Mid Year Portfolio Performance Review

2015 continued to be filled with volatility as over the last 6 months the STI has gone nowhere! The STI struggled to hold itself above the 3500 level and quickly got sold down to find support around the 3300 level. The current main worries are on 2 points, the fear of a rise in interest rates and the fear of a Greece exit.

If we take a step back and look at the fundamentals, the STI is actually selling cheap at only 13.5 times earnings with a dividend yield of 2.7%. This is way lower than the 18 times earnings seen in major economies such as US/Europe/China. As such I have stepped up from being 90% vested to 100% fully vested.

As for my current portfolio, its down by 2% (excluding dividends and realized gains) for 2015, under performing the index. So let us look at my counters one by one.

ARA gained 4% over the last 6 months as the over hang from the white paper on REITs slowly fates away, the expectation is for the full details to be announced early in the 2nd half of this year.
I do not think that the management and performance fees of REITs managers will be overhaul, well maybe just some minor changes. Once the doubts are clear, I do hope that valuations could go back towards 20 times earnings. After all, ARA is still a decent growth stock, net cash position along with solid recurring income from its property management fees.

CCT is down 8.5% over the last 6 months, the current price of 1.56 is also a whopping 19% below its 1.94 intra year peak. The sell down was mostly due to the fear of rates hikes and also the huge supply of office reits coming in from 2016 onwards. I took this opportunity to be greedy when others are fearful and managed to build up a significant 15% position

My preference for Office asset is that they generally have a long life span of 99 years, which is much longer than other assets such as industrial property (30 years), Utilities (30 years) and toll roads (15 years). Going forward I do believe that DPU will be stable as they have a long weight average lease of close to 8 years, its gearing is also low at 30% with over 70% of its debt at fixed rates.

M1 is down 10% in the first half of 2015, mainly due to the worries of an increase competition from the coming 4th telco. I do think that this will fundamentally impact their futures earnings but the market seems to have over reacted, so I continued to make contrarian bets and built up a 16% position in M1.
Realistically the 4th telco would only come in after 2017, it will then need to take around 2-5 years and a lot of hard work to capture a market share of say 5-10%. Given that view, I strongly believe that M1 should have no problems maintaining its earnings and dividends for at least the next 3 years (2015-2017). After which, in a bearish case... we could see 10-20% earnings decline.

OCBC down 1%. There's really nothing much of an update here as we shall look forward in the performance of their Wing Hang bank acquisition. I'm still pretty positive that it will bear fruit and that China would be a very huge and important market in the near future. However on the down side the China stock market seems like a big bubble... and I have worries of it triggering the next crisis. As a whole OCBC is still pretty diversified among its 4 core markets, Singapore/Malaysia/Indonesia/China and this makes it a good proxy bet on the Asia growth story.

Starhub down 4% as the fear of rate hikes dragged all dividend plays down. I think this level forms a strong support with its 5% yield (5 cents quarterly payout). Honestly I wouldn't be interested in adding more in this position as I think M1 has much cheaper valuations.

ST Engineering down 12% with poor results from its Marine and Aerospace segment. Fundamentally I do not expect a quick recovery, but fortunately management has guided that earnings and dividends for FY15 to be similar to F14.
Recent readings on forum, there's been arguments that STE is overvalued due to its high PE and low to little growth. My thoughts are that STE is not a growth stock and should be valued similiarly to a defensive stock like Starhub for its predictable earnings and dividends. A small cap company may sell cheaply for 10 times earnings because it doesn't have a track record (over 10 years) of stable earnings and dividends, whereas blue chip/mid cap dividends stocks are currently priced around 15-20 earnings because they have proven themselves from surviving the previous crisis and have had long record of stable payout to shareholders. As such investors are generally willingly to pay higher valuations for a better peace of mind.

UOB down 4% over the last 6 months and I still think banks are cheap at 12 times earnings or less. I noticed that a lot of small retail investors still shun away from bank stocks because of the nightmare stories they had heard from the previous global financial crisis, that banks are risky and that it could go bankrupt in the next crisis. All businesses do have risk and all businesses have a chance of going bankrupt, but the main job of a bank is managing risk! After the GFC, more regulations have been put in place and our banks have fundamentally become much stronger than before. They have sailed through the previous crisis unharmed and I'm confident in their management to continue being prudent, especially when the management themselves hold a large stake in the company.

NamePrice WeightagePEYieldIndustry
ARA1.7417%16.72.9%Property Management
CapitaCommercial Trust1.5615%18.45.4%Commercial Reit
OCBC10.4016%11.63.5%Banking & Finance
ST Engineering3.3610%20.04.5%Engineering & Heavy Industries
UOB23.4117%11.93.2%Banking & Finance

Portfolio PEPortfolio Yield


Blue Chip/Mid Cap Dividend Stocks Selling at 10-20% Discount from Peak!

CCT is down 20% from a year high of 1.94 to the current 1.565! The dividend yield is pretty decent at 5.4%, but what matters most is still the top quality commercial assets that they have as well as their low gearing of 30%.

M1 is down 18% from a year high of 3.99 to the current 3.26! The dividend yield is 5.8%, the highest among the 3 telcos. I think that worries of the 4th telco is over blown... also SMRT has dropped out, leaving with My Republic as the one and only possible candidate left to become the 4th telco.

Starhub is down 10% from a year high of 4.46 to the current 4.02! The dividend yield is currently a solid 5% with a quarterly pay out of 5 cents.

STE is down 15% from a year high of 3.95 to the current 3.33! The dividend yield is currently 4.5% with management stating that earnings and dividends would likely to remain stable for FY15.

With fears of a rate hike coming from the FEDs, dividend stocks have been sold down really hard and I have taken the opportunity this year to adjust my portfolio to take advantage of such attractive dividend plays.

Be greedy when others are fearful~

NamePrice PEYieldIndustry
ARA1.7616.82.8%Property Management
CapitaCommercial Trust1.5715.75.4%Commercial Reit
OCBC10.0211.13.6%Banking and Finance
ST Engineering3.3319.84.5%Heavy Industries
UOB22.7911.63.3%Banking and Finance

Portfolio PEPortfolio Yield


IPO - Singapore O&G Limited

First of all, this is not an Oil & Gas stock... instead its a healthcare play. LOL

 Singapore O&G Limited

To be honest I have no medical knowledge and I am very unfamiliar with the healthcare industry. What I do know is that anything medical or healthcare related is very hot now, as we have stocks like raffles medical group trading at over 30 times earnings.

The IPO price is 25 cents

 It will close on 2nd June and will start trading on 4th june thursday.

Financial wise, earnings have been on a uptrend as their business seems to be growing well due to the encouragement and subsidies from the government. This business also seems to generate a very fat margin of over 35%! I see this business having a wide moat as well as a decent growth rate, maybe 10-20% over the new few years.

At an IPO price of 25 cents and 1.95 cents earnings per share, its only selling for 13 times earnings! Which may look like a real bargains! I expect such a small cap healthcare play to eventually trade at a range of maybe 20 to 30 times earnings, meaning a huge upside potential for those lucky share owners!

For short term traders, this is a bet you cannot miss... and if I had to put a initial trading day profit taking level, it would be 40 cents or better. Good luck!

Portfolio Update

I generally do not participate in IPOs as they are usually pretty speculative in nature, I now prefer to run a less volatile portfolio while generating sustainable long-term returns simply by holding decent blue chips and mid caps with proven long term track records.

However the IPOs that really interest me are bond issues like the recent FCL 3.65% that I have mentioned in my past few articles. I'm happy that its now trading above par at 1.007~ This bond will also no longer be shown in my portfolio as I intend to keep it till maturity, as such it will form part of my cash portion, along with my fixed deposits and cold hard cash.

I'm currently 85% vested in equities and 15% in cash

Recently the market took quite a dip as the STI fell from the 3500 level to the current 3400 or so. I took the opportunity to add more shares of companies that I already owned

M1 - Worries of the 4th telco and rising interest rates has cause it to be sold down hard and fast, however I feel that fundamentally its still a solid dividend counter with an attractive 5.9% yield. The 4th telco would only operate after 2017 and the negative impact on earnings from it would probably be felt only after 2018. I do feel confident in M1 maintaining or growing dividends, at least for the next 3 years.

STE - I previously sold some at 3.60 to lock in a 8% profit, so I'm pretty glad to pick them back up at the current lower price...as the 4.3% yield is still pretty decent. However I don't expect much earnings growth this year, but fundamentally earnings could start picking up again in FY16 onwards. My expectation is 5% earnings growth in the long run.

UOB - After selling off my lower PE marine stocks, I try to balance my portfolio with more bank stocks which are still decent at only 12 times earnings. The dividend yield of 3.2% gives comfort considering this is more of a growth stock, I expect around 5-10% earnings growth going forward.

NamePrice PEYieldIndustry
ARA1.7616.82.8%Property Management
CapitaCommercial Trust1.6216.25.2%Commercial Reit
OCBC10.2511.43.5%Banking and Finance
ST Engineering3.4520.54.3%Heavy Industries
UOB23.6312.03.2%Banking and Finance

Portfolio PEPortfolio Yield


FCL 3.65% Ballot Results

The demand was pretty strong, as such the issuer exercised their green-shoe option and enlarged the offering from 200mil to 500mil (2.5 times). As a result, the allocation % was way higher than the previous CMT 3.08% bonds and what I was expecting.

Those who applied 2 to 25 lots were 100% allocated.

The most popular bet sizes were

10 lots applied - 8.58% of demand- 10 lots allocated(100%)
20 lots applied- 12.79% of demand - 20 lots allocated(100%)
50 lots applied- 15.24 % of demand- 37 lots allocated(74%)
100lots applied- 14.26% of demand - 70 lots allocated(79%)

Like I previously mentioned that 10-20 lots would be the most optimal bet size, in which this time round both sizes were fully allocated. But what really caught be my surprise is the bigger orders of 50 and 100 lots formed close to 30% of the demand, it seems like Singaporeans are really too cash rich and have a strong appetite in parking their cash into corporate bonds.

FCL 3.65% will start trade on Monday 25th May under the counter name FCLTrea 3.65%b220522 and stock code AXXZ

There would be investors who got more than what they expected and they might be glad to throw some off at 1.005-1.01, while I would be happy to pick up more at 0.99 


NamePrice PEYieldIndustry
ARA1.7516.72.9%Property Management
CapitaCommercial Trust1.6516.55.1%Commercial Reit
FCL 3.65%1.0027.43.7%Property (Bond)
OCBC10.3811.53.5%Banking and Finance
ST Engineering3.5721.24.2%Heavy Industries
UOB24.1612.33.1%Banking and Finance

Portfolio PEPortfolio Yield


Poll Results on SSB and FCL 3.65%

The previous poll at HWZ forum was pretty informative. So this time round I decided to do polls on the interest levels of SSB and the FCL 3.65% bond at HWZ forum again.

Surprisingly SSB didn't seem as popular as I thought, as one-third of investors will not be applying for it. The general feedback is that the yield of around 2% for the 10 year period would be too low and investors were not appreciating its risk-free status.

Another one-third of respondents would be applying $10,000 to $50,000 worth. I personally think SSB is a useful place to park your cash while waiting for a  market crash (a fall of 20% or more from peak).

For details please head over here.

FCL 3.65% 7 Year bonds seems to be really hot! As close to half the investors would be applying for $10,000 or more worth! With demand being this strong, I think allocation of FCL bonds would be equal or tighter than the previous CMT 3.08% bonds.

This is the previous allocation table for CMT 3.08% bonds (7 years too).
- Those who applied 2 to 10 lots got fully allocated
- Those who applied 11 lots or more get around half allocated
- One-third of investors fell under 10 to 20 lots

So logically for FCL bonds, applying for 10 to 20 lots would be most optimal and would continue to be the most popular bet size

I personally have applied for 20 lots and may purchase more from the open market on the first trading day, 25th May.

For details please head over here.
And for Q&A or discussion feel free to visit here.

NamePrice PEYieldIndustry
ARA1.8017.22.8%Property Management
CapitaCommercial Trust1.6516.55.1%Commercial Reit
FCL 3.65%1.0027.43.7%Property (Bond)
OCBC10.4811.63.4%Banking and Finance
ST Engineering3.5421.04.2%Heavy Industries
UOB24.2012.33.1%Banking and Finance

Portfolio PEPortfolio Yield


Parking Your Spare Cash - Fraser Centerpoint Limited 3.65% Bonds (7 Years)

You can read more from the announcement here.
and prospectus can be downloaded here

Basic Details (Serious investors please read product prospectus before buying)

Duration: 7 years
Interest: 3.65%
Payment: Semi-Annual
Offer period: Now till 20 May Noon Close (Retail investors can apply via ATM or iBanking)
Min Sum : $2,000 ($1 per share, $1,000 per lot)
Trade date: 25th May

Currently what are other retail blue chip bonds trading at?

Genting perp 5.125% bonds trades around $1.055
CapMallAsia 10 year 3.8% bonds trades around $1.04
CapMallTrust 7 year 3.08% bonds trades around $1.015

As you can notice all these bonds are trading above their $1.00 PAR value, the reasons are because
1) There is limited supply of retail bonds listed on SGX
2) Low interest from bank deposits, currently its only 1%++
3) Worries of a stock market crash

I have applied for 20,000 units


NamePrice PEYieldIndustry
ARA1.7216.62.9%Property Management
CapitaCommercial Trust1.6316.35.2%Commercial Reit
OCBC10.3911.53.5%Banking and Finance
ST Engineering3.6021.14.2%Heavy Industries
UOB24.1612.33.1%Banking and Finance

Portfolio PEPortfolio Yield


Frasers Centrepoint launches its first retail bonds

Published on May 13, 2015 2:06 AM
 1  0  0  0 PRINT EMAIL
PROPERTY firm Frasers Centrepoint launched its first retail bond offering yesterday.
The company is issuing seven-year bonds of up to $200 million that carry a fixed interest rate of 3.65 per cent a year.
It will sell up to $150 million to the public and up to $50 million to institutional investors.
The public offer opens for subscription today at 9am and closes on May 20 at 12pm.
Applications may be made through the ATMs of DBS/POSB, OCBC and UOB.
Investors can also apply via the Internet banking websites of the participating banks and DBS's mobile banking interface.
The minimum investment amount is $2,000, or higher amounts in multiples of $1,000.
The company said in a statement yesterday that the move is its "latest initiative to diversify the group's funding sources".
DBS is sole bookrunner and underwriter of $50 million of the offering, if subscriptions fall short when the offer ends.
The issuer said it might cancel the offering if it receives orders of less than $75 million but could increase it to as much as $500 million if demand is good.
The bonds will be issued in the name of FCL Treasury with Frasers Centrepoint as the guarantor.
- See more at: http://www.straitstimes.com/premium/money/story/frasers-centrepoint-launches-its-first-retail-bonds-20150513#sthash.5EALFZ7c.dpuf

Polling Results from HWZ Forum

The Stocks, Shares and Indices sector of the HWZ forum is getting more active, you can visit it anytime over here to participate in our discussions.

I recently did some polls and I hope this can bring some insights as to how certain groups of retail investors are thinking. The first poll asked how many years have you been investing? The demographics were quite wide but still most of the investors in the HWZ forum  are still in their first market cycle and have not experienced the previous global financial crisis.

How much % of your portfolio is in cash? The majority (over 60%) were holding 10-40% in cash, meaning more than half of their money is vested in the market. This could mean that generally they are still positive on the market outlook and confident in staying more vested in the market..

How many counters do you hold in your portfolio? Close to 70% of them are holding between 1 to 10 stocks, as investors prefer to focus on their bets or have limited capital to diversify.

When do you think the next crash is coming? 40% of voters think that its coming in 1 to 2 years time, I think that investors are generally still worried about rising interest rates and that it will eventually pop the bubble.

NamePrice Price/EarningsDividend YieldIndustry
ARA1.7016.42.9%Property Management
CapitaCommercial Trust1.6316.35.2%Commercial Reit
OCBC10.4511.63.4%Banking and Finance
ST Engineering3.6521.44.1%Heavy Industries
UOB24.1612.33.1%Banking and Finance

Portfolio PEPortfolio Yield