Thursday, October 31, 2019

Portfolio Summary for October 2019

As of 31 October 2019

Cash Equity

Security# SharesPricePortfolio %
DBS Group400$26.0023.58%
OCBC900$10.9622.36%
SATS2,000$5.0522.90%
ST Engineering2,500$3.9922.61%
Old Chang Kee5,000$0.7558.56%
Portfolio Market Value = $44,114

SRS Equity

Security# SharesPricePortfolio %
SGX1,300$8.9424.00%
OCBC900$10.9620.37%
Sheng Siong Group8,700$1.1721.02%
SingTel2,000$3.3013.63%
CapitaCommercial Trust3,000$2.0512.70%
Frasers Commercial Trust2,446$1.648.28%
Portfolio Market Value = $48,426


Perhaps the most exciting news in the local market this month is the partial acquisition offer of Keppel Corporation by Temasek Holdings (announcement).  Keppel is a well-known conglomerate with its subsidiaries spread across many diverse industries.  Sadly, its Return on Equity (ROE) has been struggling around the low 7%, which means Keppel's management hasn't been doing a fantastic job creating value from shareholders' capital.  That said, the management has signaled their intention to boost the ROE to mid-teens (news).  Hopefully, with Temasek becoming a significant shareholder and providing strategic direction, Keppel will be able to accomplish the feat.

The earnings reporting season is in full swing.  Many blue chips will report their results in early November.  Supermarket operator Sheng Siong Group has turned in another beautiful set of numbers, derived mainly from new store sales.  On the other hand, same store sales has dropped slightly.  Hope that the decline is just a temporary blip.

On the economic front, the United States and China have come to a preliminary trade agreement (news).  But no one is popping champagne yet, as the final outcome is far from certain.  Meanwhile, the Federal Reserve has given the market another booster shot - the third interest rate cut this year (news).


Trade Actions

None.  I did not spot any suitable opportunity.


Savings

Next month's Singapore Savings Bonds (SSB) will likely have an average yield of 1.70%.  Consider SSB only if you are absolutely risk-averse.  The private market have fixed deposit products that give a better return.  Check out SINGPromo's website for details (link).


Looking Ahead

We have come to the last two months of the year.  This means I will need to set aside cash for my sons' endowment policies, as well as do a voluntary CPF Retirement Sum Topping-up (link).  I had max-ed out my SRS contribution earlier this year.  If you have not done so, this is a good time to consider topping up your SRS retirement account and take advantage of the tax savings.  You can check out IRAS website for more details (link).

Portfolio Summary for October 2019

As of 31 October 2019

Cash Equity

DBS Group400$26.0023.58%
OCBC900$10.9622.36%
SATS2,000$5.0522.90%
ST Engineering2,500$3.9922.61%
Old Chang Kee5,000$0.7558.56%
Portfolio Market Value = $44,114

SRS Equity

Security# SharesPricePortfolio %
SGX1,300$8.9424.00%
OCBC900$10.9620.37%
Sheng Siong Group8,700$1.1721.02%
SingTel2,000$3.3013.63%
CapitaCommercial Trust3,000$2.0512.70%
Frasers Commercial Trust2,446$1.648.28%
Portfolio Market Value = $48,426


Perhaps the most exciting news in the local market this month is the partial acquisition offer of Keppel Corporation by Temasek Holdings (announcement).  Keppel is a well-known conglomerate with its subsidiaries spread across many diverse industries.  Sadly, its Return on Equity (ROE) has been struggling around the low 7%, which means Keppel's management hasn't been doing a fantastic job creating value from shareholders' capital.  That said, the management has signaled their intention to boost the ROE to mid-teens (news).  Hopefully, with Temasek becoming a significant shareholder and providing strategic direction, Keppel will be able to accomplish the feat.

The earnings reporting season is in full swing.  Many blue chips will report their results in early November.  Supermarket operator Sheng Siong Group has turned in another beautiful set of numbers, derived mainly from new store sales.  On the other hand, same store sales has dropped slightly.  Hope that the decline is just a temporary blip.

On the economic front, the United States and China have come to a preliminary trade agreement (news).  But no one is popping champagne yet, as the final outcome is far from certain.  Meanwhile, the Federal Reserve has given the market another booster shot - the third interest rate cut this year (news).


Trade Actions

None.  I did not spot any suitable opportunity.


Savings

Next month's Singapore Savings Bonds (SSB) will likely have an average yield of 1.70%.  Consider SSB only if you are absolutely risk-averse.  The private market have fixed deposit products that give a better return.  Check out SINGPromo's website for details (link).


Looking Ahead

We have come to the last two months of the year.  This means I will need to set aside cash for my sons' endowment policies, as well as do a voluntary CPF Retirement Sum Topping-up (link).  I had max-ed out my SRS contribution earlier this year.  If you have not done so, this is a good time to consider topping up your SRS retirement account and take advantage of the tax savings.  You can check out IRAS website for more details (link).

Monday, September 30, 2019

Portfolio Summary for September 2019

As of 30 September 2019

Cash Equity

DBS Group400$25.0023.38%
OCBC900$10.8622.85%
SATS2,000$4.8422.63%
ST Engineering2,500$3.8422.44%
Old Chang Kee5,000$0.7458.71%
Portfolio Market Value = $42,779

SRS Equity

Security# SharesPricePortfolio %
SGX1,300$8.4723.53%
OCBC900$10.8620.89%
Sheng Siong Group8,700$1.1120.64%
SingTel2,000$3.1013.25%
CapitaCommercial Trust3,000$2.0713.27%
Frasers Commercial Trust2,446$1.618.42%
Portfolio Market Value = $46,790


It was a quiet September month.  The STI had gone on a roller-coaster ride, and is nearly back to where it started the month.  Doomsayer calls for a recession next year have gotten louder, with nervous folks predicting terrible times ahead (see news and news).  The U.S. and China will resume their trade negotiations on Oct 10 (news), though it is anyone's guess whether there will be light at the end of the (tariff) tunnel.  Our leaders are certainly worried.  PM Lee had just reminded Singaporeans to 'be prepared for rough weather ahead' (news).  DPM Heng Swee Keat also noted that 'the Government is closely monitoring how the economy will pan out by the end of the year, and is prepared to take action when necessary' (news).

Amidst the gloomy atmosphere, I had managed to execute one trade.


Trade Actions

ST Engineering
I initiated a position of 2,500 shares in ST Engineering at $3.84 apiece.  I have been optimistic about the prospects of this company.  What began as a defence contractor for the fledgling Singapore Armed Forces in the 1960s has blossomed into a global technology and engineering group, with specialty in aerospace, electronics, land systems and marine.  The company has a healthy order book of S$15.6 billion, which includes a S$1.0 billion contract to build a heavy polar icebreaker for the U.S. Coast Guard (announcement).  ST Engineering has been generating positive free cash flow consistently over the years.  The stock price had taken a dip at month end, which I thought was an opportune time to acquire a stake.


Savings

In all honesty, I feel it is not worth talking about Singapore Savings Bonds (SSB) at this moment.  The low yield is comparable or worse than some of the fixed deposit (FD) products in the market.  We will be middling around 1.73% for next month's SSB.  If you have S$20,000 and one year time horizon, ICBC has a FD promotion that is better (link).  You may want to check out their website.


Looking Ahead

September marks the end of another calendar quarter.  Companies will be releasing their results between end October and mid November.  We will know which local companies are affected by the vicissitudes of the ongoing U.S.-China trade spat.  Earning releases tend to make stock prices volatile, as institutional funds buy or dump shares depending whether it is a 'beat (estimates)' or a 'miss'.  I will be wary to take on a position until the earnings reporting season is over, and the market has absorbed the full information bonanza.

That said, there may be special situations which cause a stock price to plunge without any major change in fundamentals (such as an analyst downgrade).  I'm keeping my powder dry and ready for such opportunities.

----------

“October: This is one of the peculiarly dangerous months to speculate in stocks. The others are July, January, September, April, November, May, March, June, December, August and February.”

― Mark Twain, Pudd'nhead Wilson

Friday, August 30, 2019

Portfolio Summary for August 2019

As of 31 August 2019

Cash Equity

Security# SharesPricePortfolio %
DBS Group400$24.5330.03%
OCBC900$10.6529.34%
SATS2,000$4.829.38%
Old Chang Kee5,000$0.73511.25%
Portfolio Market Value = $32,672

SRS Equity

Security# SharesPricePortfolio %
SGX1,300$8.2022.56%
OCBC900$10.6520.28%
Sheng Siong Group8,700$1.1821.73
SingTel2,000$3.1713.42%
CapitaCommercial Trust3,000$2.1313.52%
Frasers Commercial Trust2,446$1.648.49%
Portfolio Market Value = $47,252


Time flies in a hurry.  I celebrated my older son's, my wife's as well as my own birthday this month.  I was amused and touched, when my five-year-old son tried to buy a birthday cake for me with his sole $1 coin.  It is little acts like this that make me feel grateful to be a father.

On the US-China trade war, there seems to be no light at the end of the tunnel.  The protest situation in Hong Kong had worsened, with violence being a common scene.  An economist had predicted that Hong Kong will precipitate a global recession (news).  I feel it is a bit premature for such a call, but I have been monitoring the market for an opportunity to buy shares of companies on my watchlist at a good price.

Trade Actions

LHT Holdings
I sold my position in LHT Holdings at $0.51 apiece.  I couldn't explain the peculiarly consistent 10,000+ shares that changed hands everyday as the price declines.  It is as if a substantial shareholder is selling his/her stake, bit by bit daily.  It started on April 13, even though there wasn't any drastic change in the company's fundamentals.  As this downward price creep is not observable in the other micro caps on my watchlist, it made me very uncomfortable.  I tried writing to Investor Relations for an explanation, but to no avail.  Since the price hit my stop-loss, I steeled myself and had to let go of the position.  I may revisit this company when the selling pressure has ceased.

Old Chang Kee
I added 4,900 shares of Old Chang Kee (OCK) at $0.725 apiece.  I feel OCK occupies a sweet spot in the F&B industry, providing more than a nibble and less than a full meal.  The profit margin is relatively stable and inflation-proof - I have seen how the price of an OCK curry puff rose over the years from $0.90 to $1.50 today.  The only concern is their UK joint venture, which is still bleeding money every quarter.  Hope OCK management can either scrap the idea, or properly evaluate a route to profitability.

Savings

The average yield on Singapore Savings Bond (SSB) has fallen below 2%.  Based on current outlook, it is unlikely the rate will rise in the near term.  Next month's SSB yield is expected to sink even lower to 1.75-1.76%.

Looking Ahead

Honestly, if even Warren Buffett is hoarding cash (news), it says much about the stock market at the moment.  It is tough to know what the unpredictable President Trump may do to incur China's retaliation and bring about a full-blown trade war.

Should the current trade hostility escalates, and the global economy plummets into a recession, it can be assured that the stock market will not be spared either.  As the cliché goes, the best time to buy stocks is when there is blood on the street.  I am standing by a small 'warchest' in case this scenario come to fruition.

Thursday, August 1, 2019

Happy News from OCBC

Came to office today, only to find positive news released from OCBC.

Not only has the company defied The Street's expectations of a drop in profit, it also INCREASED its interim dividend to 25 cents per share - the highest amount ever!

My Friday morning is starting to look brighter already.

Wednesday, July 31, 2019

Portfolio Summary for July 2019

As of 31 July 2019

Cash Equity

Security# SharesPricePortfolio %
DBS Group400$26.4126.80%
OCBC900$11.5426.34%
SATS2,000$4.8224.45%
LHT Holdings15,500$0.56522.21%
Old Chang Kee100$0.7750.20%
Portfolio Market Value = $39,425

SRS Equity

Security# SharesPricePortfolio %
SGX1,300$7.9221.65%
OCBC900$11.5421.84%
Sheng Siong Group8,700$1.1621.22
SingTel2,000$3.3314.01%
CapitaCommercial Trust3,000$2.0613.00%
Frasers Commercial Trust2,446$1.618.28%
Portfolio Market Value = $47,552


July went by in a jiffy.  Most of the time, I was just watching the market, which persistently remained at the high end of valuation.  I did execute one trade though.

Trade Actions

SATS
I picked up 2,000 shares of SATS at $5.01 apiece.  (Could have bought cheaper had I waited a few more days.)  Investors were spooked by the 14% drop in net profits, which saw its stock price dived over 6% in a day.  In my view, SATS is simply facing temporal, cyclical headwinds.  The underlying business looks intact.  (SATS enjoys an exclusive duopoly with dnata in servicing airlines at the Singapore Changi Airport.)  The company has a sizeable $400 million cash hoard and was still able to generate $84 million of free cash flow for the latest quarter despite the profit drop.  I will accumulate more if the share price falls further to $4.50.  The 13 cents dividend that went ex on 29 July certainly helped to reduce my purchase cost.

Savings

July's Singapore Savings Bond (SSB) (ID: GX19080E) has an average yield of 2.01% p.a (link).  As mentioned in my previous post, the SSB yield is expected to get worse.  With the widely anticipated Fed rate cut, the yield will likely sink below 2%.  I am guessing 1.95% for next month's issue.  If you are considering to park your money in SSB, there are fixed deposit products in the market with a shorter tenure and equally competitive yield.  MoneySmart blog has a summary of these products (link).

Looking Ahead

August is special for my family, as my older son, wife and I celebrate our birthdays this month.  This means I have to set aside a higher budget for expenses.  What remains will go into my money jar for investments.

As the seasonal reporting winds to a close, I hope there will be chances to pick up other quality stocks unfairly sold down due to misaligned investor expectations, just like SATS.

Sunday, June 30, 2019

Portfolio Summary for June 2019

As of 30 June 2019

Cash Equity

Security# SharesPricePortfolio %
DBS Group400$25.9635.60%
OCBC900$11.4035.17%
LHT Holdings15,500$0.54528.96%
Old Chang Kee100$0.780.27%
Portfolio Market Value = $29,169

SRS Equity

Security# SharesPricePortfolio %
SGX1,300$7.9221.58%
OCBC900$11.4021.50%
Sheng Siong Group8,700$1.1020.05
SingTel2,000$3.5014.67%
CapitaCommercial Trust3,000$2.1713.64%
Frasers Commercial Trust2,446$1.678.56%
Portfolio Market Value = $47,721


June was an uneventful month for me.  I had to set aside cash to pay my insurance premiums and income tax.  I kept a close eye on the market, but did not spot any favourable opportunity to buy stocks on my watchlist.  (I missed the chance to pick up SATS when it dropped to $4.93, because Credit Suisse downgraded the stock to 'Sell'.  Sigh.)

On the other hand, I offloaded two of my REIT positions.  The S-Reits have run up in price, some to heights that I wonder whether the valuation is justified.  My reason for selling is multi-fold.  First, I have changed my investment focus to operating companies instead of REITs.   While REITs provide sizeable dividend income, there is the perennial issue of ownership dilution, because the managers keep issuing new units to themselves as payment for management fee.  Slower global growth may make it tough for the landlords to justify a rental hike, as we recently saw Starhill Global REIT deciding to keep base rent unchanged for the Toshin master lease at Ngee Ann City (news).  Lastly, the capital raising and leveraging up of some REIT counters has made me uncomfortable.  A ballooned debt load and an economic downturn can be a lethal concoction, as we saw during the Global Financial Crisis (GFC).

Trade Actions

Frasers Centrepoint Trust
I let go of my FCT holding at $2.44 apiece, only to see the price blast off to a high of $2.63.  I could not fathom the acquisition of 1/3 ownership in Waterway Point and 17.1% stake in PGIM Real Estate Fund would have such a multiplier effect on FCT.  Are investors getting overly jubilant about the fund's prospects?  Rating agency Moody's did mention 'both acquisitions - of Waterway Point and PGIM Fund - improve FCT's earnings resiliency and geographic diversification' (news).  However, it also cautioned - as with all REITs - that FCT 'faces inherent liquidity risks, due to its high dividend payout ratios and minimal cash balances.'

AIMS APAC REIT
I sold off AIMS APAC REIT at $1.45 apiece.  I had held the position for a long time, probably since the GFC.  It had served me well, providing a constant stream of income over the decade.  Management had consistently engaged in AEIs to improve the rental potential.  But it was time for me to move on.

Savings

Next month's Singapore Savings Bond (SSB) has an average yield of 2.16% p.a (link).  It is as good as it gets.  Investors holding out for a better yield may be disappointed. 

The yield on 10-year Singapore Government Bond dipped below 2% during mid June.  It is puzzling that investors are bidding up stock prices and bond prices - hence the yield decline - at the same time.  It looks like the average SSB yield will only get worse.  (I am guessing 2.01% for the August issue.)

I am not in favour of purchasing SSB at this rate of return, unless you have excess liquidity and you are not keen on stocks. 

Looking Ahead

My wife came across an article forecasting a recession next year (news).  I have my doubts, as there is no clear indication of the global economy tanking at the moment.  The last time I checked, the US Conference Board Leading Economic Index (LEI) is just flattening out (link).  (The LEI is said to be an accurate predictor of US economic health.  It declined rapidly months before the GFC struck.)  

Moreover, during the G-20 Summit, President Trump and President Xi agreed not to impose new tariffs, and for US and China to restart trade and economic talks (news).  While this does not mean a resolution of the trade row between the two superpowers, this is likely to be seen as a positive move and give investors confidence to take on risk.

End July also heralds the start of the earnings reporting season.  I will be watching to see how much an impact the US-China trade row has had on local companies.