavourable for changing back (i.e. the worst case scenario will be that the home currency strengthens so much that the interest does not even cover back the shortfall, giving an overall loss of capital).

ILP Update July 2011

Having reached three years for my ILP, it was useful for me to take stock of where it currently stands. The reason for this is simple: in Year 1, a hefty penalty is imposed where only 15% of premiums paid is allocated to investment, this increases to 60% in years 2-3 and to 102% from years 4-6, thereafter from year 7 onwards, 105% is allocated to investment.


Looking at the graph plotted for premiums paid (blue) and amount allocated to investment (red), one can see the change in gradient of the red line to reflect the higher percentage in years 2-3 compared to year 1. What is disappointing to me is that the green data points for cash values are not consistently above the red line. This means that after deducting all expenses, the fund is not yet making money for me. For now I am continuing to monitor. After all, with the Europe and US debt situations not being healthy, this has had a toll on equity markets which have been pretty range-bound.

Ultimately, I would hope for the green points to go above the red line first and then the blue line over the long run. Only time will tell if these ILPs are worth it for private investors like myself.

REITs Screening Criteria II

For some time, REITs have been my preferred investment instrument. As mentioned in an earlier post, some screening criteria which I had formulated are:

1. Low gearing, i.e. < 35%
2. Presence of a sponsor, preferably a strong one, eg. Capitaland, F&N, etc
   
   
3. High yield, preferably > 8% p.a.
4. Discount to NAV, i.e. paying less for more
   
   
5. Quarterly distributions (as opposed to semi-annually)
6. Portfolio mainly in Singapore

The reader can perhaps notice that the list of 6 is split into 2-2-2. My current thinking is that 1-2 now form the 'pre-requisites' (i.e. the counter should possess these two characteristics before I even begin to consider entering), 3-4 would then constitute the 'buy signals' (i.e. they will indicate to me when to enter the market) and 5-6 are 'preferables' (i.e. good to have but not a must for me at this point in time).

Pre-requisites
These should be self-explanatory, although the strength of a sponsor can be debatable. For me, I should frequently remind myself of the 2008 financial crisis during when credit had dried up to a trickle. During such times, low gearing helps REITs to remain on a stable footing and having a sponsor would perhaps increase the REIT's chances of securing hard-found credit.

Buy signals
I have an untested and unproven theory that the market prices of REITs generally have upper and lower bounds. Based on my own observations, there are possibly two metrics:

• Yield
  Defined simplistically as (quarterly DPU x 4 / market price), each individual REIT's price might fluctuate within a certain range. This range would vary from REIT to REIT depending on the strength of its sponsor, past reputation, etc. When the market price falls to a point where the computed yield based on the last announced DPU reaches the upper bound of the range, this may present a buying opportunity.
  
• P/NAV
  Similarly for the P/NAV ratio, this might again fluctuate within a certain range which would vary depending on the sponsor, reputation, etc. At the low end of this range, a buy signal may be detected.

Preferables
Just to remind myself, quarterly distributions are better for me in terms of my personal cashflow and having its portfolio mainly in Singapore will enable me to have a more intimate feel of a REIT's operations.


For future posts on this topic, my self-assigned homework is to collate past records of yield and P/NAV to verify or disprove my theory on buy signals.

Cheers!

Disclaimer: these represent merely my own personal amateurish views on the subject =)

Portfolio Review 2Q11

Currently holding on to 8 counters (see Portfolio Review 1Q10 for 1-3, Portfolio Review 2Q10 for 4, Portfolio Review 4Q10 for 5-7 and Portfolio Review 1Q11 for 8):

1. FrasersCT
2. PLife
3. Starhill
4. Cache
5. First REIT
6. Pacific Shipping Trust
7. Sabana
8. Cambridge
   

Next portfolio review due after 30 September.

Note to self: only simple P/L calculated

Stock Portfolio Update May/June 2011

Continuing on from Stock Portfolio Update Jan/Feb 2011,

• May 2011
  Added to PST existing holdings
  
• 30 May 2011
  Collected dividends from FCT, Cache, First REIT and PST
• 31 May 2011
  Collected dividends from Starhill
• 8 June 2011
  Collected dividends from PLife
• 14 June 2011
  Collected dividends from Cambridge
• 16 June 2011
  Collected dividends from Sabana

Rights Issue

Thus far, I have twice had the opportunity of participating in a rights issue. For an investor in REITs, one should always be prepared for such exercises, especially in the current climate of acquisitions and increasing gearing levels (read Debt turns from foe to friend for many Reits).


When a REIT is seeking funds, there are various avenues open to it:

• Debt
  This is the most straightforward and directly results in an increase in gearing level. Recall that the subprime crisis in 2008 had resulted in the collapse of the CMBS market and caused some S-REITs to face refinancing woes (more specifically, Saizen comes to mind). Being neither a financial expert nor economist, I do not claim to understand the subprime crisis nor CMBS at all but to my simple mind, continually taking on debt can't be a good thing.
• Private placement
  My earliest experience of an acquisition by one of the REITs which I was holding was with FCT, Northpoint 2 & Yew Tee Point malls. FCT went the route of private placement with institutional investors. For the retail investor such as myself, what one should probably look out for is that the placement shares are not overly discounted and that the institutions to which the shares are placed out to are reputable ones. The advantage here is that the retail investor does not need to fork out any money for the acquisition(s) but faces a certain amount of dilution risk.
• Bonds
  Recently, CMT issued the first retail bonds by an S-REIT. This was overall 1.9 times subscribed and in particular, the public offer portion was 4 times subscribed. Going forward, tapping on the fixed income market might be an increasingly viable option for S-REITs now that a precedent has been set.
• Rights issue
  Possibly the most popular means of fund-raising with retail investors, this offers the chance of accumulating more units at a discounted price to the market. On the flipside, if one does not have the means of participating in the rights issue, one might face the double whammy of loss of capital (in a rights issue, the share price will drop to the TERP or thereabouts due to simple dilution) and a drop in dividend stream (again due to dilution but the extent largely depends on the purpose to which the funds are used for, ranging from acquisitions to AEI to paying down of debt, etc.)

This is not an exhaustive list and there are more exotic fund raising means such as CPPUs as well as combinations of the above.

As mentioned in the opener, I had participated in two such rights issues: First REIT and Cambridge. These two occurred in contrasting situations. For the former, I was not a unitholder and specifically bought into the counter so as to be allocated the rights units; for the latter, I had bought into the counter just before the rights issue was announced and for better or for worse, decided to simply go along with the exercise.

On hindsight now, both turned out to be profitable moves as the two counters managed to stay above the TERP after the rights units started trading pari passu. Furthermore, I tried my luck at excess rights for Cambridge in an attempt to round up my odd lots and was successful. Speaking of which, this last brings me to a final point on odd lots.

On occasion, retail investors may be stuck with odd lots in a rights issue exercise. To remedy this, there are a few possible ways:

• During the CR period, buy or sell units such that the number of lots held is a multiple of y in an x-for-y rights issue. For instance, in a 1-for-8 rights issue, one should hold 8, 16, 24, ... lots to avoid being allocated odd lots.
• During the trading period of rights, there will usually be a separate counter to trade rights, including one for odd lots denoted by a number at the end which indicates the board size. To continue with the 1-for-8 example, this will mean that there is a counter zzz 25 for trading in board sizes of 25. One thing to note though is that the overheads for trading rights can be significant since the dollar amounts will be smaller than that for trading the mother share.
• Arguably the most cost-effective and convenient way is to apply for excess rights when making the payment at the ATM for the rights units, since one will directly reap the benefits of the discounted price without going through the hassle of trading on the market.

Happy Easter to all =)

Stock Portfolio Update Jan/Feb 2011

Continuing on from Stock Portfolio Update Nov/Dec 2010,

• 5 Feb 2010 - 4 Jan 2011
  Bought Saizen warrant at $0.070 and sold at $0.075
• 28 Feb 2010
  Collected dividends from FCT, PLife, Starhill, Cache, First REIT and PST
  

Portfolio Review 1Q11

One transaction completed:

1. Saizen warrant
   
   • Buy
     Probable DPU resumption in 2010 -> possible share price re-rating by market
   • Sell
     See Portfolio Review 4Q10
     

Currently holding on to 8 counters (see Portfolio Review 1Q10 for 1-3, Portfolio Review 2Q10 for 4 and Portfolio Review 4Q10 for 5-7):

1. FrasersCT
2. PLife
3. Starhill
4. Cache
5. First REIT
   
6. Pacific Shipping Trust
   
7. Sabana
   
8. Cambridge
   
   • Buy
     Gearing has been progressively lowered through periodic repayment of debt and is around 33.4% after the latest round of paying down approximately S$20.0 million on 17 February 2011 (cf. gearing level of >40% in the early part of 2010, see From the Beginning...), but continues to offer high yield of >9% at ~50cents
     Cessation of Distribution Reinvestment Plan -> no DPU dilution resulting from DRP ("Distribution Reinvestment Plan
     The Manager has been informed by the Ministry of Finance on 17 December 2010 that the Distribution Reinvestment Plan (“DRP”) for REITs will not be extended beyond 31December 2010.")
     

Next portfolio review due after 30 June 2011.

Note to self: no P/L and NAV calculations due to ongoing rights issue by Cambridge