Keppel Corp First Quarter Results


In january I wrote about how Keppel Corp was a great buy, over the past 3 months it has since gone up over 15%! and I have taken the opportunity to realize profits on half my position, with the remaining awaiting the juicy dividends of 36 cents on 22th april XD date.

As for its 1Q15 results, earnings rose 6% which is really pretty solid but revenues fell 6.1%. As expected the drag came from the marine segment which sale a sharp fall of 12% in earnings.

Keppel corp only managed to secure half a billion worth of orders in the first quarter... which is pretty slow... I expect full year 2015 orders to come in around 3 billion, definitely lower than last year.

What really saved keppel corp this quarter was its property segment, which earnings jump a whopping 16%! So much for management's decisive play to take kep land private, which I think the market saw as a very positive move strongly reflected by its stock price. The deal will increase KC's earnings per share, NAV and ROE but on the down side... we might see gearing getting higher to around 50% levels, which signifies greater risk.

STI has since crossed the psychological 3500 level, signaling a bullish market as the index touches a 7 year high!!! In early 2015 my portfolio was only trading at around 12 times earnings, and with the recent big gains the PE ratio has climbed to a more expensive 14.4 times. The gains mostly came from Banks (OCBC/UOB) and Marine related (STE,KC,SCI) ranging from 5-15% increase in stock prices in a short span of under half a year.

When it comes to 15 times earnings I would really wanna be cautious and start being more disciplined on my portfolio management,that could mean taking some profits on those that had a strong up run while re-balancing to maintain my 80% equities 20% cash ratio.


NamePrice DPSYieldEPSPEIndustry
UOB24.020.7503.1%1.97012.2Banking and Finance
OCBC10.900.3603.3%0.91911.9Banking and Finance
ARA1.640.0503.0%0.10415.8Property Management
M13.870.1894.9%0.18920.5Telecommunications
Starhub4.460.2004.5%0.21021.2Telecommunications
ST Engineering3.790.1504.0%0.17122.2Land/Marine/Aerospace/Electronics
Keppel Corp9.440.4805.1%1.0309.2Marine/Property/Infrastructure
Semb Corp Industries4.780.1603.3%0.44310.8Marine/Utilities



Portfolio Yield
Portfolio PE



3.7%
14.4












M1 First Quarter Results


I wrote about M1 earlier here and also added M1 to my portfolio this year.
The first quarter results looks decent with revenues coming in flat but earnings per share going up by 5% to 4.9 cents

I think they should have no problems making 19-20 cents per share for FY15 and if the market prices M1 like Starhub for 20 times earnings, M1 could eventually trade as high as $4.00 by year end



On the down side cash has declined and gearing shot up to 50%, a high but still manageable level. I would start to be cautious if gearing continues to go up and especially if it crosses levels like 70-80%.
M1 has done a very good job of growing its postpaid mobile business, as shown from the uptrend. The previous worry was the decline in prepaid customers, but that seems to have bottomed.



Their fiber broadband business continues to grow rapidly, however average revenue declined probably due to the intense competition.

Overall M1 still trades at a yield close to 5% which is still pretty decent, so I took today's 2% decline as a good opportunity and added more of it to my portfolio. I still see M1 as a pretty decent bet, with a solid base return of 5% from dividends as well as a potential addition of 3-5% from earnings growth(which will reflect into higher stock price).




NamePrice DPSYieldEPSPEIndustry
UOB23.620.7503.2%1.97012.0Banking and Finance
OCBC10.750.3603.3%0.91911.7Banking and Finance
ARA1.640.0503.0%0.10415.8Property Management
M13.860.1894.9%0.18920.4Telecommunications
Starhub4.410.2004.5%0.21021.0Telecommunications
ST Engineering3.680.1504.1%0.17121.6Land/Marine/Aerospace/Electronics
Keppel Corp9.470.4805.1%1.0309.2Marine/Property/Infrastructure
Semb Corp Industries4.610.1603.5%0.44310.4Marine/Utilities



Portfolio Yield
Portfolio PE



3.8%
13.9

Singapore Savings Bonds(SSB) Details Out - Will Buy Sure Buy Confirm Must Buy!

Details annouced at

http://www.mas.gov.sg/News-and-Publications/Media-Releases/2015/Singapore-Savings-Bonds-for-Individual-Investors.aspx

Reference to SGS daily prices here

https://secure.sgs.gov.sg/fdanet/SgsBenchmarkIssuePrices.aspx





Since 2007, we had nearly a decade of low interest rates... Uncles and Aunties have not been happy getting 1% on their fixed deposits. Yet they are also not sophisticated enough to tap into SGS which pay as high as 3%. I think MAS is finally moving in the right direction by bringing in this new product to retail investors.

In short, I think that SSB is a superior product to SGS. This is because an investor holding SSB will be able to enjoy SGS returns plus the addition benefit of removing 2 major downsides, maturity risk and volatility.

For an individual who purchases a 10 year SGS, the price of the bond may fluctuate up or down daily. If he has to cash out, he would have to sell to the open market which may result in a loss. For SSB these 2 problems are removed and the investor can get his principal back in any month and the bond is always worth PAR value.

In the past I had been vested in 3 retail bonds before, namely
Genting 5.125%
CapMall Asia 3.8%
CMT 3.08%

The ever pressing down of interest rates have resulted in these bonds shooting up above PAR value and I have since unloaded all of them. I'm currently 85% vested in equities and 15% in cash (fixed deposits yielding 1%+). So now that rates are starting to move up, along with a great product like SSB... I would definitely want to start picking up bonds again. Ideally I would like to move towards an allocation of 70% equities and 30% bonds.

Do note that, SGS are really quite low returns.... but on the tail end, the 3% rates still feels comfortable given that its a risk free product. So ideally I would also want to mix in some corporate bonds to boost the yield while balancing in some risk. In a bond portfolio consisting of half SSB and half corporate bonds, I do expect it to yield around 4% while still being low risk which is still pretty decent.


Portfolio Update - Reduced Keppel Corp, Waiting for Singapore Saving Bonds (SSB)


NamePrice YieldPEIndustry
UOB23.103.2%11.7Banking and Finance
OCBC10.593.4%11.5Banking and Finance
ARA1.623.1%15.7Property Management





M13.854.9%20.4Telecommunications
Starhub4.244.7%20.2Telecommunications





Keppel Corp9.055.3%8.8Marine/Property/Infrastructure
ST Engineering3.524.3%20.6Land/Marine/Aerospace/Electronics
Semb Corp Industries4.343.7%9.8Marine/Utilities







Portfolio YieldPortfolio PE


3.8%13.0


I spoke about keppel corp in january, after they announced a great set of full year results. The stock price was really depressed due to all the worries of the oil bear. Valuations were really cheap and I couldn't resist making a bet. KC has since had a good ride up and I took this opportunity to lock in a 10% profit for half my position.

Oil has been bouncing around the $50 (WTI) level, and has shown no signs of a fast recovery. As unprofitable oil rigs slowly shut down, this should eventually bring back balance to supply/demand, however it could be a slow process and may take like a year or so.

With the recent rally in the local market, my portfolio has gained quite a bit. This results in a higher PE ratio, from 12~ish level to the current 13 times and a drop of yield from 4% to 3.8%. However I do not think that valuations are expensive .... its still somewhere comfortable.

http://www.businesstimes.com.sg/government-economy/govt-to-offer-singapore-savings-bonds-for-local-investors

THE government will introduce the new Singapore Savings Bonds (SSB), a type of Singapore Government Securities (SGS) for local individual investors.

Like SGS, the Singapore Savings Bonds are safe investments, principal-guaranteed by the government. Holders of the SSB can also get their money back in any given month, with no penalty, and can earn interest that is linked to long-term SGS rates. Also, unlike bonds that pay the same coupons each year, the SSB pays coupons that increase over time.

In theory the bonds seems pretty interesting and attractive, but I will have to wait for more details... I'm wishing for yields of 2-3% or higher, given that sibor already crossed 1%... we may see rates going higher and thus making bonds an decent investment again.

While many are worried of a market crash or waiting for a fire sale, I do believe that I have no talent in timing the market, as such I would continue to stay vested and keeping a good balance in my portfolio.

I'm currently at 85% Equities and 15% in Cash. My equities are yielding only 3.8% while cash on fixed deposits are yielding 1%+, so overall I'm getting like 3%+ which is nothing impressive.

As the market goes higher, I do hope to gradually take some profits and reduce my equities positions. Once interest rates have improved, I would really like to pick up some bonds. Ideally I wanna go move to an allocation of something like 75% Equities 25% Bonds.


"Far more money has been lost by investors preparing for corrections, or trying to anticipate corrections, than has been lost in corrections themselves." - Peter Lynch

Portfolio Update - CMT Out M1 In



NamePrice Dividend Per ShareDividend YieldEPSPEIndustryType
ARA1.610.0503.1%0.10415.6Property ManagementGrowth
OCBC10.490.3603.4%0.91911.4Banking and FinanceGrowth
UOB23.040.7503.3%1.97011.7Banking and FinanceGrowth








M13.780.1895.0%0.18920.0TelecommunicationsDividends
Starhub4.180.2004.8%0.21019.9TelecommunicationsDividends
ST Engineering3.440.1504.4%0.17120.2Land/Marine/Aero/ElectronicsDividends








Semb Corp Industries4.290.1603.7%0.4439.7Marine/UtilitiesCyclical
Keppel Corp8.880.4805.4%1.0308.6Marine/Property/InfrastructureCyclical











Portfolio Yield
Portfolio PE




3.9%
12.6



Today's biggest news would be the passing of our founding father, may he rest in peace. I actually thought that the market will take a small correction, but instead it seems to have already been factored into the market.

I wrote about my CMT position recently and it had since when on a strong rally, in which I sold off today to lock in some profits. I also wrote about M1, in which it dropped a bit today and I'm quite happy to move the funds over to this 5% yield-er.

Overall there's still no changes to my main strategy, with 3 growth 3 dividends and 2 cyclical stocks to form a good balance in riding out the slow economy. I'm also 90% vested with 10% in cash.

Cheers