July Updates and Thoughts

The month of July heralded new highs in the stock markets globally, with DOW hitting a new high and the STI reaching its previous peak.

The performance of my personal portfolio has not been great though, with Raffles Medical being the worst performer. That said, I'm not too concern about things yet and I am still confident about its' growth in the long term. Profits are getting squeezed, and with analysts predicting the fall in NPAT due to their expansion and upgrading plans the next 3 years, buyers seem to be rushing out of this counter. As such I have taken the opportunity to acquire a small parcel of another 1500 shares which  brings my total RMG counter number to 4300. I will continue to monitor this counter and I'm currently planning on scooping up more if the weakness continues to persist.

(image credits: Jumbo Group LTD)

I have also acquired 4000 shares in Jumbo (42R), which has retreated back from its previous peak, hence presenting with a decent buying opportunity IMO. Similarly, if this counter continues to present with weakness, I may scoop up more as well. Although this counter has been compared to other services/food-services counters which are cheaper, I believe that this is an unnecessary comparison as they are all intrinsically different. Jumbo has a great product and they are already taking the right steps (I believe) in their overseas venture.

With Regards to my REITs counters, they have all been doing well despite the recent Fed rate hike in June. IMO this is because most of these REIT counters are still fairly valued. Looking back, Parkway REIT has been by far my best performer, with about a 28% gain since I bought (nearly at it's bottom) nearly 2 years ago, with 2 years of dividends to boot on top of it. On hindsight, this highlighted to me that if I strongly believe in the intrinsic value of a counter, I should not be too worried about the general market sentiments, which I was afraid of at that point in time.

That's all for today's update, best wishes to everyone out there!

A

Why I prefer investing in REITs compared to investing directly in property

[It's 3am in the morning and here I am typing away. Thinking about it, I'm really starting to enjoy blogging now, to be able to consolidate my thoughts and to present it in a logical fashion does provide a decent amount of satisfaction 😆] Alright, I'll not carry on and on about this, so here's what I actually want to talk about, REITs:

(i drew this XD)⁠

1. Liquidity

This is probably the main reason why I'm leaning towards REITs. This is also the beauty of the share market in general. If you wake up in the morning feeling like you need some funds for other purposes, you can always simply sell with the click of a button! (Or a few buttons). There are always buyers on the market daily. Of course you may want to find a "better day to sell" as any stock on the stock market does fluctuate a wee bit on a daily basis even though the fundamentals of the company in question may not have changed one bit.

You can't do this when it comes to properties, more often than not, a significant waiting time is involved, whether or not you are buying or selling a property. Listing it on a property-for-sale webpage; recruiting a property agent's help; showing the property to potential buyers who may not even be truly interested is all part of the package as well.

2. The ability to buy and sell off a portion of what you have

You can also sell a portion of your holdings (of course this is limited by the rule that the minimum trading amount is one lot.) which is still fair in my opinion, especially since a hundred shares now constitutes a single lot whereas in the past, one thousand shares constitutes a single lot.

(What's still unreasonable is the minimum commission amount, which I will not be going into in this post, as it's not the point here.)

On the other hand you can't do this with a property, how are you going to divide up a house overnight and put it up for sale? Well unless if you're telling me you own thousands of properties, then this may not apply to you 😁. Furthermore, investors with tight finances, such as students (including myself) are not able to afford buying an entire property directly, and taking a loan to do so is out of the question as well (this point slightly overlaps with my economies of scale points).

3. Economies of scale

Let's be honest, if we, the common folk are interested in say industrial properties or healthcare properties, what are the chances that we can afford it? Do we have the funds to buy a hospital like how Billionaire Mr. Lim bought Thomson Medical? We probably do not.

But by pooling funds together, which is essentially what a REIT does, managers of the REIT are able to buy such properties! This also brings me to my point that aside from having greater bargaining power and economies of scale, us as investors, are also able to select from various types of property trusts that suits your palate! To name a few, we have; Healthcare, Industrials, Retail etc.

This essentially allows us to diversify the little amount of money we have as well. By buying various REIT shares, we are arguably “less at risk” of price fluctuations than if we were to own a single property.

4. Convenience

Owning a property can be a hassle. Or rather collecting rent is. What if the tenant is being uncooperative? Sure, there are legal means of settling the issue, but I’m trying to point out that it is going to be a huge headache and a waste of time. Furthermore, if the tenant for some reason is only able to make cash payment, you’ve got to make a trip down to collect your rent! You also have the issue of them haggling for rent (at before a contract commences that is). 

With REITs all these issues are avoided, or rather managed by someone else, or a team that’s actually professional. All you’ve got to do is sit back and wait for the dividend payouts, which goes directly to your bank account.

Not a free ride

I would like to add in this point in time, that Investing in REITs isn’t a bed of roses though, and there are some downsides: management fees (though generally you can be assured that 90% of the REITs income is distributed as it grants the REIT tax incentives), lack of control and lack of rights (unless you hold a substantial proportion of shares), volatility (just like other stocks on the market, although the prices of REITs are generally less volatile). Just like other stocks, monitoring prices from time to time, reading their financial reports, looking out for any updates/announcements would do good as well.

Although I do already own shares (albeit small parcels) in some listed REITs, there are some which I plan to increase my holdings in, and also a couple of others which I will be talking about in a separate post. (I will be talking about these in a separate post, so stay tuned!)

Till next time!

Best Regards, 

A 😁

3 Potential munchies over the next few months

For those of you who have been following my blog, you would probably know that my current portfolio is heavily concentrated on the healthcare sector. And I had previously planned to keep the proportion of healthcare counters to about 50% of my portfolio. However, with my latest purchase of shares in ISEC healthcare which i blogged about here, healthcare sits at a significant 70% (approximately) of my portfolio. 

I am planning to balance my portfolio and I am currently, and will continue looking at counters from other sectors. Please note that whilst I believe balancing my portfolio is necessary, I will not do so unless I find suitable shares at prices I can swallow.

Here are some counters I am looking at;

Singapore Telecommunications (Z74)

If you had read my portfolio page, you would have realised that I do have a small parcel of Singtel shares already, and if you are interested, I blogged about it here recently. Potentially, I am looking at doubling my holdings in this counter, and my reasons for investing in it remains unchanged from what I previously mentioned. But in short, I believe Singtel remains an excellent defensive play due to its' significant diversification, good management track record, and little free-float. 

Frasers Logistics and Industrial Trust (BUOU)

(image credits: Frasers Logistics Trust)

I have never bought an industrial REIT before, and this is the first one on my watchlist. They have recently exceeded their maiden DPU forecast, and currently sits at approximately 99% portfolio occupancy. They also boast a WALE of about 7.0 years. This is higher than most other industrial REITs listed in Singapore. For those of you who are new to the term, WALE (Weighted Average Lease Expiry) essentially reflects how long the average remaining lease period is, to a tenant of the REIT. This is done by taking into account every tenant's respective contribution to the REIT and their remaining lease period, and aggregating the amount. In short, the greater the WALE, the less risk the REIT faces as tenants aren't going to vacate anytime soon.

The REIT also has sufficient room to acquire more properties, and they have recently made a good acquisition (The Martin Brower Property), which increased their WALE and reduced their average portfolio age.

I also like the fact that the REIT's properties are based in Australia, and collects rent in AUD. Although there is no risk of unfavourable/favourable currency swings at the moment due to hedging, in the next FY (FY18), it may not be the case. I am bullish on the Australian dollar, and its economy, and I believe that its' currency will continue to be on the upswing, which could potentially increase distributions in this REIT. We should also note that Australia has not experienced a single recession in the past 25 years. 

This counter is not that expensive yet, and is currently hovering right between the 52 week low and high. Hence, I am monitoring this counter closely for an opportunity to invest.

ISOTeam

This is probably the least well known counter out of the three. This company specialises in facilities management and upgrading of the public housing estate in Singapore. Sounds defensive already doesn't it? Services they provide range from painting services, pest services to re-roofing and waterproofing. At the same time they do have a number of subsidiary companies which I will not be writing about here as it is not the main point. The problem though is that this may have already been factored into the share price, as you can see in the chart below and it is decently expensive, if not the most expensive for a counter classified under the construction sector: 

(image credits: yahoo finance)

I will probably be just monitoring ISOTeam for now due and will only strike if there's a window of opportunity.

On this note, that will be all from me today, and I'd like to thank you for your support!

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 😁