Happy Lunar New Year!

Dear friends,

If you're reading this, I'd like to take this opportunity to wish you a very happy and prosperous Lunar New Year. If you're Chinese and follow the tradition, may you have a great time visiting and spending time with your family members and friends! If you aren't, I would also like to wish you an awesome extended holiday with your family and friends! 😁

(image credits: clipartfox.com)

Remember to stay happy, and calm!

During this festive season, I do know that there are investors out there who buy (for good luck) and also those who sell (due to the increased demand!). I would just like to remind everyone (including myself) that whilst doing this, remember to make prudent and informed choices!

The stock market is much about human psychology after all, and when prices go up and up, with the markets being in the green, it becomes "easy or good to buy" to non-holders. On the other hand, holders are tempted to sell. During such times, I suppose it is important for both non-holders and holders to think again; about their investment thesis for the counter in question: has it changed? (well of course this is assuming that you are a medium-long term investor and not a trader.)

If the answer is no, then there you have it. You don't have a good reason to buy or to sell. Excessive buying and selling can potentially lead to regrets due to the opportunities lost (e.g. oh no i sold the shares of the company that I was very confident in and the price went up!), and also due to the heft brokerage fees incurred (> $20 generally for each trade is a lot of money!). I thought of the second point as I do know of a friend who makes many many trades and still end up holding shares in the same company. And this is without making any profit from the trades, coupled with some losses incurred due to the fees involved!

This argument does not just apply to this festive season but also to every other occasion in the year which influences short term investing decisions and hence the overall market direction. So, remember to keep calm when making your decisions!

That is all from me today, once again, I'd like to wish everyone a safe, happy, and prosperous 2017 ahead.

Best Regards,
A 😁

FIrst REIT latest earnings

This is not going to be a long piece! As I am sure First REIT is pretty well known to most investors. But just in case: First REIT is an Healthcare REIT mainly based in Indonesia (with small concentrations in Singapore and Korea) listed on the SGX and they currently have a market capitalisation of about $1B, and 18 properties. 

For those of you who have read my blog before, you would know that I am currently holding a small parcel of shares in this REIT (if you are curious you can check out my portfolio tab section)

Distribution

The latest quarterly (oct-dec) distribution per unit (DPU) amounted to 2.13c, up from 2.12c in the previous quarter. You may also like to note that DPU has risen steadily for the past 12 quarters (from 1.96c to 2.12c currently. Dividend yield stands at 6.47% based on current prices. You can see from the chart below that the DPU has grown together with the REITs' Earnings per share (EPS), which is a good thing.

(image credits: Singapore Exchange Ltd)

Growth

To a certain degree, the REIT has experienced growth. We can see this in the chart below; from their  increasing operation cash flows and increasing revenue over the past few years. We should also note that most recently, the REIT has acquired Siloam Hospitals Labuan Bajo, and the deal was completed on the 30th December 2016, and the contributions of this new property has not yet been accounted for in the latest quarter.

(image credits: Singapore Exchange Ltd)

Valuation

The current PB ratio sits at 1.205 (which is decent compared to historical levels. Gearing is currently at 31% which is decent as well, and provides a little headroom for further acquisitions (SGX REITs have a gearing limit of 45%). For those of you who are unfamiliar with this term, it is a common term used when describing the valuation of REITs, and it is equal to the REITs' debt divided by the total equity value. 

Other thoughts

There was initially panic when the REIT's sponsor, Lippo announced potential plans to shift the REIT (along with Lippo Malls REIT) to Indonesia's exchange. However the news has quietened down for now, and I believe one reason it has not yet happened is due to the risk free rate in Indonesia being far greater than that in Singapore, hence potentially requiring a greater yield to attract investors, which may not be plausible. 

At the same time, it is also encouraging to see that the REITs' managers have been consistently participating in the Dividend Reinvestment Plan (DRP) for First REIT, which to a certain extent demonstrates that they are confident in the REITs' future.

I will just be sitting back and collecting dividends for now, and I believe this is not a counter that I need to monitor daily. 

Cheers, 

A 😁

Recent Investment/ Portfolio Update - ISEC Healthcare

 

(image credits: ISEC Healthcare)

It's been awhile since I have updated my blog, and I am very pleased that I do have an update now! I have bought 13000 Shares in ISEC Healthcare with an  average price of $0.285. You may like to note that current price levels are very near to their IPO price of $0.280, and I have been monitoring this counter for a few months awaiting a drop to favourable levels whereby it has now arrived at. 

For those of you who are unfamiliar with this counter, this company provides medical services, and its' main focus is on opthalmology (eye medical care services). It currently has operations in Malaysia (KL, Penang), and Singapore.

Expansion & Synergies

ISEC has seen some issues recently in the past and previous year, with its Novena eye center clocking a lost for the group totalling $2.6M, due to both losses and closure related activities. (PS. It has closed down due to failure to renegotiate wages with the 3 doctors working at the center) However, the board has hinted that business opportunities remain strong, both locally and abroad (Malaysia and Vietnam, and the Asia Pacific region in general).

True enough, under a year ago, they have acquired shares in Southern Specialist Eye Centre in Malaysia, and most recently, the acquiring of 4 General Practice Clinics in Singapore. Although their expansion plans in Vietnam have not materialised, I believe that it is only a matter of time. There is potential for GP-Opthalmology referrals and for GP follow-ups as well. Although this is not definite but there is a decent likelihood. There would also likely be cost savings along with expansion; due to synergies and economies of scale (which applies to most businesses including ISEC) - better negotiating power for medical equipment, more efficient managing of facilities, staff-sharing between centers; to name a few.

Population Tailwinds

Everyone has probably heard of the ageing population argument for healthcare (ie. average population age increasing = more demand for healthcare in general) already so I would not repeat that here. But instead let me give a tiny snapshot about why opthalmology as a specialty is particularly important or potentially lucrative in a few short dot-points;

1. LASIK is gaining popularity, an increasing amount of Singapore and the world's population is experiencing short-sightedness (largely due to technology's contribution)
2. Cataracts and Glaucoma are very common eye problem requiring urgent treatment
3. Singapore (which is a main source of revenue for ISEC), has the 2nd largest proportion of diabetics amongst developed nations. Diabetes has also been on an uptrend in other countries including Malaysia the other main source of revenue for ISEC (also note that Malaysia has a greater prevalence of diabetes than the world population (about 8% higher)).
4. Diabetes has many microvascular and macrovascular complications. Amongst the former, eye complications are one of the first signs of manifestations and require urgent treatment
5. Of which, Cataracts, Glaucoma and Retinopathy (damage of blood vessels of the retina) are common complications

There are of course many other arguments (e.g. ozone depletion -> increasing UV exposure -> increase risk of cataracts and other eye conditions) that would go the same way, however I will not be going into them as the purpose of this piece is just to give ourselves a snapshot of the big picture.

I believe that the main take away point is that eye conditions are getting increasingly more common locally and abroad. Furthermore, eye conditions are arguably less insidious than other medical conditions, as their manifestations appear quickly and bring about severe changes to the standard of living of patients', leading to patients being more likely/receptive to receiving medical treatment for their eye (and being more than willing to pay for it) as compared to other specialties.

Financials

(Image Credits: Singapore Exchange Ltd)

As you can see revenue and gross profit as well as dividends per share have been on a steady rise, which is all good. Current P/E is also at 26.9 which is high, but then again relatively low to the other listed healthcare providers. 

ROE currently sits at 10.4 which is not fantastic but not terrible either, as compared to the other years since listing, and there are signs that their returns are increasing, perhaps due to their expansion from the utilisation of free cash flow and IPO proceeds. On that note, they also have $26.9M in cash and equivalents and no debt as well, giving them sufficient room to acquire other practices when they deem fit. 

In summary, there are a number of things I like about this counter and I have hopes that they are back on track onto achieving success. For now I'll just be sitting back, collecting dividends, and monitoring their progress. This is probably a counter I will be holding for the long term.

I hope you have enjoyed reading my 2 cents!

Cheers,
A 😁

Potential Munchies - A little known company?

Hi everyone, hope the New Year has been treating you all well thus far! I was bored today so I did random searches on SGX-Listed Catalist companies. 

The reason why I am interested in smaller-cap (for those of you who dont know, this is a common abbreviation for "companies with smaller market capitalisation" is due to their greater potential for growth. (I've spoken briefly about this in my earlier posts) Long story short, smaller companies are more likely to be able to grow and increase their market share as compared to larger companies, due to reasons such as product saturation.

So I found a pretty interesting company/group: 

Keong Hong Holdings (5TT.SI)

(image source: keonghong.com)

Well technically this group is not a Catalist group, it is: founded in 1983, listed in 2011 on the catalist, but transitioned to mainboard in 2015.

This group basically does construction and building, has a P/B of 0.79 which is really good value, basically you will be paying less for the company's assets than the market valuation, and this is still decent when comparing to other companies in the same sector.

It also sports a dividend yield of 7.49% (however the dividends have not been very consistent). Upon a closer look however, its' lowest dividend historically would have been in 2015, where it had total dividends of $0.018, which based on today's share price of $0.465, would be equivalent to a 3.87% yield, which is still decent. They're dividend payout ratio also sits at only 23.1%, which would give them ample financial headroom.

If you take a look at its share price; it has actually been growing at a decently fast rate since its listing, when compared to the STI ETF (ES3). Although history doesn't determine the future, it does show that this group, or the markets' expectations of this group have been growing:

(image credits: yahoo finance)

Ok moving on, the group appears to have a decent pipeline of projects in place. The construction order book currently stands at $351M, which allows for a sustainable flow of activities up till the end of FY2018. It is also in charge of a number of notable projects including the Raffles hospital extension, it also has several overseas projects, including the expansion of the Kooddoo domestic airport (Maldives), and the construction of the Pullman Maldives Maamutaa Resort in the Maldives, the group it also has investments in Japan. 

Although due to property cooling measures and oversupply (IMO) of new private housing projects would be very challenging, I believe that the group is going in the right direction by expanding overseas. 

The group has set its sights on the tourism industry in Malaysia, Japan, Indonesia and Australia and is planning to grow its contributions from hotel development and investments, which is probably a good step forward as it is currently highly reliant on the Singapore private property market for its' revenue source. 

Therefore, I will certainly be putting this company on my watchlist for now and will be monitoring its' future developments.

That's all from me for today!

Best Regards, 

A

Potential Munchies? - Singapore Telecommunications (Singtel)

(image credits: singtel.com)

Even though stocks have been generally recovering the past year (after the scare of China's slower growth, with Brexit, the Italian referendum and the US elections along the way), surprisingly telcos have not been doing well.

Of course this may be due to the nature of the telco stocks, which mainly suit the appetites of dividend seeking consumers. With rising interest rates, yield seekers would be attracted towards deposits and bonds, as the difference in yields between dividend paying stocks and deposits/bonds is now lowered, resulting in dividend paying stocks becoming less palatable due to the risks involved as well.

In addition, mobile penetrance is so high in Singapore at the moment, with the Infocomm Media Development Authority reporting that it currently stands approximately between 140-150%. What this means is that on average one singaporean has 1.5 mobile Subscriptions (of course this is not true in reality, with some having 0, 1 or 2 or more subscriptions). Furthermore, this figure has declined very slightly in the past few years. What this suggests to me is that, the industry is already fully saturated.

(image credits: TPG.com.au)

Most of you already probably know that TPG Telecom, a listed Australian Telco has won the rights to be the 4th Telco in Singapore. TPG, a lower cost provider in Australia is led by Malaysia-born David Teoh, a prominent businessman. If you take a little look at TPG's history, its' earnings has rocketed (and I do mean rocketed), from 100M to nearly 800M in the past 7 years, inclusive of both organic and inorganic growth (from mergers and acquisitions).

Although this says nothing about whether or not it will perform well in Singapore, but it certainly does worry me and probably the other local investors who are vested in local telco stocks to a certain extent. If TPG was able to achieve such phenomenal growth in a similarly competitive industry in Australia, it is somewhat arguable that to a certain extent, significant market share can also be potentially captured by them in Singapore, if they do things right.

(Please note that in Singapore, Telcos;. Singtel, Starhub, M1, provide both mobile and broadband services, this is unlike in Australia, where there are several companies which only provide either)

With all this hype about a 4th telco (note that it was only revealed in December 2016 that TPG won the bid, but they were believed to have a good chance due to their finances), its no wonder that M1's share price has fallen from a high of $2.89 to a low of $1.90 in the past year, whereas Starhub's share price has fallen from $3.97 to $2.73. Singtels share price on the other hand, has fallen from a high of $4.36 to a a low of $3.60. 

I am less worried about the performance of TPG affecting Singtel though, as some of you may already have known, Singtel derives only a small proportion of revenue from Singapore. It is the parent company of Optus in Australia, and has significant investments in other telcos in the region.  Furthermore, I also like the fact that Temasek Holdings currently hold 52.3% of the available shares in Singtel.

Singtel having a strong backer, highly diversified revenue, a good management track record, is evidenced by the relatively smaller fall in share prices as compared to the other locally listed telcos recently, even though the P/E of Singtel and it's dividend yield is significantly greater and smaller respectively, to a significant extent! (I would also like to add that the dividend yield Singtel currently sports is greater than their historical average, excluding special dividends).

This is why at current prices, Singtel is currently on my radar.  I will definitely be looking into buying more Singtel shares if prices start to fall further.


I hope that you have enjoyed reading this post, as much as I did writing it.

Best Regards,
- A 😁

Investor sentiments - Recent unrealistic expectations of the market?

Before Brexit and before the US elections, markets were in the red daily, billions were wiped off the share markets. Conversely and similarly, post-Brexit and Post-elections, the markets rebounded. However, the million dollar question is; are the rebounds sustainable?

Ever since news broke out that Mr. Donald Trump was elected to be the next president of the U.S., markets have been on the rise, with the STI soaring nearly 200 points. Just take a look at the chart below:

(image credits: Yahoo Finance)

This may be due to reasons including that Mr Trump could perhaps spur the U.S. economy towards further growth, but what investors are forgetting is that he has not even taken office. What's also funny is that before the elections concluded, investors and analysts were actually worried that markets may plunge if he were to be elected as they believed that Mrs. Clinton provided greater certainty for the market than Mr. Trump.

Another commonly cited reason for the recent bullish run on the stock market is that the U.S. economy has been doing well, evidenced by the recent rise in interest rates by the Fed, and the hinted further raises in 2017. However, we have been in a low interest rate environment ever since the global financial crisis in 2008-2009, and in my opinion, the impact of raising interest rates on the economy and business remains unclear.

The problem is that the markets are illogical in the short run, and investors' sentiments plays a huge role in influencing the direction of the market, evidenced by the recent reactions to the U.S. elections.

Just think of it this way; if you're interested to buy a plate of chicken rice, and assuming that you have the time, would you buy it from a store with a long queue or one with no queue at all? People would generally choose the one with the long queue! Not because it is definitely going to be fantastic, but because of the hype! Because others are doing it as well, because of safety in numbers!

Eventually, prices of shares may possibly arrive at unreasonable levels and thats when I (and probably other investors) may take the opportunity to sell some holdings. Because ultimately, after long and unrealistic bullish runs, market corrections tend to occur, and that's when having a little spare cash would bring you a long long way. 

Wishing everyone the best of luck steering through these rough waters.

Best Regards,

A 😁