Friday, 24 March 2017

Dividend Knight Income Portfolio Update (Mar 2017) - A Peaceful Rate Hike


No.
Company
No. of Shares
1.
AIMS AMP Capital REIT
30, 000
2.
DBS
3, 000
3.
Mapletree Logistics Trust
20, 000
4.
Singtel
10, 000
5.
Frasers Centrepoint Trust
15, 000
6.
OCBC
3, 040
7.
Raffles Medical Group
20, 094
8.
SATS
6, 000
9.
ParkwayLife REIT
8, 000
10.
Ascendas REIT
7, 000
11.
Keppel DC REIT
12, 800
12.
CapitaLand Mall Trust
10, 000
13.
Frasers Logistics & Industrial Trust
13, 000
14.
CapitaLand Commercial Trust
5, 000
15.
Sheng Siong
7, 000
16.
Mapletree Commercial Trust
8, 000

 
Dividends received in March 2017: S$831

Total dividends received since Jan 2017: S$3, 635.02

 Average dividends per month: S$302.92

Average dividends per day: S$9.96

Total portfolio market value: S$376, 663

Unrealised Profits: S$43, 975 (+11.67%)


For the month of March, I had collected S$831 in distributions from AIMS AMP Capital REIT.

Year-On-Year Quarterly Review
My portfolio’s market value grew 25.2% from S$300.9k in 1Q2016 to S$376.6k in 1Q2017. Most of this increase is attributed to a combination of fresh injection of funds (from savings) and re-investment of dividends. The bearish market last year (especially in the banking sector) made my stocks ‘shopping spree’ easier. Looking back, I was actually being greedy when others were fearful in 2016. My total dividends received also grew 12.9% from S$3, 219.50 in 1Q2016 to S$3, 635.02 in 1Q2017. Well on track to meet my 2017 passive income target.
There was a lack of knee-jerk reaction from the market after the US Fed hike rates this month. Evidence that time in market is better than timing the market. Fortunately, a short window of opportunity opened up this week that allows me to fully divest Suntec REIT while adding SATS, Raffles Medical (RMG), CapitaLand Commercial Trust (CCT) and DBS.


SATS
SATS has been leveraging on technological innovations to boost earnings despite stagnating revenue in recent quarters. For instance, its ground-handling crew at Changi Airport are equipped with customised smartwatches and bone-conductor headsets to boost productivity, bidding farewell to the ‘walkie-talkie’ era. At its massive, centralised inflight kitchens, robotic arms are humming away to arrange airline meal trays & autonomous guided vehicles carry bulky containers of goods


Source: The Straits Times

Automated machines wash, pack and sort cutlery. These machines are more energy-efficient, labour-efficient, and use less detergent, which is also better for the environment
Source: SATS

An automated facility called the SATS eCommerce Airhub would provide airmail-handling services to Singapore Post. This should form a seamless combination with SingPost’s recently-completed Regional eCommerce Logistics Hub to create a more robust e-commerce logistics network. This could give Amazon a run for their money if their possible entry into Singapore this year does indeed come to fruition. If Amazon wants to muscle in, it would need well-located, modern logistics facilities which MLT has in abundance. It is rumoured that Amazon has already leased an entire logistics warehouse from MLT.
According to SATS’ President & CEO, Mr Alex Hungate, 1.8 million people in Asia are expected to do air travel for the first time by 2034 due to a trend in rising middle-income consumption. SATS is investing now to boost its capacity to meet this future demand.
Its perishables handling facility, Coolport, has secured the International Air Transport Association’s endorsement for pharmaceuticals handling & storage. SATS has a firm grip on the local leisure cruise industry. It partnered with Creurs del Port de Barcelona to manage & operate the Marina Bay Cruise Centre.
All the above-mentioned business segments require huge initial capital outlay & a large-scale operation with experienced management. Furthermore, SATS is a trusted brand in these areas. This should provide a strong economic ‘moat’ & competitive advantage against potential rivals.


DBS
My top pick in the banking sector would be DBS. It started investing in digitalisation earlier than OCBC and UOB. I believe this has a future multiplier effect, especially on its already huge and growing private wealth business. With a large scale, DBS can use digital tech to raise productivity & efficiency,  thereby mitigating the rising costs of compliance. This should help DBS remain competitive. A rising rate environment should benefit DBS as its earnings are expected to be sensitive to rates.

 
CCT

CCT has a solid 5-year track record of raising DPU & NAV in a challenging office leasing market.

CapitaGreen would provide full-year rental contributions, thus boosting DPU in 2017. The total upcoming office supply in CBD is expected to peak in 2017. The small amount of new Grade 'A' office supply between 2018 to 2020 should help CCT seek positive rental reversions. Hopefully, the management is able to get all the necessary regulatory approvals from the authorities on the redevelopment of the Golden Shoe Car Park as soon as possible.


'Strategic Review' In Vogue

Lately, doing a strategic review seems to be the trend for major local companies. It is like a intelligent way of saying 'we want to take profit on some non-core assets on our books'. Let's take a look at a few potentially blockbuster ones. Time for crystal ball gazing!

- SPH, Keppel T&T & Axiata are considering a sale of their huge stakes in M1. This is a tricky one. Who would pay a premium to buy a controlling stake in struggling M1? The financial performance of M1 had been on the downtrend for 4 consecutive quarters - falling earnings & deep dividend cuts. Worse still, the threat of the 4th Telco (TPG) is already looming at the horizon. IMDA's vision of having 4 telcos in Singapore would rule Singtel out as a potential bidder too.

- Back in January this year, OCBC and its subsidiary, Great Eastern announced that they had appointed Credit Suisse to review their combined stakes in United Engineers & WBL Corporation. If a sale does indeed go through, there is a possibility of a one-time special dividend from OCBC.

- Back in December 2016, Global Logistics Property (GLP) undertook a strategic review of its business options after a request from its largest shareholder, GIC. Maybe Warburg Pincus, e-Shang Redwood & ARA can consolidate GLP, Cambridge Industrial Trust and Sabana REIT into one mega logistics company!

- Singtel should do a strategic review of its stake in SingPost. Even though SingPost is no longer a dividend powerhouse, once the new CEO gets the house in order and ramp up its e-commerce & logistics business, SingPost is still a reasonably attractive logistics play in my opinion.



The secret of getting ahead, is getting started
DK

Thursday, 23 February 2017

Dividend Knight Income Portfolio Update (Jan & Feb 2017) - Was Budget 2017 a Non-event?


No.
Company
No. of Shares
1.
AIMS AMP Capital REIT
30, 000
2.
DBS
2, 500
3.
Mapletree Logistics Trust
20, 000
4.
Singtel
10, 000
5.
Frasers Centrepoint Trust
15, 000
6.
OCBC
3, 040
7.
Raffles Medical Group
15, 094
8.
SATS
4, 000
9.
ParkwayLife REIT
8, 000
10.
Ascendas REIT
7, 000
11.
Keppel DC REIT
12, 800
12.
CapitaLand Mall Trust
10, 000
13.
Frasers Logistics & Industrial Trust
13, 000
14.
Suntec REIT
6, 000
15.
Sheng Siong
7, 000
16.
Mapletree Commercial Trust
8, 000


Dividends received in Jan & Feb 2017: S$2, 804.02

Total dividends received since Jan 2017: S$2, 804.02

Average dividends per month: S$233.67

Average dividends per day: S$7.68

Total portfolio market value: S$353, 768

 Unrealised Profits: S$42, 243

For the months of January & February, I had/would be collecting a total of S$2,392.02 in dividends and distributions from my income portfolio.

·         Singtel: S$544

·         CMT: S$201.60

·         FCT: S$433.50

·         Suntec REIT: S$155.76

·         Keppel DC: S$358.40

·         MLT: S$607.56

·         MCT: S$91.20

·         PLife REIT: S$336.60
·         Ascendas REIT: S$412.02 (*Advanced distribution)

Latest Portfolio Re-balancing:
Completed a partial divestment of MLT and a full divestment of MGCCT after their respective XD. Although MLT’s DPU has been steady over the past few quarters, I find it a tad too stagnant for my liking. MGCCT’s DPU took a small hit for 2 consecutive quarters due to a change in property tax regulations in China and unfavourable forex movements of the Chinese RMB against Singapore dollar. I feel my funds can be put to better use in other counters with brighter growth prospects.

The funds from the divestments were promptly utilised in building my positions on MCT, CMT, Singtel and DBS. The recent acquisition of Mapletree Business City Phase 1 had given a considerable boost to MCT’s DPU. The recent trend of businesses shifting their backend operations outside the CBD to cheaper business parks should benefit MCT in the long run since it still has Mapletree Business City Phase 2 (where Google is a major tenant) waiting in the wings. The management is also competent in achieving strong positive rental reversions from lease renewals/new leases.


 

The accumulation of CMT is more of a ‘buy on dip’ decision. Besides, I like the new retail concept at the Funan mall redevelopment, which I expect to provide future growth catalyst in 2019. The new Funan will feature an indoor cycling path, rock climbing and other sports facilities and a new cinema experience when it reopens. is being redeveloped into a mixed-use complex that will comprise two office towers, serviced residences and six floors of retail stores. Three tenants have already signed on: movie operator Golden Village, food court operator Kopitiam and rock climbing facility Climb Central.




Apart from indoor cycling lanes, there will also be bike shops, bike cafes, lockers and shower facilities for cyclists. While a floor of the mall will be dedicated to IT products, it will also incorporate workshops and other interactive elements. Other new concepts include a drive-through for collection of products ordered online, and a 4,000 sq ft urban farm.

The accumulation of Singtel was largely based on its latest set of resilient results compared to the truly woeful results from its competitors (Starhub & M1). Furthermore, the management finally officially stated that they are preparing the blockbuster IPO of NetLink Trust in 2H2017, widely expected to be worth $2.5b. I am hoping a one-time juicy special dividend payout from this IPO. Fingers-crossed. The statement made by Mr Heng Swee Keat, Finance Minister, in his Budget 2017 speech, was a confidence-booster for me too.

With increased digitalisation, data will become an important asset for firms, and strong cybersecurity is needed for our networks to function smoothly.”


Light at the end of the tunnel for the banks?
No surprise from the latest results of DBS, OCBC and UOB. Earnings were down y-o-y and provisions for O&G related NPLs increased. I believe the worst of the O&G crisis is behind us. We are looking  at a slow recovery in 2017. Moving forward, major players like Keppel Corp and SembMarine should be on stronger footing. For the love of God, no more ‘Swiber-like’ fallouts this year (Please!).  So I asked myself, when the market eventually recovers (and it will), which bank will be the best-positioned to grow fast again? OCBC’s insurance arm (Great Eastern) has been a drag on its earnings in recent years and UOB has always been relatively conservative in my opinion. That leaves DBS as my top choice because I like the looks of its ‘crown jewel’. DBS’ wealth management fees climbed 19% to a new high of SGD 714 million from stronger bancassurance income. The ‘Wealth Management’ customer segment income increased 19% to SGD 1.68 billion with assets under management growing 14% during the year to SGD 166 billion. Earning more fees from ultra-high-net-worth individuals in Asia? Hell yeah!


Raffles Medical Group (RMG) – Expansion plans still in gestation period
RMG’s topline and bottomline were weak as operation costs intensify due to the recruitment of staff and procurement of medical equipment. Weak medical tourism and rising expansion costs have hit its hospital segment’s profit margin. ISOS is taking longer to turn profitable. I am expecting earnings growth to be minimal this year. Even though I am confident of the new Raffles Hospital extension and Shanghai International Hospital in providing long-term growth, I am only willing to consider adding current holdings if PE comes down to 28 times.

 
Patience is not the ability to wait, but the actions you make while waiting
DK

Sunday, 25 December 2016

Dividend Knight 2016 Portfolio Review and Projected Dividend Income 2017

First, I would like to thank all my loyal and supportive readers who have followed my investment journey thus far. The viewership of my blog finally crossed the 100k mark while I was away on vacation. Yay! :) Another milestone achieved.

A quick snapshot of my portfolio's year-on-year performance (accurate as of 30 Dec 2016)
 
- Market value of portfolio has increased almost 14.62% from S$301k to S$345k. Pure capital appreciation represents 5.32% of that increment while the remaining 9.3% represents fresh injection of funds.
 
- Total annual dividends collected has decreased 8% from S$16, 835 to S$15, 492 as I subscribed to significant amounts of SCRIPS/DRIPS offered by DBS, OCBC, MLT and RMG in 2016. If I had taken dividends instead, the total amount of dividends collected this year would have increased marginally to S$17, 270, which is still way off the target I made last year.
 
- Total Returns: $16k (capital appreciation) + $15,492 (dividends) = S$31,492
 

Walking A Thin Line in 2016
In 2016, I humbly re-learnt an important lesson from Mr Market - a stock is only as good as its fundamentals at the end of the day. The financial figures don't lie, especially over a few quarters. This prompted me to divest my Starhub, M1 and Cache positions completely. Fortunately, the dividends that I collected from these companies over the years have helped me to get out while barely in the black. My decision turned out to be right as their prices continued to tumble throughout 2016.
 
On the other side of the coin, my 'buy on dips' strategy for DBS, OCBC and UOB worked out pretty well. Their fundamentals remain robust despite the temporary weakness in the O&G, business and property loan sectors. I found myself walking a thin line when I had to make a judgement call. Questions like 'Is this a short-term scare?' 'Is a reversal of fortunes remotely possible?' 'Has the fundamentals changed permanently?' would flow into my mind. Navigating through seismic global events such as Brexit and Trump's election victory certainly did not make it any easier.
 
 
2017 Strategy - Passive Income Longevity
I would not allow the Fed rate hike cycle to derail my dividend investing style in 2017. In a world with low returns and uncertain markets, I shall maintain a sharp focus on high-quality companies with healthy balance sheets, sustainable earnings and dividend payouts in defensive sectors such as healthcare. In my opinion, global macro-economic growth will remain subdued with geo-political tensions arising from elections in France and Germany, official start of Brexit negotiations and Trump's first year in the White House. If the banking crisis currently unfolding in Italy requires a bailout package from EU a few months from now, will Germany and France (1st & 2nd largest economies in EU) have the political will to save Italy in the middle of an election campaign? Knowing that using taxpayers' money to help Italy is likely to lose them votes, the leaders of France and Germany probably would not want to put their political careers at risk. Or at the very least, they would drag their feet and delay financial assistance to Italy until their elections are concluded. By then, the problem might have deteriorated into a full-blown crisis. Remember the Greek sovereign debt crisis (Grexit) back in 2012 and 2014, anyone?



Projected Dividend Income 2017 - Planting the seeds today!
  1. Singtel: S$1, 400
  2. DBS: S$1, 254
  3. OCBC: S$1, 094
  4. SATS: S$640
  5. Raffles Medical Group: S$150
  6. Sheng Siong: S$227
  7. Ascendas REIT: S$1, 078
  8. CapitaLand Mall Trust: S$728
  9. Frasers Centrepoint Trust: S$1, 680
  10. Suntec REIT: S$600
  11. Mapletree Commercial Trust: S$320
  12. Mapletree Logistics Trust: S$2, 405
  13. Mapletree Greater China Commercial Trust: S$870
  14. AIMS AMP: S$3, 300
  15. Keppel DC REIT: S$668
  16. Parkway Life REIT: S$960
  17. Frasers Logistics & Industrial Trust: S$832
Total Projected Dividends: S$18, 206
Projected Average Monthly Dividends: S$1, 517
Projected Average Daily Dividends: S$49.88

Merry Christmas and A Happy New Year!
DK