Recent actions and thoughts

Actions

-Added SingHoldings

Ø  Relatively safer stock pick

Ø  52 weeks closing price of 37.5 cent to 41.5 cent, fluctuations of roughly  11-12% is not volatile

Ø  Will be cash rich after Parc Botannia project which is 95% sold is done.

Ø  Lack of projects moving forward a key risk, but trading at 0.6 of book value even with Parc Botannia not fully recognized yet is too attractive preposition.

Ø  1 cent to 1.375 cents dividend equate to 2.5% to 3.4% yield.

Ø  Recent buying of shares by owners at 37.5 cents could be a sign of a price floor

Sold half of Uni- Asia Group

Ø  Totally dumb decision in portfolio decision making sense as it's a loss making position and I sold half of it only.  Dumb decision make as a result of personal reasons but still dumb from portfolio management basis

Ø  When the position its loss making on the portfolio, usually I should have done 1 of the 3 options. 1) Hold and as the stock's financials are okay. 2) Add more if the financials are acceptable and the current price is an attractive buy. 3) Sell all of it as the results/prospects might not be as ideal as to what you have researched. I ended up doing none of the 3.

Ø  Results wise 3Q was decent as Hotels reached new occupancy rate and the absence of fair value losses resulted in a profitable quarter albeit barely. Cash flow remains strong and debt to equity has gone down.

Ø  4Q estimations perhaps -1 million to 1 million in bottom line. Equating to roughly 1.2 cents of loss/ profit. Key upsides that might affect earnings will be improve in hotel operations and closing of more marine related deals. Key downsides that might affect earnings will be a sharp drop in dry bulk rates and impairment losses of dry bulk vessels.

Ø  Personally after making a dumb decision, I am not sure what unpredictable action I might do with this counter.

Added Shinvest (a company that has rise by 200% this year)

• -Fair value I think would be at least $3, though the main factor affecting valuation will be the decision of management in handling their investments
• -Hopefully I would have time to attend the agm and hopefully they would be willing to share their plans moving forward.
• -Always a psychological barrier for myself to add a counter that has ran so much this year but there will always need to be a first time to overcome such barriers.

Thoughts

KSH Holdings

-Results showed improvement in results which is good but cost of construction as a percentage of the construction revenue actually increased again.

-This leads me to believing that some project margins might not be profitable at all.

-As such there will be heavy reliance on Gaobeidian and the local projects that are in the form of associates and joint ventures.

-Affinity @ Serangoon looks like the best in margins. Thought I have some reservations about the margins of Rezi 24.

-A good amount of income also comes from loans to its joint ventures and associates.

-Ultimately the decision not to add this stock into my portfolio came from the really poor and deteriorating construction margins.

Tat Seng Holdings

-Cash flow generations remain excellent in 3rd Quarter

-Results although poorer than 3Q previous year, but that was to be expected as corrugated prices have been at lower levels as well.

-On closer look, depreciation this year is higher by about 900k while results was only poorer by 600k hence there has been an improvement in the business despite last year having higher corrugated prices.

The year has been kind to me, very thankful for that. Since one of the aims was met this year, its time to think about the year ahead...

Thoughts on 5 years of investing

November 2019 actually marks my 5 years into investing. 5 years of trying different methods of investing. 5 years of doing the same thing....is definitely not easy.

Happy 5th Anniversary!

(What a 5th anniversary could look like)

(What these 5 years actually looked like to me)

(Credits to lovelinuscom)

Will be sharing some thoughts to what I have seen, felt and observed in these 5 years. Do note that these thoughts are definitely biased and might be wrong as well.

1) It's possible to be investing for 5 years and still be unable to encounter a take-over offer or a rights issue.

The former is probably due to luck and the latter would be picking companies with high levels of cash and low debt. Avoiding reits would also help in avoiding a rights issue

2) People who are awaiting a 'crash' like 2009 are probably still huge in cash since I have started investing.

Unfortunately, the STI has not reached the 1500 levels (1594 in 2009) from 2014 to 2019, the lowest it ever went while I was investing was about 2629 in 2016. Hence people who thought that in 2016 the oil price crash and the china penny stock crash was actually gonna send the STI to 2009 levels would probably be still logging in to their bank accounts on a regular basis thinking how much of it should go into SSB and telling themselves the crash is definitely coming as its long 'overdue'

3) Power of compounding > Waiting at the right time

This point has been illustrated many times online on a numbers basis. However the psychology of losing money is too strong for some people. For others, it's about whether they can compound well. Index funds have decent past results but naysayers would always say 'Past performance does not guarantee future results keke'. Ironically it's also some of the naysayers that say the 10 year once crash is due and mocking those that say 'this time it's different'

Year	5%  Compounding	10% Compounding	15% Compounding	20% Compounding	25% Compounding	2% Bank Interest Compounding
1	1	1	1	1	1	1
2	1.05	1.1	1.15	1.2	1.25	1.02
3	1.1025	1.21	1.3225	1.44	1.5625	1.0404
4	1.157625	1.331	1.520875	1.728	1.953125	1.061208
5	1.215506	1.4641	1.749006	2.0736	2.441406	1.082432
6	1.276282	1.61051	2.011357	2.48832	3.051758	1.104081
7	1.340096	1.771561	2.313061	2.985984	3.814697	1.126162
8	1.4071	1.948717	2.66002	3.583181	4.768372	1.148686
	18%	41%	57%	68%	76%

The last % is the amount u would have to lose in a market crash to lose to 2% Bank Interest Compounding which we all know is just a layman assumption as interest rate falls, it's difficult to find a pure play deposit and obtain 2% interest in each month.

4) For stock-picking, idea generation is important.

I have probably came across roughly 40 stocks in just 5 years that I have bought and sold some. So it's safe to say each year I probably need to have about 8 stock ideas that I would execute. The number of ideas would definitely fall when one is being more concentrated. I would say 5-6 ideas a year is pretty good already.

Another thing would be that you cannot expect all ideas to do well, it will not. There will be some hits, some misses and many more refining and going back to the drawing board to redo the process again.

5) Attending Company Agms are important even if not all Agms are particularly useful.

That is one way I seek some confidence in holding stocks that are relatively less known and those that I have quite some losses in. In particular to those that are in deep red, attending agms would allow me to gather some thoughts to if I should average down and when I should.

My thoughts would be that

If one would buy insurance to cover the risk of yourself falling ill or be unable to work, why would you not seek some form of insurance to your own investments even if it's not fool-proof.

Short thoughts on Lendlease Global Commercial Reit

Lendlease Global Commercial Reit will be listing on SGX on 2 October 2019. The application for its IPO will be open to public from 25 September 2019 (Wednesday) to 30 September 2019 (Monday). 

Prospectus can be found here

Will keep this article short as the reit has already been covered by many prominent bloggers such as Investment Moats

Key Information

1)Listing Price of $0.88 per unit is 1.08 of its book value of $0.81

2)Currently the portfolio consist of only 2 properties. The first being 313 Somerset and the second being 3 freehold offices in Italy.

313 Somerset currently has 86 years left on its lease.

3) The gearing ratio upon IPO is expected to be 36.4%

4) The forecasted dividend yield is expected to be 5.8% and 6.01% for 2020 and 2021 respectively based on the IPO price of $0.88 per unit.

5) 1,167,946,000 units will be issued, of which Lendlease Trust would hold roughly 27.2% of it, Roughly 33.1% would be available to the public and private placements. Roughly 38.85% would be placed to cornerstone investors which include Blackrock , Fullerton Fund Management and Nikko Asset Management.

What I like about the reit

1) Institutional Investors are onboard, as such there should be a higher corresponding trading liquidity to the company and allow the company to be better priced.

2)313 Somerset sits just on top of the mrt station and it still has 86 years left of lease which means valuations are unlikely to be adjusted too far downwards in the near future should a recession occur. To add on, there has been little sales of retail mall in the Orchard area. The most recent news would be Starhill Global Reit willing to offer above market price for Isetan's share of Wisma Atria, another retail mall which is just up the road.

3) Effective Interest rate is only 1% currently.

What I dislike about the reit

1) With only 2 properties, it is widely estimated that more properties will be injected into the portfolio and this will likely result in more offering of shares.

2) Projected forecast seems too good to be true on first glance. The forecasted financials seems to indicate that revenue would increase 36.7% from 2020 to 2021 and this would result in a corresponding increase in DPU of 38.4% after distribution adjustments. The revenue increase constitutes a 34.3% revenue increase in its Italy property and 37.7% in 313 Somerset. 

Valuations

	313 Somerset	Wisma Atria	Plaza Singapura	Paragon
Net Property Income Yield	3.1%(2020)/4.32% (2021)	4.85%	5.36%	5%
Occupancy Rate	99.6%	99.6%	99.3%	Not shown
Latest Rental Revisions	Not Shown	Not Shown	+1%	+8.6%

-If anything, the current valuations of the net property income yield for 313 Somerset remains to be below the current market levels even after a 30% increase to be projected in 2021. With higher yield shopping malls having a positive rental revision, I remain fairly optimistic that the income should be able to deliver as forecasted.

According to the S-Reit data provided by fifth person,

CapitaMall Trust trades at 4.41% dividend yield with a gearing of 34.2% and book value of 1.29

SPH Reit trades at 5.08% dividend yield with a gearing of 26.3% and book value of 1.15

Starhill Global Reit trades at 5.97% dividend yield with a gearing of 36.1% and book value of 0.85

My personal thoughts would be that for Landlease Global Commercial Reit to trade at 5.8% dividend yield with a gearing of 36.4% and book value of 1.08 is actually quite attractive.

However we have to be aware that the property's yield is actually currently below its competitors.

Final Thoughts

-Personally I do not think the IPO would stay underwater for the short run as there would most likely be injection of properties into the reit and it would be problematic if they have to issue shares at a cheaper price. Furthermore, this would make the yield trend towards 6% or even higher which would make the reit even more appealing.

-In the long run, many factors such as interest rate environment as well as the yield of property on its future acquisitions and the reit's ability to increase the property income yield would be important as well. Generally if I were to purchase a reit, i would be betting on inflation, economic growth being positive and interest rates to be stable or low .

-I would be applying for the IPO for the reit though i have not decided the amount i would want to put in yet as i would have to assess my expenses going forward and the equity to cash level before making a decision.

As usual, I would end off the post with a k-pop picture.

Thoughts on Uni-Asia Group 1H 2019 Results- Expecting a good full year

Uni-Asia Group (SGX: CHJ) actually released results back in August but then i decided to take some time off and gather some of my thoughts first.
-Results can be found here 

Quick Summary
-Interim Dividend of 2 Cents
-Profit of USD 2.9 million or 3.78 usd cents in Q2
-1H 2019 Profit came in at 8.66 usd cents
-Results mainly driven by recognition of certificate of completion by its 3rd Hong Kong Office Project K83. This was previously guided in the Q1 analyst briefing hence its not a surprise.
Previously i wrote about hopefully a 2 cent dividend being announced and it did happen. So I am pretty please with it.
-Overall i would say i am not surprised with the results. It's probably the first or second time i actually think this way for this company as in the previous year there has been too many fair value losses.

Uni-Asia Shipping


Q2 charter income came in roughly the same as Q1.  Having previously estimated a drop of at most 10% in charter income from Q1 to Q2, i am not too surprised with the results. The only concern would be the expenses which shot up from Q1 to Q2 as well as much higher than previous year.

Moving forward(at time of writing its 3 September), the baltic handysize index has jumped from 516 on 31 July to 665 on 3 September. With some ships due for renewal and some with rates pegged to the handysize index, i should see better shipping numbers in Q3 compared to Q2 and Q1. This is because the highest the index reached in Q2 was 516 while in Q1 its 588 but it sharply declined to 294 before recovering to 464 at the end of Q1.

Properties Investment Ex-Japan





With regards to both the projects, more gains should likely be recognized in Q3 and Q4 2019.
The main dilemma facing the company is whether should take continue to invest in Hong Kong should another proposal to invest comes to their table. As they have mentioned its tough to find a good partner in Hong Kong and the returns from its investments have been very good but the current Hong Kong conditions might pose a threat. That is something that the company would have to assess should an opportunity arises.

Irregardless,  i remain positive that these 2 projects would drive the bottom-line for the 2H 2019.

Properties Investment in Japan





With only 1 Alero project sold in 2Q, results came in at close to 0.
Looking at the list of projects, it is unlikely there would be a huge contribution in Q3 2019.


Japan Vista Hotel Management


As a result of lease accounting, it was estimated that the segment would be unprofitable and it did not surprise. 
The encouraging signs would be
1)The segment would be profitable had lease accounting been not accounted for.
2) Higher occupancy rate in Q2 than Q1 and as well as higher than previous year despite having more hotels opened
3) Occupancy rate of 83.8% is highest ever, with Q4 2018 being 83.7% while Q3 2018 was 82.8%

However it is worth noting there will be 1 hotel opening in December 2019(Q4) which means there would be some pre opening expenses recorded again.

Conclusion

-Business Segments showing improvements and with the gain yet to be recognized, i remain largely positive on a very good result in 2H 2019 and subsequently a very good dividend.
-The possible pitfalls that might affect the company's operations will be another sudden downturn in the dry bulk industry or Japan Tourism affected by global economic sentiments.
-Another key area for concern would be the lack of substantial HK Project Drivers in 2020 should the situation in Hong Kong deepens.


With that i would end off my article when a k-pop photo as usual

Thoughts on Tat Seng Packaging 2Q Results- A decent 2nd quarter

Back from holiday in Korea and the earnings season arrives for my portfolio once again.

Tat Seng Packaging released its results on 8 August 2019

Personally i would say i am pretty pleased with the results as i had anticipated much worse results.
Interim dividend of 1 cent is maintained and from the cash flow statements, they can well afford the 1 cent.

My Key takeaways

1) Margins Improvement
- Gross profit margins and net profit margins improved quarter on quarter despite falling corrugated prices.

	1Q 2019	2Q 2019
Gross Profit Margin	15.79%	16.81%
Net Profit Before Tax Margin	4.29%	5.38%
Net Profit Margin	3.36%	3.66%

2) Cash Flow Improvement
- Compared to previous year where its operating cash flow is negative, the cash flow this quarter is surprisingly high at 14.2 million ( roughly 9 sgd cents)
- Compared to previous quarter, 2Q's cash flow was higher by 1.5 million before change in working capital and roughly 5.6 million if net cash in operating activities is calculated.
- The impressive ability to pare down its inventory as well as trade receivables led to the above.

3) New production line at Nantong Tat Seng did not lead to Tat Seng being unprofitable
- One worry i had was that the depreciation might be too high and erode profitability especially when margins are very lean. However from the cash flow statements, it seems like the incremental depreciation could be around 500k per quarter or 2 million per year.
-Despite the increase in depreciation cost, the company is able to be more profitable than in the 1st quarter.

4) Sales Volumes increased
-Despite falling corrugated prices and tougher market conditions, Tat Seng recorded a 2.6% growth in sales volume for its China operations in the 2nd quarter.

5) Broad Corrugated Trend still intact but quarter on quarter trend differs


Quarter on Quarter, corrugated prices fell but Tat Seng ended up earning more, breaking the 'trend' that a lower corrugated price leads to lower profit each quarter. But when compared to previous year where corrugated prices are clearly higher by about 26%, the much lower profits in this quarter are reflected by the way lower corrugated prices.


Final Thoughts

-With the 2nd half of the year usually being the peak period of the company, i still remain confident that they have a shot at achieving 10 cents earnings per share this year. If anything, last year's 1H profits were a high watermark to beat and given the economic conditions it was very unlikely for them to better it this year anyway.

- A key concern i would probably have would be that RMB depreciation would once again eat into the earnings and book value of the company. In the 2nd quarter, SGD to RMB increased from
1 SGD = 4.96 RMB at end of Q1 to 1 SGD = 5.08 RMB at end of Q2. A rough 2.4% increase was enough to eat up close to all its profits. With talks about China using RMB depreciation as a measure, the macroeconomics side of things definitely does not look as rosy.

-Having said that, i remain pleased at how the company controls the decrease and increase in % of general and administrative expenses compared to its decrease and increase in % of revenue when compared to previous year's quarter.

Currently trading at a potential 6.18% yield, 0.6 price to book and possibly 6.2 PE with reducing debt levels. It looks tasty to me actually.


As usual, ending the post with a k-pop picture