Recent Investment/ Portfolio update - Capitaland Mall Trust (C38U.SI)

I have purchased 1200 units in Capitaland Mall Trust [CMT] (Code: C38U.SI) at an average price of $1.875, read below to find out more!

(image credits: capitaland mall asia)

Investment Thesis

Below are some of my thoughts with regards to CMT.

1. Stable Profile - Low Beta

There are people who shun stocks due to their volatile nature, prices fluctuate on a day-to-day basis and occasionally even rocket or plummet due to unexpected good news/bad news. In fact this was one reason why I was also hesitant to invest at the start, I was afraid that I could lose the little that I had. Which was also why I am very comfortable with my position in Capitaland Mall Trust, which faces low volatility compared to the greater market. 

CMT has a Beta (5y) of 0.286. 

Beta? What's Beta?

Simply put, Beta is the volatility of the stock relative to market volatility. Hence, a stock with a beta of 1 implies that the price of the stock fluctuates together with the market. A beta of greater than 1 implies that the stock is more volatile than the market and conversely, a beta lesser than 1 implies that the stock is less volatile than the market. 

CMT with a beta of 0.286 would mean that it is (1- 0.286) x 100% = 71.4% less volatile than the market. This is one reason why I am comfortable with my position in CMT, this is a stock that I would not need to monitor constantly. Perhaps, also contributing to this is a low proportion of free floating shares in the market.

2. Good Value

With the recent rise in interest rates in the US on the 14th of December, and the expectations that there are more to come, REITs in Singapore have taken a hit, with CMT exchanging hands near it's 52-week low ($1.87). It currently also has a price to book value of 0.998. Which means that I have (and so did the other recent investors) paid below the book value. 

Book Value

Book value of a share is the amount that each share is worth, if the company's assets are completely liquidated and divided amongst shareholders (after paying the debtors)

Furthermore, it trades on a decent P/E ratio of 11 and has a decent a trailing 5.9% yield.

3. Personal Views?

I personally have not been to all capitaland mall trust shopping malls, but I have been to most of them. Even though most of their malls are placed alongside malls by other developers, the "shopping atmosphere" simply feels different. Their malls for some reason (to me at least) feels more comfortable than the other shopping malls in the same area. Perhaps this can be attributed to good/strong tenants or a good mix of tenants, as well as a good design layout. This is not something that is tangible nor is it something that can be inputed into calculations, this is very subjective, and if you are interested, I would suggest you take a look at the malls and have a 'feel' of them personally.

Furthermore, their malls are located in verystrategic locations (think Bugis Junction, Tampines Mall, Plaza Singapura etc.) - most of their malls are directly connected, if not connected to major MRT stations and are very convenient choices for shoppers and diners. 

Risks

Retail environment remains competitive in Singapore, with vacancies piling up due to oversupply and competition (which I have talked about in my previous post) and it is difficult to comment as to whether or not this will eventually affect CMT further. CMT looks to be safe (for now) as it currently has high levels (generally high 90s%) of committed occupancies and strong tenants. Also, E commerce once again poses significant risks to the retail space.

Funan Mall, which is currently under development (projected to be completed by 4Q 2019), could provide potential upside (with nearly double the floor area) if it is able to successfully attract shoppers with the revamped "mall of the future", but of course there is no guarantee that it will be able to achieve it goals. However with good management at helm, I believe that the potential for upside is greater than the potential for downside, so I see this as a bonus rather than a risk at the moment.

Tampines Mall which is strategically located right beside Tampines MRT now faces even greater competition with the opening of Tampines HUB, an integrated retail and lifestyle center which replaced the old badminton halls and sports stadium that once occupied the plot of land. The hub features a hawker center with >40 Cooked-food stores and many other food stores including pizza hut, gongcha and starbucks which are also tenants of Tampines Mall. Increased competition can potentially lead to a decrease in shopper traffic at Tampines Mall which may eventually put pressure on demand for occupancies in the long run.

Undoubtedly there is probably way more information with regards to upside and downside risks that I have not talked about. What I have written above can be seen as a tiny snapshot of a much bigger picture. 

In summary, I am decently comfortable with this investment and I will work hard to look out for other investment opportunities if permitted by my finances. I hope that you have enjoyed reading my post(s). 😁

Wishing everyone here a very happy and blessed New Year ahead. 

(image credits: clipartfest.com)

Best Regards,

A 😊

My current Portfolio

This may be an odd date to post an update of my current portfolio, as a portfolio update is typically done on the first day/last day of each month, however it should be noted that this is the first time I am posting with regards to my portfolio! In the future, I aim to provide a portfolio update as soon as possible whenever I make a trade, so stay tuned! 😬

Counter	Number of Shares	Current Market Value per share	Portfolio %
Raffles Medical Group	3000	$1.39	26.1%
Singapore O & G	3000	$1.16	21.8%
First REIT	2000	$1.26	15.8%
CapitaMall Trust	800	$1.87	9.4%
Singtel	400	$3.66	9.2%
Singpost	1000	$1.45	9.0%
Parkway REIT	600	$2.34	8.7%

Concentration Risk?

As you can see, my portfolio is very heavily concentrated on the healthcare industry. In fact >50% of it is concentrated in the industry. Although this seems to result in greater risks, I believe that it bodes for greater stability. The world is facing an aging population, and there will be a natural increase in demand for healthcare services over time. I will not be going into the technicalities in this post, but I will be talking broadly about my concentration thesis.

Tech Disruption

At present, many industries are being disrupted by improvements in technology, the retail industry and the supermarket industry are recent examples of this. Brick and mortar stores are being replaced by e-retailers such as amazon and ebay, where suppliers or even retailers can reach out to buyers directly. 

A manifestation of the rise in e-retail, in conjunction with many other factors (such as an increase in land and mall-space supply, negative sentiments etc) will contribute to a decrease in mall occupancies over time. (this is my personal opinion, however the Straits Times also reported that shopping mall vacancies in town are at 5 year high levels as of 23rd April this year)

On the 2nd of November this year, the media also reported that Amazon may launch selective services in Singapore as early as 2017, and some of these services are rumoured to be Amazon Fresh, a grocery service. Undoubtedly this may disrupt the local supermarket and Grocery Chains scene (Some notable listed companies include Dairy Farms and Sheng Siong). I will not go in depth into this at the moment (and it seems that I have sidetracked a little), as my point was that in the NEAR FUTURE, I do not foresee any significant Tech disruption to healthcare services, people need to get a check-up in person in order to get a proper diagnosis, call services and even video-calls are also unlikely to be useful. Furthermore the idea of healthcare professionals being "delivered" (visiting) to patients with a click of a button online is a very far-fetched idea which also seems very inefficient to me, with lots of travelling time incurred by the professional who probably can well utilise the time to see more patients at the hospital or clinic (It is also worth noting that some clinics do offer house visits but these services are often only used in the case of an emergency and significant waiting time is often involved too, hence it is no wonder why these services have not expanded). Coupled with the aging population, demand for traditional healthcare services are therefore likely to remain and even increase over time.

Of course there are disruptors to healthcare service providers too - other healthcare service providers. Not everyone has great access to healthcare at the moment, however healthcare service providers are expanding at a faster rate than population growth. Hence it is only a matter of time before an equilibrium (between needs and services) is reached and (eventually) breached again, and at that point in time, healthcare companies will need to battle for market share, and only the 'good' or better companies can continue to perform well (economically speaking). On that note, I will be writing specifically with regards to why I have chosen to invest in the companies in my portfolio, and why I believe they are in a position to succeed in my other posts in the future.

Thank you for reading and I wish you a Very Blessed Christmas. 😬

(image credits to: clipart panda)

Some basic metrics and investing tools

Some of you who are new to investing just like me may initially be puzzled by all the different metrics used by seasoned investors. Below are a few basic ones (share price, market capitalisation, and price-to-earnings ratio) which I believe are useful.

Share price

Basically this is the cost of owning one unit of a share in a company.
Note that a hefty share price may not necessarily mean that a company is expensive as the company may have many shares on issue. A better way of determining whether a single share is cheap or not may be the Price to Earnings Ratio Metrics which is covered below.

Market Capitalisation

This is the total number of shares issued, times the price of each share. Effectively, this gives a valuation to how much a company is worth.

For example:
In the case of Singapore Telecommunications Limited (Singtel):
Shares on issue: 16329 million (= 10^6)
Current share price: $3.65
Market Capitalisation = 16 329 000 000 x 3.65 = $59.60 billion (= 10^9) approximately.

Why is this important?
A big company may indicate "stability". Logically thinking, it may be nearly impossible for a large corporation with a market capitalisation of $50billion, with a longstanding history to collapse (well, at least not in a single day), but this may actually happen with a  $10million dollar company in a speculative industry (e.g. diamond mining, even though I do not believe there is such a listed company in the SGX at the moment).

Price to Earnings Ratio (P/E)

Effectively this tells you how much of a "bargain" the share is. This is the cost of each share, divided by the average earnings per share.

As you may have guessed it by now, a LOW P/E suggests that the share is currently cheap, and a HIGH P/E suggests that the share is currently expensive.

Although this metric gives you a quick insight as to how cheap each share is, it does NOT take into consideration a number of things, which include:

- Bumper earnings
e.g. a company can report higher earnings in the past year due to a divestment (selling) of a subsidary business. As a result earnings seem greater than what it usually is for the past year. As you can expect, there is no way a company can sustain its operations in the long term by constantly selling their assets, hence watching out/reading carefully a company's earnings report for bumper earnings which creates a false image of a company's P/E ratio is important.

- Falling share price
A company's P/E may be low as a result of share price previously plummeting due to a bad earnings forecasts, broker's downgrade, etc. Such reasons must be investigated first before concluding that a share with a low P/E is actually cheap.
For example, some companies may provide update on their operations/earnings, and they could predict a "bad" year ahead due to adverse trading conditions. For example, a property developer could forecast poorer earnings the following year due to an oversupply of properties in the property market, or even due to a change in regulations; such as one which increases restrictions on individuals borrowing to invest in a property.

Why are there "Differing P/Es"???
It must be noted that although share price may be current, earnings can be "trailing" or "forecasted". Trailing earnings are earnings that have come to pass, and are often earnings by the company in the last financial quarter/year etc. However forecasted earnings are often used by analysts who predict how much a company will be earning in the upcoming year/years.

For example;
in FY2016,
A company may have a share price of $1
Trailing Earnings per share: $0.10
P/E (trailing) is therefore = 1/0.10 = 10

Analysts may forecast the company to have an earnings per share of $0.15 in FY2017. FORECASTED P/E would therefore be 1/0.15 = 6.67

Hence a share may be trading on a seemingly "unreasonably high" TRAILING P/E ratio, such as Raffles Medical Group (with a P/E of about 36), but the share price could very well be sustainable as many holders/potential buyers believe that the future earnings of the company would increase substantially. For example, if they were to predict that earnings were to double by FY 2019, that is equivalent to saying that Forecasted 2019 P/E would be only 18. Seems cheaper right?


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An acquaintance who is also a more experienced investor once said to me "growing companies never come cheap" and I eventually came to believe so. On a side note, I will be talking about some of my investments (albeit tiny ones due to my finances) in companies which I believe have significant potential ahead in a separate post.

This post may be boring to the seasoned investors here, but I am putting this out as I feel that there may be many others who may be slightly more unfamiliar with these investing terms. I hope that everyone has enjoyed this post.😁

Best Regards,
A.

Introduction/About

ABOUT

This blog documents my Personal investment journey, and it serves to allow me to keep track of my personal finances and investments. Content posted in this blog documents of my journey thus far, and may also include posts unrelated to my portfolio.

I believe that writing about my personal investment decisions would allow me to reflect and learn even from my own experiences. I will also be grateful if you can voice out your opinions with regards to my posts, because I am a very junior investor after all.

Thank you for reading this and I sincerely hope that you will enjoy reading my blog. 😁

My Background

If anyone's interested, I am currently studying in a tertiary institute and starting to invest was a daunting yet exciting thing for me, not simply because of my tight finances as a student, but also as a result of hearing of a number of success and horror stories.

What pushed me to start investing then? Simple: I want to achieve financial freedom as early as possible. Although I may not have a specific target with regards to what age I am to achieve financial freedom, nor perhaps a monthly passive income target, simple math demonstrates what I should minimally achieve. This:

Average cost of a meal at a Hawker Center in Singapore: $5
Number of meals consumed on average per day: 3
Total average cost of food spent per month: $15 x 30 = $450

Average cost of housing per month in a non-central area: $950 (per pax assuming its rental housing)

Average cost of travelling per month: $120 (assuming a concession pass is used and only public transport is being utilised

Healthcare/Insurance/Miscellaneous expenses: $150

TOTAL COSTS OF THRIFTY LIVING PER MONTH: $1670

(please note that i did not pluck most of these numbers from official statistical websites and that these numbers are from my own observations)
Of course the numbers can fluctuate, and even though many are living in the comfort of their own home, I have assumed rental housing is used and included it in my calculations simply because significant funds would be initially required to purchase a home which can then offset future income, and at the same time, I believe that going into the maths in detail would make this discussion a little too complicated. furthermore, I would say most people would occasionally splurge on their meals, on entertainment, on travelling etc. Which is why in my opinion, $1670 is still a conservative figure.

Achieving $1670 and beyond on average from monthly dividend payouts is by no means attainable (for me at least) quickly, or even within the next few years. However, I believe that I have got to start somewhere, and I have finally taken the plunge to start my journey.

Why read my blog?

I do not have an excellent argument for this as there are many other great writers/bloggers who blogs about their personal finances and portfolio. I guess my blog is unique in the sense that most personal portfolio blogs are written by and started by working-class adults, on that note, I hope that my blog creates a little diversity. :)


Disclaimer
I will like to reiterate that the purpose of this blog is NOT for providing advice on stocks, it documents my personal journey. I am also not affiliated with any of the organisations/companies I mention/may mention unless stated otherwise.